HL Deb 30 May 2002 vol 635 cc1491-511

Report received.

Clause 1 [Paternity leave]:

Lord Henley

moved Amendment No. 1: Page 2, leave out lines 12 and 13. The noble Lord said: My Lords, in moving the amendment, I shall also speak to Amendments Nos. 2 and 3, which are grouped with it, and—if I may, on reflection, for the convenience of the House—to Amendment No. 4. The issues I wish to address are raised in those four amendments.

It seems a very long time since we started the Bill's Committee stage; I think it was in early March. Sadly, I rather lost touch with the Bill as it proceeded through a rather lengthy consideration in Grand Committee, ably assisted by the noble Lords, Lord McCarthy and Lord Wedderburn, and the noble Baroness, Lady Turner, all of whom played a great part in Committee. I dare say that they will be playing an even greater part as the Bill proceeds through Report stage. I note that we have been offered three days for Report, and I am very interested to see whether we can achieve completion of Report in that time.

My concerns centre around Clause 1, which deals with paternity leave, and Clause 2, which deals with statutory paternity pay. I set out my concerns about those two matters in Grand Committee but for the convenience of the House I hope that I may repeat some of the questions that I put and some of the arguments that I raised as the Committee stage was taken off the Floor of the House and therefore the Bill did not receive the due attention of the House that Bills of this kind ought to receive. I spelt out my concerns about a Bill of this size and complexity being taken in Grand Committee. I mention that again now for the sake of the record as I know that others similarly doubted the wisdom of hiving-off a Bill of this size and complexity to a Committee Room upstairs rather than discussing it on the Floor of the House. However, obviously, that is a matter for the usual channels to consider in relation to other Bills in due course.

I turn to the amendments that I have tabled. I tabled Amendments Nos. 1 and 2, along with others, in Grand Committee simply to probe the Government's intentions in introducing paternity leave and statutory paternity pay and to ask why those two provisions were being introduced and where the demand for statutory paternity pay arose—was it coming from employers or from disgruntled employees? Having mentioned disgruntled employees, I suspect—to quote from P G Wodehouse—that a measure of this kind will not exactly make them "gruntled". However, that is no doubt a matter for the Government to argue in due course.

I also said that I thought that such matters were probably best left to informal arrangements between the employer and the employee rather than being a matter for the law. Furthermore, I asked what would be the effect of the measures on employers. As always, we know—the noble Lord, Lord Sainsbury, speaks on the matter with great expertise as his family is a large employer—that large employers can cope with such measures but they pose much greater problems for small employers, particularly the small employer who loses a key worker at what might be a crucial time of the year or a crucial time in his business cycle when demand is particularly high and he cannot afford to lose that worker.

I asked what research the Government had carried out or commissioned into the effectiveness of such measures and whether they thought that there would be massive take-up. I also asked how many fathers would want to take time off and receive greatly reduced earnings at a time when household expenses were likely—as some of us know from experience—to increase massively. I was also concerned—this is what lies behind Amendment No. 2—about the Government's future intentions. The Bill as drafted permits two weeks' paternity leave but allows the Government to increase that from time to time without new primary legislation, merely by order. I speculated whether we would see continuous pressure for further gradual increases—all no doubt made in the name of sex equality—to bring fathers in line with mothers.

Those were a number of the questions that I posed. I was also concerned about the cost of the measures to employers. I appreciate that there is reimbursement, but for most employers there is only 92 per cent rather than 100 per cent reimbursement. In Committee I suggested that it might be better to reimburse employers at 105 per cent to allow for some of the administrative costs of dealing with such a measure and for some of the inconvenience that it caused.

Those were my original concerns behind Amendments Nos. 1 and 2 and some of the other amendments that I tabled in Grand Committee. As I said earlier, it seems a long time since the Committee stage occurred. Since then we have had the Budget and all the extra costs that have been imposed on employment particularly in regard to national insurance contributions. I think that we can all now see clearly that the increased national insurance contributions will constitute both an income tax and a tax on employment. We have heard the resulting cries from employers about the difficulties that are being heaped upon them. Only recently we have realised that the state of our economy is not quite so rosy as the Government would have us believe. Figures show that we have had virtually no growth, or no growth at all, for the past two quarters. The economy is in a serious situation particularly in the light of the greater burden that the Chancellor will impose on it through taxation. The economy is not in as good a condition as it ought to be.

That is what inspired me to table two further amendments to leave out Clauses 1 and 2 in their entirety. I tabled those amendments in a spirit of being helpful to the Government. As they wish to be business friendly and to assist business, they might be minded at this time—when, as I said, businesses are facing extra burdens due to the state of the economy and the Budget—to accept my amendments in that spirit and to remove the potential extra burdens on business contained in those clauses to show that they are a business-friendly government. I offer those amendments to the Government in that friendly spirit. I hope that they will accept them and remove the burdens that I mentioned. I am not saying that that will immediately and suddenly transform the state of the economy, but it would show that the Government are prepared on occasion to prove that their actions are business friendly rather than merely saying that they are business friendly while at the same time adding yet further burdens on employers. I beg to move.

11.45 a.m.

Lord Monson

My Lords, before the Minister replies to the noble Lord, Lord Henley, will he say whether an employer with only one male employee is obliged to grant paternity leave?

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

My Lords, I say to the noble Lord, Lord Monson, that as I understand the position the provision applies to all businesses.

