HL Deb 25 May 1993 vol 546 cc256-9

7.55 p.m.

The Parliamentary Under-Secretary of State, Department of Employment (Viscount Ullswater) rose to move, That the draft order laid before the House on 1st April be approved [26th Report from the Joint Committee].

The noble Viscount said: My Lords, I beg to move the Motion standing in my name on the Order Paper.

Your Lordships will know that the employment protection legislation provides that each year the Secretary of State is required to review certain limits used in calculating payments under employment protection legislation. She may also from time to time review the limit on the compensatory award which may form part of the award for unfair dismissal, and which also compensates for discrimination on grounds of sex or race. In practice this compensatory limit is always included in the annual review exercise.

In carrying out the statutory review, the Secretary of State must take account of the general level of earnings in Great Britain at the time of the review, the national economic situation as a whole, and any other matters she considers relevant.

As usual, the Secretary of State for Employment has consulted widely with employers and employee bodies and with others who have interest in the matter. In carrying out the review this year, the Secretary of State took account of the various comments received. She also considered very carefully the economic climate and the very low level of inflation—only 1.9 per cent in March this year. At a time when industry is beginning to succeed in its struggle against recession, it is vital that the Government do not put unnecessary obstacles in its way.

My right honourable friend considered all those matters in deciding the level of the compensatory award. She also took into account that no increase has been made in the award since 1991, together with the fact that the maximum compensation is rarely awarded by an industrial tribunal. We therefore think it right to increase the limit this time round. If it is agreed by your Lordships, the increase will come into force on 1st June.

The order before us today increases from £10,000 to E11,000 the maximum sum industrial tribunals can award in compensation for the loss suffered as a result of being unfairly dismissed. It includes compensation for loss of earnings from the date of dismissal to the date of the tribunal hearing, future loss of earnings and loss of benefits such as pension and other entitlements the individual would have enjoyed but for the dismissal.

'The limit may affect part of the award made when an employer fails to comply with an industrial tribunal's order to reinstate or re-engage an employee who has been unfairly dismissed.

The limit on compensation which we are seeking to raise also applies to compensation payable in certain cases involving sexual or racial discrimination in the workplace, unreasonable exclusion or expulsion from a trade union, unjustifiable discipline by a trade union, and refusal of employment on grounds of membership or non membership of a trade union.

I hope that your Lordships will agree that this substantial 10 per cent increase in the compensatory award is to be welcomed. I commend the order to the House.

Moved, That the draft order laid before the House on 1st April be approved [26th Report from the Joint Committee]. —(Viscount Ullswater.)

Baroness Turner of Camden

My Lords, I rise to thank the Minister for his usual clear explanation of the purpose of the order. However, I have to make some comments.

We do not oppose orders in this House, but on the other hand it seems to me that it has been some time since the last upratings took place, and over a number of years the uprating itself has not kept pace with wage or price increases. To some degree that has undermined the effectiveness of employment rights, and the continued erosion of the value of compensation diminishes the effect of the sanction on the employer and reduces the benefits to the employee who has been wronged. I should like to emphasise that we are talking here about individuals who have suffered an employment wrong. I understand that the Law Society has said that, had upratings kept pace with average earnings, the limit on a week's pay would be around £445 a week and the maximum compensatory award for unfair dismissal would be nearly £29,000.

The Minister told us that consultations have taken place. I know that to be the case. The TUC tells me that it has been consulted. The EEF and the CBI have been consulted. Not surprisingly, the EEF and the CBI have accepted and agreed with the Government's view. On the other hand, the TUC has submitted some objections on the grounds that I have indicated.

I do not believe that we are talking about a large number of cases. Therefore, it is difficult to see whether the relatively small amounts of money involved could make a great deal of difference to businesses in the way that I understand that the CBI and the EEF have argued. As I understand it, at present there is no maximum limit to the amount of damages that an employee may recover for breach of an employment contract. The courts are able to award damages for the actual loss that the employee has suffered. If the maximum amount of compensation that may be recovered is limited by statute, there are bound to be some employees who will not be fully compensated. It might be a fairly small number of people, but the figure may well grow in the future.

There is therefore a case for not having limits. But no uprating for a number of years, and certainly no uprating in line with either price or wage increases, has meant that over the years the level of compensation able to be awarded under the terms of the orders has severely diminished. Indeed, I should be grateful if at some future time the Government would consider again the question of limits. I do not suggest that with regard to the order. But perhaps the Government will consider whether it is possible to return to the level of limits set when the legislation was first introduced.

As I said earlier, it is not our practice to oppose the order and I certainly do not intend to do so today.

8 p.m.

Lord Rochester

My Lords, I join in thanking the noble Viscount, Lord Ullswater, for the clarity of his explanation of the order. It is a delight to be talking about the subject of unfair dismissal in rather more congenial circumstances than those which have obtained on one or two occasions in the recent past.

I have some sympathy with the points made by the noble Baroness. I shall listen with interest to what the noble Viscount says in reply. However, I have nothing further to add. I am therefore prepared to accept the order on behalf of my noble friends.

Viscount Ullswater

My Lords, I am glad that the noble Baroness, Lady Turner, and the noble Lord, Lord Rochester, have welcomed the proposed increases in the compensatory limit, even if the argument has been that those increases have not gone far enough. I believe that we are all agreed about the importance of industrial tribunals and the valuable role they play in resolving disputes between individuals and their employers. The level of limits is clearly a matter for judgment—balancing various factors and seeking to arrive at a sensible compromise. There is a balance to be struck between the need to avoid excessive burdens on businesses and the legitimate claims of employees. On the one hand, we do not wish employers to feel inhibited from recruiting employees because they fear unreasonable penalties if a dispute arises. On the other hand, limits must be high enough to ensure that workers are adequately compensated for breach of statutory employment rights.

I believe that any decision to increase the limits must be set in the overall context of the country's economic priorities. This year our first priorities are to strengthen the economy and to avoid any unreasonable increases in the burdens on business.

The order before us now and the report which was laid in this House and in another place at the same time contribute to those aims. I commend the order to your Lordships.

On Question, Motion agreed to.