Clause 3

Employment Bill [Lords] – in a Public Bill Committee am 10:45 am ar 14 Hydref 2008.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Non-compliance with statutory Codes of Practice

Photo of John Bercow John Bercow Ceidwadwyr, Buckingham

With this it will be convenient to discuss the following amendments: No. 11, in clause 3, page 1, line 11, at end insert—

‘(1A) In section 199 (Issue of Codes of Practice by ACAS) at the end of subsection (2) there is inserted—

(ca) discipline and grievance procedure, and’.

No. 5, in clause 3, page 2, line 2, after ‘with’, insert ‘the’.

No. 6, in clause 3, page 2, line 9, leave out ‘a relevant’ and insert ‘the’.

No. 8, in clause 3, page 2, line 10, leave out ‘that’ and insert ‘the’.

No. 7, in clause 3, page 2, line 19, leave out ‘a relevant’ and insert ‘the’.

No. 9, in clause 3, page 2, line 20, leave out ‘that’ and insert ‘the’.

No. 10, in clause 3, page 2, line 26, leave out from ‘(3),’ to end of line 28 and insert—

‘“the Code of Practice” means any Code of Practice issued by ACAS under section 199(2)(ca)’.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Although there are many amendments, they all do pretty much the same thing. They look at what constitutes the defined code of practice in dispute resolution. I shall consider some of the wider issues in the code in the stand part debate. I direct the Committee to the debate in the other place on this matter. Lord Bach, the then Minister, confirmed that six codes were currently issued under chapter 3 of the Trade Union and Labour Relations (Consolidation) Act 1992. By his own admission, the drafting of the clause was deliberately wide to allow for flexibility to cover other present or future codes.

While I agree that we have no interest in hamstringing ACAS, there is a need for certainty on this front. Employers are placed in a disproportionately burdensome position whereby they are forced to comply with broadly defined procedures. To prevent undue expense and time-consuming second-guessing of the legislative intention by employers, would it not be prudent to specify the relevant code from the outset as the ACAS code of practice on discipline and grievance procedures? Would that not be preferable to a definition that encompasses six separate procedures but expects compliance with only one? There is a need to give employers a clear, well sign-posted route for dealing fairly and efficiently with disciplinary procedures. It is a course of action that, for most, is a last resort. It benefits neither the employer nor employee to have an opaque legislative procedure, which leaves both parties in the dark. This is especially true given the financial penalties for non-compliance.

Photo of John Hemming John Hemming Democratiaid Rhyddfrydol, Birmingham, Yardley

We broadly support the amendment. When there are statutory codes and a process that people need to follow, clarity is greater and things are easier.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I thank the hon. Member for Huntingdon for the spirit in which he moved the amendment. My response is about future-proofing the Bill. The clause is important and goes wider than the subject matter of the amendments. I am sure that we will return to that on clause stand part. The clause is about the balance between content and merit, which I mentioned  in my opening remarks. It includes the capacity to vary awards based on the degree of adherence to the codes issued under it.

The definition of a relevant code of practice was, as the hon. Gentleman pointed out, discussed in the other place. A relevant code of practice is one issued under the Trade Union and Labour Relations (Consolidation) Act 1992, which relates exclusively or primarily to procedures for resolving disputes. The hon. Gentleman correctly said that there was more than one code. There are currently six codes, some relating to disclosure of information to trade unions for collective bargaining purposes and others relating to industrial action, picketing and so on. Those matters need not concern us here and are not covered by the clause.

Of the existing codes, the definition of a relevant code of practice in the clause would apply only to the ACAS code of practice on disciplinary and grievance procedures. I endorse what my hon. Friend the Member for Hastings and Rye said a few moments ago about the valuable work that ACAS does and its expertise in these areas. The clause will also allow the application of adjustment in the context of future relevant codes issued by ACAS or the Secretary of State under the 1992 Act.

