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Unfair Dismissal Allegation

Volume 931: debated on Wednesday 11 May 1977

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Motion made, and Question proposed, That this House do now adjourn.—[ Mr. Frank R. White.]

12.26 a.m.

I am glad to see the Minister of State on the Front Bench even at this somewhat late hour. First, there is a technical matter that I am sure he will understand. The terms under which I asked for this Adjournment debate refer to "wrongful dismissal". Technically the correct words are "unfair dismissal". However, the Minister and I will both be talking about the same thing.

The law provides a procedure for dealing with cases in which people feel that they have been wrongly dismissed. This is not a party matter. It was introduced in the Conservative Industrial Relations Act 1971 and was re-enacted in the Labour Government's subsequent legislation.

It is important that we should have a system whereby a man may have the means of appeal if he feels that he has been wrongfully dismisesd. If we do not provide such a procedure, we virtually create a situation in which a man's workmates who are uneasy or are convinced that he has been wrongfully dismissed have almost no alternative but to go on strike to secure him justice. Surely everyone will agree that a situation in which there is no redress other than the solidarity of workmates coming out on strike is wholly unsatisfactory and that the House was right to introduce the concept of a right of appeal against unfair dismissal.

The intention of Parliament was quite clear. It was that if someone was unfairly dismissed there should be a procedure for reinstatement or compensation. What Parliament never intended was that if someone had been properly and fairly dismissed he should also get compensation. The problem which I raise tonight is that the legislation is not working out in the way expected by Ministers, Opposition spokesmen and Members in all parts of the House who follow matters of industrial relations with care and interest.

This matter has been raised with me by the Smaller Businesses Association, now known as the Association of Independent Businesses. I have been approached by its president, Patrick de Laszlo, who has been involved in a case of such a nature. I have also been approached by its chairman, Colin Davris, and its secretary, Miss Ingram. Their attention has been brought to the sequence of events that I shall spell out to the Minister.

In addition the Small Business Bureau, which has been advising the Conservative Parliamentary Party's Small Business Committee, has arranged a series of meetings throughout the country so that we can consult on the problems facing small businesses. I have to tell the Minister that the whole question of the Employment Protection Act and this aspect of it is one of the subjects most often raised with us. However, I do not want to stray into the generality of that. I shall turn now to the sequence of events which broadly occurs, although the phraseology may be different from one case to another.

A man is dismissed. He signs on at the employment exchange and seeks unemployment benefit. If he lost his job because of misconduct, he is barred from unemployment benefit for six weeks under the very old-established rule that if one is responsible oneself for being unemployed one is not able to claim. Therefore, the first question which arises at this early stage is "Were you fairly dismissed? If you were, you have six weeks to wait".

It is rather a leading question, and the answer very often, quite inevitably, is "No. It was unfair". I put it to the Minister of State that if the electors of Doncaster should decide to dispense with his services at the next General Election and he were asked such a question, he would reply "It was very unfair".

The point having been established that the man feels that it is all rather unfair, a stack of leaflets is made available to him, explaining to him how to make a complaint, and he is given a form to fill in. Simple inquiry will reveal rapidly to the man that it costs him nothing to fill in the form and that he does not have to be very precise in explaining the reasons for his complaint.

He learns that if he gets as far as a tribunal it is simply a case of telling his side of the story, and someone is there to help him. But the employer must tell his side of the story first, which makes it that much easier for the man. Of course, the case might be settled before it gets to the tribunal—another fact which the man can easily learn. He will also be told that he may withdraw the case if he does not want to bother any further. With all this knowledge, a very large number of people decide to fill in the complaints form. They also know that their only chance of getting six weeks' benefit is if the officer specially allows the benefit, which he is unlikely to do if they have not bothered to challenge their dismissal.

All this is not a criticism of the Department or its officers. It is right that they should point out to people what their rights are. They would he failing in their duty if they did not give such information.

Great latitude is allowed to an individual in filling in the complaints form. Again, that is quite right, because we do not want to penalise an ordinary working man for not being a good form-filler. The employer gets a copy and tries to fathom it out. Sometimes it is clear, but in many cases it is not, and I have examples with me.

We have a situation in which it is very easy for an employee to arrive at the point where he makes a claim. The employer then has to decide whether to go to the hearing. At this point a conciliation officer appears and offers his services. He goes over the ground. Either the employer has committed some very small technical infringement, which it is extremely easy to do, and then he is in the wrong, or it is all correct.

