HC Deb 28 July 1980 vol 989 cc1177-205

Lords amendment: No. 4, in page 10, line 43, at end insert— Indemnity in respect of union membership clauses. 76B.—(1) If in proceedings before an industrial tribunal on a complaint against an employer under section 67 the employer claims that—

  1. (a) he and another person (in this section and in section 76C called "the contractor") were parties to a contract requiring that work done by employees of his for the purposes of the contract should be done only by employees who were members of trade unions or of a particular trade union.
  1. (b) the complainant could not, consistently with that requirement, be employed on that work,
  2. (c) the employer had requested the contractor to consent to the employment of the complainant on that work notwithstanding that requirement,
  3. (d) the contractor had witheld his consent,
  4. (e) apart from the work to which that requirement (or any similar requirement under other contracts to which the employer was a party) related, the employer had no work available which was suitable for the complainant to do, and
  5. (f) the employer would not have dismissed the complainant but for that requirement,
then, subject to subsection (2), the employer may before the hearing of the complaint require the contractor to be joined, or in Scotland sisted, as a party to the proceedings.

(2) An employer may not by virtue of this section require more than one person to be joined, or in Scotland sisted, in proceedings in respect of any complaint.

(3) Where a person has been joined, or in Scotland sisted, as a party to proceedings before an industrial tribunal by virtue of subsection (1), and the tribunal—

  1. (a) makes an award of compensation under section 68 (2) or 71 (2) (a) or (b), but
  2. (b) finds that the claim of the employer (as specified in subsection (1)) is well-founded,
the tribunal shall order that person to pay to the employer an amount equal to the amount of that compensation. Contribution in respect of indemnity under section 76B.

76C.—(1) If in the proceedings referred to in section 76B the contractor claims that he was induced to withhold the consent referred to in subsection (1) of that section by pressure which a trade union or other person exercised on him by calling, organising, procuring or financing a strike or other industrial action, or by threatening to do so, the contractor may before the hearing of the complaint require the person who he claims exercised the pressure to be joined, or in Scotland sisted, as a party to the proceedings.

(2) Where any person has joined, or in Scotland sisted, as a party to proceedings before an industrial tribunal by virtue of subsection (1), and the tribunal—

  1. (a) makes an order under section 76B, but
  2. (b) finds that the claim of the contractor (as specified in subsection (1)) is well founded,
the tribunal may make an order requiring that person to pay to the contractor a contribution in respect of the contractor's liability to the employer by virtue of the order under section 76B.

(3) The amount of any contribution ordered to be paid under this section in respect of any such liability shall be such as the tribunal considers to be just and equitable in the circumstances, and many constitute a complete indemnity."

10.30 pm
Mr. Mayhew

I beg to move, That this House doth agree with the Lords in the said amendment.

The amendment relates to union labour-only clauses. These clauses bind an employer who agrees to provide, say, bricklaying services on a site, when the contractor requires that he put only union labour on to the site and economic pressures force him to agree. The amendment provides an additional right for an employer who faces an unfair dismissal complaint which results from a contractor's refusal to lift such a contractual requirement. It makes a valuable inroad into what is a most unfair and undesirable practice.

New section 76B will enable the employer in the circumstances specified to require the contractor to be joined as a party to the proceedings. The contractor may then be required by the tribunal to pay the employer the cost of any compensation awarded. There must, as a condition, be no other work suitable for the worker which the employer can offer him and the employer must show that he would not have dismissed the worker otherwise.

New section 76C provides that if the contractor in turn claims that he was induced to withhold his consent to a nonunion worker being employed by pressure put on him by a union or other person calling or threatening to take industrial action, he may require the person he claims exerted the pressure to be joined as a party to the proceedings as well. That person may then be ordered by the tribunal to pay to the contractor up to the full amount of any sum the contractor has been ordered to pay.

Concern about such union labour only clauses was expressed on Report by my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) and was expressed by certain of their Lordships in another place. The amendment will discourage the practice of contracts requiring union labour only to be employed, and it will protect the position of an employer upon whom such a contract might be imposed. Without the amendment, an employer might, to avoid defaulting on a contract which contained a union labour only clause, sack valued and blameless members of his work force who were not union members.

Mr. John Evans (Newton)

Will the Minister explain why his hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne), on Report, having moved new clause 10 and the Government having not only rejected but advised their supporters to reject that new clause, he is now standing on his head and presumably is about to advise his right hon. and learned Friends to stand on their heads by this time going into the opposite Lobby?

Mr. Mayhew

I shall advise my right hon. and hon. Friends to use, not to stand on, their heads. The new clause moved by my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) was different in its effect. Its effect would have been to render such clauses void. On that occasion I advised the House that it would be impolitic to do that at that stage because it would leave unanswered what sanction there would be. Until we had the opportunity to review completely the immunity of trade unions, it would have been unwise to accept the new clause.

This amendment provides a remedy for an employer. The trouble is that an employer may find himself at the sharp end of a claim for unfair dismissal compensation by a worker whom he has sacked in order not to lose a valuable contract, yet he would be unable to avail himself of the protection which the other clauses give to an employer in these circumstances because he would not, for example, have been able to hold a ballot.

Therefore, the effect of the clause is that an employer may say to his client, the contractor "Very well, you have secured this agreement in the contract that I have made with you, but I now ask you to waive it, to lift this requirement." If the contractor says "No, I shall not lift it," and if the worker who is not a trade union member then gets the sack and brings a claim for compensation for unfair dismissal, under the provisions of this amendment it will be open to the employer to join the contractor in the suit and say "This is your fault," and to say to the industrial tribunal" This is the reality of the position. Let any compensation for unfair dismissal be paid by the contractor."

