HL Deb 11 April 2002 vol 633 cc429-60GC

[The Deputy Chairman of Committees (Lord Brabazon of Tara) in the Chair.]:

Clause 38 [Failure to give statement of employment particulars, etc.]:

Lord Razzall

moved Amendment No. 192A: Page 41, line 45, leave out subsections (1) to (7) and insert— (1) Where an employment tribunal makes any determination under section 12(1) or (2) of the Employment Rights Act 1996 (c. 18) (determination of references) the employment tribunal shall make an award that the employer pay to the employee a sum equal to the amount of two weeks' pay. The noble Lord said: I trust that we are all suitably refreshed and have done our homework over the Easter holidays. The purpose of this amendment—and I am indebted to the work that the Low Pay Unit has done here—is to attempt to deal with one of the difficult issues, the complexity of Clause 38. I think everybody will agree with the comments of Judge Prophet that the existing Clause 38 is mind-numbingly complex. As Judge Prophet says, It is so complicated that even the judiciary who have looked at the clause are uncertain what it means. Pity then the ordinary employee and the small business". The object of the amendment is to provide a freestanding remedy for failure of an employer to provide a registered statement which is both proportionate to the mischief it addresses and provides a sufficient incentive to employers to comply with this requirement.

I am sure we are all agreed that the widespread failure to provide written statements, as identified by the DTI, causes damage to the employment relationship. That certainly conforms to the experience of people who are familiar with this field. Therefore, there is no dispute from these Benches as to the rationale for a sanction on employers to encourage compliance. We would, however, agree with the comments of the Low Pay Unit and others that the question must remain as to whether Clause 38 is the best public policy response to this problem.

Perhaps I may share with the Committee some of the problems that can arise. First, we submit that the measure is badly targeted. The sanction under Clause 38 will apply only where an employee has brought one of the claims listed under Schedule 5. It will not apply to claims brought for other purposes, even though the failure to provide a written statement may be just as fundamental to that claim. For example a claim for under payment of the national minimum wage is not in Schedule 5, whereas a claim for detriment in relation to the national minimum wage is. In both those cases, it would seem equally important for the tribunal to determine fundamental terms of the contract, such as hours of work, which should have been included in the written statement.

The compensation mechanism is also complex and, we would suggest, flawed. In summary, Clause 38 provides for the following—and it is complicated. As Judge Prophet says, it is mind-blowingly complex. First, to trigger extra compensation, the applicant must have made a claim under one of the jurisdictions under Schedule 5. In determining that claim, the tribunal must then find that the employer has not complied at all, or only complied partially with the requirement to provide a written statement.

If the tribunal then decides the claim in favour of the employee but decides not to make an award in respect of that claim, the tribunal must still make an award for the failure of the employer to provide a written statement. This must be two weeks' pay where no written statement has been provided and one week's pay if the statement is incomplete or out of date.

If the tribunal decides the claim in favour of the employee and does make an award in respect of the claim, then the award should be increased. The increase should be the greater of 5 per cent of the award or one or two weeks' pay, depending on whether the failure to comply with the requirement was complete or partial. If this increase in the award is less than 25 per cent of the original award, the tribunal can then increase it up to 25 per cent of the original award, if it would be just and equitable in the circumstances. The tribunal may, however, have increased the award already through the operation of Clause 31. This would apply in circumstances where the employer is at fault for failure to complete internal procedures and could result in an increase in the award of up to 50 per cent. If such an increase has already been made, the total of the increase under Clause 31 and the clause should not exceed 50 per cent of the original award.

I believe that in the past two minutes that I have demonstrated the mind-blowingly complex nature of the clause as drafted. Not only is the formula unnecessarily complex, we would submit that it is also flawed and that one gets inconsistent and unfair awards for compensation. I will not list all the examples that the Low Pay Unit has demonstrated, but I will take two. One example is that of an employee who earns £ a week, wins her claim, but receives no compensation. She is then awarded compensation as she has had no written statement. This is two weeks' pay or £400. Therefore, the compensation for the written statement in that case is £400.

A second example is of an employee earning the same amount—£200 a week—who wins her claim and receives £10,000 compensation. She is then awarded compensation as she had no written statement. Under the first part of the calculation, that would be the greater of 5 per cent or two weeks' pay, so there would be £500 compensation for failure to provide the written statement. The tribunal then decides it will be just and equitable in the circumstance to increase the compensation up to the 25 per cent maximum, so she receives £2,500 for failure to provide a written statement. With exactly the same earnings as in the previous example, there is a difference between £400 compensation and £2,500 for an identical role.

The amendment is clearly designed to get an answer from the Government as to whether they propose to make this complex and flawed formula simple. I beg to move.

The Deputy Chairman of Committee (Lord Brabazon of Tara)

I should point out that if this amendment is agreed to, I cannot call Amendments Nos. 193 to 197.

Lord Wedderburn of Charlton

It has been agreed that I should speak to Amendment No. 198, which might be more efficiently grouped with this particular clause and it is wholly my fault that the groupings do not include it. It would be a saving of time if I did so and my noble friend the Minister and the noble Lord, Lord Razzall, have kindly agreed that I should do so.

The effect of Amendment No. 198 would be very similar to that of Amendment No. 192A. It was drafted after the excellent argument of Judge Prophet on Clause 38, to which I wholly subscribe, and before I saw the excellent briefing from the Low Pay Unit to which the noble Lord, Lord Razzall, has referred. If I may return a comment conversely from what the noble Lord, Lord Razzall, said on a previous occasion, I think that his amendment may be rather better than ours.

This gives me the opportunity of saying that Amendment No. 198 would apply in the case where, as it puts it, an employer has failed to give to an employee a statement as required by the sections 1, 4 or 8 of the Employment Rights Act 1996. Under Section 12, which at the moment allows only for a declaration by the tribunal, there would be added an automatic right to compensation. In case the Government were going to insist on their extraordinarily complex, not to say tortuous, Clause 38, we linked it to Clause 38. If, of course, the Government have had second thoughts on Clause 38, we would merely wish to give the tribunal a discretion as to the amount which it must award.

This is a longstanding ground of criticism of what is now the Employment Rights Act 1996 and began as the Contracts of Employment Act 1963. For many, many years the tribunal has been allowed to make a declaration as to the inadequacy of the written statement of employment particulars but to go no further. It seems to me that by the very fact of including the complex Clause 38, the Government accept that in the normal case there must be a sanction on an employer who does not give proper written particulars.

It is in that sense that both the amendment moved by the noble Lord, Lord Razzall, and our Amendment No. 198 are important from a long-term point of view. They seek to provide a long-term improvement to the employment protection rights legislation by ensuring that the tribunal has a duty to give compensation to an employee to whom proper written particulars have not been given by the employer at the proper time. In that respect, they provide a clear and automatic sanction upon employers who fail to do so, and many employers do fail to do so. That sanction improves the working of the employment protection legislation and practice at the place of work. I speak to Amendment No. 198.

Lord McIntosh of Haringey

I am grateful to both noble Lords who have introduced their amendments, and I welcome the opportunity to deal with both amendments together. As the noble Lord, Lord Wedderburn, said, Amendment No. 198 is similar to Amendment No. 192A but it differs in that it would not remove the penalty regime which is in Clause 38.

Amendment No. 192A would insert a new provision into the Bill relating to the enforcement of existing requirements in the Employment Rights Act 1996 that employees should receive a complete and accurate written statement of employment particulars. The effect of the amendment would be to enable employees whose employers have not fulfilled those requirements not only to take a case to the tribunal to rectify the position, as they can now, but to go beyond that and obtain a fixed level of compensation if they win their case.

At the same time, the amendment deletes the provisions in the present clause, having the effect that the awards made as a result of complaints to tribunals about other issues are to be increased by a percentage if no, or an inadequate, statement of written particulars has been given.

I have mixed feelings about the amendment. I have to resist one of the effects that it would have but I shall agree with the other and take action accordingly.

It is clear that we all agree that the effective resolution of disputes in the workplace and clarity in employment relationship more generally requires that employees should be given the written statement of employment particulars to which they are entitled. We all share the aim of encouraging compliance with that requirement.

The Bill directs tribunals, when a successful claim is made under the majority of the main types of tribunal claim—that is, what are called "jurisdictions", which are set out in Schedule 5—to make an increased award where the written statement was not issued or was incomplete or inaccurate.