Suppose that a conciliation officer finds that everything which should have been done has been done in the correct way. That is not the end of it, because we then come to the question of what it will cost the employer to go to the hearing. He has to decide whether he will take his manager to give evidence of dismissal or whether he is prepared for any number of other allegations of reasons for dismissal because of the vagueness of the form.

The employer might want to be there, in which case he might want to take along half a dozen or more witnesses. I know of a case in which the employer had 14 witnesses, only three of whom were called. A lot of time, and cost in terms of time, is involved for the employer.

I now turn to the question of costs, because in the course of one of the consultation meetings to which I have referred I consulted a solicitor who handled a recent case which occupied a day and a half in court and numerous conferences, and his account amounted to£234. That is in addition to the cost falling on the employer in having to take time off work, as well as taking other people from work as witnesses and the like. We come to the dilemma facing the employer. He has a cast-iron case. He has done everything he should have done. He is entirely within his rights. Nevertheless, it will cost him between£200 and£400 to prove it.

I want to quote from actual cases drawn to my attention by the Smaller Businesses Association. One person says:
"We have, over the past two years, been approached by the ACAS on several occasions where ex staff have claimed unfair dismissal. In every case the official tried to coerce this company into paying extra money which the company negotiated and eventually paid a modified sum which averaged out at£75 on the three cases. However, it was decided last year to carry a case through to the courts, and we were successful in having the claim squashed, only to be told that our costs for our staff attending court would not be met, their personal transport costs would not be met, meal expenses would not be met, and above all, although the plaintiff was given legal aid, our solicitors' costs were to be stood by us. We feel that all this is fine were we to lose the case. My conclusion to this is quite simple: it is cheaper to be blackmailed even if you're right."
In another case an employee had sought to change his terms of employment to terms which the company found unacceptable. The employee therefore left. When he went to sign on at the employment exchange, a clerk, following what is believed to be common practice, encouraged him to complete a wrongful dismissal form claiming that he had been dismissed unfairly, with an assurance that he would not be bothered further. The conciliation officer visited the firm for a day and verified that the employee had not been wrongfully dismissed and that all the forms had been kept correctly. He suggested that the company should pay£50 to the employee because that would be cheaper than instructing lawyers and fighting the case at an industrial tribunal.

The association knows of several other cases which follow the same pattern. This seems to reveal a very serious situation in which, in effect, people are being blackmailed to pay money to people who have been quite properly dismissed from their employment, who have no case whatever and who are being handed cash on a plate.

I asked the Department about this, and the Minister of State himself replied to my Question some time ago indicating that in about 3,000 cases a year "out-of-tribunal" settlements are being made in which the payments were less than£100. These are cases where the former employees have no grounds for complaint but where it is cheaper to give them the cash—in other words, to accept the blackmail—than to fight the cases before tribunals.

This has been confirmed by independent research carried out by Ian Murray of the Daily Express, who made an investigation and wrote:
"Thousands of firms say that they have been blackmailed by the State into paying compensation to people who have been perfectly fairly dismissed from their jobs."
I put it to the Minister that that is not the intention of Parliament. I trust that it is not his intention. I am certain that he will assure us that it is not. It was never the intention of Parliament at the time the legislation was put on the statute book. I hope that, in the light of my raising the matter in this short debate, he will instruct his Department to look into it and see whether there is some action which should be taken.

I make a simple suggestion about how it might be done. Since no costs fall on the employee, whereas substantial costs fall on the employer, the right and proper way would be for the ACAS representative to certify that there was a case to answer. I assure the hon. Gentleman that I make no criticism of the staff of ACAS. What they are doing is obvious and logical: it is cheaper to accept blackmail than it is to take a case to court. One does not have to be a genius to realise that. If, however, we introduced a procedure whereby, before a case went to court, the conciliation officer had to certify that there was a case to answer, that in itself would prevent this problem arising.

If the Minister does not like that, some relatively minor cost—say,£10 or£20—could be imposed on the employee if it was found that there was no case to answer. I have no strong feelings about the figure, but I suggest that we need something sufficient to make him think twice before embarking on the rosy path which leads very easily from one point to another.