Mr. John Page (Harrow, West)

I am following my hon. and learned Friend as closely as I can in his interesting and lucid explanation. Does it mean that the valued and blameless employee has to be dismissed before any part of this new clause comes into matters? Is there nothing to stop the chap from being dismissed except the threat on the other party that if such an employee were to be dismissed he would be joined? Would this apply to a lorry driver delivering goods at a particular destination?

Mr. Mayhew

I am grateful to my hon. Friend, who takes a close interest in these matters. It applies to any worker who faces the threat of dismissal because his employer has entered into a contractual requirement that he will provide only union members to work upon the site, so it applies to any worker of any class.

My hon. Friend is right in the supposition in the first part of his question, but that applies also to the closed shop generally. Under the provisions of the Bill there is only further protection to an employee who gets the sack because he is not a member of a union where a closed shop agreement exists. This Bill does not provide security of tenure for him in his job. It simply provides him with compensation on the basis of unfair dismissal where the present law gives him none.

That is the position which we are seeking here to build upon in the case of union labour only clauses. The difficulty for his employer in these circumstances is that the employer is not able to hold a ballot to see whether there is massive support from those whom a union membership agreement would affect, and yet he is liable to have to pay compensation for unfair dismissal to the worker whom he sacks simply because the main contractor will not relieve him from the contractual clause which he has entered into.

What this clause does—I am sorry that it is complicated, but it is necessarily so—is to say to the employer "If you have sacked someone because you have felt obliged to do so. you would not have sacked him otherwise, but you have had your arm twisted by the contractor with whom you are in contractual relationships. If you would not have sacked him otherwise and there is no other work that you can give him that is suitable for him, very well, you may join the contractor in the proceedings and say to the tribunal 'It is all his fault. Please make him pay the compensation'."

That is what the clause does. Similarly, if the contractor in turn is able to say "I would have liked to have released the employer from the terms of this contractual provision, but I am afraid that it was the trade union organiser who twisted my arm and said "No, you may not do so'," he in turn may be joined.

Mr. Stan Crowther (Rotherham)

rose—

Mr. Mayhew

I think that the House wants me to get on. I have given way twice.

I have done my best to explain the provisions of the clause, which provide a necessary protection. I shall be happy to reply if further points are raised.

I commend this important amendment to the House. I believe it to be desirable.

Mr. Harold Walker

As the Minister reminded us, we are on familiar ground, because apparently the amendment sets out to achieve what the hon. Member for Knutsford (Mr. Bruce-Gardyne) sought in his new clauses that we debated on Report on 22 April, although it appears from comments passed in another place that the whole thing was triggered by the National Federation of Building Trades Employers.

It is worth looking at what the Government said when, admittedly seeking to achieve the same objective by a different route, we debated the new clauses on 22 April. The Minister then told the House: I am not persuaded that legislation on the lines of new clauses 10 and 11 would be either effective or desirable. I recognise that he was talking about rather differently worded provisions, but I repeat that they set out to achieve the same objective, as was made absolutely clear by Lord Orr-Ewing and by Earl De La Warr, and were triggered by the same thought processes. The Minister added: We should look first to voluntary action because the experience of making closed shop agreements void in the 1971 Act does not lead us to go headlong into making new legislation providing that a certain approach should be unlawful. Making an undesirable condition void does not necessarily get rid of the undesirable influence that it is intended to exert. I do not think that it would do so in this instance. Later the Minister said—and I hope that the House will note this: The new clause could increase pressure upon employers not to use contractors at all, and that would help no one". If that reasoning was valid then, it is no less valid today. The hon. and learned Gentleman owes it to the House to ex-plan the Government's U-turn.

The Minister also said on 22 April: we cannot at the moment accept the argument that there is a case for amending the law—[Official Report, 22 April 1980; Vol. 983, c. 379.82.] That "at the moment" was three months ago. In three months the Government have been able to stand the whole argument on its head. On that occasion the hon. and learned Gentleman was supported in the Division Lobby by 200 of his hon. Friends and some hon. Members from the Opposition Benches. I wonder what they will do tonight. Will they stand on their heads like the Minister, like performing animals in a circus? Those who voted with the Minister in April, in line with his advice then, should think of the ridiculous posture that they will be adopting tonight when they troop dutifully through the Lobby, having gone the other way on 22 April.

Mr. Douglas Hogg (Grantham)

Will the right hon. Gentleman kindly tell the House what his party proposes to do to protect employees dismissed in the circumstances with which we are dealing?

Mr. Walker

I am not sure that the hon. Gentleman is with us. [HON. MEMBERS: "Answer."] If you will permit me, Mr. Deputy Speaker, and if the House really wishes it, I shall set out at length the Labour Party's views on the closed shop. I can only tell the hon. Gentleman, and some other Conservative hon. Members who have not participated in our proceedings on many occasions so far, but who wander in late at night, that some of us sat through 32 Committee sittings, for about 120 hours. These matters were debated at length in Committee, where we set out our view on the closed shop, as I have done so often from both sides of the House.

Mr. George Park (Coventry, North-East)

Does my right hon. Friend agree that it is the height of impertinence for a lawyer, of all people, to criticise a closed shop?

10.45 pm
Mr. Walker

Indeed it is. We have repeatedly said that the law has remained essentially the same since the Industrial Revolution. It has been so in relation to closed shops. We believe that that is the correct position. We have asked for union membership agreements to continue to be applied and practised in the flexible and tolerant fashion that has always prevailed. The intervention of the law in such issues, and in many of the other issues covered by the Bill, will harm industrial relations. It will not provide an answer to the human problem.

