Motion to Approve
My Lords, this first order permits but does not oblige judges to sit alone rather than, as at present, with two lay members on unfair dismissal cases. It is part of the wider package of reforms. It is not a silver bullet, standing on its own, but neither is it a risk to the just handling and disposal of cases.
As I said in Grand Committee, when we debated these orders on Monday last week, the order seeks to replace prescription with flexibility, and helps to secure value for money. It will allow employment judges to sit alone in unfair dismissal cases before an employment tribunal. It will provide discretion for judges to decide whether to sit with lay members, where appropriate. The criteria against which such decisions must be made are set out in primary legislation. It has been tried and tested for years in relation to other types of case to which it already applies.
Many of your Lordships here today were also present in Grand Committee last week. Noble Lords who then opposed the measure did not argue against flexibility for its own sake. Indeed, it is difficult to see how flexibility per se could be easily argued against in this context. Instead, some noble Lords, and some who debated the matter in the other place, seemed to distrust the motives underlying this reform. The perception seemed to be that this is the thin end of the wedge. Fairness, independence and justice must not be compromised. However, proportionality is key to all those concepts, and the Government have a duty to ensure that value is secured.
The safeguard of judicial discretion is real. As noble Lords themselves cited in Grand Committee, academic research demonstrates that employment judges value the input of lay members. Judges tell us that too. We have good evidence therefore—something noble Lords were rightly keen on drawing out in Grand Committee—to explain why we think panels will continue to sit where they are appropriate, and where they will add value. That is as it should be. There is also evidence of support for the proposal. Some, such as the British Chambers of Commerce, say that we should go further and abolish lay members altogether. Some say that we should row back and drop even this order. Some think we have got the balance right. We have considered the numbers, considered the substance of the arguments put, and made sure that we have listened carefully to all parties with an interest. Our conclusion is clear, and I am confident that it is right.
The Government value the role of employment judges, just as the Government value the role of lay members. Each group brings significant expertise and experience to the system. Judges are well placed to make decisions about how best to manage a case to hearing, including about how and where the respective expertise and experience is best deployed, and with what value. Employment judges are trained in active case-management techniques and to deal with cases in the unique fora of employment tribunals. The safeguards are real. The objective of securing value for money is important.
The purpose of the second order, the Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012, is to extend the qualifying period for unfair dismissal from one to two years for individuals beginning work on after 6 April this year. It also extends in the same way the minimum period an employee must have been with the employer before being entitled to request a written statement of reasons for dismissing. The purpose of the statement of reasons is essentially one of evidence when making a claim for unfair dismissal. It is therefore closely linked to the right to claim unfair dismissal and it is logical that the qualifying period for both is kept consistent.
The Government are committed to reviewing all aspects of employment law over the course of the current Parliament. We are doing this because we are serious about rebalancing the economy, supporting job creation and achieving strong, sustainable growth. We want new and growing businesses to thrive and feel confident about taking on more staff.
The legal framework of employment law today is quite different from that which obtained when unfair dismissal rights were first introduced in 1971—by a Conservative Government. In 2012, employees additionally have a wide range of day-one rights: the right not to be discriminated against; the right not to be dismissed for asserting a statutory right, such as asking to be paid the minimum wage; and the right not to be dismissed for making a protected disclosure, otherwise known as blowing the whistle.
The change we seek to make will not affect any of those day-one rights, but it will reduce the fears that many employers have—until a few years ago, I was one of them—that a minor procedural slip-up might land them with a tribunal claim. As the British Chambers of Commerce has noted, a single claim can wipe out a whole year’s profits for a small business. That is a burden that many small businesses are simply unable to bear. The British Chambers of Commerce also reported—this is particularly shocking—that 48 per cent of larger firms have been threatened with an employment tribunal claim in the past three years.
This change will have a relatively small impact on employment tribunal claims and individuals who might seek to bring a claim. We have made a conservative estimate that the increase in the qualifying period will bring about only a 4 per cent reduction in unfair dismissal claims. Furthermore, we have not taken account of the fact that employers will not be under such pressure to let employees go, as my noble friend Lord Razzall pointed out in our debate in Grand Committee on Monday of last week. They will have the extra time to give them a chance, to coach them and to train them. Also, as set out in the impact assessment, we estimate that more than half of unfair dismissal claims currently made by those with one to two years’ service are part of multiple claims, so we would expect them still to go ahead under one or more other jurisdictions.
The Government are taking other measures that will help employers and employees to resolve disputes outside the tribunal system. I am sure that many noble Lords will agree that this is most often preferable for all parties. We are increasing the role of ACAS in conciliating disputes before a claim is made. We are piloting a scheme to boost access to mediation among small businesses in Cambridge and Greater Manchester, and we will be considering how we can deal more quickly with straightforward employment tribunal claims.
Looking back over the history of unfair dismissal rights, a two-year qualifying period has existed for most of the past 30 years, so it is hardly an unprecedented measure, but it is one that we, and large numbers of businesses, believe will make a positive difference to employer confidence.
As I said, our top priority is to achieve strong, sustainable and balanced growth. We are tackling youth unemployment by ensuring that more and higher-quality apprenticeships are available. We are taking steps on issues such as tax, planning rules and access to finance to boost enterprise. Critically, we have a credible plan to reduce the deficit and tackle the UK’s debts, as set out in the Budget.
The extension of the qualifying period must be seen in the following contexts: the greater employment rights that individuals now enjoy; the Government’s measures to encourage early dispute resolution; and our focus on growth and business confidence.
The Government’s view that employers’ confidence and their perceptions of employment law will be improved by this measure is based not on anecdote but on the views of the businesses that responded to the public consultation and the thousands of businesses surveyed by the British Chambers of Commerce—
My Lords, perhaps the noble Lord will allow me to make my case. There will be plenty of opportunity for him to speak later.
The Government’s view that employers’ confidence and their perceptions of employment law will be improved by this measure is based not on anecdote but on the views of those businesses that responded to the public consultation and the thousands of businesses surveyed by the British Chambers of Commerce, the Institute of Directors and the CBI. During the consultation, the CBI expressed the view that,
“the extension of the qualifying period will have a positive impact on marginal hiring decisions, particularly in smaller firms”.
That accords with my own experience as an employer in an IT company, which I ran for six years. I cannot emphasise enough how much time is needed for training and assessing people. I can categorically say that a year is not enough in every case, and it is a view that the Government share. There is a credible body of opinion that employers will have greater confidence to recruit as a result of this measure. I assure noble Lords that the Government will do everything practicable to monitor and assess the impact of increasing the qualifying period.
As set out in the impact assessment, we are committed to a post-implementation review of the Resolving Workplace Disputes policy package, including this measure, in 2016. The amendment laid by the noble Lord, Lord Young, calls for a review after 18 months. With respect, this will be too soon to be able to make an assessment of the policy’s effect, not least because the qualifying period will be two years and will apply only to those starting a new job from 6 April. No employee will therefore have reached the end of their qualifying period in 18 months’ time.
While respecting and preserving the important employment rights that have been established over the years, we must give proper weight to those currently outside the labour market: the school leaver looking for the first job, the long-term unemployed striving to get back into work, and the person who was let go during the first year of employment because the employer was unsure whether they would come up to scratch. These are the real beneficiaries of this order, and I commend the orders to your Lordships.
