HC Deb 23 October 1972 vol 843 cc947-58

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fox.]

11.10 p.m.

Mr. Greville Janner (Leicester, North-West)

I am happy to have the opportunity to raise on the Adjournment the sad fact that the vast majority of those who are unfairly dismissed and who bring their cases before tribunals fail to receive any compensation whatsoever, and that those who are compensated very often receive derisory sums. Nor, so far as I know, has any person received the potential two years' compensation provided for by the Industrial Relations Act. This is a peculiarly unhappy circumstance as this part of the Act was, in the main, uncontroversial and could, in the main, do good. It is the sole part of the Act, probably, which could have a positive function, but it has proved a sad disappointment. The purpose of this debate is to raise the matter and ventilate it, and to invite the Government to investigate the circumstances in which these sections of the Act have failed so very badly.

Section 24 provides that an employee who is dismissed shall be presumed to have been dismissed unfairly. That is its effect. The employee who is covered by the section shall have the right not to be dismissed unfairly. That section states: In determining for the purposes of this Act whether the dismissal of an employee was fair or unfair, it shall be for the employer to show … the reason (or, if there was more than one, the principal reason) … and that it was a reason which, in broad terms, justified the dismissal by making it fair. So the burden of proof rests on the employer.

I raised this matter previously, some three months ago, when this part of the Act had been in operation for only some four months. We on this side did not know the figures, but they were provided by the Minister, who put them in a somewhat odd way but one which did give results. The Minister said: Rather over 20 per cent. of the cases reaching tribunals so far have ended without recom- mendations for re-engagement or compensation. That was a rather charming, if misleading, way of saying that nearly 80 per cent. of all cases failed, and nearly 80 per cent. means that there is a failure rate probably higher than in any other court or tribunal there has ever been in this country. Therefore, the legislation cannot be working properly, particularly when the burden of proof allegedly rests on the employer.

Mr. Robert Redmond (Bolton, West)

Would it not have improved the working of the Act if the trade unions had been prepared to take cases before the tribunals on behalf of their members, and would it not have helped further if they had done so quickly, instead of procrastinating and leaving members of unions 28 days out of time? I can give cases of that happening.

Mr. Janner

The trouble is that cases have to be brought before the expiry of four weeks. After four weeks, the conciliation officer comes in, but cases come on after two months, generally after the end of the employment, and at the end of that stage the employee is unable to prove anything like two years' loss, and instead of the tribunal then adjourning the case and enabling the man to come back and claim more money, it makes a final order, in the course of which it tries to assess in this 80 per cent. of cases. The issue here is twofold—first, the 80 per cent. failure rate and, second, the fact that very little money is received by those who succeed. There is no question of lack of speed—in the main it comes on too quickly.

The Minister explained the failure rate in these words: I do not mean to be offensive, but I use the term for want of better words—there are 'try-on' cases. In any litigation people try things on, but not 80 per cent. and certainly not when they come forward without the help of lawyers and on occasion without the help of their unions. They often face employers who are legally represented and a tribunal which resents legal representation because lawyers take too long. For the tribunal the quicker it comes on and goes off the better.

I have no doubt that it tries to do justice, but it does not succeed, because this failure rate shows that this part of the Act is a fraudulent mirage. It produces false visions of fairness to employees unfairly dismissed. Nearly 80 per cent. of these cases result in total failure and the remainder usually get a very small proportion of the compensation which they reasonably hoped for.

Parliament did not, without a Division, produce the sum of £4,160 because it thought that no one would get it. It did so because it believed that there should be a two-year cushion against disaster. It has not worked in that way, and this is not because of employees who are "trying it on". It is because something has gone radically wrong with this potentially advantageous portion of the Act.

When I suggested last time that this was due to a lack of legal representation, the Minister said: Legal proceedings at the tribunal are in general kept informal. Fair enough. … it is comparatively rare that barristers and solicitors are employed."—[OFFICIAL REPORT, 3rd August 1972; Vol. 842, c. 845, 851.] I do not know the figures. Perhaps they can be produced. I understand that, although it is comparatively rare for lawyers to be employed by the employees, it is comparatively common for them to be used by the employers.