Before I go further, perhaps I may say a word about Schedule 5. That schedule is intended to be fairly comprehensive. It is intended to cover pretty well everything that comes before an employment tribunal. If it is found not to be comprehensive, and if there are changes in matters which can and should go before an employment tribunal, it can be altered by regulation. It does not require primary legislation for that purpose.

I want to correct one point made by the noble Lord, Lord Razzall, concerning his statement that the schedule does not apply to the national minimum wage. The national minimum wage is enforced under Section 23 of the Employment Rights Act 1996, which is a provision specified in Schedule 5. I do not believe that the issue of what is included in Schedule 5 is absolutely essential to the argument that we are making today, the point being that the amendment would create a stand-alone penalty for noncompliance and would remove the linkage with the other types of tribunal claim and replace it with a freestanding right to compensation.

I believe that the current approach in the Bill creates the right balance in encouraging compliance and by putting employers on notice that they neglect their obligations under the written statement provisions at their peril, without in effect creating a new stand-alone right to compensation. It focuses on an area of particular abuse—that is, those situations where the employment relationship has been damaged and that is the employer's fault.

Of course, we could go further. We could, as the amendment suggests, enable tribunals to make awards where the only issue is the absence or inaccuracy of a written statement. However, we take the view that this would be a step too far. At the moment, where a complaint is made of the absence or inadequacy of a written statement, the tribunal will determine what should have been included in the statement and the employer will be deemed to have given the employee a statement containing that information. That seems to me an acceptable and appropriate remedy for the abuse suffered. Providing a stand-alone financial penalty where the only problem is the absence of a statement might encourage speculative claims where no real damage has been suffered.

I turn now to the other issue, which is the simplified fixed penalty approach which is proposed in the amendment. The amendment would take out subsections (1) to (7) of the clause, which the noble Lord, Lord Razzall, has quoted so effectively. It would remove the penalty provisions as currently drafted. These provisions enable an award made for one of the types of claims listed in Schedule 5 to be uplifted by a variable percentage of between 5 per cent and 25 per cent, with a minimum floor of one or two weeks' pay. The noble Lord, Lord Razzall, said that that was impossibly complicated: I agree. I have read the clause and the Explanatory Notes very carefully, but at the end of that—not being a lawyer, and certainly not an employment lawyer—I was none the wiser.

Although we do not wish to create a stand-alone penalty and we want to preserve some link between a penalty for a breach of this requirement and a penalty for breach under some other type of claim, we should adopt the simplest and most readily understandable formula for calculating the penalty that we do impose.

I am persuaded that a fixed-rate penalty—I suggest two or four weeks' pay—would be as effective as the current percentage-uplift system in discouraging employers from ignoring their obligations. It would be a good deal simpler to operate. The Government will therefore bring forward an appropriate amendment on Report.

11.15 a.m.

Lord Wedderburn of Charlton

I am grateful that the Government will reconsider Clause 38. When they consider whether to impose a two or four week basic award, will they do further research, which they say that they have not done, on the effect of sanctions an employers fulfilling their obligations?

Government policy is not to allow for any standalone penalty for the failure by an employer to give proper written particulars to the employee of his conditions of employment, because they only want a remedy where the employment relationship is damaged. Do not the Government regard it as an automatic damage to the employment relationship if the employer does not give to the employee a written statement, which he is legally obliged to give, of the main terms and condition of employment?

Lord McIntosh of Haringey

My noble friend rightly describes the Government's position. We do not think that there is automatically a damage to the employment relationship—it only matters if anything goes wrong as a result. In a very large number of employment relationships, particularly continuing employment relationships before this Bill conies into effect, nobody has ever queried the need for a written statement. Unless something goes wrong, nobody will query it—neither the employee nor the employer. If something goes wrong, it must be clear—we ate making this clear in the Bill—that there will be a penalty if it is missing. That is as far as we can reasonably go without introducing a whole new category of matters going before the tribunal simply because there is not a written statement, or an adequate one.

On the first question posed by my noble friend Lord Wedderburn about research, we consulted on Clause 38 and consultees were broadly happy. However, I rather think that they were happy before they saw the way in which Clause 38 had to be drafted in order to achieve what we were seeking to achieve. I cannot imagine that there will be any difficulty with a simplified approach.

Lord Gladwin of Clee

I am most disturbed by the language that my noble friend has just used. The concept that no damage has been done if no contract of employment is ever issued is one that I hope does not receive too much publicity. This is monstrous. You cannot pretend in this regard—not issuing a contract of employment to someone you have employed just does not stand up to examination. I cannot go along with the idea that unions that have been consulted are happy with this concept.

Lord McCarthy

I want to be clear about what the Minister is saying. It seems to me that he is not prepared to make a single concession. He said that, if necessary, he wants the regulations in Schedule 5 to be more comprehensive, because he wants them to cover everything. If we find that they do not cover something, you use regulations to state that they do. That is not a concession. He also said that he wants to retain the indirect approach. You have to go to a tribunal and win before anything happens. That is not a concession. In so far as he explained why he wants such provisions, he said that we must not have speculative claims. Most claims to tribunals are speculation; no one knows exactly who will win, and if the worker does not win, he will receive no money. If we said in advance that if there was a chance that he would receive no money, he should not take a case, that would simply—this may be getting close to the reason why the Minister is making more concessions this morning—get the Government nearer to the necessary 40,000 cases. He is quite happy in this regard. This is another non-concession, with a fixed rate, even if it turns out—if the Low Pay Unit works on the matter again—that it is just as anomalous and just as unfair as the complicated system in the Bill.

The main concession that the Government will not make is about doing anything that enables the applicant to believe that he or she might get justice. There is no justice in this. A fixed rate is not justice and the refusal to move on an indirect approach—and all the other issues—are not justice. This all goes back to the need to cut 40,000 cases; that is the only justification. The Minister, of all men, said that consultation of interested parties is the same as research, or is a substitute for research. He should make some concession somewhere or we shall have to come back on Report.

Lord Davies of Coity

I want to reinforce the concern that has been expressed by my noble friend Lord Gladwin. An employer's obligation to provide contracts of employment or a written statement is rather unusual. If I understood the Minister correctly, he said that no damage could be done. The chances are that in some circumstances a complaint will not be registered and, as a result, no determination by a tribunal will be provided.

However, if a complaint is made, a stand-alone penalty must of necessity be an obligation for the tribunals to impose upon the employer because they have not fulfilled a legal obligation they should have fulfilled. It seems to me that in its present form the Act—and I welcome it being looked at again to take away some of the unnecessary complex complications there—is giving the employer an excuse to advance an explanation as to why he did not fulfil his legal obligations. That is an absolute nonsense.

Lord McIntosh of Haringey

Clearly, in view of what has been said, I will look again at the experience of the 1996 Act, the point being here that it is already a requirement under the Employment Rights Act 1996 that employees should receive a complete and accurate written statement of their employment particulars. That of course is not being taken away. The difference between us is not that it is not a legal requirement that there should be a complete and accurate written statement of employment particulars, but that there should be a stand-alone penalty for failure to comply with that. There has not been a stand-alone penalty until now and clearly it is appropriate that we should look at whether that has caused problems. The experience of the employment tribunals is obviously relevant to that.

We are neither advancing nor retreating on this matter at the moment. What we are doing is proposing that where there seems to be—I do not know whether the right term is "collateral damage"—a combination of one of the matters covered in Schedule 5, in other words, nearly all of the matters going before an employment tribunal, and where that is accompanied by an inadequate or non-existent statement of written particulars, the employer should pay an additional penalty to the employee. It may not be called a concession but I believe that it is a step forward for employees. Certainly, between now and the Report stage, if there is anything else we can discover which is relevant to this we shall certainly do so.

Lord Davies of Coity

Before my noble friend sits down, there is one point that strikes me arising out of what has just been said. It may be that there is not a current provision for stand-alone penalties in certain circumstances. However, the emphasis of the Bill, as I understand it, is to ensure that something like 6 million people will have provisions for settling their complaints within the company that employs them. If that is where the emphasis is, it places obligations upon employers to ensure that employees have all the facilities and knowledge that they are entitled to. Consequently, if an employer does not provide that, then a stand-alone penalty for not doing so seems a very legitimate approach.

