Draft Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012
Draft Employment Tribunals Act 1996 (Tribunal Composition) Order 2012
The Committee consisted of the following Members:
Mark Etherton, Committee Clerk
† attended the Committee
The following also attended, pursuant to Standing Order No. 118(2):
Draft Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012
It is a pleasure to serve under your chairmanship, Mr Amess. The effect of the first order is to extend the qualifying period for unfair dismissal from one to two years for individuals beginning work on or after the commencement date.
Mr Brian H. Donohoe (Central Ayrshire) (Lab): May I ask where the Minister got the evidence for introducing the order? I asked a written question in January last year, only to be told that nobody in Government had any idea of the answer and that it could be supplied to me “only at disproportionate cost”. How then can he possibly conclude that the order will make any difference to employment law and tribunal cases?
Norman Lamb: First, the consultation has been published. There was clear evidence in its outcome that employers had a strong view that concerns about dismissal processes were putting them off employing staff.
Norman Lamb: Let me finish my point. In my background, before becoming a Member of Parliament, I worked as an employment lawyer, and I can tell the Committee that in my experience, employers expressed concern on many occasions about the risks of taking on staff due to the potential cost of terminating employment. At a time when we in this country must focus strongly on getting people into work and encouraging businesses to employ people, we must do everything that we can to encourage employers to take that risk. Employers see it as a risk. It must be important for this Government to take steps to facilitate things.
Mr Donohoe: I thank the Minister for giving way once again. I was a trade union official, both lay and full time, for more than 30 years, and I think that what he says is absolutely nonsensical if he cannot give me
Norman Lamb: In 2011, the Institute of Directors surveyed its members—[Hon. Members: “Oh!”] The Institute of Directors represents directors, who employ people, so we should at least listen to what it has to say. [ Interruption. ] Well, every employer takes on staff and sometimes terminates their employment, but let us at least listen to what the Institute of Directors said. It surveyed its members and found that 51% of respondents said that the one-year qualifying period for unfair dismissal was a significant or very significant factor in considering whether to take on an additional employee.
Norman Lamb: One moment. In this debate we should for a moment think about people who are out of work, as well as those in work. We should all focus on giving those who are out of work a chance in the workplace.
Mr Dave Watts (St Helens North) (Lab): Is it not clear that the Institute of Directors may well be opposed to any legislation giving any protection to any group of workers? It has a past record on that. Is the Minister not ashamed that he is introducing legislation that will disproportionately hit the vulnerable, and young people?
Norman Lamb: I do not accept that. There can be no issue of principle about determining a particular date when unfair dismissal rules should apply. Under the Labour Government it was a year. What about all the people employed for up to a year, who have no protection? It is a question of degree. It is clear, from anecdotal evidence and the knowledge of many people, that a lot of people get dismissed just before the qualifying period applies. The result of the order could easily be less pressure on employers to terminate people’s employment before the qualifying period expires, which would give people more of an opportunity to prove themselves in the workplace.
Chris Ruane: Will the Minister give further figures on the issue of the Institute of Directors questionnaire? Fifty-one per cent of what? How many responded, out of the total membership of the Institute of Directors? My hon. Friend the Member for Central Ayrshire mentioned that he tabled a question on the statistical evidence a year ago last January, and I tabled one two weeks ago. I asked that the statistical evidence for weakening employees’ rights should be placed in the House of Commons Library. Is that information there for us to look at?
Norman Lamb: I will check on that and come back to the hon. Gentleman on it, but the British Chambers of Commerce also surveyed small firms in 2011 and 54% of respondents felt that dismissal rules were extremely or fairly burdensome. That was a response to one of the questions. The measure will provide direct savings to business of £4.7 million a year, through a reduction in tribunal claims, but the impact on employees is limited, given that the saving reflects only a 4% reduction in unfair dismissal claims—
Norman Lamb: Let me finish this point. The saving reflects only a 4% reduction in unfair dismissal claims, because of the number of claims that relate to that period of between one and two years of employment.
Unfair dismissal has been a feature of UK employment law since 1971. There has always been a prescribed minimum period for which an employee must have been working for an employer before qualifying for the protection it affords. The length of that period has been changed several times and I am sure that some hon. Members will remember participating in previous debates on that subject.
When unfair dismissal was introduced in 1971 the qualifying period was two years. It was reduced to six months and then increased to one year in the 1970s. In 1980 it was extended again from one year to two years, but only for employers with fewer than 20 employees. Two years applied in all cases following the coming into force of a statutory instrument in 1985. Finally the qualifying period was amended to one year in 1999, and there it has stood since.
To grow and hire staff, employers must feel confident about recruiting, and about having an opportunity to determine whether a new staff member will be the right one for their business without undue fear of an employment tribunal.
Norman Lamb: Let me finish this point. The Government are taking a range of measures to reduce the number of tribunal claims and cut employment red tape to stimulate recruitment. That is in the interests of everyone, and I am sure that all members of the Committee would agree that we should be doing everything that we can to encourage employers to take on more staff.
Norman Lamb: Let me finish this point. We believe firmly that the extension of the qualifying period is an essential component of this package. Business has consistently told us that current dismissal rules and the one-year qualification period generate reluctance to take on new staff. In their responses to last year’s “Resolving workplace disputes” consultation, a clear majority of businesses and business representative groups were in favour of the move to extend the qualifying period. They have told us loud and clear that a year is not always long enough to be certain that a new employee is right for their organisation, especially when staff are inexperienced in the workplace, or when roles require a high level of training.
Norman Lamb: Let me finish my point. Too short a qualification period can be detrimental for all employees. Employers sometimes feel compelled—I have made this point already—to dismiss someone after nearly 12 months. I know of countless examples of employers who have dismissed someone before the 12-month qualification period was up, rather than keep them beyond a year and risk facing a claim to an employment tribunal. It is the law of unintended consequences because a law that was designed to protect people in their employment ends up with people being dismissed before the qualifying period is up. We need to provide both employers and employees with sufficient time to get the working relationship right.
Mr MacShane: This one-year qualifying period has been in operation for 20 years during which time we have had peaks and troughs of unemployment. At the moment we have high levels of unemployment. There is no causal evidence or connection between this measure and increases in employment. Does the Minister have the guts to admit that this is a shabby gift to the most reactionary right-wing employers? The CBI and the British Chambers of Commerce are against it, and this attack on working people in our country has, of course, been implemented by a Liberal Democrat.
John McDonnell (Hayes and Harlington) (Lab): We cannot legislate by anecdote. The Minister needs to read his own impact assessment which shows that those hardest hit will be the youngest. He looks to the Institute of Directors but that is 51% of a survey of only 1,100 firms. Perhaps we should take advice from the chief economist at the Chartered Institute of Personnel and Development, which deals with industrial relations. To quote John Philpott:
“If you look at the evidence on unfair dismissal, I mean there isn’t actually anything to suggest that watering down those rights would create any more jobs and indeed the job insecurity it would create would actually be bad for the economy and businesses.”
The hon. Gentleman can ignore that evidence and the anxiety of employers over the risks of taking on new employees, but we should be listening to what employers have to say about what is putting them off taking on new staff. To give youngsters opportunities in the workplace, we should encourage employers to take them on.
Our aim is a flexible and fair labour market. I do not want any return to a hire and fire culture. I absolutely take the view that the best employment practice is to recruit well, train staff and invest in them to make them productive, but we have to listen to the anxieties of employers and what is putting them off taking on new employees.
Day one rights are unaffected by extending the qualifying period. Employees will be able to challenge their employer over discriminatory behaviour at any time. There remains no qualifying period for an employee to raise a claim if they have been unfairly dismissed due to their race, gender, sexual orientation, age, disability or religion or belief. Those protections also apply to the recruitment process. There is also no qualifying period if an employee has been unfairly dismissed for asserting their statutory rights such as access to the national minimum wage or paid leave.
Mr Watts: I am grateful to the Minister for giving way. What does he think will happen when a poor employer, which is what I think that most of the people he quotes are, pays their wages below the minimum wage and asks their staff to work longer? Does he think that many of those staff will complain if they feel that they have no protection under law?
Norman Lamb: As I already explained, the protection from day one remains for any claim in respect of discrimination or for automatically unfair dismissal. That continues to apply from day one of employment, so those vulnerable employees will remain absolutely protected.