The amendments would have two effects. First, they would tie the definition of “relevant Code of Practice” to a code on discipline and grievance procedure issued by ACAS and not the Secretary of State. Secondly, they would provide expressly in the 1992 Act that ACAS’s power to issue codes encompasses codes on discipline and grievance procedure.

On the first point, ACAS certainly plays a crucial and valuable role in the resolution of workplace disputes, as I have said. In my time as employment relations Minister, I have valued my working relationship with ACAS. That organisation is sometimes in a strange position because its successes do not reach the news. It resolves many issues without their spilling over into a wider problem of industrial relations. The drafting of the clause to refer to codes issued by ACAS or the Secretary of State is therefore not intended to belittle or downgrade the role of ACAS. However, under the amendments, it would not be open to the Secretary of State to issue additional codes if he or she so wished. While there is currently no intention for the Secretary of State to issue a code of practice under this provision, the power exists and the Government do not wish to exclude the possibility that it might be used. It would therefore not make sense for tribunals to be unable to take account of the provisions of such a code, were it to be issued.

We believe the second proposal to be unnecessary. Under section 199 of the 1992 Act, ACAS has the power to issue codes of practice as it thinks fit to promote the improvement of industrial relations. That covers the issue that we are discussing.

We believe that the first effect of the amendments would be to tie the hands of future Secretaries of State in issuing codes alongside the ACAS codes. The second effect is unnecessary. On that basis, I hope that the hon. Gentleman will not press the amendment.

Photo of John Hemming John Hemming Democratiaid Rhyddfrydol, Birmingham, Yardley

Does the Minister accept that employers and employees both need certainty and that the Department should be guided by that need when issuing guidance and identifying what is and is not relevant?

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I accept that clarity is needed for employers and employees. I do not believe that building in the possibility for the Secretary of State to issue a code detracts from that clarity. I have been quite clear that the code we are talking about in the Bill is the ACAS code.

Photo of Brian Binley Brian Binley Ceidwadwyr, Northampton South

May I add my expressions of pleasure at serving under your chairmanship, Mr. Bercow? It is always clear, with no confusion whatsoever, and we are grateful for that.

May I, too, question the Minister about simplicity? The Bill was originally intended to be a simplification of what is pretty complicated law for laymen to deal with. That is what matters. We are dealing in many cases with very small business people who cannot afford recourse to the law on such issues. They try to do their best, but find it a nightmare. The complication that we create in this law leads to a compensation culture, which is not healthy, especially for small businesses. Over the next two years, it will be particularly unhealthy because, as we all recognise, such businesses face massive strains.

Having represented my company in days gone by in three tribunals, I know how much the law has been misunderstood. I know also how effective ACAS is in helping with these matters, particularly in supporting both sides in such disputes. To complicate the law beyond that process seems to me simply to add further problems, not only for small businesses that deal with these matters from an employer side, but for employees.

I would like to make one further point. Employees often have recourse to Citizens Advice and receive legal representation as a result, but many employers are unable to do that. There must be a balance. Establishing one code of practice is an important part of that balance because everybody knows where to go. Everybody knows in the first instance that ACAS is the authority. To complicate that particular trend seems unhelpful. I urge the Minister to think again.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General 11:00, 14 Hydref 2008

I had intended the amendment to be probing, but I will have to go away and think further about it. Having heard the Minister, I am not totally satisfied. I always feel rather uncomfortable when I hear a Minister say that we need to legislate for what might need dealing with in the future, and that the Secretary of State might need such powers. I get the same chilly feeling that I had yesterday evening when I heard the Home Secretary say that she was going to put her draft Bill in the Library.

I agree with my hon. Friend the Member for Northampton, South. Businesses expect clarity. They will want at the very least a full explanation of what this legislation means for them. There is potential for things to be changed and for them not to hear about it, and to therefore be confused as a result.

Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art

Does my hon. Friend agree that in the present economic climate, it is even more important to be clear about what we are asking businesses to do and how they should change? The cost implications of those changes will not be inconsequential, at a time when most companies are struggling to survive.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

My hon. Friend makes an important point that I will use when discussing other aspects of the Bill. I thank him for making it now as it is relevant.