I wish to speak to Amendments Nos. 1, 2, 3 and 4, as did the noble Lord, Lord Henley. Clause 1 of the Bill establishes the new right to paternity leave. This is part of a package of measures that we are introducing, together with improvements to maternity leave provisions and the introduction of paid adoption leave, aimed at improving choice for working pa rents and enhancing competitiveness for business. I thank noble Lords for the generally warm welcome that they have given to these new measures. I know that many noble Lords share our view that the introduction of paternity leave is a key step towards recognising that fathers increasingly want to play more of a role when a new child arrives—a crucial time in their family's life.

The right to paternity leave will give fathers more time to care for and build a relationship with their new child and to support their partner in the important first weeks following the birth. Clause 2, which I shall mention shortly, will help fathers to rake advantage of the new right to leave by offering a measure of earnings replacement.

As noble Lords will know, Clause 1 provides the fundamental framework of how we envisage the new scheme for paternity leave will look. It will be inserted into the Employment Rights Act 1996 and is similar in construction to existing provisions relating to parental leave.

I say to the noble Lord, Lord Henley, in case he is unaware of this, that we have consulted widely on our proposals for the introduction of paternity leave from a formal 12-week consultation on the Green Paper, Work and Parents,through to a further 12-week consultation specifically on the detailed framework of paternity leave. I believe that on this matter the noble Lord, Lord Henley, is out of touch with public opinion. Our proposals for new paternity rights have been supported by employees and employers alike. Indeed, paternity leave was the second most popular option in the Green Paper. Many employers—possibly covering up to half of employed fathers—already offer some paternity leave; and most fathers able to take time off choose to do so. But decent minimum standards also work to support employers who already offer good working conditions to their employees by enabling them to compete on a level playing field. This clause will ensure that new fathers—around 450,000 each year—have a basic right to time off in the important first few weeks following their baby's birth.

I also say to the noble Lord, Lord Henley, that it is a mistake to say that something will have a very harmful impact and to say at the same time, as another argument against it, that very few people will take it up.

Amendments Nos. 1 and 2 impact on parts of the clause that give us the power to make regulations dealing with these issues. The noble Lord tabled the same amendments in Grand Committee and we discussed them in some detail.

As I said then, the amendments would have the effect of taking the period of paternity leave out of regulations, with a view to stating on the face of the Bill that the period would be of exactly two weeks. As things stand, the Bill makes it clear that regulations will provide that leave will be a minimum of two weeks. I am happy to offer further reassurance to the noble Lord that it is our current intention that the maximum period of paternity leave will be two weeks. We know, following extensive and exhaustive consultation, that that period represents a reasonable consensus. However, as I said in Grand Committee, I cannot rule out the possibility, over time, that the Government might want to look again at the issue of the length of leave. It could happen. But, I repeat, it is not our current intention.

I therefore believe that it is right that the architecture of these provisions follows that of maternity leave, where the length of pay is a matter for primary legislation but where the length of leave is a matter for regulations. I therefore ask the noble Lord to withdraw those amendments.

I turn to Amendments Nos. 3 and 4, which seek to delete Clauses 1 and 2, and would therefore stop the introduction by the Government of paternity pay. I shall begin with the question of the cost to business. Those costs will not be great. As the noble Lord said, businesses will be able to recover most of the money that they pay out in statutory paternity pay in the same way that they can currently recover statutory maternity pay. All employers will be entitled to recover at least 92 per cent of what they pay out and small employers are able to recover 100 per cent plus an additional amount—currently 4.5 per cent—to compensate for employers' national insurance contributions that they may have paid in respect of statutory payments. As from April this year, we have doubled the threshold, so that a further 10,000 small employers are able to benefit from that special help.

I consider those costs across British business to be justified, particularly because I believe that helping fathers to balance their work and family life will be good for business, encouraging employee commitment, motivation and productivity.

The only other point that I should like to make on Amendments Nos. 3 and 4 is that we in government totally believe in paternity pay. We believe that it would be totally wrong not to have it. I draw the attention of the House—and, indeed, all voters—to the fact that the new caring Conservative Party apparently does not believe in paternity pay and would presumably get rid of it if it was ever returned to power.

I doubt whether the noble Lord is interested in any advice from me on the amendment. I suggest that he withdraws the amendment before anyone notices.

Lord Henley

My Lords, I should make it clear that I was not speaking for my party in this regard. The Minister will have noticed distinct silence from the Opposition Front Bench. I suspect that my Front Bench is somewhat in support of the noble Lord rather than of me. The Minister said that I was out of touch with public opinion. I have been told that on a number of occasions previously. I do not mind being out of touch with public opinion. However, I am not sure whether I am on this occasion. Those members of the public to whom I have mentioned this seem to think that it is a rather silly little measure that is of no purport whatever. There is very little point in bringing it in.

I was seeking to raise the matter before a slightly wider audience than that in the Grand Committee. Obviously, the Thursday morning before we break up for the Whit Recess is not a time when a large number of our colleagues deign to stay in the Chamber to discuss important matters, such as the Employment Bill.

I have raised this issue, which was my intention, and I am grateful for the fact that the noble Lord has yet again repeated the fact that the Government's current intention is that the arrangement will be limited to two weeks. Long may it remain so. I hope that they will think long and hard before giving in to any pressure to increase it. He also repeated the fact that there is some easement in terms of costs to small employers, in that they will be reimbursed at a higher rate than that which applies to others through the 92 per cent rate.

Finally, I give the assurance that I have no intention of pressing the amendment to a Division at this stage; nor am I likely to bring it back at Third Reading. I was merely offering it in the spirit of being helpful and hoping that the Government might wish to agree to Amendments Nos. 3 and 4. Obviously, they have not seen fit to do so but they might want to think again about the matter. Perhaps they might table such amendments at Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 2 to 4 not moved.]