Mr. John Evans

Is my right hon. Friend aware that the hon. Member for Grantham (Mr. Hogg) is one of those who will stand on his head tonight and who will go into the other Lobby? Will my right hon. Friend explain to the Conservative Party that the clause concerns the protection of those employed in lump labour? They do not pay their income tax or national insurance contributions. That appears to be in line with the philosophy of the Tory Party.

Mr. Walker

No doubt my hon. Friend will pursue that point, Mr. Deputy Speaker, if he catches your eye.

The hon. Member for Grantham (Mr. Hogg), whether or not he is "hon. and learned", is one of those who has a vested interest in allowing the law to intervene in industrial relations. His primary concern is not the well-being of industrial relations but the well-being of lawyers. He will probably do very well if the law intervenes. He probably knows more about the legalistic terms involved than he knows about the problems of the shop floor.

The House should be more concerned about doing what it can to abate the problems that exist in industrial relations. We should be wondering how we can mitigate and solve them. We shall not solve them by means of the law. Lawyers have a curious idea that any problem can be solved by enacting a Bill. That is one of the absurd ideas that persists among Conservative Members.

When the Under-Secretary referred to "sites", I thought that he gave us a revealing insight into the Government's limited approach. Earl De La Warr confirmed the Government's limited approach when he spoke in the House of Lords about curbing the activities of Left-wing local authorities. Conservative Members should realise that when the House enacts a measure that is aimed at one specific issue its effects are often wider than anticipated. This measure will affect local authorities—including not only Left-wing authorities, but Conservative-controlled ones—which have good reason for insisting that a stipulation should be inserted in the contract stating that it should be carried out by union labour.

Some Conservative-controlled local authorities are anxious to avoid undercutting properly fixed rates, and the terms and conditions of employment that have been rightly set by national agreements. They are anxious to ensure the quality of work. One way of achieving that is to ensure that the contract is carried out by properly qualified labour. Often the only way of doing that is to make certain that the labour has the appropriate trade union qualification.

The problem is not limited to local authorities. Many public bodies are involved. A whole range of public bodies—British Aerospace, the National Coal Board and so on—put these stipulations in their contracts. Furthermore, this practice is widespread in the private sector as well.

A "fair list" system is operated by the union TASS. That is a very proper system. When an employer, faced with an overload of work has to secure the cooperation of the trade union in sub-contracting that work in order to avoid taking on additional labour that may be surplus to his requirements, TASS has this arrangement which enables that employer to sub-contract. The price of that cooperation is very often that it shall go to a trade union sub-contracting house. The Federation of Engineering Design Consultants co-operates with that union in operating what is called a "fair list".

This amendment is likely to undermine that system, and with what consequences?

In future, after the first time this is tested in relation to the "fair list", the union will tell the employer that it does not agree to a certain sub-contractor. I cannot see who can possibly benefit from that.

Furthermore, let us suppose that a subcontractor is on the "fair list" and has its entire work force as members of the appropriate trade union in order to continue for to qualify for membership of the list finds that it has a vacancy. It advertises, and a man comes along who is not a union member, or who refuses to join. In the event of the employer refusing to employ that man because he is afraid of being disqualified from the "fair list", would that individual have grounds for claiming that he had been constructively dismissed? Within the Employment Protection Act there is a provision for constructive dismissal to be construed where the individual has not necessarily been in employment. The Minister must explain that point to us.

Perhaps the Minister would also explain the position where less formal arrangements exist than those that are specifically written into a contract. This is often the case. There is no formal agreement written into any contract, but there is a long-standing and traditional understanding that work will not go out of a particular establishment other than to trade union labour. What will the position be in relation to those understandings and arrangements which fall short of a formal contract provision?

At what point will those who may be joined for the purposes of compensation be informed and allowed to participate in the proceedings of the tribunal? As I understand it, the person who has been dismissed will lodge a complaint to the tribunal against his employer. If the tribunal upholds the claim of unfair dismissal, the employer may then be required to pay compensation or part of the compensation. In his defence, the employer may then invoke the pressure that was applied by another party, who can then be joined for the purposes of compensation. But it seems to me that the action in the first place would be between the applicant, who claimed that he had been unfairly dismissed, and his employer. They would decide substantially the merits of a dismissal. It is only when the fact of the dismissal, fair or unfair, has been determined by the tribunal that the question of compensation arises.

Is it at that stage that the contractor will be told that it has been decided that there has been an unfair dismissal, and he will either have to pay or explain why he should not pay part of the price? Is it at that stage that the unions—or the shop stewards who originally said "If you put that work out to that firm, the lads will come out"—will be told that they may have to pay compensation? Will this happen after a decision has been taken on the dismissal being fair or unfair? Will they be told that without being able to put forward a word in their own defence? At what stage will they be able to say that they want to contest the entire proceedings and that a lot of nonsense has been talked before the tribunal? The problem is that the tribunal has made its decision by then.

Mr. Mayhew

The position is exactly the same as it was when I explained it to the right hon. Gentleman in Committee in relation to joinder. Applications to join must be made before the hearing. If he looks at the amendment, he will see that that applies in the case of the employer, who must make his application to require the contractor to be joined before the hearing of the complaint. Under new section 76B, if a contractor wishes to say that he has acted only under pressure from a trade union, he must make the application—require the joinder—before the hearing of the complaint. It all has to take place before the beginning of the hearing. Once those parties have been joined, they may take a full part in the hearing. It is exactly like third party proceedings in the civil jurisdiction of the courts. It is intended that all the relevant issues should be tried at one and the same time.