Lord Wedderburn of Charlton

Further to my noble friend's, with respect, well taken points, what my noble friend has said suggests to me that the Government need to think again whether they can find any experience in the tribunals, as he put it. Of course, the tribunals have no experience of this matter because there is no right in the tribunals to a penalty for failure to observe Sections 11 and 12 with just the right to a declaration. Even that has obscurities as to its precise scope.

My noble friend does not answer the point that to keep the worker in the dark—because that is what it is—as to his proper written particulars of his employment terms in itself damages the employment relationship. Of course, from the employer's point of view, it may not be much damage, and that is the point of view the Government have espoused. Will the Government think again, from its roots, on this matter of sanction in Section 12 of the Employment Rights Act?

11.30 a.m.

Lord McIntosh of Haringey

I do not believe that I have anything to add. It is not just for the employer's benefit that we do not seek to provide a stand-alone penalty. The noble Lord, Lord McCarthy, returned to the issue of 40,000. I think he will agree there is nothing in any of these provisions which provides any barrier to access to the tribunals which does not exist at the moment. To have a stand-alone provision that any failure to provide a complete and accurate written statement would in itself be an offence which could be taken to the tribunal and could attract a penalty is a very major step.

Lord Razzall

Taking the point that has occupied the Committee for the last 10 minutes, I feel that those of us on this side—and indeed the Members of the Committee on the other side—have been somewhat remiss in failing to spot this point in the 264 amendments that had been tabled to the Bill. None of us has tabled an amendment on the point that has just been debated for the last 10 minutes; that is, whether or not there should be a stand-alone remedy. With the greatest respect, I am not sure the amendment that has been tabled would have that effect, but in any event I am delighted that the Minister will look again at this issue. I suspect that I know the answer that will occur when he has looked at it. I suspect the Government will not wish to reopen the question as to whether or not there should be a simple stand-alone remedy because contract employment law, ever since the requirement came in all those years ago—when the noble Lords, Lord 'Wedderburn and Lord McCarthy, were teaching us all about employment law— right from the start did not impose a stand-alone penalty for this. This would therefore be a significant change in the law. However, I would he interested in the comments of the Government and it is obviously for Members on either side of the Committee to decide whether they wish to move an amendment on Report.

On the substantive point of my Amendment No. 192A, in the light of the Minister's comments some 20 minutes ago, it would be extremely churlish of me not to withdraw my amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Hendon

moved Amendment No. 193: Page 42, line 5, at end insert "and (c) the breach by an employer of the duty to provide a written statement is the main reason why the employment tribunal finds in favour of the employee in paragraph (a) The noble Baroness said: In moving this amendment, I would like to make a comment on something that was said which has some bearing on Amendment No. 193. First, I certainly took some comfort from the fact that the noble Lord, Lord Razzall, and the Minister found great difficulty with Clause: 38 and the notes on the clause, as I did. I found it difficult to cut through all of it and find the essence of what was meant. However, I note that Members of the Committee opposite had no difficulty whatsoever because they were able to talk for quite some time on this amendment. Bearing in mind that the noble Lord, Lord Wedderburn, suggested that Amendment No. 198 be discussed with Amendment No. 192A—he said in the interests of speed and not wasting time—my Amendment No. 193 is a very short amendment and is to the point.

Secondly, I drew comfort from the Minister's reply. Had he accepted Amendment No. 192A in its totality, I could not move Amendment No. 193, as the Deputy Chairman of Committees informed us. It is important because I want to touch on another point of view. I understand entirely what the noble Lord, Lord Wedderburn, said when he talked about employers. I understand totally where he comes from and I understand totally the interests of the section that he is representing, as indeed are the noble Lords, Lord Gladwin, Lord Davies of Coity and Lord McCarthy. However, as a former employer—and a good employer—it is worth mentioning that there are some employers who are very interested in the interests of their employees. However, something might happen that did not make any difference whatsoever to the employee but if this stand-alone provision made such a matter an absolute offence right away that might cause some difficulty.

Clause 38 applies—as stated in subsection (1)—to proceedings before an employment tribunal in relation to a claim by an employee under the eight Acts and four regulations listed in Schedule 5. The clause, as the Explanatory Notes describe, provides for employment tribunals to award compensation to an employee where, the lack, or incompleteness or inaccuracy of the written statement becomes evident upon a claim". The clause as at present before the Committee does not carry that description into effect. The amendment makes it clear that the defective written statement, or the absence of one altogether, must be the main reason why the employment tribunal found in favour of the employee. In other words, the section will not apply if such defect or the lack of a statement actually made no appreciable difference to the outcome of the case. I believe that when the Minister first spoke—from recollection, it was some time ago—he used the same wording: "made no appreciable difference to the outcome of the case". I believe that that is what he said.

The old-established legal maxim is de minimis non curat lex, which simply means that the law does not concern itself with trifles. This principle is used by the civil courts, particularly the appellate courts, to justify the refusal to countenance matters of very small import. There is no reason why the same principle, relying on the tribunal's common sense, should not be used to ensure that penalties are not increased clue to what the tribunal considers is an irrelevant technicality, thus denying one of the parties justice. It is not what the employer considers is an irrelevant technicality; it is what the tribunal considers to be an irrelevant technicality.

I hope it can be accepted that, without in any way depriving any employee applicant of his rights to a fair hearing, there ought not to be rough justice to an employer when he commits what the tribunal itself decides on the facts of a particular case—not a sweeping amendment that is now stand alone but on the particular case in front of the tribunal—turns out to be some inconsequential breach of the rules. I beg to move.

Lord McIntosh of Haringey

I will not repeat the context in which we have been debating Clause 38. I think the Committee is well seized of that. I will concentrate on what this amendment would actually do. What the Government are doing in Clause 38 is to provide, for the first time, a penalty for not having an accurate or complete written statement in the circumstances where a case comes before the tribunal for one of the other reasons for which a case could come to the tribunal.

The amendment would restrict the awards where the successful claim itself attracts no awards to those occasions where the employer's breach of the written statement was the main reason for the tribunal's finding for the employee. But that change would undermine the whole purpose of the clause and would remove the benefit which employers are gaining from the clause. It would make it virtually impossible for the tribunal to make an award for a failure to meet the written statement requirements.

For example, a tribunal is very unlikely to find, where it is considering an unfair dismissal claim, that the main reason for finding in favour of the employee is the absence of the written statement. It may well deduce that the lack of a written statement contributed to a breakdown in communications between employee and employer, which in turn led to disciplinary action and dismissal but that would not make it the main reason. It is more likely to be the case that the employer does not have one of the potentially fair reasons for dismissing an employee set out in the Employment Rights Act 1996.

In many cases, the connection between the written statement failure and the actions complained of may not become clear at tribunal proceedings. It would be inconsistent and unfair to do what the amendment suggests because the outcome would be that there would always be a penalty if the employee received an award for his claim, but where the employee does not receive an award there would be a penalty only if the offence were the main reason for finding in his favour.

We do not intend to limit compensation to situations where the employer's breach of the written statement requirements is relevant to the matter complained of. The written statement is a key document, clarifying the relationship between employee and employer and helping to avoid workplace disputes. We believe that if a tribunal finds that, in addition to the subject of a dispute, the employer has not met his written statement obligations, it is right that he should incur some penalty, regardless of whether the breach is material to the case being heard.

Where the clause gives tribunals the discretion to vary the increase, they will be free to use that discretion to relate its level to the effect of the employer's breach on the matter complained of. However, we have deliberately not limited compensation to occasions where the employer's breach of the written statement is relevant to the matter complained of by the employee, for the reasons I have given.

Most employers do comply with the requirement and will not be affected by it. However, it is right that those who do not are penalised, because the written statement is fundamental to rights and responsibilities in the workplace. While the majority of responses to Routes to Resolution were in favour of this measure, a few suggested that allowing employees to claim compensation for an offence against the written statement alone would be more effective. However, I believe we are striking the right balance here in encouraging compliance, by putting employers on notice that they neglect their obligations under the written statement provisions at their peril—without in effect creating a new stand-alone right to compensation. I do not think that what we are proposing is an excessive penalty, but it is enough to make a difference and the amendment would make that impossible.