Amendment to the Motion
As an amendment to the above Motion, at the end to insert “but that this House regrets that the order will risk the reduction of justice and fairness at employment tribunals, is opposed by both trades unions and employers’ organisations, and risks increasing costs through a greater number of appeals; believes that having an employer and employee representative on employment tribunals remains the right way to ensure a fair and just decision and process for claimants; and calls on the Government to place a report into the effect of the changes before Parliament 18 months after the approval of the order”.
My Lords, I thank the Minister for his contribution, although that does not mean that I agree with it. I also thank him for the speed with which he responded in writing to the questions that had been raised but, again, I do not necessarily thank him for the content. I do not feel that he helped to clarify or justify the Government’s proposals, and that is why we have put down these amendments to the two orders.
The noble Lord, Lord De Mauley, said that people felt the introduction of lay members was motivated by further proposals. I do not think that you can really blame people for that, given that the Government have indicated that there are likely to be further movements in employment law. Even if you were not of a suspicious nature, the Beecroft report being delivered to No. 10 might at least have caused your antennae to wave about a bit in anxiety. Therefore, my question to the Minister is: can we expect more in this vein, with the view being taken that if only we lift these restrictions, somehow that will open the floodgates to employment and that the restrictions are the barriers that are really holding back SMEs or even large firms? We believe that that is a false analysis predicated on entirely the wrong views.
On the question of lay members, why do we believe that they ought to be a key part of the process? I do not intend to go through all the reasons as we had a full and frank debate in Grand Committee. When industrial—now employment—tribunals were first formed, the whole idea was that there would be a different approach and a different style. Along with that came lay members. What do they bring? They bring real knowledge and understanding of industrial situations. That is not to say that judges do not, but they do not have the same perspective. Will the proposal alter fundamentally the nature of unfair dismissal claims? We believe that it will. We believe that lay members play a fundamental and important role in the proceedings.
The noble Lord, Lord De Mauley, told me that the safeguards are there and are real. I listened carefully and the only safeguard that I could see was that it would be a judicial decision. That does not strike me as a real safeguard. I will not use the word “whim” but it depends on a view that lay members are not necessary in a significant number of cases. It must be significant or we would not be going down that road. If we are talking about preserving the nature of employment tribunals in which the views of people who have real experience in a wide range of industries and occupations, lay members play a vital role in ensuring that those views are taken into account and that the perspective of cases receives the widest possible analysis. Will it cost a bit more? Inevitably, it will, but we believe that it is justified in the circumstances.
On the second Motion, on the question of the length of unfair dismissal, it is true that there has been a history of different periods. We have gone from two years, to one year, to six months. Is the Government’s proposal justified? We do not believe that it is. Although it has fluctuated over a significant period, there is no evidence to show that it has had a direct effect on employment levels. That is why I said at the outset that it is predicated on the wrong analysis. Since the qualifying period was reduced from two years to one in 1999, more than 1.75 million jobs have been created in the UK, so it does not seem to be a barrier or impediment. The Minister quoted the chamber of commerce. Similarly, I could say that, interestingly, the SME Business Barometer survey asked 500 SMEs about the main obstacle to success. Top of the poll as the biggest obstacle was the state of the economy, with obtaining finance next. Just 6 per cent of respondents listed regulation as the main obstacle to growth.
In the correspondence that I received from the Minister, even he struggled to demonstrate that the unfair dismissal claims were the root cause of the problem. First, they cannot be disentangled. We cannot disentangle employment tribunal claims from the multiple claims; the Minister admitted that in the correspondence. We do not believe that the proposals are evidence-based.
I will quote again from the Chartered Institute of Personnel and Development. Surely it has some credibility when it states:
“Making it easier to dismiss staff without due cause is far more likely to harm the prospects of UK plc by fostering crude and out-dated attitudes to employment relationships that will put employees off from ‘going the extra mile’. Unproductive and disengaged workers will cost firms far more than the threat of tribunals”.
I believe that the institute is right about that.
If we want to give employers helpful advice, some things that the Minister suggested were right, such as more use of ACAS and mediation. However, the key for employers is how they treat their employees. We never suggested that training would be finished in a year; we are talking about continual learning in today’s workplaces. We are saying that the first year of employment is a long enough period to assess a new employee if the employer is making sure that they are being mentored and are responding to their training programmes. Are we really saying that at the end of that period an employer cannot assess whether an individual is going in the right direction and will make a worthwhile contribution to the organisation? My experience tells me that a year is a significant period of time.
This would signal the wrong route to employers. If we extend the unfair dismissal period, we will be trying to convince ourselves—without any evidence—that this will make employers take on more people. Of course we want employment to increase, but the way to encourage this is to ensure that we create the right economic conditions. I cannot resist saying to the noble Lord, Lord De Mauley, that while the focus is definitely on reducing the deficit—and I welcome the increase in apprenticeships—we still have not seen the growth that was predicted, the forecasts for which have been significantly reduced.
My final reason for moving the Motion was that I read the letter in reply to the noble and learned Lord, Lord Scott of Foscote, who made the reasonable request that an employee should be entitled to be given a reason for dismissal before they were dismissed. Unless the noble and learned Lord is more easily pleased than I am, he will be disappointed with the final paragraph, in which the noble Lord, Lord De Mauley, stated that the Government consider that requiring employers to give a written reason before giving notice would be an additional administrative complexity for them and would increase their costs. Does that send the right signal to employers about how to treat employees? Surely it is totally the wrong advice to give them. If they are handling their employees in a proper, structured way, and if they have the right HR procedures, they should have nothing to fear from an employment tribunal. On these grounds, I beg to move.
My Lords, I support my noble friend’s Motions. We had a wide-ranging debate on both these orders in Grand Committee. I opposed both, and I still do. Both orders undermine the employment rights that many people have fought for over the years. The first deals with the qualifying period and the right of workers to receive a reason for dismissal. The second provides for the removal of lay members from industrial tribunals that deal with cases of unfair dismissal. As noble Lords indicated in our previous debate, this has been opposed not only by the TUC and the CBI but by the Engineering Employers Federation and Citizens Advice.
Those who supported the Government in our previous debate did so, as I understand it, because they believed that if employers did not have to comply with employment laws, they would be able to employ more people. I doubt that. I oppose the orders for a different reason: I believe that, in a civilised community, the worker has rights which must be observed. An overriding one must be the right to continued employment unless there are very good reasons for this not to be maintained. Is it right that employees should simply be regarded as disposable? The loss of employment is often a disaster; not only for the employee but for his or her family. Many may face a decline in living standards and perhaps years spent on benefits. The trauma is even worse when the decision is felt to be unfair and if there is little alternative work available.
I agree that conciliation or mediation should be tried rather than immediate reference to a tribunal, but this is attempted nowadays and may not always work out. The opportunity to go to a tribunal should exist if such procedures do not provide an acceptable solution. The presence of lay representatives from both sides of industry or commerce, in addition to a judge who presides, produces an informal—and informed —atmosphere, conducive to a fair hearing by litigants. Most organisations familiar with our present arrangements, including many judges themselves, are supportive of the involvement of lay representatives.
The Government want to change the arrangements for hearing unfair dismissals so that the litigant will appear before a judge sitting alone. In other words, there will be a more legal set-up but no access to legal aid, since this is being removed by legislation recently before our House. There is no doubt that the Government believe there have been too many tribunal cases and that there will be fewer under their new proposals—and no doubt fewer successful cases. This is grossly unfair. There is no more important area of life than the work that most people do. Without it, life changes dramatically, not only for the individual concerned, but the family which he or she has to support. The loss, if unfair, should be compensated. The least the Government can do is examine how these changes impact upon people, which is what is proposed by my noble friend’s Motions. I hope the Government will accept them. If they are interested in fairness and justice, they can really do no other.