Mr. Walker

I am grateful to the hon. and learned Gentleman for putting that on record. It will undoubtedly help those who may have to deal with these complicated matters. However, it leads one to speculate about the complexities facing a tribunal which simultaneously has to make a judgment about the substantive merits of an application for unfair dismissal and deal with people who are at one or two stages removed from the incident that led to the unfair dismissal and who are contemplating the possibility of having to pay compensation.

Mr. Greville Janner (Leicester, West)

The matter goes even further. If the hon. and learned Gentleman is right, the contractor has to decide whether to bring the union into the proceedings at the stage when he is joined. Before any evidence has been heard, if he chooses to be mad enough to bring the union in, he has to introduce the union before he finds out even whether he will be held liable. Is that not the most ludicrous method of conducting any aspect of industrial relations?

Mr. Walker

I almost entirely agree with my hon. and learned Friend. I dissent on one small point. If, when the application is initiated and originally heard, the contractor brings in a third party—and it will not be the union—that will, in effect, prejudice his defence. He will thereby be partially acquiescing in the complaints before the tribunal. If he felt on absolutely firm grounds, he would not consider it necessary to bring in a third party.

Trade unions are mentioned in new section 76B. However, it is clear that it is not the union that will have to pay if compensation is awarded but the person or persons who exercised the pressure—the shop steward, or whoever, it may be. It may be full indemnity. At the top end of the scale that could mean tens of thousands of pounds. If the procedure provided for in the amendments came about, and at the end of that complex road a shop steward found himself before a tribunal with someone claiming the full amount of damages after long service with a contractor—and we must be careful about the difference between "contractor" and "contractee"—he may have to pay compensation of several thousands of pounds.

What will happen if that individual refuses to pay or cannot pay? I do not know many shop stewards who have thousands of pounds in the bank. The Tory Member who is sniggering obviously has no experience of the shop floor. Such Members betray their ignorance of such matters and of how ordinary working people live. The Tories who are sneering now reveal more to us late at night than the whole Conservative Party reveals to the country in a month.

11 pm

I ask Tory Members to contemplate what may happen when a shop steward has thousands of pounds of damages awarded against him. The Government might usefully reflect on the Pentonville Five and hope that they still have the Official Solicitor lurking in the wings with a big bag of cash to bail them out, as he bailed out the right hon. Member for Sidcup (Mr. Heath) after the Industrial Relations Act.

The Government are getting themselves into a hideous muddle, but much more important for the country are the serious consequences of such lunacy on industrial relations. The Government are more concerned with weakening and undermining the trade union movement, regardless of the consequences for industrial relations and collective bargaining, than they are with trying to get the country back on its feet.

I hope that the Conservative Members who heeded the Under-Secretary's advice on 22 April will search their hearts and decide that they ought, in consistency, to vote with us to turf the amendment back down the Corridor where it belongs.

Mr. Ian Mikardo (Bethnal Green and Bow)

The Under-Secretary must be glad that his task on the Bill is drawing to an end. He has had a long long stint, as have I and some of my hon. Friends. However, long as the stint has been, and tired of the Bill as some of us may have been from time to time, it is necessary to probe the purposes and consequences of the amendment.

I say with all the respect that the Under-Secretary knows that I have for him that he was a little disingenuous in his reply to the intervention of my hon. Friend for Newton (Mr. Evans) when he tried to draw a distinction between the Lords amendment and new clauses 10 and 11 that came before us on Report. Although they are different in text, the purpose of the amendment is identical to the purpose of the new clauses and the effect of the amendment will be identical to the effect of the new clauses. The clauses were introduced, as was the amendment—as their Lordships frankly admitted—in order to prevent local authorities from stipulating that contractors should use union labour. A noble Earl referred to Left-wing authorities, but all sorts of authorities carry out that practice. It works well and local authority members are practical people who do what works well. The purpose of the amendment is to bring that practice to an end. The effect will be to put in a difficult position local authorities and other organisations that give out contracts.

The Under-Secretary gave the game away when, in referring to contractors, he talked about sites, as though the only contracts that are ever given are contracts for buildings. In fact, local authorities give out contracts not only for buildings but for the supply of haulage services, school furniture, beds for old people's homes, toilet paper and all sorts of equipment and services. All these are contracts. Why did the hon. and learned Gentleman and his noble Friends talk about sites all the time?

The giveaway is that the Government have brought forward this amendment entirely at the behest of the building trades organisations which have demanded some recompense for the money which they put. directly or indirectly, into the funds of the Conservative Party at the time of the last general election.

What would be the attitude if the boot were on the other foot? Let us suppose that a Labour Government introduced legislation compelling local authorities to contract only with people using trade union labour and which prohibited local authorities giving out contracts to anyone with non-union labour. If this House passed that legislation and it went to the other place, there would be so many of their Lordships bursting blood vessels in their indignation that the Floor of the Chamber would be awash with blue blood.

If any such proposal came before this House, I would vote against it, because I believe in the autonomy of local government. It is a passion which I share with the right hon. and learned Member for Hexham (Mr. Rippon). It is a demand which is often made in weekend speeches by Government supporters, but they do not carry it out in their actions in this House. I would vote against compelling local authorities to use or not to use trade union labour or non-union labour. But one has only to seek to establish the attitude of hon. Members to legislation doing the opposite of this to see how wrong this legislation is as well.

Although this amendment is directed at local authorities, it is not only local authorities which use contractors. Let us suppose that the Trades Union Congress wanted to extend Congress House. Would the TUC be put in a position in which it could not specify that the contractor it called in to do the building extension must use trade union labour? The proposition is nonsensical.