Clause 12 [Penalties: fraud etc.]:

Baroness Miller of Hendon

moved Amendment No. 5: Page 25, line 32, leave out "£300" and insert "£3,000 The noble Baroness said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 6 and 7. They all cover the same point; namely, the rate of penalty that is applicable in cases of fraudulently or negligently making any incorrect statement or declaration or providing incorrect information or documents in relation to a claim for either statutory paternity pay or statutory adoption pay. There is also a similar penalty in the case of an employer fraudulently or negligently making incorrect payments of statutory paternity pay or statutory adoption pay.

I beg your Lordships' indulgence; my voice is absolutely horrendous. It sounds terrible to me and I cannot imagine what it sounds like to noble Lords opposite.

Lord McIntosh of Haringey

My Lords, it is like music to my ears.

Baroness Miller of Hendon

Like music to your ears, my Lords? Most certainly not!

There is an anomalous discrepancy between the penalties that are payable in the case of such offences relating to statutory adoption pay, where the penalty is up to £3,000, and to paternity pay, where the penalty is up to £300. At the previous stage of the Bill, I proposed that the two penalties should be identical and should be reduced to a uniform £300 penalty in both cases.

Dealing first with the amount of the penalty, the Minister pointed out that in the case of statutory adoption pay, a penalty of only £300 was inadequate in cases where the amount paid over a 26-week period could amount to £2,600 and that small employers' relief would increase it further. In the case of statutory paternity pay, the Minister pointed out that the maximum receivable by a father would be £200 plus S per cent in relation to small employers' relief.

That discrepancy between the two penalties is apparently justified by the Government on the basis that the smaller the amount that the fraud could net, the smaller should be the penalty. That, in my view, is a perverse application of letting the punishment fit the crime. The crime is the fraud, not the amount that it involves. If someone burgles a house or commits a mugging in the street, the crime attracts a prescribed maximum penalty, irrespective of the sum that is stolen. That is the point.

In Committee, the Minister said, the £3,000 figure is a maximum".—[Official Report, 13/3/02: col. CWH 37.] I accept the argument that the Minister put to the Committee—that the figure of £300 that I had previously proposed in the interest of consistency for both types of case—is inadequate; that is certainly so in the case of adoption pay. However, I believe that the need for consistency still remains. There is, I agree, a difference between the total benefit that could be fraudulently or negligently obtained by an employee or underpaid by an employer in the two types of case, but the actual offence is, in principle, essentially the same. Since we are agreed that the smaller sum is inadequate in the one case, the penalty should be increased to one that fits the other; both maximum penalties should be the same.

The question of fixing an adequate penalty, taking into account the size of the fraud and all other relevant circumstances, including any mitigating factors, would continue to be left to the person exercising the judicial function of imposing the fine. It is incongruous to have two widely different and inconsistent maximum penalties for what I have described as essentially the same offence. I beg to move.


Lord McIntosh of Haringey

My Lords, this is an example of what, in the artillery, we used to call "bracketing". You shoot to the right and shoot to the left and hope that, somewhere in the middle, you hit the target. I am afraid that the right off-shooting is just as bad as the left off-shooting because the target is where the Government have drafted the Bill. The answer is in the word "proportionality". It is right and proper that the civil penalties that can be awarded for offences in relation to the new schemes should be in proportion to the amounts that may be at risk.

The noble Baroness, Lady Miller, anticipated correctly what I was going to say about the matter. Where the offence involves statutory adoption pay, the maximum amount at risk is £2,600—that is, 26 weeks at the maximum rate of pay. A penalty of £3,000 is in proportion to that risk. Where the same offence involves statutory paternity pay, the maximum risk is only £200—that is, two weeks at the maximum rate of pay. Therefore, a penalty of £300 is proportionate to the amount at risk.

The noble Baroness, Lady Miller, raised another issue—that of fraud and a number of false payments. I can reassure her on that point. There may be cases in which an employer manipulates the system and creates a number of false payments of statutory paternity pay. In those circumstances, the maximum penalty could apply for each separate offence. Therefore, if there were 10 false payments, the maximum penalty would rise correspondingly to £3,000. I believe that that preserves the principle of proportionality which, I hope the noble Baroness will agree, is the correct position after the bracketing process.

Baroness Miller of Hendon

My Lords, I am not altogether sure about the bracketing process of shooting to the right and shooting to the left and hoping to hit the target in the middle. I believed that the point that I was making was correct. It had nothing to do with where I hit the Minister, but I assure him that I have no intention of hitting anyone in the middle.

I was interested to hear the Minister repeat what I said and to hear the way he expressed it. I anticipated what he was going to say. I did so only because, when we were in Grand Committee, I listened, and read Hansard, very carefully so that I knew exactly what I could say when we reached the Report stage. I still believe that the difference is not quite right. However, I accept totally what the noble Lord said about proportionality in this sense. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 6 and 7 not moved.]

Clause 22 [Employment tribunals]:

Lord Wedderburn of Charlton

moved Amendment No. 8: Page 32, line 20, at end insert— (c) for a discretion enabling a tribunal, where the tribunal considers it to be just and equitable, to take reasonable steps to ascertain the ability of a party against whom it is proposed to make an order to pay costs to comply with such an order and to take account of any information so ascertained in determining the amount to be paid. The noble Lord said: My Lords, the amendment seeks to restore a discretion to employment tribunals which they thought they had for some 30 years. It is not parallel to a number of subsequent amendments in the names of my noble friends and myself which come within the proposition in your Lordships' Companion to Standing Orders: If there is opposition to an amendment, it should be withdrawn in Grand Committee, to enable the House to decide the matter on report". This amendment was not moved in Grand Committee because only in March did the Court of Appeal hand down its decision in the case of Kovacs v.Queen Mary and Westfield College. We move the amendment now in order to encourage the Government to give consideration to the serious change in practice which that decision in the Court of Appeal entails.