Mr Sam Gyimah (East Surrey) (Con): Presumably, employees also have contractual rights that they sign up to when they are employed by a company or organisation. When it comes to complaint, not only do they have the protections in law that the Minister outlined from the recruitment process, but what is in the contract signed in the first place.
Norman Lamb: It is certainly the case that under contract law the contract of employment is entirely separate from statutory protections from unfair dismissal. Together with the day one rights I referred to on discrimination and the statutory unfair dismissal rights, employees also have rights under their contracts. That is absolutely correct.
The Chair: We have until 6 o’clock to debate the motion. Many Opposition Members have taken the trouble to be here, and I know that they are not all on the Committee, but I would like to call everyone, so I ask Opposition colleagues to bear that in mind.
Paul Murphy (Torfaen) (Lab): This is a mean and spiteful piece of legislation, and I have seen a fair bit in my time in this House. What particularly irks me is that a Liberal Democrat Minister and Secretary of State have introduced it. I always thought that the Minister’s
Ann McKechin (Glasgow North) (Lab): My right hon. Friend’s observation is absolutely correct. Does he not share my concern that the Minister has produced no reasoned or specific argument, as we would expect from someone who is qualified in law, as to how many additional jobs will be created as a result of this measure? Instead of talking about anxieties, he needs to talk about hard evidence.
The other issue is that if people are prevented from going to employment tribunals by this change in the law, the chances are that they will use other ways to ensure that their case is heard. Let me give the example of a Welsh sheep farm. If a farmer has a pen of sheep on a hill, and the sheep try to get out of the gate, he will block it. The sheep will still be disaffected, but they will try to find another way out. In the case we are debating, the other way will be discrimination laws, which are much more complex and much more costly to deal with. If people are prevented by the existing fair legislation, they find another way through.
Katy Clark (North Ayrshire and Arran) (Lab): Does my right hon. Friend agree that we have been through all this before? In the 1990s, the then Government made exactly the same arguments. They said it was necessary to raise the qualifying period to two years to promote job opportunities. They tried to demonstrate that in court in employment law cases, such as Seymour-Smith, but the court said there was no evidence that that was what happened.
Paul Murphy: That is a powerful argument. Like other members of the Committee, my hon. Friend knows that a Conservative Government introduced the original measures in 1971, when Edward Heath was Prime Minister. It surprises me that a Liberal Democrat Minister is trying to be even more right wing than Ted Heath was all those years ago.
The other way people will try to find their way out of this pen is through public interest disclosure cases. That is another, more costly and more complex method by which people who are aggrieved will want to ensure that their grievances are dealt with. I have just two other small points to make, because I know other Members want to speak. The Government believe that something
Tony Lloyd (Manchester Central) (Lab): On those 4,000 cases, would it not have been more convincing had the Minister given the Committee the proportion of cases the employer had won and the proportion they had lost? For every one the employer loses, there is an employee who will, in future, be treated unjustly as a result of the absence of such access to justice.
Finally, I have searched in vain for a manifesto commitment for this change—certainly from the Minister’s party. I rather suspect that many of his grass-roots colleagues at his party’s conference last week would have been aghast at this piece of legislation, and I hope the Committee will turn it down.
Lilian Greenwood: Does my right hon. Friend share my concern that the Government are introducing this measure because they are embarrassed and because it provides a smokescreen for their dreadful mismanagement of the economy? When their very own small business barometer, which was published in October last year, asked small and medium-sized enterprises about the main obstacle to success, SMEs said it was the state of the economy that prevented them from taking on new employees, and employment legislation came way down the list. Should the Government not be tackling their mismanagement of the economy, rather than picking on vulnerable workers?
I believe that this is just the beginning of an attack on employment tribunal services. We will see that later on with regard to the issue of lay membership of employment tribunals. Of course, we have now finished the consultation period with regard to fees. I suspect that if the fee-charging arrangements are brought in, as the Government want, that will be another blow to employment tribunals. It is a great shame.
Mr Andy Slaughter (Hammersmith) (Lab): Is it not actually part of an attack on the whole of access to justice? We have seen what the other place thinks about the Legal Aid, Sentencing and Punishment of Offenders Bill. Hopefully, it will overturn the provisions on employment law too. We are seeing fees imposed on all types of tribunals in this way. It does not matter how the Government dress it up—this is about stopping people getting justice and getting access to the courts, particularly the most vulnerable people. Younger people, ethnic minorities and women are disproportionately discriminated against by these proposals.
Paul Murphy: I accept that. It is part of a general picture of an attack on the employment tribunal system, but it also affects the most vulnerable people in society. I hope, as quickly as possible, that the Minister and his boss will disengage themselves from these extreme right-wing policies.
Ian Murray (Edinburgh South) (Lab): Thank you very much, Mr Amess, it is a great pleasure to serve under your chairmanship. I am actually quite glad that you did not call me first, because my right hon. Friend the Member for Torfaen has made many strong points. It can be seen, from the strength of feeling on this side of the Committee, that there is at least one party in this Parliament that is standing up for the workers. It will come as no surprise to you, Mr Amess, that we oppose the changes.
Today is a watershed in this Parliament. As we can see from the Annunciator, the Government are having to defend their Health and Social Care Bill in the Chamber, and we in the Committee are trying to defend workers’ rights. We are not just defending those affected by these provisions—every single one of the 29 million people who work in the United Kingdom is affected by these changes. The Opposition recognise that we need to look at reforming employment law, but that has to be done working with business, charities and trade unions, and, most importantly, with the evidence to back it up.
It is clear from what we are hearing this afternoon that taking away the employment rights of low-paid and vulnerable workers is no substitute for a proper strategy for economic growth. The reason that growth is flatlining is not because of the UK’s unfair dismissal regime, but the failed economic policies of the Government, which are cutting spending and raising taxes too far and too fast, locked into a narrow mindset of old orthodoxies of the Conservative past.
Do not just take that from me, however. The Secretary of State himself has already said that the UK has a relatively flexible labour market, with a good balance between rights and flexibility. I am not sure that the Minister, in his opening contribution, actually believes what he has just said. He should know about that balance, as he was an employment lawyer before he entered Parliament. He wrote a book—a very useful
The Minister himself has said that we need a system that offers protection to people when they are unfairly treated, but which does not disincentivise employers from taking people on. These proposals will do exactly that, and will disincentivise employers from taking people on. I will tell the Committee why. The most damning assessment of the change is that there is no objective evidence that employers will be encouraged to hire more after the qualifying period increases.
Mr Donohoe: I was watching to see whether any of the Minister’s advisers would give him the evidence that I sought in my question. Does my hon. Friend have such evidence? It is nowhere to be seen, because it does not exist. I did an exercise, although it was limited: I went to three tribunal offices and asked them to give me the number of cases that took place between one and two years. The figure was within one dozen. Does that not suggest that this is all to do with politics and has nothing to do with the reality of the situation, which is about protecting people?
Ian Murray: My hon. Friend is exactly right. Indeed, back in 1999, when the qualifying period increased from one year to two years, the Labour Government managed to generate 1.75 million extra jobs, so it certainly was not an impediment to job creation at that point.
Tony Lloyd: Does my hon. Friend agree that if the problem is not that employment tribunals are a genuine disincentive but that there is a certain perception among employers, it would behove a decent Government to get out there and do the work of saying to employers that they should not fear the measures? Is not the Minister’s real problem the fact that he was once a hired hand for those who paid him as a lawyer and is now a hired hand for the Conservative party?
Ian Murray: I could not agree more with my hon. Friend. Some of the research published in the process flies in the face of what the Government are trying to do. Indeed, the Department’s own research flies in the face of what the Government are trying to do. The Department confirmed that most employers do not perceive the current level of regulation as a major constraint on growth.
We have heard that the small business barometer published only four months ago asked 500 small and medium-sized enterprises about the main obstacle to success. Unsurprisingly, the state of the economy was the biggest obstacle, at 45%. Obtaining finance was the next, mentioned by 12%. Then came taxation, cash flow and competition. Just 6% of SMEs responded, listing regulation—and not necessarily regulation in the employment sector. The Minister’s response to my hon. Friend the Member for Central Ayrshire shows that the Department’s own evidence flies in the face of what the Government are trying to achieve in the order.
