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Lord Archer of Sandwell: My Lords, perhaps the noble Lord would allow me to interrupt him. We are all in a difficulty over this because the scheme will be prepared by ACAS and not by the Department of Trade and Industry. Until ACAS is empowered to prepare the scheme, it is very difficult to predict what scheme it will prepare. Although I fully understand my noble friend's point, we are probably all in the same difficulty here.

Lord Wedderburn of Charlton: Yes, I did not want to make the difficulties even more difficult, but I shall do so. The problem in 1996 was that the scheme appeared to be outlined by the Government with the approval of ACAS, although it was not explicitly said to be the case. I understand that the Government may not wish to do that. I am asking for some informal, non-binding, tripartite document which suggests vaguely, better than the legal officers, some idea of what the scheme would look like. I put it to my noble and learned friend (who knows it very well as he helped to draft the Bill) that the 1996 scheme is based upon a text in the Bill which is not so different from the present one. I simply ask whether we are to look at that as a possibility or are we to be told, "No, that is out; it is something else and we shall tell you when the time comes"? I will be frank with my noble and learned friend: when we come to this matter in Committee, I shall suggest that there should be consultations with the department of state and ACAS at rather different and additional times to those required by the clauses.

It is fashionable and to a great extent true that "legalism" has overcome the tribunals. I do not believe that that has much to do with the introduction of lawyers--I must speak carefully because I am a lawyer. We all know plenty of legalistic barrack-room lawyers who are not lawyers, and we all know many lawyers whose great ability has been to put legalism aside and find a commonsense answer. One only needs to think of Lord Goodman, whose expertise in that direction was incomparable.

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To reverse the trend towards undue legalism research suggests that reform in procedure must be matched by reform in substantive law. Unfair dismissal is one area where we may put the lawyers out of the door; we may bring arbitration in; but we shall make little difference if we do not change the substantive law of what is the definition of an "unfair dismissal". The history of the French tribunals--the Conseils de Prud'hommes--suggests the same.

That is why I wonder about those who believe so strongly in the new arbitration scheme. I am not against it. It is rather like sliced bread. It is impossible to be against it in the form in which it stands in the present Bill. Experience of wholly voluntary arbitration which ousts the tribunals altogether (as Professor Dickens suggested in her work) is not a firm guide for a scheme which is, as in the Bill, legally-based arbitration. I mean by that arbitration which is within a structure, within a statute, based not merely upon the consent of the two parties. Legally-based arbitration is subject to the High Court by way of judicial review, if not in other ways. It may be necessary to ensure that the interpretation of the law by arbitrators--especially if it is open only to judicial review--does not diverge to the assumptions or interpretations of the law for those cases which have chosen to go the parallel route.

Although the arbitrator will concentrate upon the facts, nevertheless, no determination by an arbitrator can avoid a finding of the legal base of his or her arbitration award. In other words, we have two legally-based channels for disputes. A certain finesse must now be introduced if we are not to wait until we find that there is a clash between the two channels and depend merely upon judicial review. I do not have an answer. It may be worth spending the summer finding an answer to the possible clashes between the two legally-based ways of solving employment disputes.

Perhaps I may put forward two final points. First, the position of the employee as the weaker party is the constant care of legislation--that must be so--in relation to tribunals. But that makes even more important so-called compromise agreements where employees are allowed to abandon their rights in agreements with other parties. That is quite a new phenomenon; it did not exist before 1993 as compromise agreements. The Bill extends the notion of qualified compromise agreements, largely by removing the restriction on the advice which must be given being advice given by a qualified independent lawyer.

Most people will respond positively to that--they like ejecting lawyers from things. The trouble with the Bill is that it just leaves it at that. So long as the person giving the advice is properly insured under a contract of insurance or an indemnity provided for by members of a professional body (against his or her negligence, obviously) it seems that anyone can now give independent advice. I have made inquiries, and not only would that cover a suitable arrangement with union officials, which I take to be the object of this clause--it is sensible, if there is proper insurance, to have union officials who are very much experts in this subject giving advice--but it would also cover accountants, dentists and osteopaths being able to give independent

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advice. The prowess of dentists and osteopaths on points of employment law is not noted, at any rate so far as concerns the books on points of employment law. That is the first important area of compromise agreements.

Secondly, we find that deductions from compensation for unfair dismissal may be made when an employee has failed to make use of an in-house procedure. My noble friend has managed to shorten the clause by saying that a maximum of two weeks' compensation will be involved. But that may occur where an in-house procedure has been provided by the employer and the employee has not made use of it. When we come to Committee, I shall propose that that part of the Bill is unfair to employees. Except for a general jurisdiction of the tribunals, the test of whether it is a proper in-house procedure is merely the choice of the employer. The Bill says "provided by the employer". It should be the case that such in-house procedure agreements on unfair dismissal, if they are to be a ground for diminishing the compensation of an employee, should be negotiated with an independent trade union or there be in place some equivalent manner of testing its propriety.