The amendment concerns the unusual event of awarding costs against a party, or expenses in Scotland—something which is done only rarely in the practice of tribunals when a party has brought or conducted a case vexatiously, unreasonably, frivolously or as a misconceived case. In those circumstances, under the amendment, employment tribunals would, in the award of the amount of costs, be able to take account of the party's poverty or limited resources with regard to ability to pay. That is a rare event. Of the 93,000 tribunal cases decided last year, costs were awarded only in 247. But, in a number of those, the ability to pay was a factor.

Employment tribunals all over Europe do not operate with the same technical rules as ordinary courts. It has been—at any rate, until now—a bipartisan policy in Britain that, since their introduction in the late 1960s, such tribunals should be, as the Donovan commission report suggested, easy of access, informal and expeditious. In particular: Costs should be awarded only against a party who has acted frivolously or vexatiously". For some years, employment tribunals took the view, and were supported by the Employment Appeal Tribunal, that they were entitled in their wide discretion, differently from ordinary courts, when fixing the amount of costs in rare or special cases of awarding costs, to take into account the lack of resources of an applicant, even if he had acted improperly. The tribunals considered that to be a useful instrument of justice in their jurisdiction.

In 1980, Mr Justice Waterhouse supported that view. In 1981, Mr Justice Browne-Wilkinson, as he then was, added in a case where the claimant had been in prison and was without means: In our view the inability of the applicant to meet any order for costs is a matter which is properly to be taken into consideration ֵ it is no consequence of our decision that the mere fact that for the time being the applicant is penniless is in every case a sufficient ground for refusing an order for costs. Each case depends upon its own circumstances and lies within the discretion of the Tribunal". In 1993, new regulations permitted ability to pay to be considered by the tribunal when fixing a deposit in relation to proceeding with a weak case in a pre-hearing review. But the Secretary of State at the time failed expressly to confirm that practice in regard to the award of costs generally. What happened in those regulations may have been an oversight in drawing up the amendments of 1993 when the power to assess deposits in the light of the ability to pay was not extended expressly to the parallel case of costs.

In the Court of Appeal in the Kovacs case in March this year, Lord Justice Chadwick accepted that, an employee should have recourse to a tribunal without being deterred by the potential liability for the other party's costs", as being Parliament's policy since 1974. On the other hand—this is the point in the judgment which gives rise to the amendment—he held, as did the Court of Appeal generally, that: Ability to pay is not a factor which an employment tribunal is required or entitled to take into account". One factor which swayed the court was that the Secretary of State had given that power in regard to deposits but not to costs in 1993.

The requirement to take into account ability to pay is not an issue in this amendment. The issue is to restore the discretion of the tribunals. Nor does the amendment say anything about the decision in the Kovacs case. If one looks carefully at the facts of that case, it is clear that the claimant had acted in a scandalous and outrageous fashion. Any rules on costs would have to allow full costs—that is, an amount of up to £10,000—to be permissible in that case.

But the more general principle of the Court of Appeal—removing the discretion of the tribunals—seems unduly technical in regard to the spirit of tribunal practice and the social function of tribunals, as understood by a number of judges, by many chairs and by the lay members of the tribunals and of the Employment Appeal Tribunal. Their experienced views are rejected by the Court of Appeal in pursuit of ordinary court practice, which is not always applicable to tribunals, as the Donovan report and subsequent inquiries have made clear.

In our submission, the discretion of the tribunals that has been in place for many decades in assessing the award of a deposit and of a cost should be restored in the unusual case of an award of costs. The new wave idea that the practice of tribunals should be compressed into the rules applicable in the ordinary courts should not only be rejected, but also should not be introduced by a side wind, eroding the discretions to do justice which have long been in the hands of the tribunals. If that happens, confidence in the tribunals, certainly on the part of working people, will be seriously affected. That decision is a matter that has already caused widespread comment among those with long experience and practice in the tribunals.

Two years ago the Leggatt report concluded, after careful inquiry, that there should be no move towards the ordinary courts' rules on costs in employment tribunals, and certainly not without much greater consideration and research. Without resorting to quotation, I understood that in Committee in another place and in Grand Committee in this House the Government generally were sympathetic and supported that proposition in the Leggatt report.

There is no question, as some people have said, of "allowing very poor litigants to behave with impunity". That formulation misunderstands and under-rates the wisdom shown by tribunals and the appeal tribunal in exercising that discretion. That is the result of having the invaluable presence of lay members alongside the legal judges which has given rise to that discretion being sensibly exercised.

This is an important and a sensitive moment for tribunals. One experienced chair has called it a "moment of crisis". There is great concern in the world of those who have the difficult job of administering industrial justice in what were once described as "industrial juries" that in the Bill the task may become more arduous and the confidence of working people may be reduced. In our submission, the Government would contribute positively to that situation if they were to take away for favourable consideration the amendment that I now beg to move.

Lord Gladwin of Clee

My Lords, as a former member of an employment tribunal and of the Employment Appeal Tribunal I support the amendment. I recall few cases at the employment tribunal—or the Industrial Tribunal as it was—in which there was a discussion as to whether costs should be awarded against an employee who had brought a case that was quite unreasonable. There were few cases, but the matter of means always arose. I am aware that it was discretionary, but in the minds of the members of the tribunal it seemed to be a mandatory requirement. That was supported by a case that I recall in the Employment Appeal Tribunal. One of the grounds of the appeal was that in the court below investigation had not been made by the tribunal into the means of one of the parties, the employee. On those grounds the case was sent back for a re-hearing at the employment tribunal. The issue is important. I hope that the Government recognise that and bring forward an amendment of their own.