My Lords, I would also like to support the amendment proposed by my noble friend on the Front Bench. The two SIs before us today are shabby. They are retrograde and in opposition to models of procedure and rights that have been with us for many years. I do not think that the Minister who argued the case for the statutory instruments today made a better case than he did in Grand Committee. An odd thing that he said today in support of the statutory instrument dealing with unfair dismissal was that, because workers now have certain rights that they did not have 30 years ago, such as those in relation to discrimination, it is reasonable that the qualifying period for claiming unfair dismissal should be extended to two years.
He indicated that there are rights of discrimination—sex and racial discrimination—that did not exist 20 or 30 years ago. That is true. How on earth can that justify greater rights for the employer to dismiss without due cause or indicating what the reasons are? Someone not fitting in or being surplus to requirements would not be an adequate reason if the unfair dismissal qualifying period was available.
The noble Lord on the Labour Front Bench and my noble friend Lady Turner have indicated reasons why we doubt the desirability of changing the composition of the tribunals, so that the judge or chairman—the legally qualified person—can, at his discretion alone, determine that the composition should do without lay members in future.
As my noble friend Lady Turner has indicated, the tradition of lay members has in practice brought tremendous value to tribunals through the experience of the employer representative on one hand and the worker representative on the other. My recollection is that the procedure of joint decision-making that we have had in employment tribunals came in with the Lloyd George settlement of national insurance cases as far back as 1911. It has been perceived by employers and employees not just as a fair but as a reasonable and useful decision-making set-up that is better than a set-up where the judge sits alone. Now it is thought that the judge should determine whether he should sit alone or should have lay members sitting with him. That would be retrograde, and I see no merit in it.
As for the qualifying period, it simply means that for a much longer period—up to two years—the employer has no need to produce any valid, useful or good reason for dismissal; it will be justified. In a situation of joblessness across the market for young and older people, that is most unhelpful, which is why I think this is so retrograde.
I also think these SIs are retrograde for another reason. This is not the last word from the Government. They have threatened that a charge should be made before anyone can make a claim before an employment tribunal. That would be a serious diminution in employment rights to claim a legal entitlement—namely, a claim before the employment tribunal. The Minister has not today given any indication of whether that will appear this year, next year or at some other time, but that it is there in the background is surely something that he cannot deny.
My Lords, the question we have to ask ourselves is whether in any way the one-year qualifying period is a barrier to hiring. That is an essential part of what is before us today. We can all agree that small businesses face significant challenges, a weak economic environment and difficulties in accessing credit. At the heart of this discussion is youth unemployment, which is a huge difficulty right across Europe. Almost all European countries are suffering from very high levels. Small businesses—acorn businesses—being able to hire people, young people in particular, must be an ambition for all us who want to see the economy do well.
We have all had representations from a range of organisations. The thing is to encourage employers to make that leap and take on additional staff. Among those representations there was something from the British Chambers of Commerce that I thought was particularly interesting and instructive. It was about issues facing sole traders—those who have not yet taken on additional employees. It says:
“In the UK, over 3.6 million individuals are classed as ‘enterprises with no employees’. Not all of these people want or have the potential to expand their business and become an employer, but some do. The key questions are how many of these companies are interested in employing people, how we can identify them and how we can encourage them to take the huge leap needed to become an employer.
The first action must be to reduce the size of the leap required. Throughout our survey work, individuals said they would prefer to use freelancers to assist them rather than take on employees. So, in many cases, it is not a question of whether there is enough demand out there for the business to sustain another worker. The issue is whether the individual wishes to take on the obligations and risks inherent in employing their first staff member”.
All of us who have been involved in small businesses or tried to build up businesses know that that is a very pertinent question.
If we look at the main concerns of businesses in the current environment, pension requirements, dismissal rules and sickness absence feature very strongly. The British Chambers of Commerce says:
“The second biggest barrier is the dismissal process, and it is interesting that it is seen as a significant or total barrier by more than double the respondents that feel that way about the recruitment process. 27% of businesspeople believe that dismissal is a significant or total barrier to recruiting a first employee”.
This is an important point. We must make sure that in a civilised society there is just and fair redress against bad employers. However, I believe that the extension to two years would be welcome to the business community as part of restoring business confidence—something we all aspire to.
I will touch on the issue of tribunals. We already have a precedent for the arrangements that have been set out by the Minister. Judicial discretion prevails; there is no automatic mandate for the exclusion of lay panel members and there is no clear evidence that suggests a judge cannot satisfactorily deal with unfair dismissal claims. This would send out a small but significant message to businesses that have been calling for the change that is before us today.
Coming back to the original point, our major challenge is not only to keep people in employment where possible but to encourage employers or even those sole traders to add to their workforce. Having hired and trained many people in my professional career, I know that one year is often an insufficient time in which to come to that final judgment. I therefore support the proposals put forward by my noble friend today.
My Lords, perhaps I might say a word or two about the second Motion moved by the noble Lord, in particular the statement of reasons.
I was astonished to learn from the noble Lord, Lord De Mauley, who took the time to come and explain the position to me, that the statement of reasons was only an adjunct to the introduction of a right to claim for unfair dismissal. It was thought desirable to have a statement of reasons so that the employee subject to the dismissal would know what the reasons were and could have some record on which he could base his opinion as to whether he should bring a claim for unfair dismissal.
I had supposed, maybe naively, that it would be regarded as good management practice for employers to give reasons for dismissal, particularly to young employees, for whom this had perhaps been a first job, and those who had previously been long-term unemployed. With those reasons, they could modify their behaviour if they were lucky enough to obtain alternative employment, or they could go into some other occupation if they thought that there was some insuperable barrier to their success in the job from which they had been dismissed.
The noble Lord explained to me that the introduction of a one-year period before the right to reasons for dismissal arose was tied to the one-year period that was the condition for being able to bring a claim for unfair dismissal. The two ran together. He explained that if the condition for bringing a claim for unfair dismissal was to be raised from one year to two years, so too the right to have reasons for dismissal should be raised from one year to two years.
I find myself in some difficulty in accepting that the right to reasons for dismissal should be tied in that way to a claim for unfair dismissal. I should have supposed that it would be good management practice and, moreover, a matter of common courtesy for an employer to inform an employee why they were being dismissed. The notion is that a young person could be taken on as an employee, perhaps in his or her first job, and after six months—that is the position now but 18 months would be the position if these statutory instruments come into effect—be dismissed without being given any reason whatever for the dismissal. It is astonishing that that could be regarded as acceptable management practice.
Acceptable management practice would be to provide reasons to an employee who was being dismissed, particularly if it were a young person or a person who had been long-term unemployed and was working his or her way back into employment habits. I respectfully disagree with the part of the Motion that attacks the proposition that the time period for getting a statement of reasons for dismissal should be raised to two years. I would want greater justification than has yet been offered for requiring a two-year period before a statement of reasons for dismissal can be obtained. It should, as I repeat—I am afraid that I have repeated it more than once—be regarded as good management practice for an employer to tell an employee being dismissed why he or she is suffering that fate. For those reasons, I support the second amendment.
My Lords, I support my noble friend’s amendments, if only because the Government’s policy seems to be based on a myth; namely, that in this country our labour market is more regulated than those of our successful competitors. It is a myth comparable with that of the compensation culture, which has been used to justify some of the changes under the Legal Aid, Sentencing and Punishment of Offenders Bill, which limped through the House last night at the end of its Third Reading.