Because of the special character and importance of my noble friend's Bill, I have dwelt on parts of it. I wished to give some idea of the points we should look at in Committee, but none of those remarks leaves me in any doubt but that your Lordships will wish to give the Bill unanimous approval on this, its Second Reading.

11.48 a.m.

Baroness Turner of Camden: My Lords, I welcome the intentions behind the Bill so ably introduced by my noble and learned friend Lord Archer. Of course, it is necessary that unfair dismissal claims should be processed more speedily than at present. As we heard, there is already a large backlog of cases waiting to be heard by industrial tribunals and the situation in regard to cases going to appeal is even worse.

There are reasons for that heavy load of cases. We are living through an era of destabilised employment. Unemployment figures may be reducing, but the lack of security for those in employment remains as great as ever. That is not only a product of globalisation and technology, although they play a part. The previous government made a virtue of so-called "flexibility". It may have been right for employers, at least in the short term, but not for employees. Constant downsizing was bound to lead to increases in the number of people who felt that they had been dismissed unfairly.

I do not subscribe to the view that there is now no alternative to the instability that is a feature of many working environments. It is socially unacceptable since it is hardly possible to create the conditions for stable family life without stable employment. Those are issues which the new Government will have to tackle--from a quite different philosophical standpoint, one hopes, than that of their predecessors. The Conservative Party does not yet realise the part that lack of job security played in their downfall; it had begun to affect people who hitherto regarded themselves as being in safe employment and who were largely Conservative supporters.

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Pending discussion of these vital issues, the noble and learned Lord, Lord Archer, is right to urge that something must be done to deal with the cases which have accumulated and to press for alternative procedures. The radical proposal is that unfair dismissal cases should be dealt with by a system of arbitration. As we have heard, industrial tribunals, when first established, were intended to be informal courts where individuals did not need to incur the cost of legal representation. However, as everyone knows--this was referred to by my noble friend Lord Wedderburn--the situation has rapidly changed and has become much more legalistic. Although, in my union, we preferred to have members represented by trade union officials who understood the working environment and the union agreements covering their terms and conditions, most employers chose legal representation. Many union officials, including myself, who represented members before industrial tribunals felt that we did very well because we understood the conditions which governed the way in which our members worked and the agreements we had negotiated.

Arbitration may be a better way of dealing with some cases of unfair dismissal. Certainly it should be speedier. The length of time, in most instances, spent awaiting hearings at industrial tribunals makes a mockery of the provisions in legislation for reinstatement. After a gap in time--even longer, of course, if the case goes to appeal--reinstatement simply ceases to be a realistic option even though it is within the powers of the IT and the EAT to award it. I was once a member of the Central Arbitration Committee. We did not consider individual unfair dismissals, but we did deal with a range of other disputes--I think effectively. However, the CAC was ultimately written out of most of the relevant legislation by the previous government who did not really like arbitration and favoured unrestrained employer power.

I understand the TUC believes that the simple arbitration process suggested in the Bill is suitable for straightforward unfair dismissal cases only. However, as we have heard, the Bill makes provision for extending by order the arbitration scheme to include sex, race and disability discrimination. Those can be very complicated matters.

I recently raised on a Question in the House the whole matter of the law relating to sex discrimination cases, particularly as it affects equal pay for work of equal value. There is a case for looking closely at the procedures in conjunction with the Equal Opportunities Commission. The Government have already indicated that they are prepared to do that. Race and disability discrimination may also present problems. I am therefore glad to hear that my noble and learned friend Lord Archer is seized of the difficulties here and is considering introducing his own amendment.

Clause 3 of the Bill appears to extend provision for chairmen to sit alone on cases. I am not too happy about that. The wing members not only bring to the consideration of cases a great deal of experience of industrial relations--that is why they are chosen--but make what I believe is an important contribution to the perceived fairness of the proceedings. I hope that what is proposed will receive careful consideration.

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I have some concern about internal appeal procedures. Some internal procedures have been unilaterally imposed by employers. They may not even be known to the employee until the employer seeks to claim that they should have been utilised. Or the employee may mistrust the procedures because he or she was not involved in their original negotiation and may regard the procedures as a piece of window dressing by employers, having no real validity. Employees could have their compensation reduced on the basis of an appeals procedure in which they had no real trust. I would like appeal procedures agreed with an independent trade union. It also seems fair that the employer should have to set out the appeal procedure in writing to the employee when issuing the dismissal notice, advising the employee of the legal consequences of failing to use the procedure. It would simplify matters if a statutory form of words could be used.