Lord McIntosh of Haringey

My Lords, I am grateful to my noble friend for bringing our attention to the ruling in the Kovacs case which means that a tribunal cannot take into account a party's ability to pay when considering an award of costs. I agree with my noble friend Lord Wedderburn that this is an unhappy position and I am sympathetic to his amendment. We do not believe that it is right that a tribunal should be prevented from taking into account a party's means when awarding costs. On the face of it, the Kovacs judgment is a perfectly logical one.

Costs recovery operates in other courts, and if a party has overstepped the boundary of reasonable behaviour why should it not face costs? But as we have said on many occasions, we regard employment tribunals differently from other courts. We acknowledge that the body of tribunal users, in particular applicants, may be in a vulnerable position and may be severely financially disadvantaged as a result of the very circumstances that have led them to pursue a tribunal case.

That is not to say that we believe that parties should be able to act with impunity simply because they might be hard-up. It may be that a party has behaved so unreasonably or abused the system to such an extent that the tribunal considers it just and equitable to award full or partial costs without consideration of the party's financial circumstances. My noble friend's description of the Kovacs case leads me to believe that that may be the position there.

We would like to take away this amendment. and consider it fully. We agree in principle that a tribunal should have a discretion to take into account a party's ability to pay costs and we will bring forward an amendment at Third Reading specifically enabling the tribunal regulations to provide for that.

Lord Wedderburn of Charlton

My Lords, I thank the Minister for his remarks and my noble friend for his practical support. We are happy to have reached the stage of one run for no wicket. We hope that that precedent will continue for the rest of the innings. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

12.15 p.m.

Baroness Miller of Hendon

moved Amendment No. 9: Page 32, line 20, at end insert— () The regulations as to cost and expenses made hereunder shall include provision so as to ensure that—

  1. (a) at the conclusion of a case before an employment tribunal—
    1. (i) an applicant (if the tribunal has granted no part of that person's application) shall he required to demonstrate to the satisfaction of the tribunal that he has received advice from a person whom the tribunal considers competent to give such advice to the effect that the applicant's case has a reasonable prospect of success; and
    2. (ii) a respondent (if the tribunal has refused no part of the applicant's application) shall be required to demonstrate to the satisfaction of the tribunal that he has received advice from a person whom the tribunal considers to be competent to give such advice to the effect that no part of the application has any reasonable prospect of success;
  2. (b) if a tribunal is not satisfied that the conditions set out in paragraph (a)(i) and (ii), as the case may be, have been complied with, it shall award costs against the applicant or respondent respectively."
The noble Baroness said: My Lords, with the leave of the House I shall speak to Amendments Nos. 9 to 13 and 18 to 20. They all relate to the subject of costs and expenses before employment tribunals and appeal tribunals that are dealt with in Clauses 22 and 23. They all have a common theme and a common safeguard for litigants before a tribunal. I shall deal with them separately. The common theme is to discourage frivolous and vexatious litigation before a tribunal and to discourage nuisance claims and blackmailing claims brought in the hope of a payment, taking into account the nuisance value, and claims brought maliciously with the object of embarrassing or inconveniencing the employer.

In case it should be thought that that theme is a one-sided piece of employee bashing—I hope I said enough in Committee to show that I would never dream of doing that as I try to be fair—I point out that the theme is also intended to inhibit bullying, or delaying tactics before a tribunal by a powerful and financially well-heeled employer, designed to discourage or to wear down an employee with an arguable claim.

From an employer's point of view, the problem is that often the case of defending an unjustified claim can be out of all proportion to the amount that the tribunal may reasonably be likely to award. Costs also involve the expenditure of management time and the clerical cost of investigating the claim. There is also the risk that an employer has to take into account of the swingeing punitive damages that tribunals can, and sometimes do, award, again, sometimes out of all proportion to the loss or detriment suffered by the employee.

In summary, the common theme is to discourage frivolous or malicious or purely speculative claims and the raising of untenable defences by putting the litigant at the risk of having to pay at least some of the adverse costs to which their conduct has given rise. That is the usual consequence to an unsuccessful litigant in ordinary civil litigation. However, conversely, the safeguard that I mentioned also has to be taken into account. The safeguard is to ensure that the financially weaker party, who will usually be the employee, is not deterred from launching in good faith a genuine claim because of the fear of having to pay costs. Usually the employee will be the financially weaker party, but it could be the employer when the employee is backed by his or her union.

I now invite your Lordships to consider the amendments in the light of that theme and that safeguard. Amendment No. 9 is designed to allow a tribunal to award costs against an unsuccessful claimant who has not been awarded any part of his application, or against an unsuccessful respondent who has not succeeded in any part of his defence. A partially successful claimant or respondent will not suffer this detriment because partial success will be proof that the claim or defence had some reasonable basis. Similarly, I have inserted a further safeguard—if the totally unsuccessful litigant can demonstrate to the tribunal that he was acting on the advice of someone who was competent to give such advice. That does not necessarily mean from a qualified lawyer, a legal executive or a citizens advice bureau or some similar person. It could include, for example, a trade union representative experienced in dealing with such matters.

The description in the proposed clause of, a person whom the tribunal considers competent to give such advice is deliberately unspecific so as not to be over-prescriptive and to enable the tribunal to adopt a wholly flexible approach that I would think that the Government and the unions would welcome.

At this point I should like to refer to the intervention of the noble Baroness, Lady Turner of Camden, when this same amendment came before the Grand Committee. She said. How on earth the tribunal is expected to demonstrate competence, I have no idea".—[Official Report, 14/3/02; col. CWH 70.] I have the greatest personal respect for the noble Baroness, but I believe that she may have misunderstood the point. It is not for the tribunal to demonstrate the competence of the adviser; it is for the litigant whose claim or defence, as the case may be, has wholly failed.