The second reason for the failure rate is that, although theoretically the burden of proof rests on the employer, in fact it rests on the employee. When the employer has to give a reason for dismissal, he has only to say misconduct, lack of capability or qualifications, or redundancy.

Section 24 (6) says: Subject to subsections (4) and (5) of this section, the determination of the question whether the dismissal was fair or unfair having regard to the reason shown by the employer, shall depend on whether in the circumstances he acted reasonably or unreasonably in treating it as a sufficient reason for dismissing his employee; and that question shall be determined in accordance with equity and the substantial merits of the case. Put in ordinary English language, that means that if it was fair to treat the reason as sufficient, it is fair; and if it was unfair, it is unfair. There is nothing in the section about the burden of proof. Though the burden of proof may rest on the tribunal in showing reason, there is considerable doubt where the burden lies in showing that it was a "sufficient" reason.

Is it for the employer to show that he acted reasonably in treating it as a sufficient reason? I would hope so. And the section should say so, but it does not. Or is it for the employee to show that the employer acted unreasonably? In practice, I suggest that this may be the reason why we see this staggering and unfair failure rate in regard to employees who seek compensation under the Act.

No other explanation has been provided by the Minister. He has pointed to the fact that some cases are settled on the way. On 2nd August we were given a figure of some 1,900 cases, half of which had been processed and less than half of which actually went before the tribunal. He could have put the matter round the other way and said that nearly half had reached the tribunal without being settled; in other words, some 950 cases had reached trial, after only four months of operation of this part of the Act. Another three months have now elapsed, and I hope that the Minister will be able to provide figures which are at least twice as good. In the first four months there should have been fewer cases before the tribunal than happened in the next three months.

The importance of this matter is vitally connected with the sad state of employment in the country as a whole. My constituency of Leicester has suffered unemployment at a level unprecedented since the 1930s. What happens now is that when an employee comes before the tribunal he has often been out of work for two months, and when there is high unemployment in his area the tribunal does not say "Go away. Here is what you have lost so far. Come back if you do not get other work." It makes a final order. In a period of unemployment the situation is never satisfactory because it can never be known when the employee will get other work. It is not good enough to say that damages are assessed on the same basis as in civil cases involving damages. That is not the way in which it should be done. Here we have a two-year period, and the figure of £4,160 is compensation at the maximum of £40 per week for two years in broad terms. Included in it are other factors which have caused loss as a result.

Therefore, I hope it will be recognised that this area of legislation, legislation which could have beneficial results, is not providing the benefits which it could and should provide. Instead of defending the situation and saying that many people have been helped who would not otherwise have been helped, the Minister should say, "First, we must provide more figures".

I was assured earlier in the year that the computer would churn out results by the autumn. Well, the leaves are now withering on the trees. I have the passage marked: I do not wish to be held to a date, but I hope that it will be in the autumn.

The Minister of State, Department of Employment (Mr. R. Chichester-Clark)

Read on.

Mr. Janner

It continues: It may be somewhat later than that."—[OFFICIAL REPORT, 2nd August 1972; Vol. 842, c. 846.] That was a wise addition and one that has proved to have been justified The autumn is here and the leaves are withering. When does the Minister hope that there will be full figures of the number of cases which have come before the tribunals, of the natures of the awards, of how much people have been awarded, of who has been represented, and whether this staggering failure rate is being continued?

Second, in so far as the failure rate is more than 50 per cent. it cannot be justified where the burden of proof genuinely falls upon the employer. There should be an investigation into why this is happening. If it transpires that it is because the burden of proof is not properly stated, this could be changed.

Third, there should be an inquiry into the level of compensation and as to why there should be the figure of £4,160 as a potential which is never reached, when it should be a signal to those who are earning £40 a week or more, of whom there are plenty, that there is hope for them if they are dismissed unfairly.

I hope that the Minister will deal with these questions, that he will understand that there is great and sincere concern about the failure of this part of the Act to work properly, and that he will hold out hope to those unfairly dismissed that they will be fairly dealt with under this part of the legislation.

11.26 p.m.

The Minister of State, Department of Employment (Mr. R. Chichester-Clark)

The hon. and learned Member for Leicester, North-West (Mr. Greville Janner) has once again shown his very proper interest in this part of the Act. I hope that he will not mind my saying that I believe that some of that which I may say tonight will show that the words he used in describing the Act as a fraudulent mirage are unjustified.