Baroness Miller of Hendon

I find the Minister's answer totally fair and I accept that he is trying to steer a middle course. I will be most interested when I see what comes back on Report because it seemed that, after a good deal of pressure from noble Lords on his side of the House, he was moving a little further from what I would consider the neutral position. Nevertheless, it was a very fair response from the Minister and I intend to withdraw the amendment.

On several occasions much earlier in the proceedings, I listened with great interest to Members of the Committee opposite who spoke for a very great length of time. I listened with great interest because I believe that they have a great knowledge and I wanted to hear what they said. Indeed, on one occasion I asked them to accept in good faith that I was also speaking from an important point of view. I noticed that there were many sniggers when I was talking and some remarks were not sotto voce. In a small Committee room, that is not appropriate. That is all I would say—I would like them to give me the same courtesy as I give them when they speak. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 194 to 197 not moved.]

11.45 a.m.

Lord Razzall

moved Amendment No. 197A: Page 43, line 12, leave out subsection (10). The noble Lord said: The purpose of this amendment is straightforward and I shall not detain the Committee for long. We have already accepted that Clause 38 is fiendishly complex, as the Minister indicated in his remarks following my moving Amendment No. 192A. Given the fiendishly complex nature of the clause, we from these Benches do not believe it is appropriate that the Secretary of State should be able, by order, to dip in and dip out of the clause as he, or his successor, so wishes, in a matter of this complexity and importance. The meaning of the amendment is quite straightforward. I beg to move.

Lord McIntosh of Haringey

This comes back to the issue we were discussing in respect of Amendment No. 192A, about what is included in Schedule 5 and what is not. Schedule 5 lists the types of tribunal claims—in other words, what are technically called the "tribunal jurisdictions"—to which we currently believe Clause 38 should apply. It includes many of the major ones which attract the largest number of complaints, including unfair dismissal, non-payment of wages and all types of discrimination in the employment field. The amendment seeks to remove subsection (10) of Clause 38, which gives the Secretary of State powers to amend this list by varying the jurisdictions covered, by specifying claims of a certain description under any of the jurisdictions otherwise covered to which the increased awards are not to apply. It also gives power to extend the measure to non-employees.

Our starting point is that we seek to underline the importance of communicating the minimum disciplinary and grievance procedures to employees. Therefore, the jurisdictions listed in Schedule 5 are currently the same as those listed in Schedule 3; that is, the provisions allowing for adjustments of award for non-completion of the statutory procedures.

Just as occasions may arise where it may be appropriate for the statutory procedures to apply to a particular type of claim in all circumstances—and we have need of the power to amend Schedule 3 which we discussed when we debated Clause 31—so we may find that it is appropriate to amend the list of jurisdictions in Schedule 5, as I have already indicated. Those variations may differ from the changes we want to make to Schedule 3—otherwise we would have only one schedule instead of the two—because different regimes may work better for some types of claim and descriptions of claims than they do for others. I believe it is important that we maintain a separate power to vary the detail of Schedule 5 by regulation, which is what this subsection does, and the Delegated Powers and Regulatory Reform Committee has, of course, considered the matter and concluded that the powers are appropriate.

If we were making changes to the schedule, we would consult and consider the results of the consultation. On that basis, I hope that we shall not be denied this power, as would be the effect of the amendment.

Lord Wedderburn of Charlton

Before my noble friend sits down, when the Government reconsider Clause 38 in light of the proposed amendment of the noble Lord, Lord Razzall, will they consider whether it is proper for the Secretary of State to have power to remove from the list the jurisdictions that depend upon European Union directives? Does he believe that the European Court of Justice in Luxembourg would accept a removal, which the Secretary of State would have powers drafted to make, from the list of those three items that depend particularly upon European law? That would mean that a worker could be deprived of knowledge in the written particulars by way of a deprival of sanction such that his rights would be effectively diminished in that respect in relation to those items.

Lord McIntosh of Haringey

The answer to that is that under the Human Rights Act 1998 not only dies primary legislation have to be accompanied by a declaration from the Minister that it is in conformity but the same applies to secondary legislation as well.

Clearly it is not the same point but, following on from that, we should be very ill advised to put forward secondary legislation to amend the matters in Schedules 3 or 5 if that brought us into conflict with European legislation. Therefore, if the question that I am being asked is whether we shall take that into account, the answer is that we shall certainly do so.

Lord Wedderburn of Charlton

I am very sorry. My noble friend or his advisers must have misheard me. I was not asking about the European Convention on Human Rights and the Strasbourg court: I was asking about European Union directives and I specifically mentioned the Luxembourg court. It has nothing whatever to do with the Human Rights Act.

I ask again: are the Government happy that the Secretary of State should have power to diminish and effectively make much less valuable the rights of workers under the three items in Schedule 5 that depend upon their implementing European Union directives?

Lord McIntosh of Haringey

I believe that the record will show that, when I was referring to human rights legislation, I was doing so as an analogy, that I said specifically that it was not the same point, and that, having made the point about human rights legislation, I went on to say that clearly we would be extraordinarily foolish if we were to bring forward secondary legislation that brought us into conflict with the European Union directives and therefore with the Luxembourg Court. The answer to my noble friend is "Yes". We are conscious of the importance and effect of European Union directives and of the jurisdiction of the Luxembourg Court. We will take that into account, as necessary, when drafting secondary legislation.

Lord Razzall

I have listened carefully to what the Minister said. He is, of course, right that the background to this amendment touches on a number of points that were raised when we debated Amendment No. 192A. I have not been totally persuaded by what he said. Bearing in mind the importance of Clause 38 and Schedule 5, it is incumbent on the Government and their draftsmen to put into Schedule 5 a comprehensive list of sections and pieces of legislation that are covered. As regards the past, they ought to be satisfied, before the Bill is enacted, that they have included such a list. Therefore as regards the past, this provision should not be necessary and as regards the future, any new legislation should have built into it the provision involving Schedule 5.

I am not persuaded that this is anything other than simply protection of the Government draftsmen, in case they have got something wrong. However, I will obviously read carefully what the Minister has said and think about the matter before Report. Until then, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 38 agreed to.

[Amendment No. 198 not moved.]

Schedule 5 agreed to.


On Question, Whether Clause 39 shall stand part of the Bill?

Lord Wedderburn of Charlton

My noble friends and I have given notice that we resist Clause 39 standing part of the Bill. It is of some importance to deal carefully with the clause. I shall do so as briefly as possible, but since it has never been explained to Parliament, it must not proceed to the statute book without a most careful consideration in Committee and, if necessary, on Report.

I am sorry that the noble Baroness is not in her place. I wanted to make it quite clear to her, in view of her somewhat remarkable remarks, that we on this side deal with these matters as we were asked to do and as we would in the Chamber, subject to there being no Divisions. We shall do so in relation to Clause 39. Nowhere is it more true than in this clause that before the industrial relations implications can he understood, the cloud of legal technicalities must be understood and swept away. The camouflage of the Explanatory Notes—in this case, as is so often the case with regard to the Bill, that is what they are—should be cast aside. The clause crosses a Rubicon into the new territory of managerial prerogative, which will enable employers to keep workers from enforcing their rights in the tribunals.

That is a strong claim and I must justify it. From the time of the foundation of the modern law of employment rights in the great Bill of my noble friend Lady Castle of Blackburn, to whom I pay tribute in the history of workers' employment rights, it has been a fundamental provision of legislation that those rights cannot be excluded by supposed agreement between worker and employer. Translated into real life, that means that the employer cannot lawfully lean on the employee to make his employment or the offer of a job dependent on his surrendering his employment rights. That prohibition is now in a series of provisions, which are listed in Clause 39(2). They relate to race discrimination, sex discrimination, disability discrimination, minimum wage, working time and employment rights generally in Section 203 of the 1996 Act.

It has always been the case that the settlement of a dispute with the assistance of an ACAS conciliation officer can be exceptionally one where the employee may lawfully surrender those rights. The conciliation officer is a guarantee of fairness in such a settlement, which is often called, in practice, a COT3 compromise, because COT3 is the heading of the forms and documents in ACAS practice.

The Explanatory Notes to the Bill, in a masterpiece of obfuscation, state that Clause 39 ensures, and I quote: that compromise agreements are as effective and as wide in extent as ACAS conciliated settlements". That is, compromises without the assistance or guarantee of a conciliation officer.