I stress "wholly failed" not partially, because a partial success precludes the clause from coming into effect. The noble Baroness said that she had never sat on tribunals although she said that she had appeared before them as a trade union representative. If she had, she might appreciate that those appointed to sit on all sorts of tribunals as well, for example, as magistrates, are trained to adjudicate on all the facts before them. I agree with the noble Baroness when she said, It is not an indication of competence or otherwise if you have one or two cases that you have lost". [Official Report, 14/3/02: col. CWH 70.] I should like to reassure the noble Baroness that the adviser's track record, even if were known, would not be one of the criteria that a tribunal would apply in deciding the competence of the adviser. There is a saying among lawyers that "You can't win them all". I am sure that the many members of the legal professions who are also Members of your Lordships' House would say "Amen" to that.

Amendments Nos. 10 and 20 propose a modification of the new Clause I A to be introduced into the Employment Tribunals Act 1996. This new clause allows the tribunal to penalise the representative of the party by disallowing part of his costs and expenses or to require him to pay all or part of the costs of the other party or of the tribunal itself. I believe that we can all agree that there could be circumstances where such a sanction was both necessary and appropriate. However, the use of that sanction should be sparing and limited to a serious malpractice by the representatives.

There already exists a system allowing for this type of penalty. It is found in rule 48.7 of the Civil Procedure Rules 1998. It is used very sparingly by judges and only in the most flagrant cases of abuse of the procedures of the court, or of time wasting or of sheer incompetence. It is not used by judges to mark their disapproval of one of the litigants or his lawyer or even of the nature of the case or other personal factors such as that.

These amendments accept the power of the tribunal to inflict a penalty on a party's representative in appropriate cases, but defines such an appropriate case as being one in which in similar cases the civil courts would have inflicted a penalty in the form of a wasted costs order. In other words, the amendments secure uniformity in the administration of justice as between the civil courts and the tribunals, which in cases under this Act will be performing similar judicial functions.

Amendments Nos. 11, 12 and 13 are identical. The new Clause 1A, as I have just pointed out, enables the tribunal to impose financial sanctions on the representatives of the party coming before it. Apart from the qualification of that power that I am proposing in the previous amendment, I believe that it is necessary to make it clear that it should make no difference whether the representative is making any charge for his services. It would be incongruous if a representative could escape well-deserved sanctions for some sort of misconduct merely because he was not being paid for his services by his "client".

In fact, the clause does not say or imply that he cannot he sanctioned in that way even if he is not being paid. The purpose of this amendment is to make it clear beyond any possibility of argument whatever, both to representatives and to tribunals, that there is no escape from sanctions due to that particular situation.

Lastly, I turn to Amendment No. 18. It provides that where an employment tribunal has power to make an order for payment of costs and expenses by one of the parties, but decides not to do so, it should simply include in its written decision why it was declining to make that order.

I believe that the reason for the amendment is fairly self-explanatory. If the tribunal is going to deprive a successful party of what could amount to a substantial sum of money, then it should explain itself both so that the successful party should know the reason why and so that there can be no question of some arbitrary and capricious reason.

In the ordinary civil courts, up to and including your Lordships' House acting in its judicial capacity, judgments are always accompanied by detailed reasons. I do not believe that there is a reason why the tribunal should escape from that responsibility in this kind of matter. Giving reasons for judgment is one of the ways in which justice is seen to be done.

Amendment No. 19 deals, like the others, with the question of the award of costs, in this case to the successful party to an appeal. It is different in tenor to my Amendment No. 9 where I propose that a wholly unsuccessful party must pay the other party's coats unless it could be demonstrated that he or she had received competent advice that his or her case was a viable one and should be brought. In other words, as I said when I spoke to the earlier amendment, the loser had to convince the tribunal that the claim or defence was not a time waster.

When we come to an appeal, different considerations apply. One of the parties has already lost in the employment tribunal and that should give them reason to pause to consider whether possibly they may have been wrong. The other party, the respondent to the appeal, has already won once. That should encourage him to believe that he was probably right. Therefore, there can be no grounds for ruling that the winner, who is dragged willy-nilly before the appeal tribunal, is simply acting contumaciously even if in the event he loses the appeal. On the other hand, justice demands that both sides, including the former loser, should be treated equally by the appeal tribunal as regards cost.

The wording of the Bill on this matter is extremely weak. It simply provides that the appeal tribunal's rules may make provision for the payment of costs and expenses. On the other hand, it may not. The contents of the rules are extremely vague. They could provide an unequal liability for costs as between an unsuccessful employer appellant and an unsuccessful employee appellant. I am certainly not going to take up your Lordships' time by giving other examples, but what I am proposing in this amendment is that the loser of the appeal should automatically be liable for the costs and expenses except—this exception is important—where the tribunal considers it would be unjust for that to occur.

I believe that that is a very wide exception and a very wide discretion for the appeal tribunal. For example, it could exercise it for a variety of reasons because, after all, somebody does have to lose in these circumstances. The tribunal could decide because the unsuccessful party had a very arguable case—I stress that and that is fine. It may also be because a novel point of law and procedure was involved, or because the winning party's case, although successful, really did not have any moral merit, or because the winning party conducted the case in some unsatisfactory way or other, including adding to the cost or time that the case took.

Once again, I acknowledge that this amendment may act as a deterrent to one or other party to appeal or to oppose an appeal. But again I remind your Lordships that costs almost inevitably follow the event in litigation before civil courts. Cases brought to employment or appeals tribunals are also just a form of civil litigation. There is no justification for different principles to apply, merely because to assist parties the procedure is less formal and, it is to be hoped, much speedier.