The Government’s other argument is that change is necessary due to the large increase in employment tribunal claims. Again, that is not supported by the Government’s own evidence, which shows that there was an 8% fall in employment tribunal claims from 2009 to 2011, and that the figure has fallen further this year. The figures on the Ministry of Justice website are quite clear. The figures used by the Government to demonstrate the significant rise in tribunals involve multiple claims, mainly concerning equal pay and the working time directive, not unfair dismissal. Clive Howard, a senior employment partner at Russell Jones and Walker, said last month:
“If you strip away the group actions, the number of claims that are going through and that are settled is pretty consistent with what one would expect in terms of the economic cycle. I don’t think there is any critical need to reduce the number of claims.”
Mr MacShane: My hon. Friend is making a devastating and rational critique. He is probably too young to remember the trade union legislation of the early 1980s, which was justified to a certain extent, in terms of secret ballots. Many of us accept that now, when there are ballots to elect union leaders or to go on strike. The order has nothing to do with trade unions. It is directed at the individual—the citizen. It is stripping away from our fellow citizens a right—not, perhaps, the most vital right—to no evident end except the pleasure of reactionaries in our country. It is the individual we are defending here; it is money-power that the Conservatives are promoting, with the help of the Liberal Democrats over there.
Mr Gyimah: It is a cheek for the right hon. Member for Rotherham (Mr MacShane) to question the motives of Government Members, when one of the principal reasons for so many Opposition Members attending this debate is their concern not for the worker, whom the order will help into work, but for their union funders.
Yasmin Qureshi (Bolton South East) (Lab): On a point of order, Mr Amess. I ask the hon. Gentleman to withdraw his comments suggesting that everyone is here because of the unions. As a lawyer, I used to represent individuals in employment tribunals. I want an apology.
Ian Murray: If the hon. Member for East Surrey thinks that union funding has anything to do with Opposition Members being here in strength today to defend the ordinary working person of the United Kingdom, he should hang his head in shame. Perhaps he should go and find something better to do for the next hour and a half.
“If you look at the evidence on unfair dismissal, I mean there isn’t actually anything to suggest that watering down those rights would create any more jobs and indeed the job insecurity it would create would actually be bad for the economy and businesses.”
“The Government’s assertion that the increase in the qualifying period to two years will increase economic growth is, in our view, without foundation and we can find no evidence to support this assertion.”
Mr Gyimah: The hon. Member for Edinburgh South just read out BIS’s evidence, which states that it is difficult to quantify the impact, but such a difficulty does not constitute an attack on workers’ rights, of which he is accusing the Government.
Ian Murray: I am not sure I understand the question. BIS is putting together an increase in the qualification period for unfair dismissal based on an impact assessment that states that it cannot quantify the impact such an increase will have on business growth. The Minister’s entire argument a few moments ago was that this is all about being able to hire and business growth. Those are not my words; they are the Minister’s words.
Ian Murray: I am going to come on to that, because it is one of the unintended consequences I was about to mention before the intervention. The Minister spoke of the law of unintended consequences, and there is a danger that changing the qualification period could have considerable unintended consequences, which might
First, the change is likely to lead to an increase in the number of discrimination or whistleblowing claims. Employees and their advisers will inevitably consider what alternatives may be available following a contested dismissal between one and two years of employment. Many claims that would previously have been issued as unfair dismissals will likely be brought as discrimination claims, because, as the Minister has already told the Committee, the qualification period for such claims is from day one.
The nine protected characteristics—age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation—are set out in the Equality Act 2010, although the Government’s proposed red tape challenge poses the question whether that Act should be scrapped. However, at the moment, those are the protected characteristics.
The CIPD has stated in its submission to the “Resolving workplace disputes” consultation that evidence from its survey suggests that employees are increasingly bringing claims linking unfair dismissal with discrimination. The evidence seems to suggest that, because basic unfair dismissal claims are capped, people bring a claim for discrimination, which is uncapped. All you have to do, Mr Amess, is jump on the Jubilee line and go out to some of the top legal firms in Canary Wharf, and they will tell you that, when representing some of their high net-worth clients in the financial sector, they have to bring discrimination and whistleblowing claims because the cap on unfair dismissal means that it is hardly worth them bringing a claim at all. That is exactly what will happen with some of the protected characteristics.
Ian Murray: I am not suggesting that at all. I am suggesting that, if the qualification period is taken from one year to two years, people who for example fall into one year and six months, for the sake of argument, will phone up a lawyer—perhaps even a lawyer from the Minister’s previous firm, which he writes so warmly about in his book—and say, “I have been unfairly dismissed by a rogue employer. It’s a disgrace, and I would like to make an unfair dismissal claim.” Any decent lawyers worth their salt will reply, “You can’t under this legislation, but are there any protected characteristics that you could bring a claim under?”
Let me give some anecdotal evidence. A senior employment lawyer in this country is Welsh. He has none of the protected characteristics that we might think of—he is a middle-aged white male, so he falls into none of the categories. He is, however, Welsh, so as a matter of interest he takes a note of every time someone slags off the Welsh rugby team, the Welsh football team or anything to do with Wales. He has built up a booklet that is about an inch thick, so he has his protected characteristics in terms of discrimination. A lawyer worth his salt will push a potential client down the road of a discrimination case.
Mr Watts : Is the proposal not likely to lead to employers getting themselves into all sorts of problems? At the moment, they normally take legal advice if they dismiss people, although some firms, such as those employing fewer than 10 people, do not even have to explain why they are sacking an individual. Therefore, is it not likely that they will do things that might lead to complicated legal cases at a later date? Rather than help employers, the proposed change might make things worse.
Ian Murray: I am grateful to my hon. Friend, because he highlights the question posed by the Minister about whether there is any evidence that the change would promote less employment. There is a case for saying that, because of those expensive discrimination cases.
Norman Lamb: My question was whether there is any evidence. The hon. Gentleman’s own party has been strong on challenging us about the evidence for the change resulting in more people being employed. I put a challenge to him and his party: is there any evidence that he can produce before the Committee that the step that we are taking will result in reduced overall employment? It will give opportunities to people who are currently out of work.
Ian Murray: If the Minister wants to give me his salary, I will be happy to accept it. I tabled a parliamentary question asking whether the Department had made any assessment of the evidence on whether the change of the qualification period from one to two years would increase discrimination claims. The answer came back that the Department could not do that research and had no answers.
“While employers will face reduced exposure to unfair dismissal claims, they face increased and more time consuming complaints of automatic unfair dismissal and unlawful discrimination as a result of the extension of the qualification period.”
Major private law firms that represent some of the UK’s largest employers also agree that employees will look for a legal avenue to address the wrong that they perceive that they have suffered. That is what I was talking about.
Ian Murray: The Minister chunters from a sedentary position about no evidence but he is in a Government who are trying to change the qualification period for unfair dismissal without a scrap of evidence. I have papers on the table before me giving all the evidence why he should not make the change, so it is up to the Minister to bring evidence before the Committee, rather than challenging the shadow Minister to provide evidence of whether the proposal will reduce employment. I have said clearly what, owing to the qualification period change, the perception for employers could be. If an employment decision is marginal, they might decide not to hire because they are more likely to end up in an expensive, potentially reputationally damaging discrimination case, rather than in one for unfair dismissal.
Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con): I am struggling to come up with some intellectual coherence in what the hon. Gentleman is saying. On one hand, he is saying that it is important to protect workers’ rights and, on the other, he wants to cap—as he said earlier—payments made available to workers in compensation. Why is he in favour of that cap?
Ian Murray: The cap is already in place. [Interruption.] Everybody is chuntering from a sedentary position. Perhaps I might be allowed to answer the question. The average unfair dismissal claim is some £7,500 anyway, so the most vulnerable and lowest-paid workers are protected by that cap. My point is that unfair dismissal in terms of discrimination is already used by high net-worth employees, because the cap is in place. For them to break through that cap to get the compensation that they feel that they deserve in an unfair dismissal claim, they have to go down a different route.
Norman Lamb: The shadow Minister claims that, without the potential to claim unfair dismissal, smart lawyers will automatically encourage clients to claim discrimination. Does he not realise that that is what lawyers do anyway and that, if there is an unfair dismissal claim, they will always pursue a discrimination claim as well if there is any evidence of discrimination having occurred?
Ian Murray: If the Minister genuinely believes that, he should tackle that culture in the system rather than tackling the workers who go into the system. It says that in the Minister’s rather good book, so I will take his word for it.
