HL Deb 07 July 1994 vol 556 cc1440-8

7.12 p.m.

The Parliamentary Under-Secretary of State, Department of Employment (Lord Henley) rose to move, That the draft order laid before the House on 10th May be approved [19th Report from the Joint Committee].

The noble Lord said: My Lords, in moving this order I will also speak to the second order that relates to Scotland. The two orders are long awaited and will, I am sure, be widely welcomed. They will enable industrial tribunals to hear claims arising not only from various statutory employment rights as they do at the moment, such as the right not to be unfairly dismissed, but also contractual claims, such as for notice pay, which may arise at the same time. Currently, these claims generally have to be pursued separately in the separate courts. This is administratively inconsistent as well as costly, time-consuming and inconvenient to all concerned. Consultation showed overwhelming support for the extension of the jurisdiction of industrial tribunals to cover such claims. The draft orders are judicial matters and are therefore to be made by my noble and learned friends the Lord Chancellor and the Lord Advocate. They are brought forward under Section 131 of the Employment Protection (Consolidation) Act 1978, as amended by the Trade Union Reform and Employment Rights Act 1993.

The two orders are identical in substantive effect, but the House may like to note the following particular aspects. Under Article 3 the new jurisdiction is limited to complaints which arise or which are outstanding at the end of the employee's employment. Under Article 4 employers can counter-claim where employees have made a complaint that they have not settled or have withdrawn. Under Article 5 personal injury and some other claims, for example disputes about intellectual property, are excluded from the new jurisdiction as being outside the industrial tribunals' normal field of expertise. Under Articles 7 and 8 employees will normally have three months to make a claim and employers six weeks from being notified of employees' applications. Finally, under Article 9 an upper limit of £25,000 is set on the amount that a tribunal may award under the new jurisdiction. That is both in line with County Court practice and is round about the highest amount normally payable in an unfair dismissal case. Of course, anyone who wishes to claim a larger sum will be free to do so in the civil courts which will have concurrent jurisdiction. I commend the draft orders to the House.

Moved, That the draft order laid before the House on 10th May be approved [19th Report from the Joint Committee]—(Lord Henley.)

Baroness Turner of Camden

My Lords, I thank the Minister for his explanation of the orders. They are long awaited and are broadly acceptable and welcomed by many of those who are concerned with industrial relations generally. However, I should like to raise one or two points. Is the Minister satisfied that the resources are available at industrial tribunals to enable them to cope with the extra work? We all know that the tribunals are rather overwhelmed by work at the moment. If there is an onward reference to an EAT the case may well take as long as two years. How does that compare with the time taken in the civil courts? I know that one of the intentions in referring these matters to industrial tribunals is to ensure speedy resolution of issues.

The second point I raise is related to the three months a claimant has in which to lodge a claim with an industrial tribunal. Is that not a rather short period? There may very well be a necessity to continue negotiations. Indeed, very often issues that are referred to the civil courts are the subject of negotiation and before the case is heard a settlement has been achieved. If people are to have only three months in which to make their references to an IT, is it not possible that they will be making references to protect their position even while negotiations proceed? That seems a rather short period. Perhaps a longer period could have been provided.

Thirdly, I note that there is an upper limit of £25,000. I understand why that is so. In most instances it will be more than adequate for ordinary breach of contract of employment cases. However, if the case is likely to exceed £25,000 the individual concerned may be well advised to commence proceedings in the civil court. Having said that, I welcome the long-awaited orders. I hope for some reactions from the Minister to the points I have raised.

Lord Lester of Herne Hill

My Lords, as someone with practical experience of arguing cases before industrial tribunals, as well as employment cases before the ordinary civil courts, I too welcome the draft orders. I agree with all the points raised by the noble Baroness, Lady Turner; I wish to add one or two of my own.

First, I believe it is good to put on record that industrial tribunals have been a great success story in the 30 years since their establishment. I remember that they were first set up to deal with industrial training levies in 1964. Step by step were added redundancy payments, unfair dismissal, equal pay, sex discrimination, race discrimination and so on. In my judgment, they have done well, despite limitations on their resources, in giving speedy decisions in simple cases. They have not done well in complicated cases, especially discrimina-tion cases with a European Community aspect where the issues are at least as complicated as the most difficult income tax cases or ordinary litigation in the High Court.

The first point I raise does not strictly arise under the order as it stands. However, I believe that if one is widening the jurisdiction of industrial tribunals there is need to think about ways to take difficult and complex cases of that kind away from them and to transfer them to some other tribunal, whether it be the Employment Appeals Tribunal as a court of first instance or the High Court. But I am sure that at the moment they are not capable of dealing with complicated, large cases of that kind.