The hon. and learned Gentleman has expressed concern about the proportion of unsuccessful complaints of unfair dismissal under the Industrial Relations Act and about the level of compensation awards. In particular, he is concerned about awards in the case of people who are unemployed when their cases are heard by industrial tribunals.

This was very much the burden of the hon. and learned Gentleman's song earlier this year, and he continues to be so concerned. These are complex matters and it is easy, as the hon. and learned Gentleman rightly says, to use figures in different ways so that they appear at the time to mean different things. If at the end of the debate there are matters which seem to the hon. and learned Gentleman less clear that they should be, I shall be only too ready to discuss them with him.

I want, first, to quote some figures to help get this so-called "success rate" of unfair dismissal claims into perspective. As the hon. and learned Member is no doubt aware, all complaints of unfair dismissal made to the tribunals are passed initially to conciliation officers of my Department for them to see whether there is any possibility of their promoting a voluntary settlement of the matter without the need for a tribunal hearing. In the first seven months' operation of the provisions—from 28th February to 29th September—the conciliation officers received a total of 4,688 applications. In 720, or 15 per cent. of them, they helped the parties to reach a voluntary settlement and 1,295, or 28 per cent. of the applications were withdrawn at this stage.

Complaints which are not settled or withdrawn at the conciliation stage go to a tribunal hearing, unless they are abandoned in the interim. Figures for tribunals' hearings up to the end of September are not yet available, but in the first five months of the new jurisdiction—from 28th February to 28th July—they heard 507 unfair dismissal complaints. Twenty-seven per cent. of these succeeded and the remainder were dismissed. In 15 per cent. of the unsuccessful cases the tribunals found that the applications were out of scope of their jurisdiction. That is something that does happen. Perhaps the hon. and learned Gentleman had not fully taken it into account.

I think that the hon. and learned Gentleman will agree, in the light of these figures, that the overall success rate of unfair dismissal complaints cannot be judged solely in terms of those which succeed at tribunal hearings. Account must be taken of the effects of conciliation; firstly, in regard to the number of settlements promoted at that stage and, secondly, in regard to the fact that there are numbers of complainants who have had the benefit of the conciliation officers' guidance but who, nevertheless, insist on taking out-of-scope or extremely weak cases to hearings. This is, of course, something that they are entitled to do, but such cases do have the effect of swelling the proportion of unsuccessful cases. It must also be remembered that, not infrequently, cases are abandoned after the conciliation stage but before a hearing because the parties have themselves reached a mutually agreeable settlement of the matter.

In so far as the level of compensation for unfair dismissal is concerned, let us look first at voluntary settlements reached at the conciliation stage. An analysis of a sample of about 500 such cases shows that 55 per cent. were for sums of less than £100, 36 per cent. were for sums between £100 and £500, and 6 per cent. were for amounts between £1,000 and £4,000.

Turning now to the awards of compensation made by the tribunals, I can tell the House that an analysis of their awards in the first five months of the new jurisdiction shows that 36 per cent. were for amounts under £100, 49 per cent. were for between £100 and £500, 8 per cent. for sums between £500 and £1,000 and 7 per cent. for sums between £1,000 and £4,000.

It is clear that a majority of the compensation awards are for sums under £500. I admit that in the context of the overall limit of £4,160 they appear fairly small. But, as the hon. and learned Gentleman is aware, compensation is assessed by the tribunals on similar principles to the assessment of damages under common law. The tribunals are required to award such a sum as they consider just and equitable having regard to the past and probable future loss sustained by the applicant and the extent to which that loss was attributable to the employer's action. So far there is no real evidence to suggest that the tribunals have been applying these principles ungenerously.

It should not be assumed that employees who are unfairly dimissed invariably suffer substantial loss. In many cases that have come before the tribunals the complainant's losses have been extremely small. For example, many have found new jobs quickly at a comparable or better rate of pay so that the tribunals' awards in these cases are mainly for the loss of statutory protection against redundancy or unfair dismissal for the first two years of the new employment. On the other hand, there have been cases where the tribunals have found that the complainant's past or prospective loss—this is what the hon. and learned Gentleman is so rightly concerned about—is considerable, having regard, for example, to age and the chances of finding further employment, and they have, in fact, awarded substantial sums in several cases.