I want to comment briefly on two aspects of the Motions. First, on the composition of tribunals, the Explanatory Memorandum to the statutory instrument records:
“The Government accepted that some unfair dismissal cases can be ‘fact heavy’ and that the input of lay members can be beneficial. But evidence and consultation responses (including from some judges and some lawyers/law firms, and in particular from business) suggested that for those cases which revolve essentially around questions of fact rather than any complex legal point, Employment Judges are competent to deal with an assessment of the evidence against established legal tests and criteria without the need for lay members”.
The inference to be drawn from that note is that there are cases in which there are complex legal points. In those circumstances, how do the Minister and the Government justify taking out of the scope of legal aid and advice, employment law tout court, which is essentially the position except in relation to discrimination cases? It is clear that there are a proportion of cases in which legal points arise; hence, the justification for the change that the Government propose. However, they do not balance that by allowing legal aid and advice to those appearing as complainants in those cases.
Secondly, I wish to touch on the point made by my noble friend Lord Borrie and the noble and learned Lord, Lord Scott, about the statement of reasons. I sympathise very much with the noble and learned Lord and feel that a statement of reasons for dismissal should be given at whatever point an employee is dismissed but for an additional reason, apart from those advanced by him. If you are dismissed and have to seek another job, it would be helpful to be able to demonstrate that your dismissal was not related to any inadequacy or misconduct on your part, if such were the case, but, for example, arose because there was insufficient demand for continued employment in the firm in question or for some reason not related to the person being dismissed.
The Government’s proposals mean that, for the first two years of employment, no one will have the benefit of such clearance to demonstrate to another employer that he is in other respects perfectly fit to be employed, subject to the employer’s own requirements. Particularly in the conditions of the present labour market, that is something to be deplored. For those reasons, in addition, I strongly support the amendments in the name of my noble friend.
My Lords, I support both amendments, but I will concentrate my remarks on the second. In one sense, I apologise to the Minister for repeating some points that I made in the Moses Room. However, I find that his response—in the Moses Room, here today and in correspondence—does not address the issue that I raised. He claims that he is not basing the assertion that the raising of the threshold will increase the propensity to employ on anecdotal evidence. Yet he does not adduce any statistical evidence. The crude evidence is that the last time the threshold was lower, there was an increase in the propensity of employers to employ. That can be dismissed on the basis that it was part of the business cycle, but I am sure that the noble Lord’s department has statisticians who could take out that effect. We have, as the Minister proudly claimed, had some provision on unfair dismissal for 41 years, introduced in the 1971 Act to which those of us who were in trade unions at the time were, in general, opposed. However, the Government of the day thought that some balance was needed in terms of the attack on trade unions that that represented and individual employee rights. Therefore, they rightly inserted the right to claim against unfair dismissal.
Since 1971, either the threshold or the scope of that right has changed five or six times. There are therefore clear points where a change in the legislation could be related to the change in employment patterns. The Minister and his colleagues have failed completely to adduce any of that evidence and present it here today. Instead, they continue to rely on anecdotal evidence. When we were in the Moses Room, I put this down to listening too much to the saloon bars of the Home Counties; we may since have learnt that it may have been raised in the private dining room of No. 10. Either way, it is not statistical evidence. It is anecdotal and it is not proven that that is how employers actually behave. Until the Government prove that, they have not got to base 1 for justifying the macroeconomic effects of these changes.
For Joe Public sitting on the Clapham Omnibus, it is a pretty counterfactual argument to say that the best way of creating jobs is to allow employers to sack people more easily. Some economics is counterfactual, I agree, but without statistical evidence, it is difficult to argue in favour of these changes. That evidence has never been there. In the mid-1990s, there was the famous case of Seymour-Smith and Perez, which went all the way up to the European Court, about indirect discrimination in terms of the higher threshold. I am not arguing that case now, but I am saying that in the course of it, every court at every level, from the High Court right up to the European Court of Justice, accepted that the Government had not proven that, whether or not this was indirect discrimination, there was a bigger good in that more employment had resulted from an upward movement of the threshold. The Court of Appeal said that,
“nothing in the evidence, either factual or opinion … obliges … us to draw the inference that the increase in the threshold period has led to an increase in employment opportunities”.
That was the case 17 years ago. In the intervening 17 years nobody has proven to my satisfaction that the connection is there. The evidence was not there then and it is not there now.
There is a wider context to this, too, as my noble friend Lord Borrie has indicated. This may be the first of many changes in employment law that the Government are bringing forward, and their intention is probably to do so under statutory instruments. I appreciate that it is the convention of the House that we do not vote against statutory instruments, and we are not doing so today. I have a slightly different view, because in the list of government defeats under the previous Government, the first two were against me, so I do not have quite the same compunction as other colleagues. However, if a central tenet of primary legislation is undermined by a series of statutory instruments as the beginning of this series suggests it will be—3 million people taken out of the protection that primary legislation allows—and that continues, we have to look at the way in which the Government are using statutory instruments. I say no more on that.
The other, wider, point, as my noble friend Lord Beecham said, is that we are talking about a vulnerable subset of the population—people who have been employed for a relatively short time, most of whom, regrettably, do not have the protection of trade unions—which is excluded from the basic right not to be unfairly dismissed. This is part and parcel of other legislation which the Ministry of Justice rather than BIS is bringing forward. We have excluded from access to legal aid not only issues of employment but of housing, social security, industrial injuries, for the most part, and industrial diseases—all of which disproportionately affect the most vulnerable elements of our society.
In his opening the remarks, the Minister said that it is vital that the justice system is fair, independent and must not be compromised. I agree—but if you cannot get before a court or a tribunal in the first place, however good and balanced the court and tribunal systems may be, you are being discriminated against. The combination of taking away employee rights in this legislation and taking away access to legal aid in the Bill we regrettably passed last night is a severe restriction of the access to justice.
I fear that those of us who hoped for a relatively liberal Secretary of State at the Ministry of Justice, and a very liberal Minister in this House from that department, will be disappointed. The Ministers’ epitaphs will be that they excluded significant sections of the most discriminated against population from access to justice. That is a bad epitaph for both the parties opposite. I hope that this legislation will not be an additional contribution to that negative effect.
The difficulty with making changes through statutory instruments is that they convey the impression that the changes being made are minor and of a technical nature. However, these changes are not technical and they are certainly not minor. As the noble Lord, Lord Whitty, said, 3 million people will be taken out of the scope of unfair dismissal legislation and protection. That is a major change which will have a major impact on the British labour market.
Why is this happening? The justification from the Government is that it will aid job creation. Have any employers said, “If you make that change, we will take on more people”? Have they given any undertakings or promises? Of course they have not. This is all in the impressionistic world and it is a matter of conjecture whether anything will change. I do not believe that it will have anything other than the most marginal effect on employers—and I know a lot of employers—but it will have more than a marginal effect on those 3 million workers, or at least some of them. In most jobs—there may be exceptional ones—you do not need more than a year to check whether or not a person is suitable. Probation periods are rarely longer than one year.
Nor is an employer likely to be found guilty of unfair dismissal if a worker does not first achieve and then maintain the required standards of competence or behaviour. Provided that a warning is given, the employer will not make the minor procedural mistakes that the Minister warned about in his moving remarks. I do not mean “moving” in an emotional sense—I wish to make that clear—but in moving the Motion. Bad employers are being given carte blanche for an extra year and the effect will be a rise in insecurity and grave injustice.