In the United States of America, an unsuccessful party does not pay costs. That is one of the main reasons there is so much purely speculative litigation there. The number of cases before our tribunals is increasing rapidly. It cannot be because there is more injustice to employees around. It is because, with the vast amounts that tribunals are now able to award—and sometimes do award in what many think are over-the-top rulings—there is the temptation to launch speculative proceedings in the hope of the equivalent perhaps of a small lottery win.

I certainly do not believe that we should deprive anyone of the right to have his day in court or publicly to air a grievance, or even to expose an injustice. I believe that a person should be able to do that. There is a maxim used in bookmaking circles that you cannot make a bet that you cannot lose. Especially before an appellate court, both parties, not just the appellant, should consider the implications of pursuing or defending an appeal.

Finally, in support of this entire group of amendments—I know that I have taken some time, but I have grouped them together in one lump—I quote from the remarks of the Minister for Employment and the Regions to the other place in relation to the procedures of employment tribunals. I think that this is quite important as regards the reason why I thought it necessary to table these amendments today. He said that, I know that that is how the civil courts operate, and that is the proper benchmark for us to use".—[Official Report, Commons Standing Committee F; 6/12/01; col. 26.] Five days later he told the same committee: We wished to mirror the civil courts, it would be strange to introduce a system for employment tribunals that was different from that in the civil courts".—[Official Report, Standing Committee F; 11/12/01; col. 77.] So, my purpose in introducing this group of amendments is to achieve exactly those objectives that the Minister in the other place mentioned. I trust that on reflection the Minister will agree that my amendments are constructive improvements in the Bill. I beg to move.

12.32 p.m.

Lord McIntosh of Haringey

My Lords, I shall deal with each amendment in turn. I am grateful to the noble Baroness, Lady Miller, for grouping them together, even though it means that I shall make a rather longer speech than I would have wanted. Amendment No. 9 provides for cost recovery where competent advice has not been sought by an applicant or a respondent. The noble Baroness, Lady Miller, made clear that that is in circumstances when no part of the application has been found meritorious. I do not believe that the amendment is right in principle and neither do I think that it can be made to work. It appears to move the employment tribunals nearer to a system of costs recovery. Indeed, the noble Baroness explicitly said that that was her intention. It would mean that in every case a losing applicant or respondent may face costs if he could not convince a tribunal that he has been advised by a competent adviser that the case had a reasonable prospect of success.

When the noble Baroness tabled the amendment in committee we said that it is a fundamental principle in employment tribunals that parties are free to choose how to conduct their cases, who to seek advice from, whether they use a representative or choose to conduct their case in person. That principle should be preserved. It recognises that applicants in particular may not be able to afford the services of a solicitor or a consultant. It takes account of the fact that some complaints to employment tribunals may be straightforward and parties may not require advice before making an application or lodging a defence.

My noble friend Lord Wedderburn made the point that the amendment would lean more heavily on the applicant. I agree. An applicant has more limited resources on the whole and may find it more difficult to seek out sources of competent advice. If we insist that every potential application to a tribunal must first be vetted by a competent adviser—and that would be the implication if we went for costs recovery on this basis—we are in danger of putting a strain on those services which provide advice for applicants and forcing more applicants into the hands of legal advisers whom they can ill afford.

Again, it may not be possible in every case for a party to obtain advice. Applicants rely heavily on free sources of advice. Are they to be penalised if they cannot get an appointment before the time limit has expired for lodging a complaint? I do not think that the idea would find favour with employers either. Small businesses may not have access to voluntary advice sources. They may not be members of a business organisation. Are we to expect them to pay out for legal advice without any choice, even if the complaint they are dealing with is not complex?

The noble Baroness, Lady Miller, has made clear her wide interpretation of -competent advice". She said that it could include not just a legal adviser but a lay adviser from a recognised source such as a CAB or a trade union representative. Despite her comment on what my noble friend Lady Turner said in Committee, it still must be the tribunal that decides whether the adviser is competent because it is the tribunal which has to make the decision in terms of costs. How will the tribunal determine which advisory bodies and their individual employees or volunteers are competent or not?

Finally, I do not think that the provision is needed. When I spoke against the amendment in Committee, I said that tribunals already have powers to deal with hopeless cases and the powers are strengthened by the Bill. They have a duty to consider whether a costs award should be made and whether the grounds for costs have been made out. In doing so, the tribunal may consider whether a party sought advice or ignored advice not to proceed with a case. But there is no need to add further deterrents or penalties to hopeless cases.

I can deal with Amendments Nos. 10 and 20 together because Amendment No. 20 refers to the appointment of appeal tribunals. They are about the role of tribunals as between tribunals and the civil courts. The noble Baroness, Lady Miller, quoted the Minister in another place. It is certainly true that we have looked at civil courts when drawing up the provisions for costs awards against representatives. It is also true that tribunals have become more complex with the growth in employment law, case law and European derived rights. But they still have their essential features. I am not inclined to import the language and procedures of the civil courts into employment tribunals.

It is not sensible to bind the tribunals to legislation which has been drawn up for another court. Changes could be made in future to the Civil Procedure Rules which would then automatically apply to tribunals without any consideration of whether those changes are appropriate for tribunals.