Technically, conciliation-officer-prompted settlements can allow, in a COT3 agreement, the exclusion of future rights of action. However, I have consulted various experienced practitioners and they tell me that, although technically that is correct, they have rarely, if ever, in practice encountered it. Nevertheless, this clause—and this has never been explained to Parliament, not a word was said about it in Committee in another place—does that by removing a vital condition from these legislative provisions.

At present, a compromise agreement is allowed only when two major conditions are fulfilled. First, the employee must have independent advice. Initially this had to be from a legal practitioner, but the Conservative government gradually widened the exception to include certified trade union advisers—I hasten to interpret that that means advisers of the trade union certified by the trade union—and advisers from the citizens advice bureaux. That is the first condition.

The second condition is that the compromise must relate to particular matters or particular complaints or proceedings. That links it to past, or at most present, events. The Explanatory Notes suggest that there has been uncertainty involved here. The DTI has never produced any evidence of special or unusual uncertainty. There have, of course, been arguments about whether a so-called agreement has compromised particular rights, or all rights in existence, or only a section of them. However, the uncertainty has been no greater than in any other area of the law, and practitioners accept that that is so at present.

I challenge the Government to produce one single quotation from any commentary or text criticising that aspect of the provisions set out in Clause 39(2) or (3) of the Disability Discrimination Act 1995 on compromise agreements.

However, the clause would remove the second condition. That means that a worker or employee, and the employer, could make a so-called agreement at any time, whereby the worker would sign away all his employment protection rights, past, present and future. That is what the Government intend. Indeed, in their response to consultation on the Bill, they declared, and I quote at paragraph 39: The consultation document proposed that the scope of compromise agreements should be widened so that they equal ACAS COT3 in terms of their ability to allow individuals to contract out of their employment rights". That would allow the situation to emerge where the employer says, "You can have the job if you promise never to sue me in the tribunals". That is one way to reduce the number of cases in the tribunals. Do not bother with a letter or waiting 28 days; just get rid of the rights by compromise agreement.

The government response of 2001 continued: This was well received by the CBI, and they went on: However the TUC considered the proposal unnecessary". I interpose that the TUC said far more than that in opposition to the proposal. The response of the Government goes on: The Government will amend the legislation to widen the scope of compromise agreements". No good reason has ever been given for this extraordinary change, except that the CBI is well disposed towards it, as drafted by its agents in the DTI. However, it will he said, "You overlooked something". I always try not to do that. It will be said, "You still have the guarantee of advice for the employee from a lawyer or a union adviser or an advice centre". In practice, you do not.

If you have ever tried to advise on a COT3 agreement, you know that when you are advising a worker whether to give up rights about particular proceedings or particular complaints, the adviser can calculate what it is the worker is surrendering. He or she can say, "Yes, that is a fair price for giving up that particular complaint on unfair dismissal". Or he or she can even say, "Yes, in view of the circumstances of what has happened, or what is happening, I think that is a fair deal in regard to the harassment you have suffered by way of sex discrimination". Or it can be said, "That is not a fair deal at all"; or, "As a disabled person you are being fairly recompensed by the failure of the employer to adjust the circumstances to your case".

However, an adviser faced with a worker who is being asked to sign away all his or her rights, or all his or her rights on particular matters, in the past, present and the future, is faced with a quite different problem. How can he possibly advise the young woman who says—and this is what the Government must face—"I need the job, I need the money, I am a single parent and my boss says I can have the job if I sign a compromise agreement agreeing not to go to the tribunals ever in the future. And by the way, just pop round to the CAB adviser and see if he won't approve it."? How can the adviser possibly know whether that is a good deal or not? He needs to know much more about the employer. How does he know whether the employer will ask her out for a drink every Friday? How cart he know whether, if he tells her she can sign the thing and safely take the job for the money she needs, he is not selling her into a world at work of permanent and unremitting harassment without remedy? How can he possibly know that?

Once the second condition limiting compromise agreements to particular and known circumstances is removed, the position of the adviser—however independent—becomes impossible, and advice is in all conscience impossible to give in many cases. In my discussions with experienced practitioners, I have found that that is a situation which they well understand. Indeed, the experience of the Law Society prompts it to say on this clause—I quote from page 19 of its brief: We are concerned that, as drafted, unscrupulous employers could make the signing of a compromise agreement a condition of employment and use this mechanism as a way to avoid their statutory obligations to their employees". What do the Government think they are doing? There is no suppression of research material here. There is no wilful misinterpretation of the statistics. There is no false perspective to the parliamentary Human Rights Committee, all of which my noble friends and I have shown on previous matters, in Part 3 of the Bill. I interpose the remark that we shall be writing to the Joint Committee on Human Rights, asking it to reconvene on the Bill as so many matters referring to human rights have arisen which are more than doubtful.

Why do the Government want to give—and they know they are giving it because they said so in their response to the consultation—a power for employers to lean on people as workers, either before the job or when they are in the job, to contract out of all their employment rights? Is it because the CBI received the idea well? That is apparently so. What is the extent of the savings from this extraordinary provision? On conciliation as a whole, in their response to consultation, the Government comment on various matters, such as the new fixed conciliation periods. On the new fixed conciliation periods, they say that, the number of hearings is likely to fall between 1,700 and 3,400 each year". Where they can, they tell us how many cases that will solve in the tribunals. At the moment, they do not like mention being made of the fact that they have a target or ambition; that is, that 40,000 cases should be solved under this Bill. They do not like that up in front of them—as Corporal Jones might say—but they put it there; we did not invent it. How many will they save with the clause? They do not say in their regulatory impact assessment—at least, I could not find it. How many of the 40,000 cases will be saved by the clause? The statistical genius who came up with 1,700 to 3,400 cases on conciliation does not tell us. Are the Government too ashamed to tell us?

It may be said—this is the final point of great importance—that the courts simply would not accept such injustice. However, the courts would have no option because, as a matter of pure chance—I imagine that the Government's advisers must have noticed this—just at the time that they were drafting the Bill, there came before the Judicial Committee of the House of Lords in 2001 the case of BCCI v Ali (ICR 337). In that case, the Law Lords dealt with a COT3 settlement. They insisted that compromise agreements strictly cover only the claims which the wording of the agreement has in mind and is in the contemplation of the parties at the time.

The noble and learned Lord, Lord Bingham of Cornhill, said in the leading speech: It is no part of the court's function to frustrate the intentions of the parties once those have been objectively ascertained". He made it clear that he meant ascertained in the written agreement. He, and the majority, concluded in that case that particular rights were not covered by the compromise agreement, but that was a matter of construction. The noble and learned Lord, Lord Hoffmann, who dissented on the conclusion, made it clear, in his 13-page speech, that when the words of compromise agreements cover all possible claims, the worker has no claim if the COT3 agreement is binding. On that ground, he held that the release in this case, as drafted, the claimant might not be, entitled to bring a claim after leaving his employment on the ground that he was suffering from repetitive strain injury", which was under discussion. He continued: The bank might be entitled to say that it paid the extra money in return for not having to hear from [the claimant] again". That, of course, is just what Clause 39 would allow. The noble and learned Lord, Lord Hoffmann, sympathised with a claimant who had been made redundant, at the difficult age of 49", as he put it. He went on: But this is regrettably a very common occurrence". If you get the drafting right—unscrupulous employers will pay to get it right—this very common occurrence in redundancy will become a very common occurrence, excluding the worker from claims in the tribunals, either on particular matters or all employment rights, which the Government have made clear in their own documents will be the effect. You would not even have to show that the deal is reasonable. In the recent case of Brigden v American Express Company in 2000, (IR LR 94), the High Court, before which it came, held that a clause whereby the employee gave up his right not to be dismissed without the operation of a contractual disciplinary procedure was lawful and did not have to meet the standards of reasonableness under Schedule 1 and Section 3 of the Unfair Contract Terms Act.

I hope that Ministers will not reply to this argument by reading out briefs which are irrelevant to the argument. That has so often marred this Committee stage, for all its other moments of great jollity. Clause 39 is a low point of moral turpitude in Part 3 of the Bill. It should be struck out if this Committee has an ounce of decency that can stretch beyond fox hunting, badgers, salmon and deer because it concerns 25 million human workers. I see that that point does not meet with approval from the Opposition. I shall put it more moderately: this is matter which concerns 25 million human workers. I should not mention other animals as that always gives rise to dissent across the Floor.