We will go away and think about this matter further. In the meantime, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of John Bercow John Bercow Ceidwadwyr, Buckingham

With this it will be convenient to discuss amendment No. 4, in clause 3, page 2, line 25, leave out ‘25%’ and insert ‘50%’.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

This is another probing amendment, which attempts to discover the Government’s reasoning behind the reduction in the power of employment tribunals to vary awards for non-compliance from 50 to 25 per cent.

The first question we must ask is whether this is yet another example of the Government tinkering with regulation unnecessarily. Section 31 of the Employment Act 2002 provided employment tribunals with the power effectively to punish employers or employees who failed to comply with the statutory disciplinary and grievance procedures. That Act enabled—indeed, obliged—employment tribunals to vary awards made to employees by anywhere between 10 and 50 per cent., depending on what they considered just and equitable. I confess that I am no statistician, but I have trouble seeing how reducing the maximum figure from 50 to 25 per cent. does anything other than blunt the teeth of the employment tribunals and reduce the scope for dealing with vexatious claims.

Furthermore, by reducing the penalties for non-compliance, could it not be said that the suggestion to employers is that compliance with the new ACAS code of practice for discipline and grievance is somehow less important than compliance with the previous code? In the other place, Lord Jones of Birmingham, then a Minister, stated that the power to adjust awards up and down was

“an incentive mechanism to encourage parties to follow good practice.”—[Official Report, House of Lords, 4 February 2008; Vol. 698, c. GC465.]

Furthermore, Michael Gibbons in his report recommended that there be an incentive to comply with the code. While I agree that those are laudable aims, I cannot help feeling that the incentive has had its legs cut from under it and become half the incentive that it could have been.

With that in mind, I ask the Minister two simple questions. What is the Government’s rationale for changing the figures? Secondly, why choose 25 per cent.? I am also curious as to how the Minister and the Government envisage employment tribunals enforcing a non-statutory, principle-based procedure for dispute resolution.

The 2006 consultation on the Employment Act 2002 stated:

“The Employment Tribunal Service will be able to monitor the number of cases where failure to comply with the procedural elements becomes an issue, including the number of cases where awards are adjusted because of procedural failings.”

Yet from what I have been able to discover—I would appreciate it if the Minister put me right—no such figures have been produced. Can he tell us why and give us those figures now? Without knowing how the existing system has been working, how can we get the system right with this Bill?

Photo of John Hemming John Hemming Democratiaid Rhyddfrydol, Birmingham, Yardley

We are perhaps more sympathetic to the Government on the 25 per cent. figure, but that obviously depends on the Minister’s answer to the question at hand. Compliance with the codes is perhaps a procedural issue, rather than a substantive one. Inasmuch as the Bill is orientated towards the substance of the issue, we do not feel that it necessarily would be good—for employers or employees—to revert to a greater focus on procedural matters and change the 25 per cent. figure to 50 per cent. Hence, we are generally with the Government on this.

Photo of Michael Jabez Foster Michael Jabez Foster Llafur, Hastings and Rye

I certainly want to resist the amendment. I am surprised that it comes from the quarters that it does, because powers have previously been used against employers, usually small employers who have simply not understood the procedural requirements.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

My point was that we do not have the figures about how powers have been applied. I would be grateful if the hon. Gentleman put us right on those figures.

Photo of Michael Jabez Foster Michael Jabez Foster Llafur, Hastings and Rye

My evidence is empirical. I agree that the substantive figures would be helpful. However, anyone who deals with small employers—not just as a lawyer but in their constituency surgery—knows that it is they who almost inevitably fall foul of the procedural rules. The hon. Gentleman seems to be penalising small employers because of some failure on their part, as we discussed earlier, to have the resources to access knowledge across the board. They do not even have the ability to go to Citizens Advice for support, as employees may. This amendment is therefore targeted against small employers, which is wholly unfortunate.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

Let me first deal with the point about figures. I do not believe that the tribunal service issues a breakdown of the cases in which the current variance of 10 to 50 per cent. is used, but it has told officials in my Department that the top end of that variance is rarely reached.