While on the matter of compensation, is it not time that we looked at the limits? The current ceiling of £6,300 for the basic award and £11,300 for the compensatory award means that the higher paid, long-serving employee may suffer extensive financial loss. Compensation for pensions alone could reach quite substantial sums. If there has been unfairness in dismissing an employee, the burden of that wrongful act should fall on the employer and not on the employee, particularly when the employee concerned may be in the older age bracket, perhaps with a long history of service, and unable to find alternative employment very quickly.

I agree with what has been said about the extension of compromise agreements. One of the unions has pointed out to me that it has some reservations about how the process works now and that it is very fearful of the emergence of freelance operators who present themselves as experts in this area.

The Bill could profit from amendment. On the other hand, I commend my noble and learned friend Lord Archer for bringing it forward. It is clear that something has to be done to deal with a long waiting list, a situation which is unfair to all concerned. I am glad that we are to have the opportunity to debate the Bill in Committee. We are fortunate that in this House there are many noble Lords who have great expertise. In particular, we shall, I am sure, benefit from the advice of my noble friend Lord Wedderburn, who is pre-eminent in this area. I welcome the Bill and look forward to having the opportunity to discuss it further in Committee.

11.56 a.m.

Lord Gladwin of Clee: My Lords, I must first declare an interest. I am a member of an industrial tribunal. I am also a member of the Employment Appeal Tribunal.

The right of an employee not to be unfairly dismissed was first introduced in 1971. The tribunals were seen to be the method whereby employees who felt they had been unfairly treated could get swift, informal and effective determination of their complaints. The primary remedy that we saw--I say "we" because as a trade union official I represented members before industrial tribunals--was the power of the tribunal to order the

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reinstatement of a worker who had been unfairly dismissed. As has been said, the reality today is very different. Informality has gone and there is a widespread use of lawyers. My experience is that employers still use lawyers when, frankly, the personnel director could do just as well. There is constant reference to case law made by superior courts--the Employment Appeal Tribunal, the Court of Appeal, the House of Lords and the European Court of Justice.

The main problem today is delay with regard to the length of time that can elapse between the registration of a complaint of unfair dismissal and its determination. Months can go by before a case comes before a tribunal. If the losing party decides to appeal, much more time elapses. Therefore, reinstatement is no longer an effective remedy. That is why it is used only in 1 per cent. of the cases that come before industrial tribunals.

Reinstatement or re-engagement--they have the same value--is an effective remedy only if it is awarded four to six weeks after the employee has been unfairly dismissed. It has to be done when the employment relationship is still warm. If it has gone cold and time has elapsed, it is no longer an effective remedy.

We are all familiar with the reasons for the delay. The workload has increased and it is still increasing. It is due to the widened jurisdiction. We now deal with sex, race and disability discrimination cases. Also there is the growing number of small businesses which seem to be unaware of employee rights and the need to have internal discipline and grievance procedures. I am bound to say that there is the unwillingness of governments adequately to provide the necessary resources to meet the growing caseload. Therefore, I welcome the Bill introduced by my noble and learned friend Lord Archer because it seeks to reduce the caseload.

I also welcome it because it could be the first step to reducing what I regard as the quite unfair and unjust requirement that a worker must have two years' employment before he can exercise his employment rights. We once had a commitment to those rights being established at day one. That is perhaps impractical, but we really ought to move to where we started, which was, after six months' employment, rights then become effective. I hope that the Front Bench will take note of that point.

As I said, I welcome the Bill, but there are a number of concerns, some of which have already been expressed. I welcome the proposal that ACAS should provide voluntary, binding arbitration to the parties to an unfair dismissal dispute as an alternative to going to an industrial tribunal. But I question--even with my noble friend's amendment which we shall see at Committee stage--whether at this stage or ever racial, sexual and disability discrimination cases are suitable for ACAS arbitration. I am not sure.

As I indicated, the remedies that are open to industrial tribunals are reinstatement, re-engagement and compensation. Reinstatement is going back to where you were the day before you were unfairly dismissed. Re-engagement has the same value as that award. I have had the experience where one has decided that there has

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been unfair dismissal, but to say to the employer that he must take the employee back in the position he was in was impractical. So the alternative is re-engagement, which, as I say, may be with an associated company or in a different place of work. But it has the same value as reinstatement.

However, in the Bill we have what seems to be a third remedy--or perhaps a fourth remedy--"or otherwise re-employed". If that is designed to give the arbitrator flexibility when making his award, I submit that re-engagement should suffice. It is dangerous to move away from the well understood remedies which are provided by the Employment Rights Act. I believe that those words should be taken out of the Bill. But we shall come to that at Committee stage. It is dangerous to drift away. The fear is that there will be an alternative remedy which could act to the detriment of the employee who has been unfairly dismissed.