However, for those workers, and especially for those who do not have jobs or who do not have the protection of an effective trade union—there are many, unhappily—this clause could become a bosses' charter for the exploitation of the vulnerable. Those who have newly taken up on their flag the case of the vulnerable should give careful thought to the effects which Clause 39 could have in practice. I believe that I have described them accurately. Clause 39 should, therefore, go from the Bill.

Lord McCarthy

I call this the "hugger-mugger" clause. There is something secretive, clandestine and hugger-mugger about it. It is quite amazing that this clause has not been debated before. When I first began to look at the Bill, I thought, wrongly, that the most dangerous clause was Clause 25 because it operated directly upon the worker who would not get a chance because he or she would not come to a tribunal. Then I began to think that Clause 33 was even worse because it operated directly on the tribunals. It was designed to put a barrier between the applicants and the tribunals.

However, now I believe that Clause 39 is the most dangerous in the long run because it operates directly on the employer. It encourages the employer. My noble friend gave examples of what a bad employer might do and the sweeping way in which a bad employer might abolish, or offer the abolition of, all employment rights.

I want to suggest in a moment or two that even reasonably good employers might fall for that. They might consider it to be a rather clever way out of particular problems. There are possibly employers out there who do that, although it is not strictly legal now. There are possibly employers who do not bring in ACAS, or perhaps sometimes they do bring in ACAS. I believe that my noble friend is right—the conciliation officers would not want to do anything in front of a particular dispute. They would not want to reach an agreement in ways that they could not measure and evaluate, as my noble friend says. However, there may be employers who occasionally behave in such a manner, and I shall come to that in a moment.

Therefore, Clause 39 is insidious as well as being secretive, clandestine and amazingly undiscussed. I am not complaining about the fact that it was not discussed at Second Reading. We did not discuss it at Second Reading; in a way, it is not a Second Reading point. The first time one really notices it—the non-notice of it; the fact that it is not there—is on 18th December at col. 250 of the Official Report of the Committee in another place. I am not making this up. Just before the Christmas break, one Member said, in effect, "We've had a good day. Now we'll go off for Christmas". Just before the Christmas break the Committee kicked Clauses 39, 40 and 41 into place and they were all ordered to stand part of the Bill—all three of them together. Then the Members of the Committee went off for Christmas.

Similarly, there was no reference to the matter on Report and no amendments were tabled at that stage. We are, in fact, the first body, up here on this floor, to consider this clause. That is amazing, considering its importance.

As my noble friend said, you can read Routes to Resolution, you can read the reply to Routes to Resolution—I shall go into that in a moment—and you can read the Explanatory Notes. You get very little guidance. Routes to Resolution, after suggesting various ways in which you could encourage conciliation, including making charges—which, I am glad to say, the Government have subsequently dropped—stated: Compromise agreements are another means of discharging legally a claim or potential claim. These can offer a fast and confidential route to settlement, but they are limited to a particular claim. Unlike ACAS-conciliated settlements, they cannot provide general, final settlement of all employment claims. This acts as a disincentive to using compromise agreements, as employees may retain a residual right to go to a tribunal. Ensuring the scope is the same will remove this disincentive". You would have thought that at this point the Government might have told us what scope they envisaged would follow from taking out the particularism of particular employment Acts, how far the abolition would allow for generality and what they meant by generality, or even, as my noble friend has said, what use ACAS has made of these powers.

I cannot find anyone in ACAS who has ever used such forward-looking powers. What kind of powers do the Government want to believe are possible or are likely? We have no description whatever in Routes to Resolution and we have no descriptions in the response to Routes to Resolution. Here I want to say a little more about what was said about the opinions of those who were consulted.

My noble friend mentioned the TUC. The Government said that, the TUC considered the proposal unnecessary". I must be careful about parliamentary language. At the very least that is a misleading statement of the TUC's position. What the TUC said in its first submission to the Government on the Bill is as follows: Some affiliated unions have found compromise agreements useful additions to the range of [possible] settlements. Others are less enthusiastic; much appears to depend on the nature of the business or undertaking and the attitude of the employer. The TUC supported the extension of the scope of compromise agreements to include trade union officers and advice centre workers. Such people clearly have sufficient expertise and the backing of their respective organisations to make this a viable solution". Here we come to it: These advisors and employers' advisors will generally be clear over what is being compromised. Sometimes though residual points emerge after a settlement and it would be wrong to disallow these points to be heard separately if they have not been addressed in the agreement. There should also be an express prohibition on excluding claims which have not yet arisen"— this is the TUC's position; they are not indifferent— and on excluding personal injury claims. The TUC would not support the extension of the scope of compromise agreements to provide a general settlement". That is the position of the TUC. They did not think it was unnecessary; they thought it was wrong. They thought it was unfair and they did not think it should be put on the face of the Bill.

So I turn to the Explanatory Notes. Paragraph 90 does its best to explain why we need Clause 39. It says the change will offer an opportunity, to change the legal status of compromise agreements I am not quite sure what that means or how it changes the legal status. One of my questions to the Government is to tell me how it changes the legal status. Presumably, it does not make it criminal but it must change the legal status in some way. How will it ensure that these measures are as effective and wide as ACAS settlements? The Explanatory Notes also stare that the clause will achieve that by taking out the requirement in Section 203(b) of the Employment Rights Act. That has been mentioned already.

Apart from repetition, the only thing added at the s point is the alleged change in the legal status. One might think that we might find out from ACAS itself ACAS is not prepared to discuss what happened in the past in any detail. All we know is that Section 18(1) of the Employment Tribunals Act 1996 states: This section applies in the case of industrial tribunal proceedings and claims which could he the subject of industrial tribunal proceedings". Therefore, in principle, as my noble friend has said, in the ACAS settlement situation as a result of Section 18 there is a general right to go forward and deal with future issues. My question to the Government is: is that what they want? They have not really said so They have not specifically said that they want all employers, as a way of reducing the demands on tribunals—and by God it would do that—to be able to offer a partial or total washing away, or cancelling out of employer rights, perhaps for some consideration.

I give a few examples. Do the Government want to see a situation in which art employer might offer a compromise agreement which removes all restrictions on hours, overtime and holidays in exchange for job security? An employer might come along and say, "We want to put certain of our workers in a particular category but they will get job security. If you look at the small details, it will not be total job security but they will get preference as regards redundancy. However, in exchange for that we cannot have all these other rights so we have a special category of workers who may get a little more money. They are going into a separate grade. They have total job security but they do not have any restrictions, they are more flexible". The employer might call them the "flexible brigade" and say that they have no restrictions as regards hours, overtime, holidays and so on and that he can call on them to do whatever he likes. Are the Government saying to me this morning that they want to facilitate that? Are they saying that is good industrial relations? Is this being done in the workers' interests?

Let us take the example of another employer. An employer might say, "I have had terrible trouble with this man or this woman who keeps considering that they are somehow being picked on on grounds of sex or race or disability, so in this case this person is going to be given a one-off amount of £2,000 and they undertake never to bring this kind of series of cases before me again". Or he might be better than that. He might say, "We want you to contract out of your unfair dismissal rights. We do not want to get involved in the unfair dismissal procedures of going to tribunals. We have another procedure; it even has arbitration in it. It may not be independent arbitration but it is arbitration. Why not sign up, come out of the statutory unfair dismissal rights and go into our special grievance and disciplinary procedures"?

Are the Government telling me that this is good industrial relations that they would like to see and that they would encourage? Perhaps they would have seminars on how to contract out of employees' rights while you give them something in exchange. Is that what the Government are saying? We are entitled to have answers to these questions. We are entitled to know why this particular clause has been so little discussed. We are bound to say, as Claudius said, that the Government have "done but greenly" in huggermugger to inter this clause. It is time to bring it out in the air and it is time to defend it. I want to hear what the Minister says.

12.15 p.m.

Lord Gladwin of Clee

I was going to describe this as a nightmare but that is too fanciful because it is a real situation. I know of cases where employees who start work without a contract of employment are subsequently offered one that has in it the requirement that they do not take the employer to an employment tribunal.

Let us suppose that a worker who has been in employment, perhaps for the first time for several months, gets a job and then a week or two later is offered a contract of employment with that clause in it. He then goes to one of my officers for guidance and advice as to what he should do. The alternative is to sign it or, if he does not sign, it will be, "Thank you and good night" because he will have lost his job. Will the Minister comment on that situation?