The more substantive issue before us is what the degree of adjustment on procedural grounds should be. I started my remarks today by saying that the Bill has a thread running through it, which is the balance between procedure and merit in tribunal cases. The hon. Member for Birmingham, Yardley got it right when he cautioned us against running against the Bill’s general direction by elevating procedure to too great a level above merit. My hon. Friend the Member for Hastings and Rye is also right when he says that the effect of the amendment, if accepted, could be that a small employer, having perhaps been substantially correct in the case presented to the tribunal, is hit with a 50 per cent. increase in the award against them because of the procedural weakness of not appealing to the ACAS code. The reason why we  are removing the 2004 procedures, as set out in clause 1, is that, having reviewed their operation for a few years, we concluded that process was being elevated above merit. I fear that the amendments would lead us to fall back into that trap.

Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art

In reviewing that matter in the legislation, has the Minister or any of his officials discussed the implications with the Federation of Small Businesses?

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

Yes. We discuss all our employment matters with the main business organisations regularly, including the Federation of Small Businesses, the CBI and others.

Another issue to remember is that, whereas the 2004 procedures required tribunals to elevate procedure above content, under the changes that we are bringing in, that judgment will be for the tribunal to make. The hon. Member for Huntingdon asked why the figure was 25 per cent. instead of another one. These matters are not an exact science; where we set the figure is a matter of judgment. Our policy aim is to not elevate process above content, and to not allow procedure to be simply disregarded. We want to get that balance right by allowing tribunals, at their discretion, to vary an award if there has been an unreasonable failure to adhere to procedures.

Clause 3 creates an incentive mechanism by proposing that tribunals be allowed—not required—to adjust awards by up to 25 per cent. if either party has acted unreasonably in failing to comply with the relevant code of practice. An adjustment of 50 per cent. would take us back to the system that the Bill is trying to reform and would perhaps repeat the unforeseen consequences of the 2004 procedures that we are trying to move away from.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

The first point to make is that the Minister has admitted that the figures do not exist, even though in 2002 it was claimed that they would. We are all operating in the dark; we do not know what the situation is. The Minister said that it is not an exact science; I say that he is sticking his finger into the wind. We are hindered by a lack of information but I am starting to see the problem, which the hon. Member for Hastings and Rye elaborated on and the Minister confirmed.

The hon. Gentleman and the Minister seem to be saying that they understand the concerns of companies and small businesses, and that they are unsure of the tribunals’ ability to get to grips with the problems of putting companies and employees on an even procedural footing and of dealing with vexatious claims. In other words, if the figure were 50 per cent., it could be used disproportionately against companies, rather than employees. In that context, I can see why the figure is capped at 25 per cent. rather than 50 per cent, but that does not make it right. Equally importantly, it shows that the Bill will not have the impact that the Minister has claimed.

Photo of Barry Gardiner Barry Gardiner Llafur, Brent North

On a previous amendment the hon. Gentleman asked for increased clarity. Does he not accept that reducing the scope by which any penalty may vary from 50 to 25 per cent. gives the clarity and certainty that small businesses would welcome?

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

No, I totally disagree with the hon. Gentleman. If companies and employees were to be treated on a fair and equal basis and the figure was 50 per cent., that figure could well act as a disincentive against vexatious claims. The point that the hon. Member for Hastings and Rye and the Minister made is that companies and employees may not be treated in the same way, and that companies may therefore lose out. I tend to agree. We do not know whether we can agree because we do not have the figures. So, as I said before, we are thrashing around in the dark here.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee 11:15, 14 Hydref 2008

Let me cast some light. The hon. Gentleman referred to vexatious claims. Surely he accepts that vexatious claims can be dealt with at a pre-hearing review and that the tribunal will recognise them as vexatious and will not find in favour of the person who brought them. To elevate this procedural device of saying that not adhering to the code should be matched with an ability to vary awards up or down by 50 per cent. will not deal with an issue of vexatious claims. They can either be dealt with in the current process, or the target would be missed.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

The Minister pre-empts my final point; I am going to agree with him. When we get on to vexatious claims we do have some figures. We will come on to that because I have great concerns about those figures, but to my mind it is impossible to separate the debate between the procedural and the vexatious; certainly, the average small company would not do so. For them, it is all part of the same problem. As the Minister says, the Bill separates the procedural from the vexatious and is rather toothless as a result.