Cutting the role of lay members is not a minor issue—this is a step towards a tribunal becoming a full court, with a judge on his own. That will be a daunting prospect for many applicants, which is softened at the moment by the fact there are lay people with some understanding of their world of work. That is not a criticism of judges, for whom I have a lot of time generally, but we will miss a tremendous amount of experience in tribunal hearings because of this change.
As others have said, these may be the first two steps in implementing some of the ideas that are circling around the Beecroft report. We have not seen the report yet, but this venture capitalist has been let loose like a bull in a china shop in the delicate field of employment law. I ask the Minister for an assurance that if any changes are to be made in the future in employment law, they will not be smuggled in through the statutory instrument route but will be a matter for primary legislation so they can have a proper debate and proper exposure in this House.
I was a lay member of industrial tribunals, as they were then called, in the 1970s and 1980s and was also chair of ACAS for seven years until 2007. I have said before that I am not sentimental about employment tribunals, as they represent a breakdown in employment relations. The vast majority of applications to employment tribunals are withdrawn or settled through ACAS. The test of these statutory instruments should be whether they are objectively justified, and whether they will create jobs and encourage good employment relations.
On the objective justification, the Minister was kind enough to send a copy of one of the letters that he has sent around, in which he wrote that although the recent increasing trend in single claims being accepted does appear to have halted, it is difficult to establish a clear trend over the most recent quarters. Indeed—so why make policy on the hoof?
When I arrived at ACAS, I found 15,000 applications for equal pay in a room. They had been sitting there for a year and could not be conciliated as they were test cases that had to be handled differently. The Minister has said in a letter that multiple claims are processed and judicially managed together—so the claims that there has been a huge increase in applications is very misleading, as I think the Minister himself accepted in correspondence.
It is important to remember that employment tribunals are not judicial courts involving an applicant versus the state. They are there to hear disputes between employee and employer. Of course they take account of facts and take due process into consideration, but they also take account of the employment relationship. This is why the role of the lay member is so important. I was unhappy when the regulations were changed to allow employment judges to sit alone in cases involving notice periods, holiday pay and other slightly technical issues. I thought it was the thin end of the wedge then, but at least there was some intellectual cohesion to the proposal, as applicants used to find themselves caught between two different processes and facing long delays before they received their lawful payments.
The issue of claims for unfair dismissal is not slightly technical. I was struck by the number of times that the paperwork I would receive for a case made the decision seem cut and dried but at the actual hearing a very different picture would emerge. It will be a very detrimental step indeed for the role of lay members to be further diminished. Increasing the eligibility period for putting claims to an employment tribunal from one to two years will do nothing to improve employment relations or the morale of employees. I speak as a fellow of the Chartered Institute of Personnel and Development; good management and good training are the answers here.
I appreciate that this is regarded as a small business problem. When I was chair of ACAS, the organisation spent a large proportion of its time on improving advice and guidance to small businesses to help to keep them out of trouble. It is perfectly possible to have adequate employment procedures on one side of A4 paper. Dare I say that too many with a financial interest insist on gold-plating employment procedures? We should concentrate on the world of work as an engine for growth, with well trained and motivated staff and good management. These measures are unworthy of any Government in the 21st century, and it makes me sad that this is being debated in the same week as the funeral of Lord Wedderburn.
My Lords, I declare an interest, as I chair and advise many businesses that will benefit in one way or another from the outcome of the implementation, or not, of this statutory instrument.
Listening this afternoon I am left with the impression that, if ever the other place or the general public want to know about the value of this place, it can be found in the marvellous depth of expertise and experience that I sit here and look at today. I do not agree with many noble Lords, but I acknowledge their experience and that they have done it. I hope that as we go home for Easter we could take that thought with us—that there are very few legislatures in the world that could debate a subject such as this one with the experience that I see all around me today.
Of course, there are many reasons why this nation can be attractive to inward investment. There are the factors of economic stability, growth, access to skilled labour, a competitive tax regime—and, I beg of this Government, better and more value and not price-based government procurement. But at the end of the day it is true to say that a flexible labour market, by perception as well as reality, is one reason why we are attractive. I think that the noble Lord, Lord Beecham, was saying that it is a myth that we do not have a flexible labour market, although I may have misunderstood him. We have one of the most flexible labour markets, if not the most flexible, in the European Union. That is why Tata continues to create jobs here before it creates them anywhere else and one reason why GlaxoSmithKline announced that fabulous news just the other day.
I say to the noble Lord, Lord Whitty, that I do not think that I could be identified with the saloon bars of the Home Counties, a place where a crèche is something that two Range Rovers have. I come from the home of the real Range Rover—Birmingham. One reason why Tata is investing in another 1,000 to 1,500 jobs in my hometown, building that product, is because that company knows that it is in the home of a flexible labour market. That company runs, as do so many other sophisticated and large inward investors, by skilling and investing in its people, and it will hardly benefit at all from extending from one year to two years. But the very fact that we have that rule will be one of the bricks in the perception that we are attractive. There is no running away from it—when I go around the world, that is one of the reasons cited. But it is not on that scale that we will target job growth in this nation, if we are to get out of the economic mess. That will happen through small business, getting micro-businesses to take the plunge and employ one person for the first time, and getting a firm that employs five to employ six or one that employs 20 to employ 21. They are the route out of this—the private sector creating jobs—and we have to do everything that we can to ensure that they get all the encouragement they can to do so. Why on earth we have a national insurance contribution from employers for small businesses when they are not making money is beyond me. At the same time, we have to, first, make it factually easier for them to do it and, secondly, ensure that they do not feel that they will be subjected to all the debilitating problems—as they see it—with an employment tribunal if they take someone on.
The noble Lord, Lord Young of Norwood Green, said at the end of his remarks that no business has anything to fear if it complies with regulation. I remind him that they have a lot to fear; it is called the spurious claim, where somebody leaves employ and has a crack at an employment tribunal to get damages for unfair dismissal. It happens a lot, and it never actually comes anywhere because these people are bought off. It is no use people saying, “At the end of the day, that is a small price to pay”. In economic boom times, it may be because, yes, people then take labour on more readily. Yet when we are really under the cosh in this country it is a real inhibitor. People say, “I’m not going to take somebody on, because in the next year or 18 months they’re just going to leave and then do me for constructive dismissal. I’m not going there; I won’t do it”. It happens all the time, and I hear it all the time.
Many of the noble Baronesses and noble Lords who have spoken come from a noble cause of championing labour. I ask them, just for a few moments, to leave their ideology at the door and think more not of those who are in work but of those who are out of work. In the European Union we have a history of regulating and championing those in work, but we are looking at serious, long-term sustained unemployment, especially of the young, throughout the whole European Union because no one is bothering about getting those who are out of work into work. If we really care about that, we have to go to town on ensuring that small businesses take the chance.
I notice that so many unions fight so often on the subject of pensions. When an employer closes a pension scheme to new entrants, they fight while their members are fine, but say that they are doing it for people who are currently not in that scheme. If you care that much for those who are out of work in that situation, why not do the same now? The noble Lord, Lord Monks, said that no one has written an undertaking saying, “You do this and I’ll take on more work”. Let us throw the glove down to small businesses. Let us champion it and say, “Come on, we’ve done our bit—you do yours”.