The second unintended consequence is that changes to the right to claim unfair dismissal are likely to have a damaging effect on work force morale, productivity and job security. Undermining job security for employees is
Ian Murray: The hon. Lady is correct. Business confidence is important, but there is not a shred of evidence to suggest that these changes to unfair dismissal will help business confidence—[Interruption.]. Every person—
Ian Murray: Perhaps if the hon. Lady lets me get through some of the contributions, she will find out that we have had a word with business. Some of the top employment lawyers in the country who are dealing with some of the top employers have given us some of this information. A spurious Institute of Directors survey of 1,100 of its members, while a respectful survey that we should all look at, is hardly evidence to change the qualification period for 29 million workers.
Katy Clark: My hon. Friend has demonstrated powerfully the lack of evidence about why this change would have any impact in terms of job creation. Has he considered the situation internationally? Many academics have considered it and, again, there seems to be no link between employment protection legislation—unfair dismissal legislation in particular—and levels of employability.
Ian Murray: My hon. Friend makes the most powerful point of the debate, because the UK currently has the third most liberal employment regulations in the world. Let us consider countries with stricter and more stringent employment regulation, such as France and Germany—Germany’s economy is doing far better than the United Kingdom’s, which perhaps goes back to the crux of the matter and why the Government are doing this in the first place. I want to make some progress, because I know that other hon. Members want to speak, but I give way to my hon. Friend.
Tony Lloyd: My hon. Friend is making an excellent speech and is generous in giving way. Have not we come to the nub of the question now? He makes the valid point that employers do not regard this as a serious issue in terms of employing people, yet Tory Back Bencher after Tory Back Bencher is urging the Minister on in this direction. Does not that show their prejudices, rather than the reality of the situation?
Ian Murray: My hon. Friend makes two valuable points, the first of which is that employment law and regulations in this country mainly affect small and medium-sized enterprises in terms of business confidence. We know from the Department for Business, Innovation and Skills’ own figures that only 6% of SMEs said that regulation was a burden when taking on staff, and indeed they were talking about general regulation, not just employment regulation. His second point is also valid, because the tension between BIS and Downing street on these matters is there for all to see. I am not sure that the Minister believes a word of his opening remarks—indeed, his description in The Daily Telegraph of changes to employment legislation as “crazy”, before his appointment as a Minister, probably highlights what he thinks.
That is a critical aspect. The changes will disincentivise employers to deal with underperformance early and therefore fly in the face of the Government’s aims to tackle disputes early and to foster good management relations. Working Families has commented on that, saying that the change
Citizens Advice has also commented. We should listen to Citizens Advice, which is at the forefront of such matters, with people coming through their doors seeking advice, so I should rather listen to what it says than take notice of the results of a small survey from the Institute of Directors. Citizens Advice says that
“Doubling the qualifying time for legal protection against unfair dismissal to two years will make the jobs of three million workers even more insecure than they are already. It’s nothing short of a charter for rogue employers.”
Fiona O'Donnell (East Lothian) (Lab): My hon. Friend is making a powerful argument, drawing on people’s experience and expertise that everyone must respect. Does he agree that it is absolutely intolerable that Government Members who stand up and praise their local citizens advice bureau, and a Prime Minister who described Citizens Advice as one of the finest organisations in the land, are ignoring what it is saying?
Jim Sheridan (Paisley and Renfrewshire North) (Lab): My hon. Friend is making an excellent speech. Does he agree with my observation that, coincidentally, almost all the occupants of the Government Benches in this Committee are new-intake Conservatives, and does not
Let me make a little progress. I know that others want to speak and I had promised to be quick. Let us consider the views of practitioners, in the form of the Law Society, which has been clear in saying that an extended qualification period may lead to employers engaging a greater proportion of their work force on short-term fixed contracts, contributing to a fragmentation of the UK work force and reduced stability and confidence of those in work.
Jessica Morden (Newport East) (Lab): Did my hon. Friend find it astonishing when the Minister tried to portray the measure as one that would help young people, when in fact it will have exactly the opposite effect and hit them hard?
Ian Murray: That is a timely intervention. When one of my hon. Friends made that point earlier, there was a great shaking of heads across the Committee Room, but that is a fact, and let us, unlike the Minister, present some facts.
Dr Poulter: This afternoon, the hon. Gentleman has presented the Committee with nothing more than a string of quotes from a string of different organisations without a shred of evidence to support them. Can he give the Committee evidence that vindicates his view that the measure is bad?
Ian Murray: The hon. Gentleman says that I have not presented a shred of evidence. The “SME Business Barometer” published in October 2011 by BIS—the Minister’s Department—stated that only 6% of SMEs said that regulation was an impediment to work. The impact assessment attached to the consultation document states that the impacts are immeasurable. Let me just give the hon. Gentleman some evidence about how the order will affect the most vulnerable: 59.2% of all employees aged 24 and under have less than two years’ service. He should go back to his constituency and tell such employees that the change will mean that they no longer have protection.
Craig Whittaker (Calder Valley) (Con): I wonder whether the shadow Minister is willing to come to Calder Valley, where manufacturing accounts for 20% of the local economy. Every week, without fail, every business and manufacturer that I go to see tells me that the big inhibitor for not taking on extra people is employment law. I challenge him to come with me to Calder Valley to meet employers who are not taking on new employees.
Ian Murray: That sounds like an offer that I cannot refuse, but the hon. Gentleman should visit the manufacturers in my constituency, who will tell him that the biggest impediment to growth is the Government’s disgraceful decision to take away their capital allowances and to give corporation tax cuts to the financial services industry. That is what is impeding manufacturers in this country, not employment rights, as he suggests.
To return to the labour force survey statistics for last summer, the extended qualifying period will particularly affect women who work part-time and employees from black and minority ethnic communities. I have some statistics and facts and figures for the hon. Gentleman. Some 1.4 million female part-time employees have less than two years’ tenure with their current employer, compared with 600,000 male part-time employees. In contrast, nearly 1 million female part-time employees miss out on unfair dismissal rights due to the existing 12-month qualifying period. Some 32 per cent of all black and minority ethnic employees in the UK have less than two years’ tenure—37% of Bangladeshi employees, 32% of Pakistani employees, 31% of black and African-Caribbean employees and 30% of Indian employees have worked for their current employer for less than two years. That highlights that the change merely hits those who have already been hit the hardest by this Government.
In the case of R v. the Secretary of State for Employment, the court looked at the qualifying period in 1999, after the change from two years to one year. It concluded that the qualification period was indirectly discriminatory against women as they are more likely to have less continuity of employment. Critically, the BIS impact assessment—a fantastic document, which the Minister should re-read—notes that disproportionate effects will be seen amongst young workers and, to a lesser extent, non-whites and females.
Norman Lamb: The shadow Minister is making a specific case about the indirect impact on women. Is he not aware that the impact assessment specifically finds that the gap in employment between men and women has reduced to almost nothing? The difference now is only 1%, so his assertion about a disproportionate impact simply does not stand up to analysis.
Ian Murray: I am citing information from BIS’s impact assessment and the labour force survey from summer 2011. If the Minister is saying that the gap has narrowed, does that mean that it is okay to move the qualification period, because men and women will be equally affected? That argument is full of holes.
My right hon. Friend the Member for Torfaen asked whether there is a mandate for change, and I do not think there is. There is no such mandate in the Conservative party’s 2010 election manifesto, nor indeed in the Liberal
Look at the battle that the Minister, his predecessor—now the Secretary of State for Energy and Climate Change—and the Secretary of State have had with Downing street. The Minister and his party do not believe that these are the right changes, and I wholeheartedly agree. BIS Ministers are being dragged kicking and screaming to make these changes by an agenda born in Downing street by Beecroft and not by BIS, and the Minister himself has publicly called the measure madness.
Let me conclude by emphasising that the change removes a right from nearly three million employees and affects every single employee in this country. It will cause more uncertainty and instability in the work place; have a disproportionate effect on vulnerable groups and women; and, as all the evidence shows, push employers into expensive, uncapped and potentially damaging discrimination cases. I will finish with one more quote:
“The majority of consultation respondents disagreed with this proposal. This included respondents from the legal community, unions and advice providers, who argue that the measure reduces employee rights and is unlikely to achieve its aims.”
The Chair: Order. The debate on the first order will finish at 6 o’clock and I propose to call the Minister at five to 6. I think that there are about eight Members who still wish to speak, and obviously I want to call everyone.