Moreover, the Bill ignores the question of vexatiousness, so we have tabled amendments to remedy that. I am sad to see that those amendments are not being considered under this clause. I feel that they should be, but that is a decision taken by others and I respect it. We will come to that issue at a later stage, but the Minister will take the point that vexatious claims are not dealt with in the Bill, and that is what will most concern small businesses. On the basis of what we have heard, we will wish to reconsider our position on these clauses, and I seek leave to withdraw the amendment.

Photo of John Bercow John Bercow Ceidwadwyr, Buckingham

Order. I make it clear to members of the Committee that ordinarily when someone seeks leave to withdraw their amendment, I will immediately put that question to the vote. Similarly, if an hon. Member seeks to push their amendment to the vote, I will immediately put it to the vote. In this case I have received a slightly belated indication from the hon. Member for Birmingham, Yardley that he wishes to speak on the matter and on this occasion I will happily allow him to do so. Hon. Members will quickly discover that I am a facilitator. I want them to contribute but unfortunately I am not psychic, so an hon. Member who wishes to catch my eye cannot rely simply on raising their eyebrow. They need to rise and indicate their wish to speak.

Photo of John Hemming John Hemming Democratiaid Rhyddfrydol, Birmingham, Yardley

Thank you, Mr. Bercow. On a procedural matter, although my declarations of interest are a matter of public record, I should like to add to that record.  I am a member of the Federation of Small Businesses, which has not been mentioned so far. I am an employer as well as having been on various sides of employment tribunals. The issue of substance is whether vexatious matters have any substance. Vexatious cases do not have any substance. Therefore they would not be found on a substantial basis, so this is totally irrelevant to the question of whether any application to a tribunal is vexatious. The question is whether it satisfies the procedural process. The Government’s direction of travel is right. Perhaps we would prefer 22.596 rather than 25 per cent., but that is not really an issue of substance.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I understand that the procedural formalities here mean that I must again seek the Committee’s leave to withdraw the amendment, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I beg to move amendment No. 1, in clause 3, page 4, line 3, after ‘Society)’, insert—

Regulation 17 of the Cross-border Railway Services (Working Time) Regulations 2008 (SI 2008/1660) (breach of regulations)’.

I refer the Committee to proposed new schedule A2 on page 3 of the Bill, which sets out a list of jurisdictions to which the rest of the clause applies. In other words, those are the enactments under which someone could pursue a claim under the clause.

Government amendment No. 1 will add an enactment to that list. It is periodically updated as employment law evolves. As we have discussed, tribunals can apply an adjustment to proceedings under the jurisdictions, as set out in new schedule A2. That schedule replicates the jurisdictions listed in schedule 3 to the Employment Act 2002 and covers the vast majority of the jurisdictions of claims accepted by employment tribunals.

In a sense, the amendment can be put down to timing. Following Third Reading of the Bill in the other place, the Cross-border Railway Services (Working Time) Regulations 2008 came into force on 27 July. I am sure that all hon. Members noticed that at the time. Those regulations transpose a European directive on working conditions for railway workers on cross-border railway services. For example, they allow a worker to complain to an employment tribunal if his employer has refused to permit him to exercise rights relating to rest, break periods and so on. Regulation 17 was inserted into schedule 3 to the Employment Act 2002. This is a consequential amendment that will add regulation 17 to new schedule A2 as a jurisdiction to which the new adjustment provisions will also apply.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

In principle, we see no reason to oppose the amendment. Perhaps the Minister could clarify who constitutes a cross-border worker for the sake of the remedies provision. Does he have figures for the number of times such remedy claims have been successful, and in how many of those cases would a tribunal have varied the award on the basis of a failure to comply with the code? Finally, does the Minister believe that the amendment will have any cost implications?