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

Before I respond to the specific points raised by noble Lords, I should like to remind everyone of the Government's overall objective in this part of the Bill, which is to encourage alternatives to resolving disputes at tribunal. Compromise agreements have an important part to play in this objective, although it is a small one. Clause 39 needs to be seen in this context.

In their response to the consultation on Routes to Resolution, the Government stated that they would make the necessary arrangements to change the legal status of compromise agreements.The Government's objective in making this change is to ensure that compromise agreements are as effective and as wide in extent as ACAS-conciliated settlements.

The clause will achieve this by taking out the requirement in Section 203(3)(b) of the Employment Rights Act 1996 and other legislation which makes similar provisions that such agreements must relate to the particular proceedings or the particular complaint. This requirement has led to uncertainty about the extent to which all claims and potential claims to the employment tribunal can be contracted out via a compromise agreement.

The uncertainty that that produces was originally put forward by lawyers involved in this area, so that the original suggestion that there was uncertainty came from the legal profession. The change we are making will ensure that a compromise agreement does not have to be limited to agreement about the particular complaint. This widens the extent of compromise agreements to match the current extent of ACAS-conciliated agreements.

In this context, the widening of the potential extent of compromise agreements is entirely consistent with the general thrust of the Bill to encourage the settlement of disputes outside of the employment tribunal. It makes the option of settling claims and potential claims to the employment tribunal via a compromise agreement more akin to that available via ACAS-conciliated settlements. In so doing, it adds to the options for settlement of claims or potential claims.

I would stress that this remains a voluntary option that both the employer and employee need to agree to. Furthermore, and of exceptional importance, there is the inbuilt safeguard for the employee that he needs to receive independent advice before agreeing to a compromise agreement.

I turn now to the various points that have been raised. First, I would say to the noble Lord, Lord McCarthy, that none of the possibilities that he suggested as flowing from this are things that we want.

Lord McCarthy

Will the noble Lord give way? If the noble Lord is saying that the Government want none of these things—and I am very pleased to hear him say that—why are the Government legislating to make them possible?

Lord Sainsbury of Turville

I will come to the question of whether this does legislate to make them possible. I wanted to make the matter clear to the noble Lord, Lord McCarthy. He asked the specific question, "Are these things that the Government want?". I am making the very clear statement to him that these are things that the Government do not want. That is the first point.

The first substantive point is one that relates to the TUC position. I do not think that his statement about what the TUC said was an exact representation of it. It did not sa.y that it was wrong; it said that it had some particular views about the ways in which it would work. At least, that is from what he—

Lord Wedderburn of Charlton

It's a lie. It's a lie.

Lord McCarthy

No, look, the TUC ends up by saying, The TUC would not support the extension of the scope of compromise agreements to provide a general settlement". That is clear enough. It does not want it. It is asking the Government not to do it.

Lord Sainsbury of Turville

But it makes the very clear point, as was said, that there are certain cases where it is valuable and helpful to have these compromise settlements. Let me get on—

12.30 p.m.

Lord McCarthy

I am sorry, I will not do this again, but I must do it. This is all from the TUC. In the first five or six lines, it is talking about the existing situation. At one stage, it actually says that it supported the extension in the past. Therefore, it is talking about a quite separate situation when it says it has been helpful. De facto, that is the status quo: that is what it is talking about.

Then it says, "But you want to go further", and it says, "Don't do it".

Lord Wedlderburn of Charlton


Baroness O'Cathain

I thank the noble Lord for giving way. Is it right that even in Committee the words, "It's a lie. It's a lie", should be used?

Lord Sainsbury of Turville

Perhaps I may continue with the issue. If I misinterpreted what was said by the TUC, I apologise for that. I thought the noble Lord was making a point that in particular circumstances, it could see values for it. I accept that the noble Lord says that he puts that interpretation on it. I am happy to accept that.

The point I wanted to deal with was the point made by the TUC that it is wrong to disallow residual points from being heard at a tribunal. That is an important point.

If there is a possibility of residual points, that may influence whether a person would be prepared to sign up to a wide-ranging settlement. The scope o:7 the settlement is of course something that has to be agreed by both parties. It is true to say, however, that one of the purposes of the clause is to provide certainty as to what can be settled by a compromise agreement.

The second key issue is whether there is any protection for people inadvertently signing away their rights to, for example, a personal injury claim. This will be covered by the general case law relating to the scope of settlements. In general terms, if an employee's personal injury claim against his employer is in the minds of both parties to an agreement, when they sign a "full and final settlement" of all or any claims, the settlement is likely to have the legal effect of preventing the employee later succeeding in suing the employer for damages in respect of that personal injury.

If, however, such a personal claim was not in the minds of parties when they signed the settlement in those terms, the settlement is unlikely to have the legal effect of preventing a future claim. Such issues require professional advice and it is for this reason that a requirement of a compromise agreement is that the employee or worker must have received advice as to the terms and effect of the proposed agreement.

The third substantive point is the one which has been raised by the GMB and the Law Society which argued that employers will now be able to make it a condition of employment that an employee signs a compromise agreement undertaking to refrain from instituting any tribunal proceedings. That is obviously a legitimate concern.

Case law has established that the court will not uphold general exclusion of legal rights that could not possibly have been in the minds of the parties when they signed the settlement. If an employer demanded that an employee signed such an agreement as "a condition of employment", the courts would be unlikely to consider that the claims were contemplated by the parties at the time of signing, and so the agreement would have no legal effect.

Lord Wedderburn of Charlton

Does my noble friend have any authority or case that he can cite which shows that the court will take precisely the attitude he has taken, which is contrary to that which the Law Lords state in the BCCI v Ali case?

Lord Sainsbury of Turville

I do not have a detailed brief on that point, but it seemed to me that from what the noble Lord was saying that was exactly the point which was being made as regards what was in the minds of the people signing the agreement.

Also, reference was made to the fact that the requirement that an employee cannot sign the agreement until he receives advice from an "independent adviser" (which since 1998 includes authorised trade union officers) will deter any employer from such behaviour. The noble Lord's remark about, "We're just popping round to get CA B advice and clearance on this", is not an appropriate way to deal with the work of the CAB, which I am sure would take this issue very seriously.

Given what I have said—and that can be briefly summarised by saying that there is the safeguard of people having to get independent advice, in addition to the other points I have made about case law in this case—I hope that the noble Lords will feel able to agree that Clause 39 stand part of the Bill.

Lord Gladwin of Clee

Before my noble friend sits down, can I be clear? The answer to the question that I posed is that a trade union officer being faced 'with the situation that I described should say to the employee, "Sign it, because you're not being damaged by signing it. You keep your job but it's worthless; if you feel you have reason to go to a tribunal then that is okay because the Law Lords have said that your contract is worthless".

Lord Sainsbury of Turville

I believe that very simple advice can he given in this regard. First, if there is any debate about what is covered, that can be specified very clearly. The advice can be, "Do not sign this, other than in relation to the very specific points that you want to have covered by the proposal".

Lord Wedderburn of Charlton

My noble friend therefore agrees that if the drafting is absolutely clear, without any doubt whatever, as covering present, past and future claims in the tribunals it would, as the House of Lords held in the Ali case, be binding.

Lord Davies of Coity

My noble friend's comments suggest that if an employee understands the circumstances and has received advice, he can enter into an agreement that waives completely and totally his rights. If that is true, I am in a great deal of difficulty because my clear understanding is that this legislation was intended to avoid reference to employment tribunals by ensuring that employers had a mechanism for dealing with issues that arose in the workplace. To that extent I have supported the thrust of the Bill. If, however, the suggestion is that an employer and employee can waive all the rights that Parliament lays down to which employees are entitled in the workplace —rights relating to discrimination of any kind, to the national minimum wage and to industrial injury—I cannot see what direction we are going in. If we legislate for people to have rights, why do we legislate again so that they can waive those rights?

Lord McCarthy

Perhaps I may help the Minister? The Minister said earlier that he did not want those examples; he thought that they were bad examples. He would not call that good industrial relations. Now he says, in contradiction to what my noble friend Lord Wedderburn says, that they may not be lawful anyway because he has a different set of beliefs about what the judges would do. That inspires me to think that he might come forward with an amendment on Report to make that absolutely clear. We should make it clear that what is not in the minds of the parties when they sign the agreement does not apply. Will he put his words where his intellect is? Will he put on the face of the Bill the statement that those matters that he does not like and that he believes the courts would not have, will not take place because he has added an amendment to the Bill?