Sarah Newton (Truro and Falmouth) (Con): I had not planned to speak in this debate this afternoon, but as there was such a clarion call for evidence and I have some very good evidence, I have decided to share it with the Committee in the hope that the hon. Member for Edinburgh South is an honest gentleman who wants to make his decisions based on evidence, as he claimed this afternoon.
We have all received a great number of briefings on the subject and clearly this is an important measure. The hon. Gentleman is quite right to say that it was not in anybody’s manifesto. That is because we did not understand the scale of the deficit that we were left until we got into Parliament and had to read the famous words, “There is no money left.” [ Interruption. ] Given that so many people want to speak, I will make some progress. Of course we are faced with having to make a series of decisions that were not in anybody’s manifesto, to try to manage the current situation.
To return to what I was saying, we have all received a lot of briefings today, but of course one briefing that the hon. Member for Edinburgh South did not care to share with the Committee is the one we received from the CBI. We have heard much rhetoric this afternoon on the line that all business is evil and not to be trusted, but of course it is businesses that create the jobs that are so vital for our economy and that will get the hundreds of thousands of unemployed young people bequeathed to us by Labour off the dole and into work, so let us hear what the CBI has to say.
“A comprehensive package of reforms is needed to give firms the confidence to hire. While returning the qualification period for unfair dismissal to two years is not a silver bullet, it is an important step in that it provides firms with confidence”—
Sarah Newton: I am reading the evidence from the CBI, which I hope will help to give the hon. Gentleman the evidence he lacks. The CBI clearly says that the change will boost the confidence of employers, especially smaller firms. The briefing quotes evidence that small and medium-sized enterprises
Sarah Newton: I am reading the evidence submitted by the CBI, which the hon. Member for Edinburgh South chose not to quote. This is clear evidence in support of what the Government are doing. The CBI is the leading organisation representing employers in this country; its evidence must be listened to. Government Members are determined to do everything we can to ensure that people who are unemployed have an opportunity for a job. To ignore this evidence completely is to ignore the voices of tens of thousands of businesses across the country.
The Chair: Perhaps the hon. Lady will reflect on that point, but may I say to colleagues that I think she should be given a fair hearing? I am increasingly concerned that the Minister will be called to respond to the debate at 5.55 and there are still many Members who wish to speak.
I will conclude by saying that I am new to this House and I am absolutely appalled by how we have been referred to today, as though we have no regard whatever for the people who sent us here. My constituents are of great concern to me and I will act in their best interests. That is why I will support the order and take no lectures from the party that left us with the widest gap between rich and poor, the highest youth unemployment, and huge gaps between the wages paid to men and women.
Nia Griffith (Llanelli) (Lab): The exceptional turnout by Opposition Members to a Delegated Legislation Committee shows how strongly we feel about the subject and how much we care. Frankly, increasing the qualifying period for unfair dismissal is a completely unwarranted attack on workers’ rights, leaving ordinary people with no redress. We see ordinary people being targeted time and time again by the coalition Government. As my right hon. Friend the Member for Torfaen mentioned, we have had another consultation on charges, and given the way the consultation on the qualifying period has been totally ignored, one fears that that may be only a fig leaf. Indeed, the Government may be determined to press ahead with charging, which will make it even more difficult for people to press the case for unfair dismissal. All the cuts in legal aid will reduce the opportunity for redress, and there will not be fees even to begin the process of getting justice through the Child Support Agency. Such measures affect people’s rights to be able to get some sort of redress against those who are in a more powerful position.
The Minister has still not given us a real reason why the change is needed. The hon. Member for Truro and Falmouth told us that it was not in the manifesto because they did not know about the size of the deficit. I do not know where she had been since 2008. Frankly, I cannot see how UK employment law had any effect on causing the deficit. Does she not realise that that was more to do with banking practices?
Nia Griffith: A good deal of that is to pay for the people who are unemployed. If more people become unemployed because of the processes suggested here, the deficit will increase yet again. It seems that there is a smokescreen being thrown up: red tape is the cause of the problem and that is why we have no growth strategy.
As my hon. Friend the Member for Edinburgh South has just said, this way of tearing up employment legislation is a charter for rogue employers. Good employers welcome employment legislation. Good employers and strong trade unions—good representatives of the work force and good representative employers’ organisations—work well together, as we see in countries such as Germany.
Dr Poulter: Does the hon. Lady also accept that a lot of employers in my constituency involved in the food and drink industry, such as Gressingham Foods, treat their employees very well, but find it difficult to employ people for more than one year because of this sort of legislation? The contracts they sign up to often do not last for more than one year, so it inhibits them employing more people because of the nature of their business. What this measure is doing is encouraging the employment of more people.
Nia Griffith: I totally disagree. The reason employers do not take on more people is that their sales are not going up, and if their sales are not going up, they are not in a position to take on more employees. That is the fundamental reason why they are not able to create more jobs.
Mr Watts: Does my hon. Friend agree that there is always a balance in a civilised society between the need to have an enterprise economy and individual workers’ rights? We already have some of the worst employment legislation in Europe, so our people have fewer rights than those anywhere else in Europe. If we go down this street, does it not mean that people will not be able to get hire purchase agreements or mortgages or to plan their life because they cannot be sure that they will have a job in two years’ time?
Nia Griffith: My hon. Friend is right. The flip side of that coin is the fact that businesses say that this country is the best place in Europe to do business. When Labour left Government in 2010, we were the best place in Europe to do business and the fourth best in the world. It is certainly not the case that our employment legislation is inhibiting business.
The Secretary of State—oh yes, the coalition Secretary of State for Business, Innovation and Skills—says that he does not want to dent job security and consumer confidence. Well, by pushing this measure through, that is exactly what he will be doing. We must remember that it is the young and women who will be affected the most. That is because nearly 60% of people under 24 have not been in employment for two years, and women will be hit hard because they take breaks for children and for caring responsibilities, and sometimes they have to move because their partner moves, which very often means they have much shorter periods of employment with any one company.
Stephen McPartland (Stevenage) (Con): I thank you, Mr Amess, for giving me the opportunity to speak. Like my hon. Friend the Member for Truro and Falmouth, I did not intend to speak. However, I feel compelled to speak because of the heartfelt considerations being expressed on both sides of the House. I want to put it on the record that I am a large supporter of the union movement. Unions are a good vehicle for social change. I can see many Members wondering why I am sitting on the Conservative Benches.
Ian Murray: I am delighted that the hon. Gentleman has decided to speak in this debate. However, would he start his comments by saying that the extension of the qualification period from one year to two years has absolutely nothing to do with the trade union movement?
Stephen McPartland: I do not want to get into an argument over the trade union movement. The point is what is practical on the ground in my constituency of Stevenage and what is an ideological debate in this Chamber this evening. The most important thing for me is getting young people in my constituency into work. If I can work with the unions, the CAB and local employers to do that, I will.
The trade union movement as an entity does not actually exist in many of the small businesses that we are talking about. It is the small businesses in my constituency that interest me, many of which are family businesses that employ between 10 and 30 people. They will be helped by this legislation. I accept that Opposition Members do not believe that that is the case, and I respect that point of view. Getting young people into work in my constituency is important. What I hear from family businesses time and again is a very simple message. I know that all hon. Members believe that this is anecdotal, rather than real, evidence, but I have sat on several Committees where both sides have swapped evidence and surveys back and forth, which has no real impact on people on the ground.
My view is quite simple. Small family businesses say to me week after week that when they let somebody go and experience a tribunal, it is physically and emotionally exhausting for everybody involved in the firm, whether that is the owners or the employees. That is something that I want to try to change. They say to me that often it is not the tribunal, but rather the process that is wrong. I issue a plea for more guidance from the Government to small businesses, so that they understand exactly what they need to do to go through the correct process. There are lawyers on both sides of the House, but once the lawyers get involved, everything goes wrong.
Mr Watts: I am grateful to the hon. Gentleman for giving way and he is making a thoughtful contribution, but does he agree with an employer in my constituency who said that if an employer cannot tell after 12 months whether somebody is a suitable employee, they should not be in business?
Stephen McPartland: The hon. Gentleman, whom I know well, makes an important and thoughtful comment. I understand his point, but I do not want to comment on it, because how an employer runs their business is up to them. The small family businesses that I refer to are often run as family entities where people will pay way above the minimum wage and will work with the employees to make a success of the business.
“were based on limited evidence and would bring little benefit to employers or to the tribunal system while having a disproportionate and chilling effect on employees. In contrast, insufficient use is made of the range of judicial responses available—including practice directions—to deal with issues in the system. These would be far simpler to implement and far more proportionate in their effect”?