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

An example of the type of worker involved is somebody working on a railway service through the channel tunnel, which is a cross-border railway service. This provision will apply to their breaks, rest periods and so on. The hon. Gentleman asked how many times the tribunal will be able to take cases. That is a matter for the future, not the past. The cost implications for employers operating services through the channel tunnel will depend on the extent to which they adhere to the working time regulations. If the regulations are contravened, there will of course be a cost implication. As in all of these matters, there is a very easy way to avoid cost implications: to adhere to the law in the first place.

Amendment agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I would like to continue probing this part of the Bill. I note with interest the comments of Lord Henley in the other place on the circulation of the draft ACAS code. He was concerned that the other place was furnished with a copy of the draft code only on the morning that it was to be debated.

Given the importance of the new code and the fact that it forms much of the core of the Bill, I would be grateful if the Minister enlightened the Committee on the consultation process that was undertaken. I am aware that the consultation was initiated and subsequently undertaken by ACAS. I would be grateful if the Minister answered the following questions on the consultation process. What format did the process take and which organisations were contacted? What responses were received and will the House have the opportunity to see them?

A shorter, more concise code is to be welcomed. I know that most employers will welcome the emphasis on informal dispute resolution, but will the lack of guidance given by the principle-based approach increase the workload of the employment tribunals? I hope not, but will the Minster give his view? I thank him for sending through a finalised version of the code—I think that it arrived last Friday. He will appreciate that we have had a short time to review it, and we will need to seek people’s views and possibly come back to him at a later stage.

Having looked through the code, I would like the following points, on the code’s paragraphs, to be addressed. The advice at point 5 of the original draft code issued by ACAS stated:

“Employers and employees should do all that they can to resolve disciplinary and grievance issues in the workplace. Recourse to an employment tribunal should only be a last resort.”

Why has that express and clear statement been removed? Point 8 states:

“In cases where a period of suspension with pay is considered necessary”.

Some employment lawyers have been saying that there is a need to clarify that, given the number of possible reasons for those cases. Is there a need to specify the situations where it is needed? In point 13, the phrase “workers” is used in the body of the section, yet the title states “employees”. We need consistency, especially as the words may convey different ideas and roles. In point 20, should “further misconduct” not become “any misconduct”, thus removing any impression that the  subsequent misconduct needs to be associated with the former? It would also ensure that minor misconduct does not slip through the net. After point 33, should powers to investigate the reported grievance and then to discuss it with the employee not be included? The manager should be able to undertake an informal fact-finding procedure before formal proceedings are initiated.

What prevents employment tribunals and courts from seeing the code as statutory again, and how will the Government avoid that? Does ACAS see it as an organic code that will be reviewed and changed as needs be? If so, how frequently is it intending to review the code? How much discretion will employment tribunals have with regard to those who follow the spirit rather than the letter of the code, especially small businesses that may lack the human resources capability of others? How do the Government propose to make small businesses aware of the new code? That action is very important in itself.

Photo of John Hemming John Hemming Democratiaid Rhyddfrydol, Birmingham, Yardley

All parties are in agreement with the Bill’s direction, which is towards clarity and ensuring that issues are resolved at an early stage with the least formality—although one does need formality at a certain point, so that people know that there is a formal grievance. I ask the Minister to recognise that there are different ways of achieving that clarity and informality. It is when one gets the whole package, including any departmental guidance, that one has what people have to face. Even if it is not specified in the Bill, departmental guidance that clarifies which code of practice to follow in which circumstance is important. It is straightforward for a smaller business to look it up and not to have to bring in legal advisers, even if some organisations provide legal support. Clarity and simplicity are the order of the day.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

It is right that we consider clause 3 in the round, and the ACAS code in particular. The code is an important part of the system, which will replace the 2004 procedures abolished by clause 1. It is more principles-based than some previous ACAS codes, because we have had an important dialogue with business and employee representatives. Some respondents have said that they do not want a lengthy procedural handbook that they have to cover, but that they want to know in broad terms what they have to do to be fair.