Secondly, I am troubled about the uncertainties of transferring industrial tribunal cases to and from the civil courts. As I read them, there is nothing in the draft orders that gives any express right to transfer appropriate cases between an industrial tribunal and the civil courts. That is a serious omission which may lead to delay, excessive cost and perhaps injustice. A right of transfer does not appear in the industrial tribunal rules, nor in the county court or High Court rules. That is very troublesome. It is even troublesome at present in equal pay cases where it is very unclear what the precise relationship is between a High Court contract claim for equal pay and an industrial tribunal claim and how one should deal with transfers from one to the other.

As regards damages, my view is that the proposed upper limit of £25,000 is inadequate. Many straightfor-ward claims for wrongful dismissal now exceed that figure. Should there be any limit, I think that a figure of £50,000, being the figure at which cases are normally considered appropriate for the High Court, would have been more appropriate. Leaving that to one side since it is outwith the order as it stands, it is unclear to me whether Article 10 is intended to apply the limit of £25,000 to the aggregate of any claim and counter-claim on the same contract or whether, alternatively, the limit is intended to apply separately to any claim by the employee and also to any counter-claim by the employer. I should be grateful if that uncertainty could be clarified.

In the county court, interest on damages is calculated from the date on which the cause of action accrues. Under the Sex Discrimination and Equal Pay (Remedies) Regulations 1993 industrial tribunals must calculate interest in a broadly similar way to that under the sex discrimination legislation. Interest on damages claims brought in the industrial tribunals should, I suggest, be calculated in the same manner as interest would have been calculated in the county court if the claim had been brought in that jurisdiction. To do otherwise is to undercompensate the innocent victim of a breach of contract and, in effect, to reward the contract breaker—the person in breach.

I share the concern of the noble Baroness, Lady Turner, as to resources. I wonder whether I may make a practical suggestion which I think would not result in more public expenditure but would ease the operation of the draft orders. In using part-time chairmen of industrial tribunals there should be no upper limit as to the number of days on which they can sit. If they show themselves to be experienced and competent, in view of the shortage of experienced judge-power in this area I suggest that that would be very welcome. It would be especially helpful to women with family obligations if they were able to sit for more days per year and help to cure the delays and backlog in the tribunals.

Finally, I turn to legal aid. This gives rise to some difficulties. Experience has shown that there is a problem of inequality of arms between the parties where an employer is legally represented and the employee is unrepresented in the kind of case where legal skill and advocacy really matter. It cannot be left to the chairman of the industrial tribunal to cure the inequality. If cases are now to be heard in industrial tribunals, which I for one greatly welcome, the employee—for it is he who will normally be the person without adequate legal means to defend himself or to prosecute his claim— should be eligible for legal aid in exactly the same way as for a claim that could have been heard in the county court or the High Court.

Perhaps I may give an example of the potential injustice which would otherwise arise. It is the best example I can give. An employer, instead of bringing a claim against an employee in the High Court or county court, chooses, as will now be possible, to bring the claim for breach of contract in the industrial tribunal. In that situation the employee would have been eligible for legal aid in an ordinary civil claim in the High Court in order to defend himself against the allegation of breach of contract. Because legal aid is not available in industrial tribunals he will not now be eligible for legal aid and there will be a gross inequality of arms. He will lose the entitlement to legal aid that he at present possesses in ordinary civil litigation. I see no good reason in principle why that should be so and why we should make this category of employees worse off. The only way in which the employee could avoid the injustice would be by seeking to transfer his claim to the civil court. The problem about transfers is at least opaque under the present legal regime.

This is a serious problem because in the grossest form of case it could lead to a real denial of justice. As the Minister will no doubt know or be advised, cases have gone before the European Commission and Court of Human Rights where a denial of legal aid in a complex civil claim involving employment or other matters has been held to be a breach of Article 6 of the European Convention on Human Rights. In the family context the case of Airey v. Ireland is the best known claim.

As a legislature scrutinising draft subordinate legislation we should note that the absence of legal aid in industrial tribunals for this class of claim could be a breach of our international obligations and, as important, lead to real injustice in the individual case. I should therefore be grateful if that point could be looked at, not in any way to cast doubt on the validity of approving the orders but in order to make sure that employees are not worse off through some Treasury-driven ambition to save on legal aid in respect of this small class of cases than they are at present.

Lord Meston

My Lords, perhaps I may also trespass on the time of the House by adding a few points to reinforce those which have already been well made. The extension of the industrial tribunals' jurisdiction is welcome and overdue. Section 131 and its predecessors lingered far too long before being brought into operation. The tribunals themselves want the additional jurisdiction and it should simplify matters for employers, employees and their advisers.