That is a quotation from the chair of the Administrative Justice and Tribunals Council, which is an authoritative and impartial body. Those are the sorts of people to whom we should be listening. I am afraid that what the hon. Gentleman is saying is as much of a red herring as what his rather more argumentative colleagues have said.
Stephen McPartland: I am afraid that that quotation sounds like it was said by a lawyer. I am more interested in listening to the family owners—[ Interruption. ] I understand the point that the hon. Gentleman is making, but I am sure that the guy who was in charge of the tribunal was a lawyer. I am interested in the family-owned businesses in my constituency, and I am not trying to make any political points today. I am simply trying to say that I am interested in getting young people in my constituency into work.
Small employers are saying to me that if we made it easier for them to take people on, they would have the confidence, which was what the right hon. Member for Torfaen was trying to say, to give kids a chance, so they would let one or two of them come through. From my experience in my previous life, I know that many people are concerned about taking people on and then having to make such judgments. The hon. Member for St Helens North mentioned “12 months”, but unfortunately employers do not get 12 months, because the process and everything else takes six months. All that the small family firms want to do is sit there, get their business done and ensure a positive environment for their employees. They are the firms that this legislation will do much to help.
Katy Clark (North Ayrshire and Arran) (Lab): Will the hon. Gentleman tell the Committee whether he held that view before he became a Member of Parliament? Does he accept the view of this side of the Committee that Government Members did not come to these policies over a short period of time, but rather that they believed in them when Labour had large amounts of people in employment and the issues were different?
Stephen McPartland: The hon. Lady tempts me to be political. I came to these views when I was growing up in my modest background in Liverpool and when I watched my father and others go on strike for many
Ann McKechin : I am grateful to the hon. Gentleman for giving way, and he is making a thoughtful contribution. Some Opposition Members who have actually been in business and been employers as well feel that he has made some important points. But he is talking about the process rather than the time period, which is what we are talking about today. I agree with him that there can always be improvements to the process, but does he share my concern about the cuts in the budget to ACAS, which is one of the mechanisms we can use to try to resolve disputes? That is detrimental to employers, particularly small employers, as much as it is to employees.
Stephen McPartland: The hon. Lady makes a good point. But let us go back to what some of her hon. Friends were saying about the most vulnerable workers. They would not go to ACAS. These people would go to the citizens advice bureau at the very most. That is about it.
Mrs Grant: I agree with absolutely everything that my hon. Friend has said. I remain a partner in a firm in Croydon. I am a joint owner. I employ 14 people and I remain very proud of all of my staff and the work that they do and the contribution that that practice makes to community life in the area. But the working environment has become far too litigious. It is horrible to operate in. It is horrible for employees. It is horrible for employers. We need to do something to reduce this negativity. I think this measure will certainly contribute towards that.
Stephen McPartland: My hon. Friend makes a very good point. I would like to make one final point as I know that another Member would like to speak after me. This is a combination of the timing and the process. It has to be two years to give the employers the opportunity. We must bear in mind the psychological impact on the employees who are working alongside the people going through these exit procedures. Finally, I should like to make an appeal. This is not an ideological argument. It should not be an ideological argument. It should be about trying to get more young people into work in our constituencies and giving them an opportunity.
John McDonnell : It is interesting that the hon. Gentleman is concerned for young people: 61% of young people will be affected by this. We have 1 million unemployed. They are the people at the sharp end of this legislation who will lose their protection against unfair dismissal.
No one has mentioned the consultation. A majority of respondents to the consultation were opposed to the measure. If we consult we need to listen. In addition the Secretary of State for Business, Innovation and Skills said that the British labour market
We need to understand where this proposal for protection came from in the first place. It came from the Donovan Commission in the 1960s and was implemented by a Conservative Government. The Heath Government introduced it for two reasons. The first was fairness. They said there was a disproportionately greater effect on the worker being sacked than on the employer sacking him. There are long-term consequences. Being sacked, no matter what for, has a knock-on effect when people go for their next job. The quote was from Carr, the Minister at the time. It is about fairness.
The second issue, as my right hon. Friend the Member for Torfaen said, is that people will find other means of redress. They will find other means through legal action and through industrial action. The measure was introduced to prevent industrial action, to resolve disputes by negotiation and conciliation and then resort to a rights-based system. The measure before us will provoke more industrial action and undermine the industrial relations climate. We have already had more strikes in the last year than we had over the last 15 years. This small measure may look insignificant at the moment but it will have fundamental consequences for industrial relations in this country and the rights of some of the most vulnerable workers in our community.
Norman Lamb: Let me try to deal with some of the points. First, this has nothing to do with Beecroft at all. The proposal came out long before the Beecroft report was produced. Reference was made to the question whether there was a mandate. The coalition agreement was very clear that the coalition Government would cut red tape and boost growth. The purpose of the statutory instrument is precisely that. A lot has been made of vulnerable workers. The most vulnerable people of all are those who are out of work. This measure will do a lot to help those people get into work.
Much has been made of whether there is evidence. We have been absolutely clear that there is evidence from the CBI surveys, the British Chambers of Commerce and the Institute of Directors that shows that the view of employers is that the current situation is a major impediment to taking on new staff. In response, there have been a series of quotes—particularly from the shadow Minister—from a range of vested interests,
John McDonnell: On a point of order, Mr Amess. One of the most frequent quotes from the shadow Minister was from the Citizens Advice Bureau. We should not allow a Minister to slander the CAB as a vested interest. I hope that he will withdraw that comment.
Norman Lamb: I made reference to the Law Society as a former member of that organisation. On the contrary, the measure will not have any negative effect on the total number of people employed. It will do precisely the opposite: businesses say that it will encourage them to take on more staff. The biggest negative impact on vulnerable people in this country was caused by the financial crisis that the previous Labour Government got us into. We are determined in this coalition Government to get us out of that mess. This is a measure to encourage companies to take on more staff. As my hon. Friend the Member for Stevenage rightly said, the purpose of the measure is to give people who are out of work—particularly young people—the opportunity for employment. The level of anxiety among small and medium-sized businesses about taking on staff is very real. The order will encourage companies to take on staff and I commend it to the Committee.
Katy Clark : It is a pleasure to have the opportunity to make a contribution to the debate. I know that the Minister has a background in this area. I, too, have to disclose an interest in that I have also worked as an employment lawyer. I suspect that many of the points made by Labour Members are very familiar to the Minister, particularly the issues surrounding the realities of what happens when people seek advice in a situation where they have lost their employment and the number of avenues that might be available to them.
The briefings that have been provided today put the number of people who would be affected by this decision at between 2.6 million and 3 million people. It would be helpful if the Minister could confirm whether he believes that that is the number of people who fall within this period of being employed for one or two years. One of Labour Members’ concerns is the lack of information that has been provided to the Committee today. Speaker after speaker on the Opposition Benches has talked about the lack of evidence. I call on the Minister to provide to the House and to hon. Members who have taken the trouble to come today—perhaps through the Library—any available evidence on the employment implications of this policy.
Norman Lamb: What I can say—I repeat this—is that only 4% of total employment tribunal claims relate to claims within this period. What may well happen as a result of the measure is that it will relieve the pressure
Katy Clark: I can confirm that I would be grateful if the Minister would provide that information to the House. If it has not already been provided, perhaps it could be given to Members who have taken the trouble to attend today.
It seems that no substantive evidence of any sort has been provided to show that the measure would have any significant impact on the number of people who would be employed in this country. The shadow Minister spoke at length and with a great deal of eloquence about the range of organisations that state in their submissions that they do not believe there is any evidence that the measure would make any difference to the number of people employed in this country.
The second order will enable employment tribunal proceedings relating to unfair dismissal to be heard by an employment judge sitting alone. It is the first step in proving the effectiveness and efficiency of the employment tribunal system under our “Resolving workplace disputes” package.