There are two other very bad effects of this amendment in practice—and I am concerned only with the practice. [Interruption.] The answer to the intervention of the hon. Member for Grantham (Mr. Hogg), who has obviously dined very well—and I envy him because I did not get time—[Interruption.] He should be able to take all that roast beef without it abasing his post-prandial manners. The answer to the hon. Gentleman is that no one can point to any difficulties which have arisen under the present system. If he has an example, I shall be prepared to listen—assuming that he can give it. I understand why the hon. Gentleman remains seated. I repeat that no one has given any evidence to suggest that the present arrangements do not work, and that is what matters.

I am concerned about two practical disadvantages which may flow from this amendment—[Interruption.] The first is that it will increase the price of contracts put out by local authorities—[Interruption.] The reason, quite simply, is that before a contractor takes on a contract he will put into his estimates a factor to protect him against a claim under this clause. If he is a prudent man, he will allow for all possible costs which may arise—[Interruption.] I have been here a long time, and I can take a lot of sedentary interruptions. From a sedentary position, the hon. Member for Grantham is dripping away like a leaking tap. Can he be called to order?

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

If it is of any assistance to the hon. Gentleman, I have heard nothing that the hon. Member for Grantham (Mr. Hogg) has said.

Mr. Mikardo

You have the consolation, Mr. Deputy Speaker, that you have missed nothing of substance. You have missed only the irritation that I have experienced from being so close to the hon. Gentleman.

Any prudent contractor allows in his estimates for contingencies which might add to the cost. One result of the amendment is that people will quote higher figures to local authorities. The Secretary of State is trying to get local authorities to cut expenditure, but the amendment will increase it.

The amendment will prevent much desirable contracting and sub-contracting. The TASS arrangement is not the only one. Many private employers, including many large firms, have agreed arrangements with unions represented in their establishments that they will not subcontract work normally done in those establishments except with the agreement of the unions. It the amendment allows contracts to be given to non-union firms—if there is an incentive to do so, to avoid a penalty—the trade unions will oppose sub-contracting. They will say "If that means that you cannot meet a promised delivery, that is your lookout, not ours." The amendment could have a bad effect in two ways.

I know of no great difficulties, under the existing arrangements, of any serious problems which the amendment will cure. Its motives are unworthy. If only for that reason, the House should reject it.

Mr. Crowther

I have never understood during the passage of the Bill why a party which allegedly believes in small companies should insist on pushing through legislation which damages them, as the amendment will. It will lead to pressure from unions—in private companies as well as nationalised industries—for more work which now goes out to contract to be done by direct labour. That will happen in the British Steel Corporation and many other large organisations.

Small firms which now exist on contracts from such large firms will be in increasing difficulty because of the danger of someone being taken to court or before a tribunal because of the amendment. More small firms will go out of business as a result. Yet the Tory Party is supposed to be the champion of small business. I do not know what its motive is for this action.

11.15 pm

The vast majority of employees in small companies are trade unionists. One or two employees might not be members of trade unions. Contracts are possible because trade unionists are involved and no difficulty arises. However, a risk is taken. A company could send someone who is not a trade union employee. The company could dismiss the employee, go to the tribunal and join the BSC or another organisation in the action. The shop stewards could be joined at the second stage. Risks are inherent. The only way to avoid the risk is to say "Sorry, but you are no longer on our list for consideration for contracts." Nothing is more certain than that that will happen. The small companies which do not have 100 per cent. trade union membership will be put out of business as a result of the provision. It is foolish.

The Minister should explain why it is reasonable to bring in something new in English law. I have no doubt that my hon. and learned Friends will tell me if I am wrong. Is it not new that someone who has entered freely into a contract should, at a later stage, be able to join another party in an action taken against him because that other party has declined to vary the terms of the contract? That is what is being done. That seems to be completely new in English law.

Let us consider the case of Mr. A who signs a contract with Mr. B, who says that he employs only union labour and that if that is not in the contract he will be in difficulty. Mr. A says "Fair enough. That is a clause of the contract and I shall use only trade union labour." If Mr. A then dismisses someone because of that condition, which is freely accepted, and if that dismissed person takes him to the tribunal, is it not a revolutionary concept in English law that he can go to the other party to the contract and demand that the contract be varied or that the other party accepts liability for total indemnity? I should like to hear justification for that. The second party can then join a third party—Mr. C—who has induced him to take that action.

What right will the contractor have to contest that the allegation is unfair? That is far from clear. I am not sure that he will have any right. I am not sure that the person that he then joins— the shop steward or the branch secretary—will have that right. The person who has the right to argue that the dismissal is not unfair is the person who dismissed the employee. Perhaps I am wrong. Perhaps that can be contested by the second and third parties. It appears that all that they can contest is that they should be subject to sharing the penalty. That is an extremely important point. If people find themselves liable to pay large amounts of compensation—we were assured in Committee that it could amount to more than £14,000—they must have the right to contest the allegation that the dismissal is unfair and, therefore, leads to compensation. It is not merely a question whether they should pay compensation.

I do not see any provision in the Lords amends that give such parties the right to demand the production of evidence about whether the dismissal was unfair—evidence that can be only in the hands of the person who ordered the dismissal.

Mr. Douglas Hogg

rose—

Mr. Crowther

I shall be happy to hear the hon. Gentleman's speech in due course. I am more interested in hearing the reply of the Under-Secretary. It is an extremely important matter.

Mr. Hogg

rose—

Mr. Deputy Speaker

Order. The hon. Member for Rotherham (Mr. Crowther) is not giving way. The hon. Member for Grantham (Mr. Hogg) is well aware of the procedure.

Mr. Crowther

I sat down because you rose, Mr. Deputy Speaker, not because the hon. Member for Grantham (Mr. Hogg) rose. I shall be happy to hear his contribution to the debate in due course.