There is often a problem in advising a dismissed employee, who may have a claim worth more than the tribunal's present statutory limit, whether to go to the tribunal or to the court first, or indeed whether to start proceedings in both to avoid missing the stricter time limit governing tribunal cases. Moreover, it is never easy in practice to work out whether and to what extent the awards from the court for wrongful dismissal and the separate awards from the tribunals for unfair dismissal do and do not overlap. This extension order will allow a single point of entry for some cases. But, as noted by a distinguished commentator recently, drawing the borderline between the contractual limit in this order and the unfair dismissal compensatory award could cause fun and games in the future.

The order does not make it mandatory to go to the tribunal rather than to a court. That raises the point of legal aid mentioned by my noble friend. Legal aid is notoriously not available in the industrial tribunal and the tribunal's discretion to award costs is more circumscribed. I certainly hope that people who are eligible for legal aid to proceed in the courts will not automatically have it refused because there is now a remedy before the tribunal.

Another matter of concern is the £25,000 limit. I do not know whether it is intended to uprate that regularly, as the compensatory and basic awards are uprated. Like my noble friend, I question the need for any such limit. Larger claims are not necessarily more difficult. Conversely, the tribunals can now make substantial unlimited awards in discrimination cases, which are often far more complicated.

Another matter to be considered is that of interest, which again was touched on by my noble friend. Putting the matter a little differently, it seems to me that tribunals should be allowed to award interest as part of the award covering the period prior to the hearing. The courts have that power. The tribunals have it in discrimination cases now, but not otherwise. As I understand it, at present they can only award interest from a point 42 days after the decision has been made. Surely, that should be rectified to equate the remedy in the tribunals with that in the courts. I also question why the employer's right to issue a counter-claim depends, under Article 4(d) of the order, on the existence of the employee's claim under the order. Why should not the employer be able to counter-claim in the tribunal if the employee chooses only to make a statutory claim for unfair dismissal?

Article 9 deals with the effect of death and bankruptcy. This is probably stating the obvious. When an employer tells you that you are no longer wanted and then tells you later that you have been overworking and closes you down altogether, a personal representative can always continue your contractual claim. Likewise a trustee in bankruptcy can continue a contractual claim. As things stand I do not believe that a tribunal could prevent them. Nevertheless, if Article 9 of the order makes that clear beyond any doubt, then I suppose it has value to that limited effect.

I conclude with a plea for the industrial tribunals to have adequate resources in the face of the extension of their jurisdiction. It is not so long ago that they faced such a severe budgeting crisis halfway through a financial year that there was a very severe problem which led to questions in your Lordships' House, as I recall. The tribunals' jurisdiction has been growing rapidly with almost annual domestic employment Acts and also with the impact of European law which has affected industrial tribunals directly far more than any other part of our legal system. Given the increasing complexity and volume of the caseload, it is no good pretending any longer that tribunals can invariably be seen as a straightforward place to deal with straightforward law. At the moment they are having to blocklist large numbers of Ministry of Defence pregnancy dismissal cases and they are bracing themselves for the introduction of claims by part-time employees. If the jurisdiction is to be extended as this order proposes, but without resources, there will be a further crisis. There will be increasing delay and remedies such as reinstatement and re-engagement will become almost meaningless. With those reservations I welcome the order.

Lord Henley

My Lords, I welcome the fairly general welcome which the orders have received. I agree with the noble Lord, Lord Lester, that industrial tribunals have been a considerable success over the years. I can only hope that neither the noble Lord, Lord Lester, nor the noble Lord, Lord Meston, has lost any business as a result.

Perhaps I may start by dealing with some of the points which have been raised. I shall deal first with the limit which has been set at £25,000 and which the noble Lord, Lord Lester, considers to be inadequate. I believe that the noble Baroness, Lady Turner, also expressed some doubts about it. Obviously, that is something which is not fixed in stone in perpetuity. Like all such figures it is something which will be kept under review by my right honourable friend. It seems to me a fairly reasonable figure. I understand that it is the guideline figure below which civil claims are normally tried in the county court rather than in the High Court. I appreciate that the actual limit is £50,000, but I understand that the guidance suggests somewhere about £25,000. It is also similar to the combined maximum basic additional and compensatory awards available in unfair dismissal cases which amount to a maximum sum of £22,480. Therefore, it is broadly in line with much of what happens already.