Norman Lamb: Let me make a little progress. The order will help us to deliver on our commitment to create a system that is fair for all, including both parties in the dispute and—importantly—taxpayers. Judges sitting alone is not a new idea in employment tribunals, and the general rule is that panels should consist of a legally qualified employment judge and two lay members who have experience from each side of industry respectively. Since the mid-1990s, certain categories of cases that have been set out in primary legislation have allowed an employment judge to sit alone at final hearings, including under the changes introduced by the previous Labour Government. Most recently, claims for holiday pay were added to that list following the 2007 Gibbons review, which found that in some cases,
As with the existing jurisdictions where judges could sit alone, the order establishes a default position that judges will sit alone in unfair dismissal cases. Judicial direction prevails, however, which is important. The order does not mandate the exclusion of panel members, whether in unfair dismissal hearings or otherwise, but it allows judges to determine independently, or at the request of either party, for the case to be heard by a full panel. The measure should not be seen as a ruse to banish lay members completely. Indeed, we anticipate that employment judges will exercise discretion to sit with lay members in a significant proportion of unfair dismissal cases. That is because of the characteristics of many such cases, and we know that employment judges value the role of members in many unfair dismissal hearings.
Yasmin Qureshi : As someone who has been on employment tribunals representing a claimant, it is good to hear that lay members will not be completely excluded within employment law processes. Is there any way of amending the order to ensure there is a lay element at all times when the substantive hearing is taking place—when evidence is called on whether someone has been unfairly dismissed?
Norman Lamb: I thank the hon. Lady for that intervention. The proposal is that the employment judge will have discretion so far as those substantive hearings are concerned. The employment judge will of course
We anticipate that judges will exercise their discretion in a significant number of cases, because we accept that lay members are valued in very many cases. As the previous Government found when they decided to add types of case to the list of circumstances where judges could sit alone, it does not appear to be necessary or appropriate in all cases. The measure simply allows discretion in a wider range of cases, so, where appropriate, full panels will sit.
I accept that the order is not without controversies. In “Resolving workplace disputes”, we asked consultees about extending the power of judges to sit alone to unfair dismissal hearings, and responses indicated that roughly two-thirds of consultees were opposed. There is also some apposite research, led by academics in the university of Greenwich and Swansea university, looking at the role and value of lay members in employment tribunals.
Norman Lamb: The purpose of the consultation is genuinely to find out what views consultees have. It is not the case now, and was certainly not the case under the Labour Government, that the purpose of a consultation is to do everything that a particular proportion of the consultees require. The Government have to take into account the views of consultees, but then have to make a proper judgment on all the evidence as well as the evidence of the consultation.
The findings of the university study, which are still to emerge fully, suggest support for lay members generally and in unfair dismissal jurisdictions specifically, and we agree with that. We value the role of lay members in the system, but we have a duty to consider the full range of evidence in front of us. There is nothing in the academic analysis published thus far that focuses on value for money, which is obviously an important consideration for any Government, particularly in the current circumstances, or seeks to break down unfair dismissal hearings in any detail to analyse characteristics that would lend themselves to judge-only determination or full-panel consideration. Nothing in the consultation responses we received persuaded us that objective, impartial and expert employment judges were not best placed to determine such cases most fairly in at least some instances.
In response to the consultation, lots of people pointed out that the presence of lay members was important. We agree with that, but the point is that the person best placed to make that judgment is the employment judge in the case, who will have, and continue to have, discretion to allow lay members in a particular case.
Katy Clark: The Minister will be aware that the whole idea behind establishing the employment tribunal system was to provide a less legalistic forum in which to resolve disputes. Does he agree that there will be concerns that this further step is yet another move towards the tribunals becoming a very legalistic forum? That is a sad step, if it is the case.
Norman Lamb: I suspect that the hon. Lady will be aware and agree that it has already become very legalistic. Many cases do not turn particularly on the facts of a case. Where facts are complex, it may be appropriate to have lay members, but where a legal judgment is to be made about how facts are interpreted in law, the legally qualified employment judge is perhaps best placed to make those judgments. It is a sad fact that the original intent of the employment tribunal—to be a layman’s court where disputes could be discussed in straightforward, plain English without the application of precedent law—simply has not been borne out by the experience of tribunals since they were established. I am sure the hon. Lady would agree with that point.
Ian Murray: I wonder whether the Minister can share any statistics—or write to me later—on the number of employment tribunal cases that have gone to appeal on the basis that the lay members disagreed with the judge, and then been won at the employment appeal tribunal?
Norman Lamb: I am afraid I have no evidence to provide. If we can come up with any evidence, I will be happy to write to the hon. Gentleman. The evidence I have seen is that in the vast majority of cases there is a unanimous decision of the panel. That perhaps again suggests that the potential value is not as great in all cases as we might imagine. It will be of great value in some cases, which is why we have retained the discretion.
Paul Murphy: Does the Minister not think it ironic that in one sentence he says that it is “regrettable” that the lay involvement in employment tribunals has declined over the years and the system has become more legalistic, yet at the same time he argues that fewer lay people should be involved? Is it not that it is all really about nothing other than cost?
Norman Lamb: Absolutely not. The point I am making is that, because it has become rather legalistic, there will be many cases where a legally qualified employment judge is the best person to judge the case. Most people who have experience of employment tribunals would see the logic in that.
Let me make some progress. We gathered a range of evidence that clearly supported our proposal. Various surveys—for example, from law firms Eversheds and
Norman Lamb: I can try to get further information on that before the debate is complete. However, I will carry on with the comments that I was making. The case for flexibility cannot be easily denied, particularly with the safeguard of judicial discretion still in place. That discretion will be exercised against well-tested statutory criteria. Together with the overriding objective for employment judges to deal with cases justly, it will ensure that the system works efficiently and fairly in practice, as it does now when judges already sit alone, just as in the range of cases that the previous Labour Government determined should be the case. I commend the order to the Committee.
Ian Murray: I am sure this order will be slightly less contentious and more straightforward. However, I asked at the beginning for these two statutory instruments to be split because the first deserved the attention it got in the hour and a half available. This matter is also important with regard to the way that employment tribunals operate. I hope the Minister and his officials will reflect on the fact that statutory instruments of such importance should be given their proper debate in this House. Indeed, if we possibly can, we will stop the practice of putting together statutory instruments of such importance.
The SI we are looking at concerns the role of lay members in unfair dismissal cases. My hon. Friends have asked about costs. Some 49% of the cost of employment tribunals goes to judges’ pay, according to the Government’s own figures in the employment tribunal fees consultation. Therefore, not having the justice of lay members on unfair dismissal cases should not be seen as a potential cost-cutting measure. We all want employment tribunals to come to the correct adjudications. It is important not just for case law but for business confidence, employee protection and the fair operation of the employment tribunal system. Some of the most complicated cases involve unfair dismissal, and lay members on those cases must be protected.
The Minister referred to research being carried out by Susan Corby, a professor of employment relations at the university of Greenwich, and Paul Latreille, professor of economics at Swansea university. Their preliminary findings were that 80% of employers value the role of wing members, particularly with regard to unfair dismissal cases. The experience of an employer and of a wing member representing workers gives the employment tribunal a balance that assists judges in making proper
According to employment judges, lay members’ most important contribution is to provide general workplace experience and give parties confidence, as decisions are reached by three persons, not one. The research to which the Minister and I referred involved sending questionnaires to all employment tribunal and employment appeal tribunal judges and all their lay members. Response rates were particularly high. As part of the study, interviews were held with those regularly representing parties at the employment tribunal and with organisations providing such representation. Interviewees mostly took the view that employment tribunal lay members’ workplace experience contributed usefully to decision making where the case involved factual issues, but that a judge alone was preferred where the case hinged on legal technicalities, as I think the Minister mentioned. He will be pleased to hear that we agree on some things.
That shows a large body of evidence to dispel the Government’s notions, without any recourse to evidence or argument, that the changes are necessary because people want them. I will quote from a few of the vested interests to which the Minister referred earlier, starting with Neil Carberry, the CBI director of employment and skills, who said only a few weeks ago:
“The Government should reconsider its decision that judges should sit alone in unfair dismissal cases. While it is appropriate in certain cases for judges to sit alone, lay members can add real workplace experience which is particularly valuable when it comes to unfair dismissal.”
“We are not convinced that employment judges should routinely sit alone in unfair dismissal cases. There is already concern on the part of employers that employment judges lack commercial experience or an understanding of…commercial life. The employer-member’s experience could be beneficial.”
Mr Watts: Is my hon. Friend as confused as I am that although the previous order seemed to be built on the idea that we needed to make the change because the Institute of Directors and the CBI thought it was a good thing, in this consultation, those two organisations think that the order is a bad thing, yet the Government continue to do what they planned to do before it began?