I want to get home my point so that there is no doubt about it on the part of the Under-Secretary. My experience of him, with the greatest respect, is that he does not always reply to the points that I put to him in debate. I want him to reply to this point. [Interruption.] I assume that the Under-Secretary will reply to the debate. If his hon. Friends will shut up so that he can hear my point, I may receive a reply. I wish to know what guarantee there is that a person who is joined in the action as contractor, and then a person who is joined in the action by the contractor—presumably a trade union official—will be able to demand the production of evidence from the original employer which relates to whether the person was unfairly dismissed. I see nothing in the Lords amendment that guarantees them that right.

Let us not imagine that there are not circumstances in which a person is dismissed by agreement. An employer who is happy to get rid of a certain employee, and an employee who is quite happy to be got rid of, knowing that he will pick up substantial amounts of compensation from someone else—not his employer—may depart on the pretext that the contractor has inserted a clause in the contract and therefore he has to go. That could happen. Let us not pretend that it could not. If Conservative Members lived in the real world of industry, they would know that that happens. What guarantee is there that that a backstairs arrangement between an employer and an employee to obtain a large amount of compensation from someone else cannot happen? The way to prevent that is by guaranteeing the right of the person joined in the action to demand by subpoena all the evidence relating to the action. I see nothing in the Lords amendment that guarantees that right. I fear that it is wide open to fiddles of that sort.

I should like replies to those points. I hope that the Under-Secretary was able to hear what I said above the uproar created by his hon. Friends, who do not know anything about the subject and who come here only to cause a tumult in the Chamber, and that he will reply to it.

Mr. Greville Janner

Working out what is in the amendment, we have to look at two questions. The first is why it has been brought in, and the second is how it is to work. It has clearly been brought in as a further step towards getting rid of union membership agreements. It is a further attempt to curb the closed shop, which the Government believe to be wrong.

In referring, as the Minister has so often, to the freedom of people not to belong to trade unions, he has failed to refer to the conflicting freedom of people not to work with those who do not belong to trade unions. But there is a much more real point that the Minister misses. If we talk to practical managers in industry who have to deal with the problems that the Bill is creating and will create, we hear from them immediately that the vast majority prefer to work in a closed shop. The majority of managers in our industry will not like this clause, whether it be section 76A, as it will be, or section 76C that we are discussing now.

Mr. Robert Atkins (Preston, North)

Will it be in the hon. and learned Gentleman's next book?

Mr. Janner

If hon. Members read my book, they might know something. Meanwhile, as the book on what we are discussing tonight is yet to be written, perhaps we can get rid of at least one chapter by getting rid of this clause. It is a bad clause not only because the philosophy is wrong but because it will not and cannot work in practice. The reason that it cannot work in practice is, first, because the unions will not have it and, secondly, because the managers will not have it.

What is the reality of the clause and of the one that is tied to it? An employer dismisses an employee who refuses to join the trade union; therefore, under pressure from the union, the dismissal has taken place, and Parliament is now to give to the employer first the right to join the union—which it has been seeking to oblige—in proceedings and to claim an indemnity from that same union under whose pressure, it is said, the employee was dismissed. In other words, an employer who has acted under pressure from the union in dismissing the person is then being invited to seek from the union contribution or indemnity.

Mr. Mayhew

The hon. and learned Gentleman has got it wrong, and I intervene only in order to correct the matter at an early stage. He has said that the employer has sacked his man under pressure from the union. The amendment is concerned with an employer who has sacked his worker under pressure from his client—say, the local authority—and it is only in those circumstances that the amendment applies.

Mr. Janner

If the Minister had done me the courtesy of listening, he would have realised that we started with new section 76A and we move on. It is not possible to debate what is happening to contractors without seeing what happens first to the employers, because, as the Minister said, the same protection is being provided for the contractors under the amendment as was provided originally in the Bill to the original employer. That is what I am talking about, and we should start at the beginning, otherwise we shall never see the ridiculous nature of the end to which we are being driven.

The position is very clear. An employer is being invited to join in proceedings and claim contribution and indemnity from a union under whose pressure it is said that the employee was dismissed. The amendment carries the matter one stage further. It says that an employer who dismisses an employee because he is under pressure from a contractor who insists, in a very wicked way, on complying with his agreement is then to be able to join the contractor and to claim an indenmity from the contractor. The contractor is then being invited to join the union and claim from the union—or, indeed, from the steward or the person in the union—an indemnity. New section 76A brings in the employer, and the employer's right to join the union or the person in the union. The amendment takes it one stage further and says that the union is joined not by the original employer but by the contractor. In either event it is nonsensical. No employer in his right mind would dream of destroying his business in the way that the Government are inviting him to do.

11.30 pm
Mr. Douglas Hogg

Then what is there to worry about?

Mr. Janner

There is a great deal to worry about in putting idiocy on to the statute book. If the hon. Member for Grantham (Mr. Hogg) continues to interrupt my speech as he has interrupted previous speeches, his discourtesy will be equalled only by the extent of his ignorance.

This is an important clause. It is designed to prevent contractors from complying with agreements into which they have freely entered with employers, agreements under which union labour will be employed. It is designed to enable more employers to join more unions in proceedings.

The worst feature about the amendment is not so much what it states but its effect, which will be to invite industrial trouble. That is the main fault with the Bill. Most of the clauses will not work in practice because neither the management of industry nor the unions will agree to its working or will enforce it or apply it.