I take this opportunity of saying in all seriousness to the Minister that I know that he shares my concern about unemployment. He will recognise, I hope, that although some parts of the employment protection legislation help to protect those in work, they are causing very real concern. The legislation is extremely complex, and it is creating costs and liabilities for small employers to the extent that they are becoming very wary of taking on new people. We must be careful about erecting barriers to the taking on of employees and the creation of new jobs.

12.43 a.m.

The issues raised by the hon. Member for Basingstoke (Mr. Mitchell) have been the subject of several letters which I have received from hon. Members in recent months.

Before dealing with the specific matters dealt with by the hon. Gentleman, perhaps I should follow his lead and say a little about the origin, nature and importance of the statutory arrangements for dealing with unfair dismissal, so that we may see in perspective the criticisms which have been made.

As the hon. Gentleman fairly reminded us, the statutory right not to be dismissed unfairly has been supported by both major political parties since it was first recommended by the Donovan Report. It was first included in the Labour Government's abortive Industrial Relations Bill in 1970. Subsequently it appeared in the Conservative Government's Industrial Relations Act, which was swept away in 1974. But, of course, the unfair dismissal provisions were preserved. It is important, therefore, to recognise at the outset that both major parties are agreed on the importance of this statutory safeguard.

The arrangements have, I think, three features which are particularly relevant to this evening's debate. First, the legislation is rightly built on the proposition that employers must be prepared to justify a dismissal, if necessary, to an impartial and informed tribunal. In the Act the onus is placed on the employer to show why he dismissed the employee, to demonstrate that he did so for a fair reason and to show that in dismissing the employee for that reason he acted reasonably.

Good employers have always appreciated that an employee should not be dismissed unless these conditions have been fulfilled. But since 1971 employers generally have known that they may be publicly accountable for their actions in this way. This is salutary knowledge, and it is important that these statutory rights should apply to employees in small firms in just the same way as they do to those in larger firms. All employees deserve this measure of job security. The Government attach particular importance to the provision in the Employment Protection Act, now in operation, which extended to small firms the right not to be unfairly dismissed.

I prefer not to give way. I do not blame him for it, but the hon. Member took rather longer that is normal.

Secondly, employees' statutory rights are backed by effective enforcement arrangements. As hon. Members know, industrial tribunals can order reinstatement or re-engagement by the employer if that is practicable and the employee so wishes it. Alternatively, the tribunal may award compensation. The Employment Protection Act has given the tribunals the power to order reinstatement or re-engagement, as distinct from their previous power merely to recommend these remedies, and thus greater emphasis has, quite rightly, been placed on job retention than on compensation for loss of a job. Nevertheless, I am bound to say that, perhaps for understandable reasons, only a small percentage of cases result in reinstatement or re-engagement. The vast majority of cases result in compensation.

Thirdly, a major and essential feature in the statutory arrangements is the accessibility of the industrial tribunals and the relative informality of their proceedings. Dismissed employees are obviously in a vulnerable position. There would be little point in a system of tribunals which employees found difficult to reach or whose procedures they could not understand. There has been recently an increasing tendency, more marked amongst employers than employees, for parties to be legally represented at tribunal hearings. This causes me some concern.

Lawyers, of course, may have a rôle to play at the tribunals. But, with the greatest of respect for their profession, I hope that the increasing tendency for them to appear at hearings will not—as it might—lead to a more cumbersome and legalistic procedure concerned overmuch with legal proprieties and less with the merits of the case and to a situation where both employers and employees find it difficult to understand the language used at the hearings. I have heard it suggested that the industrial tribunals offer palm-tree justice. But palm trees offer convenient and simple shade when the heat is too much.

The value of these provisions to employees can hardly be exaggerated. The number of applications to industrial tribunals involving alleged unfair dismissal has increased steadily since the legislation was introduced—from 5,000 in 1972 to 34,000 in 1976. There could hardly be more graphic proof of the importance to workers of this legislation. It is significant that since 1971 the proportion of industrial stoppages caused by dismissal has declined.

Against that background, let me turn to the criticisms which have been made of the present arrangements. They can, I think, conveniently be divided into two classes—criticisms of the rules under which the tribunals operate, or the way their rules are administered, and criticisms of the rôle played by the conciliation officers of the Advisory, Conciliation and Arbitration Service.