The amendment speaks of “justice and fairness”. In supporting this statutory instrument, I absolutely agree with the noble and learned Lord, Lord Scott of Foscote; it is despicable if anybody is ever dismissed and does not get a letter from the employer saying why. The other side of that should be concern if they do not want it, because often an employer can write, “Actually, I fired you because you’re rubbish”. There is nothing wrong with that. Perhaps if they knew they were going to get that letter, employees might behave and go to work a little differently along the line. As the amendment speaks of “justice and fairness”, I end by asking: fairness to whom? Yes, it is fairness to a business because it is not going to have so much time, resource, effort and lawyers’ fees going towards fighting so many claims, which occasion after year one at the moment. Yes, it is fairness to the wealth creation of the nation but, at the end of the day, that generates tax which pays for a lot of schools and hospitals. More than anything else, it is fair to the unemployed because it is just one more chance of getting them into the world of work. I support the Motion.
My Lords, I will not repeat what I said last week in Committee but I want to emphasise one point, although I shall not do so as eloquently as the noble Lord, Lord Jones, has just done. Jobs do not exist automatically. In the small and medium-sized businesses with which I have been concerned they need to be created and people need to take risks in order to create them, borrowing money and so on and putting their own money on the line. Obviously they hope that that will be successful—sometimes it is, sometimes not—but they need to be creative. As I say, jobs do not exist automatically and a tribunal cannot decide who does them in every case. This measure will make it just that bit easier for employers to create the sort of new jobs in small and medium-sized businesses that the noble Lord, Lord Jones, was talking about, and will make it more likely that they will do so. We need these jobs and less bureaucracy.
On the question of reasons, which the noble and learned Lord, Lord Scott, mentioned, I entirely accept what he said about good management practice but this is not just a question of good management practice; it is a legal requirement to produce a legal document that could form the basis of legal proceedings in the tribunal and so on. It is different from good management practice, with which I would concur, to say that there must be a legal duty to produce a legal document. That is the difference, and that is why this measure goes along with the extension of the amount of time in the statutory instrument. For those reasons, I support the statutory instruments as they stand and would not accept the amendments.
My Lords, my involvement with employment tribunals is recorded in the register of interests. Issues of fair or unfair dismissal are at the heart of workplace relationships. The first-tier employment tribunal is in effect an industrial court where evidence is assessed and decisions made on what is fair and reasonable conduct. It was intended that those decisions would be rooted in the industrial context and business realities.
That is why lay members were introduced and why they should be retained in the hearing of unfair dismissal cases. The presence of lay members brings to the employment tribunal system both legitimacy from the view of the claimant, and a significant component of knowledge of social relationships at the workplace acquired through observation and participation. Employment tribunal decisions that are made jointly by a panel of people who pool legal and other knowledge and experience are better for that range of skills. This is particularly important when, as has been said, one considers that unfair dismissal claims are often questions of fact rather than complex legal points.
The Government argue that allowing judges to sit alone on unfair dismissal cases will bring cost reductions and efficiencies. Removing lay members’ automatic presence from unfair dismissal cases will save around £140,000, together with perhaps a further £500,000 as a result of needing to recruit fewer lay members—a most modest saving when one considers the challenge being posed to the industrial jury concept when dealing with unfair dismissals. As for inefficiency, the timetabling of cases is as much driven by the availability of judges as it is by lay members.
The Government argue that employment tribunal judges are highly competent, which I fully endorse—of course they are, but that is not the issue. What is important is that the legitimacy and benefit of a tripartite industrial court system in unfair dismissal cases remain. That is important for a series of reasons. In unfair dismissal cases people often feel very hurt and upset and the dismissal may be a life-changing experience, whatever the merits of their case. The employment tribunal must decide the reason for the dismissal and whether the employer acted reasonably in treating that reason as sufficient for dismissal. Where a tripartite tribunal finds against a claimant, that is a powerful message: the lay and the legal are of a common view. However, they have had their day at the tribunal, and that tripartite tribunal has expressed a view. Where that decision is taken by a judge sitting alone, the claimant may well feel more minded to pursue an appeal. I believe that legitimacy in the industrial context will be perceived to be less valid without that tripartite system.
The judges will be allowed to decide whether a case requires the input of lay members, but no doubt there will be an expectation that those instances are kept to a minimum. A claimant will be able to request of the judge that their claim is heard by a full panel. However, anybody who has experience of employment tribunals will know that an unrepresented vulnerable claimant will not have either the competence or the confidence to argue such a case. As many noble Lords have said, there are further changes to come on employment rights. The Government may well introduce no-fault dismissals, make it easier to make redundancies and introduce other changes in the belief that making it easier to fire people will be a significant driver of economic growth. However, I think that these cumulative changes will come as a shock to many people and their families as they begin to experience their impact. Against that background, to weaken the strength of the tripartite industrial court on such a fact-sensitive issue as unfair dismissal strikes me as not only rash but undesirable given that the financial saving would be of such modest proportions and that the majority of those who expressed a view defended the retention of the tripartite system.
The Government’s proposals seek to achieve a reduction in employment tribunal cases through earlier resolution of disputes, which is very good if it can be achieved. However, this suggests that those cases which do reach the tribunal are likely to involve strong feelings and contested views, which again supports the continuation of the tripartite panel.
I accept that flexibility in the deployment of labour at work is clearly desirable in a rapidly changing world where products, technology and markets are changing all the time. It is desirable to have a national industrial culture where positive change is embraced rather than resisted, but achieving that does not require such stripping away of protections against unfair dismissal or decent treatment in a redundancy situation. This instrument makes it easier for all companies, irrespective of size—the very big as well as the micro—to hire then fire, with little reciprocal responsibility, in the belief that this will drive growth and improve economic performance. However, such a labour market will reduce incentives on the part of the employer to invest in and train the workforce. There is a systemic problem in significant parts of UK industry whereby employers do not invest in training, excluding health and safety, which directly contributes to the skills challenge and the lower levels of UK labour productivity—levels that are declining in relative terms and causing us increasing concern. Numerous studies, commissions and data sources confirm this view.
An aggressive reduction in employment rights—as many have said, I fear that there are more to come—simply encourages the attitude that labour is a resource that can be easily disposed of and does not merit training investment, and that skills shortages can be addressed simply by paying the prevailing labour market price or operating at a sub-optimal level. Tackling that issue is a bigger challenge to the economic performance of the UK than measures unsupported by evidence that deny 3 million people statutory protection, or hoping that undermining the industrial court will somehow deliver an economic transformation. Getting employers not to take a short-term attitude to labour that such changes will deliver, but to give a commitment to training, is the bigger economic challenge.
My Lords, we have had an extremely interesting discussion, which was virtually a repetition of our debate in Grand Committee. I remain with the fear I expressed during that debate that this issue has become far too polarised. On the one hand, the proponents of the statutory instrument suggest that it will lead to a significant increase in employment, particularly in the SME sector. On the other hand, after listening to a lot of the remarks on the Labour side, one would think that one was returning to the days of the Tolpuddle martyrs. I worry about this polarisation because this is a relatively modest instrument.
As the noble Lord, Lord Whitty, indicated, I know that a lot of the evidence here is anecdotal. I now see that the noble Lord has extended his saloon-bar anecdotes beyond just Hertfordshire to the whole of the Home Counties. The evidence is not only anecdotal but based on the experience of many noble Lords who sit on boards of directors and are involved with SMEs. The evidence is therefore not entirely anecdotal, but I take the point.
