Employment Bill

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Alan Johnson: If it were an elaborate charade, my hon. Friends would not be raising the points that they are raising. The hon. Gentleman is arguing against the basis of the schedule, which has been widely welcomed. One has to take account of the circumstances. The ACAS code does, and I believe that the schedule does, too. If there is no manager at a higher level, it is clear that one should not be appointed just for the purposes of the Bill.

The hon. Gentleman also referred to an amendment concerning how much of the procedure is to be conducted in writing, which the Committee will discuss later. I am not sure which party is behind that amendment, so I will not comment on it now. In the circumstances that the hon. Gentleman suggests, it would be sensible for the employer to tell the corner shop employee what the offence is in writing. If the employer is considering dismissing the employee, they should sit down and talk about the issue, and the same manager must make the final decision. When the company has another manager higher up the line, the second manager should deal with the appeal.

Norman Lamb: I certainly would not describe this as an elaborate procedure, and I think that there are advantages to introducing something so basic into many workplaces that have no such procedure. I accept the principle, but I would like to ask about the impact of compensation. The Minister is effectively introducing automatic unfair dismissal. If a person does not follow the basic procedure, the dismissal is automatically unfair. At the moment, if there were a failure to follow procedure, there would be an unfair dismissal finding; but the tribunal has the power to reduce compensation to take into account the fact that, had the proper procedure been followed, the dismissal would still have occurred. Often, tribunals reach findings of unfair dismissal, but end up imposing very little compensation because, apart from its procedural weakness, the dismissal was fair.

What will happen under the new provisions? A finding of unfair dismissal may be automatic because the basic procedure has not been followed, but perhaps in all other respects the basis for dismissal was fair. In that situation, will the tribunal be able to reduce compensation as it does now, or will it have to award the full amount against the employer for failing to follow the basic standard procedure?

Alan Johnson: The hon. Gentleman is on the wrong clause. I have said enough about that clause and I do not want to steal anybody's thunder for when we get on discussing those matters. His point is relevant, but not to this clause.

Mr. Hammond: I have not forgotten the point that I was going to make, although I wanted to intervene rather a long time ago. Our debate shows that there is a real issue here. The Minister will not be surprised to hear that I am not tempted by the solution of the hon. Member for Wolverhampton, South-West. He suggested that the ACAS code should be imposed in all cases. The alternative extreme would be to impose the minimum procedure in all cases.

That brings me back to the suggestion that I made to the Minister half an hour ago. I asked whether he had considered the possibility of different procedures for different sizes of employer. At the time, he said that that was unnecessary. I suggest to him that our debate since then implies that it is necessary, and that such variation might be a way of resolving the issues raised without going to the extreme advocated by the hon. Member for Wolverhampton, South-West of imposing something like the ACAS contract on micro-businesses?

Alan Johnson: These are my last remarks on the issue, because we have spent a long time on it. The hon. Gentleman's suggestion would make matters much more complex and much worse for employers. By law, tribunals are required to take into account the size and resources of the employer. That is an important discretion of the tribunal. If we stipulated different procedures for companies with 100 employees as against those with 90, 11 redundancies would mean adopting a different procedure, as would the recruitment of 10 more staff. That is not a solution.

We have had an interesting and wide-ranging debate, and some important points were raised. However, the employment tribunal service and ACAS do a splendid job. I believe that when we look back in our dotage, we will say that we did the right thing, and that although it was right to express those fears and to say those things, the envisaged scenarios did not emerge. I hope that the Committee will agree to the clause standing part.

Question put and agreed to.

Clause 29 ordered to stand part of the Bill.

3.15 pm

Schedule 2

Statutory dispute resolution procedures

Norman Lamb: I beg to move amendment No. 29, in page 57, line 8, after 'writing', insert

    'in the form of a statement.'.

The Chairman: With this it will be convenient to discuss amendment No. 30, in page 57, line 12, at end insert—

    '(3) Where the employer contemplates dismissing or taking disciplinary action against the employee for a reason other than redundancy, then the employer must investigate fully before preparing the statement.'.

Norman Lamb: Welcome to the Chair, Mr. Conway. I am not sure whether protocol dictates that I should have welcomed you when I intervened earlier. I hope that it will be a pleasure to serve under your chairmanship, although if I make to many mistakes, I may regret saying that.

Amendment No. 29 is a tidying amendment. Paragraph (2) of step 1 of the standard procedure refers to ''the statement''. Paragraph (1) of step 1 states:

    ''The employer must set out in writing the employee's alleged conduct or characteristics'',

but it does not refer to a statement. I am sure that the statement referred to in paragraph (2) is what the employer would have written down under paragraph (1), but it would achieve greater clarity if paragraph (1) included the words

    ''in the form of a statement''.

Amendment No. 30 deals with the inter-relationship between the ACAS code and the standard procedure. As the Minister said, the standard procedure sets out the minimum standards that employers must comply with—the bottom line, as it were. We believe that, as well as what is already included, the bottom line must include the principle of investigation. The standard procedure already sets out certain basic requirements. For example, there must be a meeting, and something must be set out in writing beforehand, but the procedure says nothing about the need for an employer to investigate the matter before calling the meeting. We would all agree, I am sure, that that must be a requirement of a fair procedure. It would give sensible and helpful guidance to small employers as well as large.