As to the first kind of criticism, it is, as I have already emphasised, fundamental that every employee should have ready access to machinery for settling his grievance. On the other hand, it is, of course, important that employers should be protected against groundless complaints where the employee knows that he has no case and where he makes the complaint from perhaps malicious motives, which waste time and money. There is a difficult balance here to be struck. But I believe that we have got it about right. I do not think that a case has been made for tipping the scales any further against a dismissed employee.

The main deterrent against malicious complaints lies, of course, in the powers of the industrial tribunals to award costs against either party if they consider a complaint to be frivolous or vexatious. This power is sparingly used, but it is used and it acts as a deterrent. It has been suggested that the power should be widened, but I cannot accept that such a change would be justifiable. A wider power might well deter applicants who were sincerely convinced of the merits of their cases. In passing, let me emphasise that it is not only employees who can insist on arguing groundless cases before tribunals. Employers may do it too.

Another important aspect of the present arrangements is the procedures operated by the tribunals for trying to ensure that complaints that are out of scope are not proceeded with. Great care is taken to explain to applicants whose complaints seem to be out of scope that a tribunal is likely to have no power to consider their application and that it should therefore be withdrawn.

If, nevertheless, such a case comes forward for a hearing, the tribunals are prepared to hold preliminary hearings, without witnesses in order to save the parties and their witnesses unnecessary trouble and expense, to consider the question of scope. I hope that this will become more widely known. It has been suggested that modified and more effective vetting procedures should be introduced. I am, however, yet to be convinced that this would be practicable or desirable when it is borne in mind that it is often difficult to be sure whether an application is or is not within scope.

I am not claiming that the present procedures are perfect. We are always ready to consider representations on ways of improving them. In recent months officials of my Department have discussed with the CBI and the Institute of Personnel Management ideas put forward by those bodies for tightening up the procedures for dealing with what they consider to be groundless complaints. So far, however, the discussions have not persuaded me that the present arrangements need to be changed.

Let me now turn to the rôle of the conciliation officers. As the hon. Gentleman recognised, all complaints of unfair dismissal go to a conciliation officer in the first place. These officers play a valuable rôle—the hon. Gentleman fairly recognised this—in setting nearly 60 per cent. of complaints. It is the task of a conciliation officer to try to settle complaints by conciliation between the individual and the employer. If the parties do not want conciliation, or do not reach a settlement, the case goes forward to a tribunal for hearing, unless the complainant withdraws it. Twenty per cent. of cases are withdrawn in this way without any settlement having been made at all.

The conciliation officer gives his assistance only if both parties are willing to accept conciliation. He talks to employer and employee separately to try to clarify their point of view, and may also offer advice about the legislation.

Last July the CBI raised with my Department the rôle of the conciliation officer and complained that he frequently proposes an instant solution which involved the payment of a sum by the employer to the former employee. This criticism was carefully considered by ACAS and the chairman subsequently met representatives of the CBI to discuss the matter.

ACAS accepted that small conciliated settlements occur quite frequently, but it emphasised that it is not ACAS policy to press employers to offer small sums to settle complaints. The conciliation officer tries to help the parties to reach agreement, but he does not attempt to act as an arbitrator on the merits of the case. Nor does he seek to impose, or even to recommend, a particular settlement. ACAS appreciates that settlements are the responsibility of the parties concerned.

ACAS pointed out, however, that conciliation officers find that in discussion with employers on what seems to be a complaint without much substance the employer may ask the conciliation officer whether there is a way of settling the complaint without going to the tribunal. In these circumstances the conciliation officer may suggest paying compensation. But he will be careful to point out to the employer at the same time the possible dangers of setting a precedent by doing so.

ACAS also pointed out that its conciliation officers are also finding that where solicitors represent employers they overwhelmingly advise employers to settle complaints with a small sum of compensation. "Nuisance money", I am told, is the description which applied here.

Following the meeting with the CBI, the Chairman of ACAS took a number of steps to ensure that the rôle of the conciliation officer was fully understood within and, as far as this was possible, outside ACAS, and that effective machinery was available for dealing with complaints. In this respect, regional directors were asked to discuss these matters and a leaflet was prepared describing the rôle of the conciliation officer and emphasising that he is not an arbitrator. We are considering other ways of publicising the conciliation officer's rôle.

I shall look carefully at what the hon. Gentleman said about the complexity and lack of clarity of the appropriate forms.

In conclusion, I should like to emphasise two points—

The Question having been proposed after Ten o'clock on Wednesday evening, and the Debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at four minutes to One o'clock.