As my right hon. Friend the Member for Doncaster (Mr. Walker) said, the Bill will invite people to flout the law. My right hon. Friend made some unhappy remarks about lawyers in his otherwise excellent speech. Some of us felt rather strongly about that. Those of us who are involved in the law believe profoundly that the rule of law should be preserved. We preserve the rule of law, not by creating statutes that are unenforceable and with which no one will comply, not by creating statutes inviting people to assume the crown of martyrdom, not by making rules that people will inevitably flout, especially if they are on the extremes of our society, not by making rules creating the situation of the Pentonville Five, who deliberately put themselves into prison to become martyrs, but by making sensible laws that those in industry will be able to implement and to use to create better industrial relations.

We are discussing law that will not be welcomed by management any more than by unions. The Government are introducing it in a doctrinaire effort to implement procedures that I believe they cannot understand properly in their industrial context. If they understood them, they surely would not introduce them in such a way.

This is a bad amendment to a bad clause in a bad Bill, and it should be rejected.

Mr. Ron Leighton (Newham, North-East)

In considering the amendment, we should consider some of the current industrial practices that are accepted by all and have become traditional. Some firms and unions have accepted that work should be contracted out only to union only sub-contractors. That arrangement is presumably to be threatened and disrupted.

The National Coal Board sub-contracts work. It is understood that that work should be done only by union labour. What would happen if an NCB sub-contractor used non-union labour? That would immediately bring a confrontation with the National Union of Mineworkers. is what the Conservative Party wants.

Why is it that union only sub-contractors are specified? It is to eliminate the undercutting of agreements. Surely that is reasonable. Even the Conservative Party should consider that reasonable.

The Federation of Engineering Design Companies is part of the engineering industry. It is accepted that if there is an extra work load involving Rolls-Royce and British Aerospace, the work can be contracted out to sub-contractors who will use only union labour. That is to stop agencies using bogus self-employment that produces lump labour systems designed primarily to evade income tax and to secure tax concessions. Those are practices that create serious problems for industry and unfair competion for companies that are in the FEDC.

The overwhelming majority of personnel who are engaged on a self-employed basis are not genuinely self-employed. They claim to be self-employed only for the purpose of evading the normal obligations of employed persons and for claiming certain immediate advantages such as allowances not available to employed persons—schedule D rather than schedule E. Also, by registering as a limited company, individuals in the past have evaded tax scrutiny, and such tax evasion is borne by the rest of the community.

This can lead to widespread evasion. It can lead to the breaking of agreements on hours of work, holiday pay and redundancy agreements. We might also note that the agencies employing these people contribute nothing to the training of technical staff and have no apprenticeship schemes.

In the engineering industry self-employed personnel could not be members of the union, and so one way of ensuring that they were bona fide was to check whether they had membership of the union. If the amendment goes through tonight, arrangements of this sort will be disrupted, and what will be the reaction of the union members to that? As my hon. Friends have said, they will take the attitude that work should not be contracted out at all, and I wonder whether that is what the Conservative party wants.

I agree with my right hon. Friend the Member for Doncaster (Mr. Walker), who said that the Government have stood on their head, because this is the opposite of what the Secretary of State for Employment argued in Committee. I shall quote from what the right hon. Gentleman said. He started by saying: I am going to stick reasonably close to some notes on this. In other words, he wanted to be exact. He went on to say: In drawing up the clause we paid particular and close attention to existing industrial relations practices and traditions. The clause is drafted as narrowly as possible … We could, of course, have drawn a clause which would have been much wider and caught many more people but we were particularly worried, for example—this will come up, or could do, I suspect, in this debate—about trade union practices on building sites and so on where one often cannot get a group of union members to work alongside non-union members. That is why we had to draw it up in the way that we did. The right hon. Gentleman went on to say: The clause does not make it unlawful for workers to refuse to work at the same place as someone who is not a union member. It does not make it unlawful for them to advise or warn their employer that they will not work with a non-member. The right hon. Gentleman went on to refer to the TASS agreement, to which I referred earlier, which deals with TASS and the agreements that TASS made and the fair lists that TASS has in a number of places, operating as it does with the Federation of Engineering and Design Companies. Our view is that it will not interfere with the operation of fair lists, provided that the purpose of the fair list is not simply to force workers to join a trade union. The clause would not prevent industrial action by workers against their employer because he had contracted work—contracted work is important in this respect—to a firm or self-employed person that did not meet the requirements of the agreement. Only if the action was intended to compel such a firm's workers to join the union would it be unlawful. The amendment is therefore unnecessary in the case of the TASS-FEDC agreement, and disputes about non-membership of a union are unlikely to arise in the area covered by the agreement because the fair list system is well established and the design companies operate post-entry closed shops as a requirement of the agreement. In other words, they will have union labour only. [HON MEMBERS: "NO."] Let us have the facts. I want an answer.

This is what the Minister told us in Committee. I want to know what has caused the Secretary of State to stand on his head and to take a completely different view. The Secretary of State said: I do not particularly care for the fair list system operated by TASS but I accept that it is an industrial practice, and one which I am not seeking to deal with in this clause or in any other clause of the Bill. … I repeat that we have drawn the clause in this manner, which is perhaps difficult to understand, specifically to seek to avoid some of the normal industrial practicices which are part of everyday industrial life, whether it be in a TASS agreement or the agreements that operate on many large contractors' sites in this country. I end with these last few words from the right hon. Gentleman.

We are not seeking to abolish fair lists…. The way fair lists are entered into as a result of an agreement—as is the case with the TASS agreement—is something with which we all ought to be able to live in good industrial relations."—[Official Report, Standing Committee A, 25 March 1980; c. 1569–74.] The Secretary of State told use that this was traditional, something with which we ought to be able to live. What has changed his mind? Why do the Government stand on their head and move away from the sensible policy that the Secretary of State for Employment put to us in Committee? Why have they changed? Why do they bring forward proposals such as this which will disrupt industrial relations and will not work in practice?