I know that the hon. and learned Gentleman is concerned about the question of what evidence can be brought as to prospects of future employment. This is a matter which we are looking at, so that complainants' rights in these matters, if it is possible to do so, may be even more clearly known to them than they are. I hope that that will give the hon. and learned Gentleman pleasure.

Mr. Janner

It does, very much. But can the hon. Gentleman say whether the Department is also looking into the possibility of giving the tribunals the right, or insisting that they exercise the right, to adjourn cases where a person has not obtained other employment before his successful case reaches the tribunal?

Mr. Chichester-Clark

I will deal with that point. I think that I dealt with it to a large extent in August.

The problem there, apart from any other, is one of case load. It is a little too early to know just how substantial a case load there is. It may well be that there are other priorities before the one the hon. and learned Gentleman has in mind. I am referring to the two-year rule and so on.

I remind the hon. and learned Gentleman that the awards in quite a number of cases are well above the maximum award envisaged in the last Administration's Bill. I should have thought it would be common ground that a relatively generous maximum award to cover really unfortunate cases was highly desirable. I would draw attention to the inflexibility and unfairness of a system of compensation which involves the application of a rigid scale rate without regard to individual circumstances.

The hon. and learned Member has made much of the fact that no one has yet received the maximum amount of compensation awardable under the Act—£4,160. Although it is true to say that no tribunal has yet awarded the maximum sum, he will be interested to know that the maximum has been exceeded in at least one settlement reached by conciliation. Nevertheless, I would stress that in the Government's view the maximum is a substantial one that provides the tribunals with ample scope to compensate the individual whose past or prospective losses are really high—for example, where an individual is unlikely to obtain fresh employment for some considerable time because of his age or the nature of his occupation.

Apart from lost wages, the tribunals take account of a variety of other losses—loss of pension rights, loss of status, loss of fringe benefits, such as accommodation or perhaps a car, and, as I have already mentioned, loss of security in regard to future redundancy or unfair dismissal. As in common law suits, the dismissed employee has a responsibility to mitigate his loss. Moreover, compensation may be reduced where the employee is found to have provoked or contributed to his dismissal. I know that the hon. and learned Gentleman disagrees with this provision.

He tends perhaps to see dismissals only in terms of black and white.

Mr. Janner

With respect, the tribunal has got to decide. I do not disagree with the provision of a maximum of £4,160. What I say is that it is no good having a maximum if it is never reached or if it is very seldom that anyone gets anywhere near to it. It is an unreal provision.

Mr. Chichester-Clark

I cannot accept that a dismissal is either totally fair or totally unfair. One can go into a long argument about this. One can use the analogy of a husband deserting a wife, and so on, but it would not be profitable if we were to argue on those lines. The blame does not necessarily rest only on one side in these cases.

The hon. and learned Member seems to think that tribunals should award two years' pay to most of the people who are unemployed at the time their cases are heard, or else that such complainants should receive an interim award and have their cases adjourned for a further award or awards if unemployment continues. Section 118 of the Act does not contemplate such a procedure. This is a matter which it would be difficult to deal with at the present time, in view of the present case load.

The hon. and learned Member has dealt with a number of other matters, but time prevents my dealing with them, for he has covered a lot of ground. But I would say what I said on the last occasion when we debated this matter. If he feels that there is an element of unfairness in tribunals' awards to unemployed applicants, the best course would be to prevail upon more of his trade union friends to make their valuable knowledge and experience available as lay members of tribunals or by representing members at hearings. This could go a long way to dealing with a position which he regards as unsatisfactory in regard to legal representation. The voice and help of an experienced trade union member could be absolutely invaluable on these occasions to the complainant. I hope he will bear that in mind.

The hon. and learned Gentleman and I can discuss this matter, and if lie can show real flaws in the case, anything that he says will be examined, because we want this to work. We believe that this provi- sion has given assistance to the individual who has complained and that it is working well.

Question put and agreed to.

Adjourned accordingly at twenty minutes to Twelve o'clock.