The hon. Member for Huntingdon asked whether tribunals have discretion in this area. They do and that is one of the changes that we are making from the 2004 procedures, where the elevation of procedures was more automatic. The ACAS code that we have proposed is more principles-based. The draft code has been circulated. It will allow tribunals greater discretion in the varying of awards.

Photo of Brian Binley Brian Binley Ceidwadwyr, Northampton South

The Minister clearly recognises that vexatious cases can be a problem. He points to a strengthening of the code. My experience is that often, ACAS, and its code, have shied away from the issue of vexatious cases in reality because it is fearful of being labelled anti-employee or anti-employer. That is a real concern. Will the Minister take that into account and genuinely consider strengthening the code and the conciliation that follows in this respect? That would take away much of the concern that small businesses have about this matter.

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee 11:30, 14 Hydref 2008

The hon. Gentleman makes a fair point about the fear small businesses have of vexatious claims. The changes that we are making will help in that regard. Part of the problem with the 2004 procedures was that they often placed the claimant—if I may put it like that—on a fast track to tribunal, without going through the kind of conciliation that could have solved the problem outside of a tribunal. Later, we will consider ACAS and time limits on intervention, which is another relevant issue. The system that the Bill creates places greater emphasis on pre-claim conciliation. ACAS will have more money to do that through the extra funding, and an expanded helpline will help with that. We will go a long way towards meeting the hon. Gentleman’s legitimate point.

I return to the questions that the hon. Member for Huntingdon asked about the code. The consultation on the code was with ACAS’s usual stakeholders—not a term I always like, but I use it for want of a better one. They include the business organisations, some of which have been represented here, the trade unions and others in this field. I understand that about 170 responses were received during the consultation on the code. ACAS has a balance to strike because some people’s responses will be that they want the code to cover everything—to mention this, that and so on—and others will be that they want less and less in the code. I think that ACAS is right to go for a principles-based code because we are trying to reach an end product that can be read and dealt with by businesses of all sorts and sizes. We are talking about busy people so it is correct to have something that is short, concise and principles based.

The publication of consultation responses is a matter for ACAS. The normal practice is that consultation responses are made available unless the person who submitted the response requests otherwise.

Is the code set in stone for ever? No, ACAS may revisit it. However, we have spoken of the virtue of clarity. When the code is settled, laid before Parliament and approved, I do not think that we will want ACAS to revisit it any more than necessary. In that way, businesses and employees will know what is involved and what is required of them.

The hon. Gentleman asked various other questions, for example, whether the size and resources of business could be taken into account. Yes, they can. He also mentioned the worker-employee distinction. That distinction is recognised in law, and the terms are used precisely. The hon. Gentleman will be aware—this is not a debate for this Bill—that the employment rights and the obligations attached to a worker are different from those attached to an employee, and that distinction exists in law.

The new code is more principles based, and tribunals, employees and employers are asked to have regard to it. It also contains a discretionary power for tribunals to take into account such regard when assessing awards, and to adjust awards by up to 25 per cent. if either party has acted unreasonably in failing to comply with the code. I emphasise that the power is discretionary; it is for employment judges to apply depending on the case, without the rigidity of the previous automatic link to the statutory procedures that we discussed earlier. As we discussed in relation to the amendment that I moved,  proposed new schedule A2 lists the enactments that apply to the clause and to the power to vary awards. I commend the clause to the Committee.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I made some other points that the Minister has not mentioned, but I did make a lot of points. Therefore, I would be most grateful if he would go away and look at what I said, and address a letter to the Committee on some of those points.

Question put and agreed to.

Clause 3, as amended, ordered to stand part of the Bill.