This is a very modest alteration if you look at the number of people who, when the restriction was one year, actually made a claim for unfair dismissal when they were dismissed between year one and year two. There does not seem to be any significant indication that such people will lose their rights as a result of this legislation.
The point I really want to make, which I made in Grand Committee—and I am glad that one or two noble Lords on the Labour side have taken this up—is that we are in the middle of a significant internal argument around the suggestions in certain quarters that virtually all employment protection should be scrapped. This is a very serious matter. Conversely, a number of people, certainly on the coalition side, have been arguing that we need improvements in employment protection, particularly in what are described as family-friendly rights on maternity, paternity and other such issues. I hope that this will appeal to the Labour side of your Lordships’ House. If we are going to get the improvements we want in those family-friendly rights, and if we are to beat off the damaging proposals that seem to be coming from Mr Beecroft and ensure that they are not implemented, passing this modest instrument seems to be a small price to pay.
My Lords, I have three points. First, perhaps I may pick up on the points made by the noble Lord, Lord Razzall, if I have his attention. He made what I would call a Sudetenland remark—the one made by Neville Chamberlain about “peace in our time”. If only that were so. Does he want a guarantee, a white piece of paper in his pocket that he can wave, promising that there will be no more legislation if this order is passed? Well, we shall see.
I also congratulate the noble Lord, Lord Jones of Birmingham. His joke about crèches is the worst joke I have heard in the House in the 12 years that I have been here.
My first substantive remark is about the evidence base. In Committee, I pointed out that the evidence paper presented to us as part of the background material did not give evidence as you would normally understand that term—that it was clear what would happen if you moved from one year to two years; instead, it was evidence about perception. It is probably worth repeating that the Minister said that perception is as powerful, if not more powerful, than evidence.
Today, having been given the challenge that if you have a problem of perception, your job should be to counter perception by evidence—to change the perception by talking to people—the noble Lord said, “Exactly. That is what we are trying to do”, which caused an intake of breath on these Benches. The Minister has reinforced that today by saying, “I want to meet the challenge that there is evidence of perception”. I am sure he has evidence of perception—that becomes a circular argument—but there is still no evidence.
My second remark is that noble Lords repeated three or four times the Americanism about how many people we should let go. I do not think I am alone in finding that American usage distasteful. I deplore the idea that these people want to be let go. Do they come up and say, “Please let me go”, to which the answer is, “All right, I will let you go”? They are being sacked, they are being dismissed, they are being thrown out, they are being put on the scrapheap. That is the language. I have never heard in a pub in Burton upon Trent anyone saying, “I think they’ll let me go”, when they mean that they are going to be dismissed. Does the Minister appreciate that that is not the industrial language in this country?
Finally, I echo the remarks of my noble friend Lord Whitty, supported and reinforced by my noble friend Lord Monks. If legislation through statutory instrument as deep-cutting as this goes on and on, one is cutting the legs off primary legislation. We have a growing problem in the role of the House of Lords—second only, perhaps, to the Money Bill question. We are seeing more and more statutory instruments which are not playing around with minor detail of the primary legislation but, bit by bit, salami-wise, cutting the legs off primary legislation. Does the Minister think that we can go on taking 3 million, another 3 million and another 3 million out of the scope of primary legislation without making nonsense of the conventions about the use of secondary legislation?
My Lords, perhaps I may start by agreeing with the noble Lord, Lord Jones of Birmingham, most strongly about the quality and value of debate in your Lordships’ House. Today is no exception. We have had a good debate today, as indeed we had a good and full debate in Grand Committee on Monday last week, in which nine noble Lords from the opposition Benches participated, as did two from the Cross Benches and four from the coalition, as well as me.
Many of the questions and issues raised today were debated when we discussed the orders on that occasion, and my answers have not changed much since then. I am also well aware that noble Lords on all sides want to get on with the next business, so I hope that they will forgive me if I focus on the key issues.
The words flexibility and discussion have been deployed liberally throughout our debates, particularly by noble Lords on my side of your Lordships’ House, and my noble friend Lord Risby used those words today. Those concepts are at the heart of what the first order, the tribunal composition order, is about. The amendment of the noble Lord, Lord Young, suggests that the order will reduce the justice and fairness of employment tribunals and risk increasing costs through a greater number of appeals. These concerns are unfounded. I explained in this debate and in Grand Committee last week why they are unfounded but perhaps I may repeat what I said.
This order provides flexibility; judicial discretion will prevail. The decision to sit with a full panel, where appropriate, can be exercised by the judge at any point in the process and the parties can request a full panel at any stage. There is no evidence that judges sitting alone in the various other jurisdictions in the past has led to more appeals. However, Her Majesty’s Courts and Tribunals Service will be monitoring the impacts of this change through its regular management information collation systems and a full post-implementation review of the complete package of tribunal-focused reforms is planned for 2016. The employment tribunals system is something of which we should all be proud—it serves an important role in society. However, that does not mean that it should not evolve and search for further efficiencies and improvements. The noble Lord, Lord Young of Norwood Green, said that his side believes it is the thin end of the wedge and he asked whether I blame him for thinking that. He and the noble Baroness, Lady Turner, also suggested that lone judges will fundamentally shift the balance of the tribunal. I restate that we have no plans to extend the ambit of the order. It does what we proposed at the consultation and there are no further proposals regarding composition. Tribunals are different from courts. Lay members, where they add value, are one factor, but the specialist expertise of employment judges in employment law and in handling tribunal users is another. Flexibility is better than prescription and judges are experts.
The noble Baroness, Lady Turner, raised the question of legal aid, linking it to the removal of lay members, and the noble Lord, Lord Beecham, also referred to it. Legal aid will continue to be available in respect of unlawful discrimination. Advice is available from ACAS and is usually available from trade unions. With the introduction of early conciliation, parties will have free access to the opportunity to resolve disputes without the need to lodge an employment tribunal claim.
The noble Baroness, Lady Drake, said that the savings are not huge. Predicting what the savings will be across the more than 10,000 unfair dismissal hearings that take place each year is a speculative process, given the need for judges to exercise discretion and assess what cases might require full panels. The savings conservatively estimated in our impact assessment might not be considered significant but, as a Government, we must take all measures to ensure that taxpayers’ money is used to best effect.
The unfair dismissal and statement of reasons for dismissal order, which extends the qualification period for dismissal from one to two years, demonstrates the Government’s determination to provide the right environment for businesses to grow. We are facing the toughest of economic circumstances and we need the private sector to hire staff and generate growth. Employers tell us that to do that they must have enough time to get the working relationship right without undue fear of an employment tribunal. They must feel confident to recruit. By extending the qualification period to two years, we are removing one of the barriers which employers tell us can make them reluctant to take on new staff.
The amendment of the noble Lord, Lord Young, suggests that this measure will have little or no effect on employment, but the businesses that responded to our consultation and large numbers of employers surveyed by the British Chambers of Commerce, the Institute of Directors and the CBI tell us that it will. It is not, as the noble Lord’s amendment suggests, a measure that will diminish the range of employment rights that employees enjoy. Without the shadow of an unfair dismissal claim hanging over them, businesses—particularly smaller ones—will have more confidence to hire. They will feel secure in the knowledge that there is enough time to make sure that they have the right person for the job. It will send a signal to businesses that we will back them when they take the risk of taking someone on without taking away important protections for individuals, such as the right not be discriminated against.