Mr. Hammond: Perhaps, taking up the example given by my hon. Friend the Member for Tatton, the hon. Gentleman could explain what could be investigated if the basis for dismissal was that the employee had punched the employer. What investigation would he expect the employer to undertake before giving the employee a written statement saying that he was on his way?

Norman Lamb: The schedule deals with the law that the tribunals already work under. The level of investigation will inevitably vary, depending on the facts of the case. I agree that there have been some stark examples of misconduct—for instance, of someone being hit in the face—but those people may have been provoked. For a tribunal not to investigate the facts that surround such an incident may render a dismissal unfair under existing law. Is the hon. Gentleman suggesting that it is not appropriate to investigate?

Mr. George Osborne: To build on the point raised by my hon. Friend the Member for Runnymede and Weybridge, would the hon. Gentleman expect the employer to investigate a serious case of sexual harassment in a two-person company where there is only an employer-employee relationship?

Norman Lamb: The hon. Gentleman is referring to an employer who sexually harasses an employee, and that employer would hardly bring disciplinary proceedings against himself. I am not sure that I understand the hon. Gentleman's point, but I suspect that it is rather trivial. We all understand that there is a basic principle of investigation.

Mr. Hammond: I accept that we are using slightly absurd examples, but the underlying issue is important. In amendment No. 30, the hon. Gentleman seeks to require an employer to investigate every case. Although investigation will be appropriate in many cases, it clearly will not be appropriate, or even possible, in every case.

Norman Lamb: In all my experience of employment law over about 10 years, I have never come across a case in which it was not appropriate to investigate the circumstances of an allegation against an employee before conducting a meeting to determine his guilt. The level of investigation inevitably varies from case to case—sometimes it is quite complex, but sometimes it can be completed without much delay. It must, however, be appropriate to investigate all cases.

Step 1 makes it clear that we are talking not simply about dismissals that could result from an allegation of misconduct, and the wording of the schedule suggests that we are talking about dismissals for a whole range of reasons. All the appropriate steps must be followed, whether an employer contemplates dismissal on the grounds of redundancy, performance, sickness absence or incapability. The Minister is nodding, which is helpful, but I would be grateful if he could confirm the position in his response.

I am concerned about how the schedule's procedural requirements compare with, for example, case law guidance on consultation with an employee over redundancy. The schedule says nothing about consultation, although it talks about a meeting and an appeal. We need much greater clarity about how the schedule compares with existing case law guidance on consultation on redundancy, and the Minister's response would be a good place to start.

The purpose of the ACAS code is primarily to deal with misconduct, and it talks about disciplinary proceedings. As I suggested, however, dismissal under the Bill could be for a range of reasons. The Employment Rights Act 1996 sets out five potentially fair reasons, including redundancy and incapability, either through poor performance or ill health. I need to understand better how the standard procedure in the Bill compares with existing case law guidance on dealing with dismissals other than those envisaged in the ACAS code, which deals with misconduct. As I said, the procedure applies to many different reasons for dismissal.

To return to the amendment, the basic statutory minimum procedure for dismissal and disciplinary matters has been widely welcomed. The schedule forms the basis for an improved approach. I accept what the Minister says about all those workplaces that have no procedures in place. The schedule would impose basic procedures on contracts of employment. The Confederation of British Industry commented that the new procedures would be of great benefit to small businesses, many of which have no procedures in place. The existence of the new minimum resolution procedures should help to encourage the resolution of disputes in the workplace and, hopefully, reduce litigation.

Although the TUC generally welcomes the introduction of the new procedures, it has spoken of its fears that the new minimum procedures may supplant the ACAS code of practice, as has the National Association of Citizens Advice Bureaux. Their concern is that, with the reversal of the Polkey principle, employers may be likely to run through the minimum statutory procedures with little or no reference to existing additional procedures or little adherence to basic principles of natural justice. That is why incorporating a requirement for investigation is important. The NACAB states:

    ''In our view, any move away from the present widespread use of the ACAS Code and Handbook as a 'benchmark of what the employer should have done' would be a retrograde step.''

Yet from an employer's point of view, the fact that an employee will not win an unfair dismissal claim simply because of a procedural failing beyond the basic requirements of the standard procedure is a welcome step and has the advantage of making clearer to employers what they should do.

In a recent survey conducted by the Forum of Private Business, one small business owner commented on the reversal of Polkey:

    ''Small businesses now live in fear of inadvertently falling foul of employment law through the lapse of procedure rather than by bending the rules or purposely flouting them. Any amendment to reduce time wasters will be welcome.''

Another said

    ''Most small employers do not have the resources to deal with unreasonable employees. The growing burden of employment legislation is as frightening to a well meaning employer as a minefield.''

Our dilemma is how to reconcile the rights and needs of both employer and employee. Amendment No. 30 is designed to reconcile those interests by imposing a requirement on employers to investigate fully the circumstances surrounding an employee's dismissal before preparing a written statement, as required in schedule 2, outlining the employee's alleged misconduct, behaviour, poor performance or sickness absence.

I am not especially proud of the wording of the amendment, but it is a probing amendment to urge the Government to consider further what provisions the standard procedure should contain as the bottom line. The requirement to investigate will remind employers about the need for basic fairness and the need to comply with natural justice. The fact that they will no longer be in fear of litigation as a result of a failure to adhere to a technical detail of their more extensive procedures is welcome, but the requirement in the standard procedure for an investigation must be enhanced, other than in circumstances of redundancy where investigation is inappropriate.

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