Lord Sainsbury of Turville

I suspected that help from my noble friend would not be help in the way in which I would define it. To be absolutely clear, I repeat that I dealt very clearly with this point. Case law established that the courts will not uphold general exclusion of legal rights that could not possibly have been in the minds of the parties when they signed—

Lord Davies of Coity

I hope that Minister will excuse me for interrupting. If his view is that the courts would not uphold that, why are we legislating for it?

Lord Sainsbury of Turville

Because we are legislating for a particular set of situations that are sensible compromises, which are reached between parties—two parties in this regard—and in this case the employee will have independent advice. My noble friends suggested that they would be used for a totally different purpose—to exclude people from their basic rights. I am dealing with that situation and I am giving what I believe to be the best legal advice; that is, that case law established that courts would not uphold general exclusions of legal rights that could not possibly be in the minds of parties when they signed the settlement.

Lord Wedderburn of Charlton

Does my noble friend understand that he is saying something different from what was laid down in 2001 in the BCCI v Ali case, by the noble and learned Lord, Lord Bingham of Cornhill, for the majority of the Judicial Committee? I hesitate to read out too much of his speech—all of it is rather different from what the Minister has said.

The noble and learned Lord made it clear—I am sure that this is common ground—that the intention of the parties is to be objectively ascertained from the agreement that they have signed. What is in their contemplation is primarily recorded in the agreement. He went on, at page 342, to say: This seems to me both good law and good sense. It is no part of the court's function to frustrate the intentions of contracting parties once those have been objectively ascertained". They are objectively ascertained in the agreement that they have made. That is what the noble and learned Lord, Lord Hoffmann, thought. This is a matter of interpretation, of course; it is not a rule of law that the courts will not enforce agreements where the parties have objectively stated that all claims are excluded. The noble and learned Lord, Lord Hoffmann, says so over 13 pages.

The Minister must take that into account— future claims could be excluded. He does not want them to be, so why does he not put such a provision in the clause?

Lord Sainsbury of Turville

I think that the policy in this regard is very clear. We would like to take that point away, see what application it has to the views that we are putting forward and reflect on the matter before coming back.

Lord Wedderburn of Charlton

I believe that a few more words are appropriate. I am tempted to say that an Opposition who have put up the flag of protecting the vulnerable, and who do not take these problems seriously, are not worthy to be—

Baroness Miller of Hendon

I object to what the noble Lord, Lord Wedderburn, is starting to say. He said something earlier to which I objected—a sotto voce remark which I heard very clearly—and I made a complaint, which is in Hansard. I have to tell the noble Lord that I thought that he had not heard my comments; he did not look as though he had heard them and he continued to chat. However, I understand from my noble friend who is sitting next to me that he did hear them. When I unavoidably went out for a few moments, he made some comments about my remarks and said that he regretted that I was not in my place.

I would like the noble Lord, Lord Wedderburn, to continue our debate on the amendment by discussing the amendment and not by continually talking about the Opposition claiming to be the party of the vulnerable. We are all here from our own point of view and we are trying to scrutinise a Bill that has gone through the House of Commons. Many of the points that have been raised were not even discussed in the other place. We are sitting here patiently listening to the points that noble Lords are making. However, there is absolutely no reason, in the course of doing so, why they should continually talk about us claiming to be the party of the vulnerable or the party that is more concerned with animals or hunting, which they said earlier. We should be dealing with the amendments. We are listening very carefully. As I have said to the noble Lords before, I listen carefully to everything that they say and treat it with respect because of the knowledge that they have. I must insist that they do exactly the same for us.

Lord McIntosh of Haringey

I believe that it would be most undesirable if the fact that we are in close proximity in Committee led us to behave in any way other than how we would behave in the Chamber, where we cannot hear each other's conversations. If we studiously keep our ears open to the person who is on his feet speaking at a microphone, and if we refrain in what we say on our feet from ascribing motives to each other, then we shall get on together much better.

12.45 p.m.

Lord Wedderburn of Charlton

I am grateful to the Minister. I assure the noble Baroness that I listen very attentively and carefully to what she says, both here and in the Chamber, and I listen to her party. I always do that. I understood that the position of Members of her party was that they were now particularly concerned with the vulnerable. I believed that this clause raised an issue where the vulnerable were especially vulnerable, and I was surprised that she did not weigh in to object to the possible scope of the effects of Clause 39. I make no apology for not always pleasing and satisfying the noble Baroness. However, it is a function of Members of the Committee to criticise those whom they believe are open to criticism. I criticise my own Government, and in relation to this clause I criticise them extraordinarily.

The reply that I have been given is such that I am almost tempted to say that my noble friend lives with his advisers in some fantasy land. He says that it is all a matter of voluntary options and voluntary agreements, as though he did not hear my noble friend Lord Gladwin give to him a straight case where options, exercised in the real world and not in a fantasy land, are exercised under pressure.

The employment relationship is not one of bilateral contracting in a marketplace where the parties are equal traders. The employment relationship is one where, unless the worker has the protection of an independent trade union of strength, he is in the weaker position. That is the basis of the whole of employment law in western Europe and beyond—the worker is the weaker party. Therefore, he does not exercise voluntary options without pressure not. only as regards his employer but also as regards life, discrimination and family problems.

The Law Society did not make a case different from the one that I and my noble friends made. It made the case that, if the clause goes through as it is, the unscrupulous employer could, with the approval of the citizens advice bureaux, give effect to certain pressures on workers. I was rather surprised and somewhat pained to hear my noble friend suggest that I was in any way criticising citizens advice bureaux. Without them, the workers' position would be much worse.

My noble friend Lord Gladwin gave the example of a trade union adviser. What is he to say to the worker who says, "I can have the job if I sign and not if I don't sign"? That is the predicament in which the Government will place workers. It is intolerable that this Labour Government will put workers in that position. I have news for the Minister. Expert employers' advisers are already drafting common form Clause 39 compromise agreements. Perhaps if the Minister asks them they will give him one. I have heard the rough outlines of the agreements and they will not leave any question of uncertainty. They will do what the noble and learned Lord, Lord Hoffmann, suggested in the Ali case. They will be absolutely clear and certain, and the courts will not be able, as the noble and learned Lord, Lord Bingharn, said, to evade such agreements.

I press my noble friends the Ministers to he a little more forthcoming in their reconsideration of this clause which we understand they intend to make. Are they confident that the clause is compatible with the Convention on Human Rights and the Human Rig ts Act? Are they going to ignore the Human Rights Act in this regard, as they haw ignored the 12th report of the Joint Committee on Human Rights? Are the Government confident that the Unfair Contract Terms Act 1977 could have no impact, despite the decision in the Brigden case in 2000 in the High Court, which I cited? Are they going to add a little item to the schedules, a new parcel of provisions from Postman Pat, to make it quite certain that the Act does nit obstruct unscrupulous employers from using this route to freedom from the tribunals' jurisdiction?

Events move fast in this area. Today's law report in The Times shows that the European Court in Luxembourg will not accept public security provisions in Northern Ireland as a proportional ground for a blanket exclusion of a worker from the fair employment tribunal in regard to his rights against unfair dismissal. The Luxembourg Court holds that in the report in The Times law report this morning. Is the Minister confident that this clause, together with the other clauses of the Bill, will escape similar criticism? On the point concerning the Convention on Human Rights, will they agree to the reconvening of the Joint Committee on Human Rights to consider these and other clauses?

Those are straightforward questions, of which the most important is: do they understand that advisers already have in draft absolutely copper-bottomed compromise agreements, whereby workers will be asked to contract out of their rights—past, present and future? If they do not, their reconsideration will be flawed. Will they take that away and look at it? I ask the Minister again, will they look at that and will they look at Clause 39 from the bottom up in regard to total exclusion of employment protection rights?

Clause 39 agreed to.

Clause 40 agreed to.

Lord Sainsbury of Turville

This is a convenient moment for us to adjourn until four o'clock this afternoon.

[The Sitting was suspended from 12.53 until 4 p.m.]

[For continuation of the afternoon's proceedings see the second part of the Official Report published on Friday.]