The tribunal regulations currently state that a party may be liable for costs where it or its representative has conducted proceedings in a way which is vexatious, abusive, disruptive or otherwise unreasonable. Although I would not be happy to introduce "contumacious"—that wonderful word of the noble Baroness--into the regulations, I just want to express my appreciation of the word. The new provision for wasted costs will enable the tribunal to awards costs directly against the representative when he or she has conducted proceedings in such a way. Costs awards would he limited to conduct. A representative would not attract a costs award because he or she had acted as a representative in a case which had no reasonable prospect of success. That is because we do not want to take away the right of parties to representation, even when the case may be without merit.

Most definitions of unacceptable behaviour used in employment tribunals have been there from the beginning. They are working perfectly well. Why have a different set of behaviours for wasted costs awards directly against representatives, which are used in the civil courts, alongside the existing criteria for costs awards against parties on their own account?

Tribunals have their own body of case law on which to rely, and I believe that chairmen are just as capable of exercising their powers wisely and reaching sensible decisions on costs as judges in the civil courts. Therefore, I am not clear what the amendment adds or why it is desirable to require tribunals to ape the civil courts.

I am also concerned that incorporating the court provisions into employment tribunals could limit the way that the wasted costs provisions would work in employment tribunals, because rule 48.7, which the noble Baroness, Lady Miller, mentioned, refers to legal representatives. Employment consultants are not legal representatives but we would want them to be captured by the wasted costs provisions. The same arguments apply to employment appeal tribunals.

Amendments Nos. 11 to 13 would establish that all representatives could face costs awards, regardless of whether or not the representative charges for his services.

We do not intend the provisions on wasted costs to apply to representatives who are not acting in pursuit of profit, such as trade union representatives or those working for voluntary or not-for-profit organisations. That is the basis on which we consulted and on which we are committed to implementing the provisions on wasted costs. The amendments would prevent the provisions on wasted costs from distinguishing between, for example, a large multi-national legal firm and a small voluntary advice centre or a local trade union official. We should not adopt such a blanket approach to all of those.

Of course, anyone can behave badly, but we must consider the nature of employment tribunals, their users and their representatives and adopt an approach that reflects this. The resources of organisations that gain financially from the provision of their services and those that do not are simply not comparable. Applying wasted costs to the not-for-profit sector could discourage voluntary advisers from offering their services or mean that an order against an individual impacted on an organisation's ability to provide its services. For the sake of accessibility, which is an essential feature of the employment tribunal system, we ought to make the distinction provided in the Bill and we oppose the amendments, which would remove it.

Amendment No. 18 requires that where a tribunal does not make an award of costs it should always give in writing its reasons why an award was not made. I must start by saying that, as awards of costs are made in fewer than 1 per cent of cases, we would he giving reasons in writing for 99 per cent of cases before tribunals. The regulations cover the matter. They set out the circumstances in which costs can be awarded. Either party can request a costs order or the tribunal can consider costs of its own volition. Where a party has requested costs, the tribunal is required to consider them.

If, in the opinion of a tribunal, a party or its representative has acted unreasonably or, in the case of the defence, had no reasonable prospect of success, the tribunal has a duty to consider making an award of costs. We introduced that change last year. It means that even where one of the parties has not requested costs, the tribunal will have to consider whether costs should be awarded if a party or its representative has acted in a particular way. In practice, costs will be considered in appropriate cases at the hearing or at a separate costs hearing where parties and their representatives are present. The tribunal is obliged to record its decisions which are then sent to the parties, so that is not a problem and the amendment is unnecessary.

I turn to the final amendment, Amendment No. 19, which concerns the Employment Appeal Tribunal. It was tabled in Committee and I am sorry to see it appear again. I had hoped that I had been clear enough—I do not know how I can be clearer. Despite what the noble Baroness, Lady Miller, said, we do not believe that a "general costs follow the event" rule is right for the employment tribunals or for the Employment Appeal Tribunal. I acknowledge that the amendment leaves room for discretion, but essentially it proposes costs recovery being the norm. In reality, that would mean that all parties could face costs and that would of course fall particularly hard on those of limited means.

I do not accept the argument that because a party has lost in the tribunal—after all, someone must lose because it is a zero sum game—he should face costs if he chooses to appeal. It would be a serious restriction of people's right to appeal procedures if we introduced general cost recovery. It does not operate for tribunals or appeal tribunals, except for misconduct or hopeless cases. That is because tribunal users are by nature likely to be more vulnerable because they have been dismissed, made redundant or suffered an unlawful deduction from their wages, or, on the other side, because they are small businesses which would find the costs of a case hard to meet on top of any award. Perhaps I should have made that point in our debate last night about small businesses.

In the vast majority of cases, appeals are launched in the genuine belief that there has been an injustice. I agree that there is no place for claims that are unfounded or vexatious, but there are powers to deal with that. An appeal to the Employment Appeal Tribunal must disclose an arguable point of law. If it does not, the tribunal has discretion to hold a preliminary hearing to determine whether there is a reasonably arguable point of law, so a vetting process exists before the appeal tribunal. Appeals are not common—last year, there were fewer than 2,000 out of 27,000 tribunal sittings. On the whole, parties who lose pause to think before launching an appeal.

I am sorry to be so negative about all the amendments in the group.

12.45 p.m.

Baroness Miller of Hendon

My Lords, I am sad that the Minister was disappointed that I tabled an amendment that I tabled in Committee. Like me, he should get used to it. I get used to him always turning down my amendments—although I am disappointed, I am used to it.

Lord McIntosh of Haringey

My Lords, I did not say that. I said that I was sad that the noble Baroness was not convinced by my excellent arguments.

Baroness Miller of Hendon

My Lords, that is a different matter. I am not surprised that the Minister does not accept any of my amendments this time, although I was disappointed when he talked about the fact that I used the word "contumacious" only because I thought that at long last he was going to accept something that I said and include the word somewhere. Nevertheless, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 10 to 13 not moved.]