Nor is this order, as some noble Lords fear, a substitute for the use of good management practice. The problem of poor leadership and management skills is one that the previous Government acknowledged they faced. Like them, this Government are committed to improving capability in this area through the Leadership and Management Advisory Service and Business Coaching for Growth. But, as has been said, not every individual will be suitable for every job, no matter how skilled the manager.
I know that the noble Lord, Lord Young, believes that employees should always get a written reason for their dismissal. However, the purpose of the statement of reasons is not to provide employees with a document that can be used as a reference or which could be useful to prospective future employers; it is essentially one of evidence when making a claim for unfair dismissal. It is, therefore, very closely linked to the right to claim unfair dismissal and it is logical that the qualifying period for both is kept consistent. I will return to that in a moment.
The amendments to the Motions tabled by the noble Lord, Lord Young, both call for a report to be placed before Parliament in 18 months’ time. I explained in my opening speech that no employee will have reached the end of the qualifying period by then, so such a report might not be very helpful. However, I can make the commitment today that the Government will report any interim conclusions on extending the qualifying period ahead of the planned post-implementation review in 2016. That means that an indication of the measure’s effect could be made available to noble Lords in late 2014 or early 2015.
I said that I would return to the issue of the statement of reasons which was raised by, among others, the noble Lord, Lord Young, and the noble and learned Lord, Lord Scott of Foscote. The purpose of the statement of reasons is essentially, as I said, one of evidence when making a claim for unfair dismissal. It is therefore closely linked to the right to claim unfair dismissal, and it is logical that the qualifying period for both is kept consistent. I agree with the noble and learned Lord, Lord Scott, that it would be good management practice, and indeed common courtesy, to provide an explanation in writing of why a person is being made redundant. I very strongly agree with that. However, we are not, with great respect, legislating for good management practice. As my noble friend Lord Cope said, this is about a statutory right to a written statement of reasons, the purpose of which is connected closely—as I have said several times—to the right to bring a claim.
A different point—I think that the noble Lord, Lord Beecham, raised it—is that the statement of reasons might be linked to a reference to a new employer. That is not the purpose of the statement of reasons. It is a very formal document and, in my experience, is not likely to be terribly helpful to an employee as a reference. It will simply include reasons why the person was dismissed. If I were an employer I would want rather more—and, dare I say it, rather more positive—information. References are also not regulated by government, and, speaking for myself, I do not think that they should be. The individual is of course able to ask for a reference and—I say to the noble and learned Lord, Lord Scott—it is good management practice that they should be.
The objective of the qualifying period is to provide sufficient time for both parties to get the working relationship right. A benefit of extending the qualifying period is to give the employee two years to prove that he is up to the job, and any subsequent employer a two-year period to confirm that the employee is right for his new job. A further relevant point is that day-one rights currently operate effectively without a written statement in the first year of employment, and there is no reason to suppose that a longer period would change this.
The noble Lords, Lord Young and Lord Whitty, asked for quantitative evidence of the effect on employment of our proposals. I felt that I had given some qualitative evidence in Grand Committee, whether or not noble Lords accepted it. In addition to the service I have already quoted from, perhaps I may make the following point from a British Chambers of Commerce workforce survey. It states:
“Firms looking to grow their staffing levels by more than 50 percent are more likely to see dismissal rules as extremely burdensome, than those looking to stay the same or downsize”.
On the issue of quantitative evidence, I made it clear that we do not see this as a panacea for job creation, or believe that it will create an overnight sea change in employers’ attitudes to recruitment. It is difficult quickly to isolate the impact and evaluate it with certainty. However, as I said to the noble Lord, Lord Young, we will monitor factors such as the number of employment tribunal claims for unfair dismissal, any changes to employees’ length of service, and business perceptions of unfair dismissal regulations, including how they affect business decisions—and, as I also said, we will report on the interim conclusions.
The noble Lord, Lord Whitty, referred to the fact that 1.75 million jobs were created after the qualifying period was reduced in 1999. Of course, a huge range of factors affect levels of employment, and the economic circumstances of 1999 were rather different from those of today. The evidence from business stakeholders is that the change will improve their confidence to recruit.
The noble Baroness, Lady Turner, asked in empirical terms how it could be acceptable to dismiss someone unfairly at any time. Since the introduction of unfair dismissal legislation in 1971, all Governments have accepted the principle that employers must take time to establish a working relationship and decide whether an employee is suitable. We estimate that there will be only a 4 per cent reduction in unfair dismissal claims, so the direct impact on individuals will be limited. We should not forget that many of the potential claims would be settled out of court or decided in favour of the employer. However, those cases would still have a cost to the employer.
The noble Baroness, Lady Donaghy, spoke about the need for better management. The noble Baroness, Lady Drake, referred to an aspect of this. I agree with them and spoke about this earlier. That is why we are refocusing the Leadership and Management Advisory Service, set up by the previous Government—I give them full credit for that—to emphasise coaching and mentoring for management, and rapid access to trusted sources of specialist advice and support and to business and knowledge networks. We accept that we must do better and we are addressing this. We want to go further. We are working with a wide range of organisations, including ACAS, to ensure that information and practical help such as mentoring is available to management to improve capability.
On changes to employment law, the noble Lord, Lord Young, asked if we could expect to see more in this vein—I think that those were his words. The department is leading a cross-government review that will last the length of the Parliament into all aspects of employment-related law. Adrian Beecroft has contributed to that review. The aim is to make it easier for business to take on staff and give it the confidence to do so, without compromising fairness for employees. We set out an ambitious programme of reforms as part of the employment law review that began in the summer of 2010.
The orders have been consulted on publicly, affirmed in another place and debated at some length in your Lordships’ House, both in Grand Committee last week and today. They will have a positive impact on businesses, on the economy and—as the noble Lord, Lord Jones, said so eloquently—on those who would otherwise be out of work. Together with the wider package in which they sit, they will help make a difference by improving the efficiency of the system while maintaining a level of service to the users who rely on it to deliver justice. I commend the orders to the House.
My Lords, I thank the Minister for his extensive reply. I will keep my remarks very brief. I see that I am getting support for that intent. It is not because I think that the issues are unimportant, but because my noble friends did ample justice to the reasons for both amendments to the Motions.
I will pick up a couple of points. The noble Lord, Lord Jones, invited us to leave ideology at the door. I like to think that we did in this debate, and that there were sincerely held views on both sides. All of us in the Chamber care passionately about youth unemployment. That is why the previous Government spent so much time rebuilding the apprenticeship programme, which was practically at death’s door.
Because we hold a different view on these issues, that does not mean that we do not care—we do care, passionately. However, the noble Lord is being over-optimistic if he believes that this measure, described by the noble Lord, Lord Razzall, as “modest”—again I must part company with him there—will somehow ensure that we do not have, in his view, any spurious claims. I still firmly believe that if you really want employers to protect themselves, the way is to have proper personnel procedures and not imagine that somehow they can deal with this at the 11th hour.
Because of the time, I am going to telescope my remarks to a large extent. I welcome one point by the noble Lord, Lord De Mauley. I do not know whether he called it a “review” or a “report” in a two-year period approximately, but I welcome it, even though we are totally opposed to these changes. As for the composition of the tribunals, we believe that this is a profound change in their nature. I am not going to test the opinion of the House on the first amendment to the Motion, not because we see this issue as less important, but mainly in the interest of time; it is for that reason alone. We are still fundamentally concerned about it; we are still not reassured by any means when the noble Lord tells us that there will be more to come. We believe that this will again diminish rights. However, for the reasons I gave, I beg leave to withdraw the amendment.
Amendment to the Motion withdrawn.