My third concern relates to Part III, Clause 13 of the Bill. It is what I call the "fines and bonuses" clause. We have heard of it already in this debate. It gives the tribunals the power to penalise employees who have been unfairly dismissed by reducing the compensation by not more than two weeks' pay if they have not used the employer's procedure for appealing against unfair dismissal. That is the fine. Similarly, if the employer has prevented the employee from using his procedure, the tribunal can make a supplementary award to the employee of up to two weeks' pay. That is the bonus.

In my opinion this is a minefield. It will be most unwelcome to industrial tribunals. It will prove to be a nightmare for them. For example, what is "procedure"? All the evidence will need to be assembled to argue the case whether they went through the procedure or whether the employer prevented the employee from going through the procedure. There is already enough evidence that has to be amassed to deal with the argument about mitigating the loss where a compensation award is being made to an employee who has been unfairly dismissed. To extend that to an argument about whether he was prevented from using an internal procedure--all for two weeks' pay--is not worth the candle.

I believe that that provision should come out of the Bill. It does not address the problem. Many cases of unfair dismissal come before industrial tribunals because employers have no internal appeals procedure. This clause is silent on that. It relates only to circumstances where, allegedly, there is in place an appeal procedure. What is the penalty for employers where there is none? What is needed is encouragement for (or even a requirement that) all employers to have an internal appeal procedure which conforms to an ACAS code of practice. That needs to be looked at again.

My final concern is Clause 3 in Part I of the Bill which extends the categories of cases where the chairman should sit alone--that is to say, without the two lay members. In my experience chairmen welcome and benefit from the presence and participation of, as they are sometimes called, "the industrial members". Disputes over redundancy payments and the transfer of

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undertakings regulations should be heard by a full tribunal. These are issues which are best settled with the industrial members present because their knowledge and experience are vital. Chairmen should not be under pressure, as they are now, to sit alone in order to improve the throughput figures of tribunals.

I repeat my welcome for the Bill. I hope that before Committee stage discussions can take place on some of the issues that have been raised to make a good Bill even better.

12.7 p.m.

Lord McCarthy: My Lords, I also welcome this Bill on three counts. First, it is a good and commonsensical Bill. It tries to improve the speedy, effective disposal of disputes and, if it works, it will save public money. That makes a significant contrast to the Bills on industrial and labour relations that we have had over many previous years. That is my second reason. I hope that it marks the end of the dismal parade of anti-worker Bills, which I always called "The eight brides of Frankenstein", the best parts of which were for the most part dictated by European directives which the government did not want to introduce.

The third reason why I welcome the Bill is that for the first time since I have been a Member of this House I have a chance to declare an interest. I have always wanted to declare an interest. I cannot say that I am a lawyer, but I am an arbitrator and therefore I have an interest. If I say hard or difficult things about arbitrators, that comes from experience.

I have a number of questions which I shall fire at the noble and learned Lord, Lord Archer, and the noble Lord, Lord Haskel. I do not expect them to answer them all today. But I hope that they will think about them and that they might get in touch with some of us about them. I hope that they will tell us whether they find the questions acceptable in general terms in order to give us some idea of the sort of amendments that we might profitably move in Committee.

My first query is to indicate surprise that there is nothing in the Bill about the procedure for encouraging exemptions. The procedure goes back to the 1978 Bill. It is still there and yet, as we all know, only in one case involving the Joint Industry Board for the electrical contracting industry does the exemption procedure operate. I do not know why the Government do not put in the Bill or say in this House that they support the notion of the exemption procedure. It may be it is to be improved in various ways. But in a way it is a matter of common agreement between all sides of the House, because in the previous government's green paper, which has been frequently quoted, on page 25 they talked about the possibility of encouraging exemptions. They stated:


    "Another possibility is whether any change should be made to the arrangements (in Section 65 of the 1978 Act) under which dismissals procedures may by agreement be 'opted out' of the statutory provisions on unfair dismissal. Exemption from the unfair dismissals legislation currently requires the making of a designation order by the Secretary of State; and is subject to several safeguards".

The safeguards are then listed. Paragraph 4.29 then states--and this is absolutely true--that the performance standards (in the exempted procedures),

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    "represent considerable advantages, both for employers and employees, compared with the industrial tribunals".

That is what the previous Conservative Government said. The quotation continues


    "the Government suggests that the voluntary exemption procedure should be considered more widely by employers and trade unions. The Government has always taken the view that industrial disputes are best resolved by the parties concerned, without the intervention of the state. The evident success of the JIB voluntary procedure sets an example which, if adopted more widely, might produce considerable benefits".

That is unanswerable. I have operated within the context of the JIB voluntary procedure. It is standard form, if necessary, to award reinstatement and re-employment because there is speed and efficiency and because the people who operate that procedure know it very well.


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