Ian Murray: That is a strong point. When I mentioned the Institute of Directors and the CBI, I expected a sea of interventions from Government Members. Equally, I am sure that if I mentioned the TUC or the Union of
Finally, the Institute of Directors takes a sensible approach in saying that judges could sit alone if both parties agree. The Minister might want to consider that compromise. Judges would not make a determination to sit alone; the two parties, claimant and defendant, would agree that the judge could sit alone. That might be a sensible way forward, but in the absence of any sensible compromise, we should stick with what we already have.
There is already a diminishing role for lay members in certain cases, and the Minister referred to that. Extending that to unfair dismissal would be a step too far. The CBI, the Engineering Employers Federation and that vested interest, Citizens Advice, as well as the trade unions, are all opposed to the move, and it is important that the Government get it right. The Minister said that he would review it, but he has given no time scale or framework for doing so. Will he tell us how he plans to review it, what the time scale will be, and whether he is willing to change his mind?
Paul Murphy: I will not detain the Committee, but the points that my hon. Friend the shadow Minister made were good ones. Opposition Members have been deeply impressed by the way in which he has argued the case over the past two hours.
This order is all about money, and that came through in the depths of the notes that the Minister read out. It has nothing to do with the efficiency or fairness of the courts. It is about saving money, which is not a bad thing in itself.
Paul Murphy: Yes, it was. I am sure that the Minister will be able to respond to my right hon. Friend and to the rest of the Committee. As the Minister alluded to, the purpose of the employment law that was established in 1971 by Edward Heath, who described himself as a one-nation Conservative—things are a bit different now—was to give employment tribunals credibility so that people in business, industry, and the trade union movement, as well as working people, would have the confidence to go to them, and not have to deal with technical legal issues. Such issues are dealt with by employment judges, sometimes sitting alone these days. The strength of the system lies in the experience and knowledge that people bring as lay members.
My hon. Friend the Member for Edinburgh South touched on a compromise, and perhaps the Minister will think deeply about it. We will undoubtedly vote against the order, but we will lose because the Government have a majority. The Minister hinted—he more than hinted, he said—that employment judges will have the final say on whether lay members go on to the tribunal,
I repeat the point that I made in the previous debate that this is a pattern of attack on employment law. This debate, the earlier one and the forthcoming one on fees will seriously damage industrial relations and access to justice, particularly for vulnerable people.
John McDonnell: Tribunal systems were established, as the Minister said, to try to avoid a rush to a formal court. They were established because they were a forum in which both sides of industry could explain to the sitting judge the individual elements that operated on the shop floor from the perspective of both management and trade unions. In that way, they could inform the interpretation of the law with the practical realities of the operation of industry in the workplace. That is why there was such overwhelming support—63%—in the consultation for the existing system. Both sides—the CBI and the Institute of Directors, as well as the trade unions that were consulted and the TUC—said that they worked together to ensure that the law was interpreted to reflect the reality of life in the workplace. I cannot understand why we are withdrawing that element of expertise from what could be a complicated area of interpretation of the law.
There is acknowledgement of that, as the Minister said, in the explanatory memorandum, which says that in those areas where we have allowed judges to sit alone, there has been strict interpretation of fact or the law, including unpaid wages, holiday and redundancy payments, and particularly internal relief applications, which are interpretations of the law itself. The Minister accepted that, as the report says, in fact-heavy cases it may be beneficial to have lay members present. To be frank, most of these cases are fact-heavy, because they are interpreted within the workplace itself. We may well be in a situation where the lay members continue to sit, but they will only continue on the whim of the judge. He or she will decide whether or not the lay members will sit.
If we took the approach of my hon. Friend the Member for Edinburgh South, which was to try to at least go down some form of consensual route to make that decision, that would be helpful. If we do not go down that route, however, we should at least set some criteria by which the judge will make that decision, otherwise it literally becomes the whim of that individual judge, depending on which side of the bed they get out that morning. We cannot just leave it to this subjective judgment. There have to be some objective factors that the judge has to consider before they make the decision to dismiss the lay members.
Norman Lamb: First, may I deal with the cost calculation. It is estimated that the minimal annual saving will be up to £140,000 a year. It is a small saving—it is not saving substantial sums of money, but it is none the less important. The Opposition conceded that any Government have to take into account how much a service costs.
Many references have been made to the value of lay members, and we agree that they certainly add something to the hearing of cases, particularly when complex facts are involved, as the Opposition have said. There are also, however, many cases which turn on fairly simple facts and where a point of law is the important issue to determine. In those cases it makes sense for an employment judge to hear the case alone.
The hon. Member for Hayes and Harlington mentioned the whim of the employment judge, but judges will make that judgment properly and objectively, and will consider a number of different criteria in determining whether the case should be heard alone. The criteria already exist in the cases that have been selected by previous Governments as those to be heard by a judge alone, so there is no difference. He could make the accusation that judges who sit alone in existing cases make judgments on a whim, but that is not based on the evidence of what happens. They judge objectively.
The case in favour of moving away from prescription by Parliament in imposing a particular model, towards giving the discretion to an employment judge to decide for themselves whether it is appropriate for a case to be heard by a judge sitting alone, is supported by a number of people who contributed to the consultation. I have already referred to surveys from Pinsent Masons solicitors and Eversheds. Michael Gibbons, however, who was appointed by the previous Government to undertake a review in 2007, said that the Government should review the circumstances in which employment judges can sit alone, to ensure that value is maximised. The coalition Government see the importance of value for money for the taxpayer in delivering services, whether it is an employment tribunal or any other public service. The Government have to ensure that the money is spent wisely because money does not grow on trees.
The academic research from Greenwich and Swansea included some interesting data. For instance, despite clear perceptions from judges and members that members add value in at least some unfair dismissal cases, the number of instances where panel decisions were anything but unanimous was very small. Across the entire sample, there were only 77 majority cases, and in 60 of them, one or other of the lay members was the dissenting voice. The survey covered 191 judges and 1,143 lay members, each of whom had sat on several occasions. The number of cases in which there is any dissent from within the panel is very small.
Ian Murray: I am grateful to the Minister for that information. However, does he not think that there is a great deal of consensus with regard to decisions because of the lay members’ input into the process, which allows panels to come to a properly balanced, judged and well researched decision? That is why there is consensus.
Norman Lamb: Just as the Labour Government made a judgment about extending the number of cases that could be heard by a judge alone, so this Government is making a judgment that that could be extended, with the absolute safeguard that the employment judge can determine cases in which there would be added value from including lay members on the panel.
The shadow Minister asked about a compromise. He suggested that the parties could agree to a case being heard by a judge sitting alone, but that has been the case since 1993. The parties can consent to a judge hearing the case alone, so there would be no change from the situation that has existed for a long time. We suggest moving away from prescription by Parliament. It is inappropriate or unnecessary to have a full panel in many cases. We want to put in the hands of the judge whom Parliament has decided has authority to hear the case the power to determine whether it is appropriate for a panel to hear it.
Ian Murray: I hope that the Minister is not saying that the proposal from the Institute of Directors is wrong. It said clearly that it was against removing lay members in the circumstances set out in the order, and it proposed the compromise. I am glad to hear that such compromises can already happen in employment tribunals, but perhaps the Government should consider providing guidance on whether they could happen more regularly. The Institute of Directors is against the provision. How does he respond to the institute, and why does he think that the measure will be good for business?
Norman Lamb: The case is not based on what is good for business; it is based on value for money, but the interests of justice are preserved because judges will have discretion to determine cases, just as they can determine other cases that the previous Government decided should be heard by judges sitting alone. The Institute of Directors made one contribution to the consultation, but other contributions supported the proposal. This is a fair and reasonable provision.
John McDonnell: The Minister said that there are criteria by which a judge will decide whether to sit alone. I ask this purely to get the answer on the record: are those criteria in statute, and so judicially reviewable by the claimant? Will the claimant be advised of the judge’s decision to sit alone, and be told on what basis that decision was made in relation to the criteria?
Norman Lamb: The criteria are not set out in statute; they are guidelines for employment judges to follow. I am told that the provision is section 4 of the Employment Tribunals Act 1996, which confirms the criteria that judges should apply in determining whether a case should be heard by an employment judge sitting alone or by a panel.
To conclude, the provision is fair and proportionate. Justice is preserved because the employment judge has discretion to decide to have a full panel in appropriate cases. The Government recognise and support the value of lay members in appropriate cases, but it is inappropriate to prescribe in Parliament that they must sit in every case. I commend the order to the Committee.