Mr. Mayhew

This has been a depressing debate, because it has revealed yet again the depth of misunderstanding of the purpose of the clause.

I shall deal with the first point made by the right hon. Member for Doncaster (Mr. Walker)—that this represents a complete reversal of the Government's position on Report. I repeat that the new clause that was moved by my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) was quite different in its form and intent. Its purpose was to render void this type of contractual arrangement. I advised my right hon. and hon. Friends to oppose it because it would have led to great uncertainties. The clause made no provision for what sanction should be applied if somebody produced a void agreement and then sought to act upon it. It was uncertain and bad law.

Our purpose is clear. I agree with the hon. and learned Member for Leicester, West (Mr. Janner) that we do not like the closed shop. The amendment reflects our dislike of it. We are not ashamed of that. The closed shop seeks to make compulsory that which should be voluntary, namely, the membership of a trade union. We seek to say "If you wish to make a contract with this type of clause in it, those who are responsible should pay the compensation." If a contractor insists that his sub-contractors shall have union labour only and does not accede to a request to lift that clause, the resulting compensation should be paid by whoever insisted upon it—namely, the contractor. That is all that the clause does.

I do not see where the great injustice or attack upon trade unionism lies there. But there is great harm under the existing law, particularly to small firms and to those whom they employ. The hon. Member for Rotherham (Mr. Crowther) asked: where is the advantage for small firms in the amendment? Small firms are obliged by the force of economic circumstances to enter into these contracts, although they do not want this clause. If a small firm finds that it is insisted upon and it has brought somebody on to a site for whom there is no other work, he not being a member of a trade union, is the firm to sack him? If it sacks him, it will have no answer to a claim for compensation for unfair dismissal. That may be a very substantial claim because he may be a very senior worker.

That is why it is important to relieve those employers of that peril by enabling them to say to the contractors "It is you who are insisting on this. You, then, pay the compensation." That is what is done.

11.45 pm

I take up the point made by the hon. Member for Bethnal Green and Bow (Mr. Mikardo). He asked whether anyone could point to any difficulties under the present arrangements. It depends what one means by "difficulties". Under the present arrangement, there is difficulty surely for the worker who is sacked with no compensation at all. That is the consequence of the law passed by the previous Government. It casts some light on the approach of the hon. Gentleman and the Labour Party to these matters that he says that there is no difficulty under the present law.

Mr. Mikardo

I am most grateful to the hon. and learned Gentleman for his unfailing courtesy in giving way. Can he tell me of one case in which a person has been sacked in these circumstances and for this reason?

Mr. Mayhew

If the hon. Gentleman will consult the Federation of Civil Engineering Contractors he will find that so great is the pressure upon the federation that is imposed by the present law that it finds it a matter of the deepest concern.

Mr. Mikardo

One case?

Mr. Mayhew

I shall put it in this way. If the hon. Gentleman were to be right in what lies behind his question, what has he got to fear? If, on the other hand, he is wrong, surely it is an injustice which must be rectified.

The right hon. Member for Doncaster asked about a fair list. I shall detain the House by answering the questions that I have been asked. The right hon. Gentleman suggested that a non-union person who applied to an employer who intended to remain on the fair list could, on being told that he would not be employed because he was not a union member, claim constructive dismissal. This cannot be so because he was not an employee of that employer in the example given, so no question of dismissal, contractive or otherwise, would arise.

The right hon. Gentleman asked what part the contractor can take in these proceedings. He can take a full part. He can argue any issue that is relevant, and can also—and here is the question asked, I think, six times by the hon. Member for Rotherham who complained that I did not answer questions—take a full part in the question whether the dismissal was unfair in the first instance. That is the purpose or bringing him in before the hearing begins.

Mr. Crowther

Will the Minister give way?

Mr. Mayhew

I think that the House wants me to get on.

The hon. Member for Rotherham made another point. He asked whether it was a revolutionary principle in English law that someone who has entered into a contract can then call upon his contractual partner to abandon it. I do not know whether the hon. Gentleman wishes to secure the immediate repeal of the Rent Acts. That is exactly what a tenant can do. He can enter into contract whereby he takes a lease for three months or any fixed term and immediately on the expiry of that term he can call upon the landlord to abandon that. He can cast aside the contractual obligation into which he has entered. There are many other illustrations in statute law. That is because Parliament has seen fit, in what it has thought, rightly or wrongly, to be the national interest, to override what people have agreed by way of contract.

I simply say that the principle of the closed shop is fundamentally alien to the concepts of English law. We are seeking here to mitigate the injustice in a manner that accords with industrial realities. Some of my right hon. and hon. Friends may wish us to go further. Indeed, I know that they do. But, in furtherance of what we believe to be a sensible and practical approach at present, we believe that it is right to say "Very well. Let these terms be negotiated, but let those who insist upon them being enforced pay the damage." That is in the interests of workers as well as of employers.

A small firm, knowing that the law is to continue in the form that the right hon. Gentleman's Government gave to it, will say "We are moving out of this business, because now it will be possible for us to be sued for unfair dismissal by our workers, and we shall not be able to avail ourselves of the protection that the Employment Act 1980 gives us." That is why it is necessary to be able to pass on the claim for compensation to those who really are behind it.

That is all that I want to say in reply to the questions that have been asked. This is an important provision, one that accords with industrial realities. I believe that their Lordships got to the root of the matter. They did not say "We shall make these things void and hope that they will go away." They will not, make them void simply by declaring them to be void. Justice requires that those who insist on enforcing these clauses should be made to pay for the compensation.

Question put, That this House doth agree with the Lords in the said amendment:—

The House divided: Ayes 310, Noes 230.

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