The noble Lord, Lord Lester, asked whether it would apply separately both to the claim and counter-claim. I can give an assurance—I sincerely hope that we have drafted it so as to meet the assurance—that our intention is that the £25,000 limit should apply separately to the claim or a number of claims arising from the same contract and also to the counter-claim. We believe that the order achieves that. If the noble Lord advises me that it does not, obviously that is something we would have to look at in due course.

Some concern was expressed about the possible impact on the tribunals themselves of this new and extra work. There has been some criticism, notably last Monday, about the resourcing of industrial tribunals, if I can use that word. On Monday night I answered in some detail exactly what we have done to reduce delays and referred to the number of extra full-time chairmen and administrative staff and how we have expanded premises. It is not necessary now for me to repeat all that I said on that occasion other than to say that I can give an assurance to the noble Lord, Lord Lester, that already many part-time chairmen sit. We are obviously very keen to make use of their expertise. It is obviously difficult to estimate the number of cases which will be brought under this new jurisdiction.

Lord Lester of Herne Hill

My Lords, I am most grateful to the noble Lord for giving way. Before leaving the question of part-time chairmen, I believe I am right in saying that they can sit for a maximum of 70 days only in a year. That seems to me an unnecessary restriction. I was suggesting that that might be looked at in order to make better use of the most expert and experienced of the part-timers.

Lord Henley

My Lords, perhaps I may check the figures which I have in front of me. The noble Lord is right. Originally, part-time chairmen could sit only for 50 days. As the noble Lord put it, that has been increased to 70 days and to 100 days for those who have retired from practice. Both figures have gone up to some extent. I take note of what the noble Lord said but having just increased those figures we have no current plans to increase them again. It is a matter we shall keep under review. It could have a positive effect. One begins to wonder at what point someone ceases to be a part-time chairman once one increases the number of days beyond 100 or whatever. We take note of what the noble Lord said.

It is difficult to estimate exactly the number of cases which will be brought under the new jurisdiction, but we shall monitor the operation of it and determine its impact. If it is necessary for more resources to be put in or for changes to be made such as those suggested by the noble Lord, we will consider them.

The noble Baroness also referred to the time limit of three months being too short. I say to her that it is the normal time limit for making a complaint to an industrial tribunal, including under the Wages Act, which may cover similar claims, and also for unfair dismissal claims where, along with other claims, ACAS successfully assists in conciliation in up to two-thirds of the cases. I can give an assurance to the noble Baroness that the tribunals have a discretion to increase that three-month period where it is not reasonably practical to claim within that time. There is a discretion that they can make use of.

The noble Lord, Lord Lester, asked about the transfer of complicated cases to the High Court. Again, I can give the noble Lord an assurance that we shall always look at whether there are better ways of dealing with claims. I can give an assurance that my honourable friend the Parliamentary Under-Secretary in the Department of Employment has announced a review of tribunals. I believe that the limit of £25,000 to some extent ensures that those cases involving high costs, which often, despite what the noble Lord, Lord Lester, said, relate to the more complicated cases, will remain with the civil courts.

As I think I made clear in opening the debate, the jurisdiction is concurrent with the civil courts and it will be entirely a matter for the applicant to decide in which forum to bring the action. Therefore, those who wish to apply for legal aid can obviously continue to pursue their cases through the civil courts. As I think the noble Lord will know, industrial tribunals were set up to provide a far speedier and more informal means for settling employment disputes than the civil courts. The procedures have always been designed with that in mind. I do not believe that legal representation is necessary from my brief experience of those courts, and I have to say that legal aid will continue not to be available.

I do not accept the argument of the noble Lord, Lord Lester, that we are likely to be in breach of our international obligations. I believe the noble Lord was trying to argue that there would be an imbalance between the employer who might make use of lawyers and the employee who did not. As the noble Lord will know, employers cannot institute a complaint in the industrial tribunal unless the employee has already made a Section 131 claim to the tribunals. Therefore, it is for the employee to decide whether to institute such a claim in the courts with legal aid if he thinks it appropriate, or in the tribunals, taking advantage of the simpler and less legalistic system. Therefore, I do not think that it is fair to argue that there is not a level playing field between them.

Lastly, the noble Lord, Lord Meston, asked why the employer was not allowed to counter-claim when the employee claims arrears of wages under the Wages Act. In these orders, we are allowing for employers to counter-claim when employees make a claim under the new contractual jurisdiction. To allow counter-claims more generally when the employee's complaint is under the Wages Act or some other employment protection provision would be another matter and a major departure from the current position. There has been no pressure for such a change from either the employers or their representative organisations. In our view, it would not therefore be justified.

I hope that I have answered most of the points that have been put to me. I hope also that, with the general welcome that has been given to these two orders, the House will see fit to give them its approval tonight.

On Question, Motion agreed to.