Employment Bill [HL]

My Lords, I beg to move that this Bill be now read a second time. The Government’s approach to the UK labour market is based on combining economic prosperity with social justice: enabling businesses to grow, employment to expand and delivering opportunity for all. Fundamental to this is the need for an effective and proportionate regulatory framework: one in which complying with the law is simple and straightforward for businesses and where individuals get the rights to which they are entitled, all supported by an effective, clear and speedy enforcement and penalties regime, while never losing sight of maintaining a flexible labour market that allows wealth creation to be at the core of our nation. The Employment Bill extends this approach and makes changes to employment law with the aim of improving its effectiveness to the benefit of employers, individuals and other interested parties. The two key elements of the Bill increase protection for vulnerable workers while lightening regulatory burdens on businesses. Enforcement of employment law will be strengthened by the introduction of new penalties for businesses not paying the minimum wage and additional powers for employment agency inspectors to deal with disreputable agencies. At the same time, the Bill will reduce burdens by repealing the workplace dispute resolution procedures. These legislative changes will be accompanied by a package of non-legislative measures to help employers and employees resolve disputes earlier, saving millions of pounds for businesses and individuals. The measures form an important part of the Department for Business, Enterprise and Regulatory Reform’s wider simplification plan, which is set to deliver net reductions in administrative burdens worth more than £1 billion per annum to the UK economy within the next three years. In addition, the Bill clarifies the position of cadet force adult volunteers in relation to the national minimum wage and amends trade union membership law to comply with the European Court of Human Rights judgment in ASLEF v UK. I will now outline the measures in the Bill, beginning with those on workplace dispute resolution. On 21 March 2007, we published Michael Gibbons’ independent, Review of Employment Dispute Resolution in Great Britain, and an associated government consultation paper, Resolving Disputes in the Workplace. The review identified several key problems with the current dispute resolution system including that: the statutory dispute resolution procedures introduced in 2004, although right in principle, carry a high administrative burden for employers and employees and have had unintended consequences which outweigh their benefits; and around 75 per cent of claims made to an employment tribunal are resolved before reaching a hearing—a substantial portion with the involvement of ACAS. But a significant proportion of cases that reach a tribunal hearing really could be resolved beforehand between the parties, saving cost and time for employer and employee alike. We will publish our full response to the consultation shortly. We have focused on the policy changes that require primary legislation. The responses to the government consultation were broadly supportive of the conclusions of the review. Clauses 1 and 2 provide for repeal of the procedures, and of the linked provisions on procedural unfairness. Michael Gibbons also argued that there should be an incentive for employers and employees to take steps to resolve their disputes themselves. Clause 3 therefore gives tribunals the discretion to adjust awards upwards or downwards by a maximum of 25 per cent where they find that the parties have unreasonably failed to comply with ACAS’s statutory code on discipline and grievance. This will be a discretionary power for employment judges to apply in the circumstances of the case, without the rigidity of the existing link to the statutory procedures. ACAS will revise the code. The chair of ACAS has confirmed that the draft code will be concise and principles-based, and supported by fuller non-statutory guidance. Gibbons also argued that the Government should make additional investments to improve the accessibility and quality of the advice services provided by ACAS, and to provide additional ACAS conciliation services for disputes that are likely to become the subject of an employment tribunal claim. We intend to do so. Two legislative changes intended to maximise the effectiveness of ACAS conciliation are contained in the Bill. First, Clause 5 changes ACAS’s existing duty to conciliate in cases which are not yet the subject of a tribunal claim, on request from the parties, to a power. This will underpin our investment in additional conciliation services, ensuring that ACAS is able to prioritise its caseload effectively without the risk of legal challenge. Secondly, Clause 6 removes time restrictions on ACAS’s duty to offer conciliation to parties already involved in employment tribunal claims. Michael Gibbons recommended that some tribunal cases, which revolve around the determination of facts in cases of monetary disputes, could be dealt with more quickly and simply. The Government intend to enhance existing arrangements to deal with such cases by establishing a new ““fast track”” procedure. This will largely be achieved by changes to employment tribunal practice, but requires two legislative changes which are provided in the Bill. Clause 4 creates additional safeguards where employment judges draw on their existing powers to propose to the parties that a fast track case should be determined in writing, without a hearing. Clause 7 will simplify the process for claimants who have suffered direct financial losses over and above the non-payment itself—for instance, as a result of charges for unauthorised overdrafts. The tribunal will be able to make an additional award against the employer to provide compensation for such losses, rather than leaving the claimant to bring a separate action in the small claims courts, requiring additional expense and time from employer and employee alike. The Gibbons review and the consultation also addressed a number of issues concerning employment tribunals practice and, in particular, consistency across the regions. The Government do not propose primary legislative change but will be working closely with the Tribunals Service and judiciary to ensure a streamlined and consistent service, including in the treatment of weak or vexatious claims. A majority of consultees believed that tribunals had sufficient powers, but many commented that there was scope for those to be used more consistently across the country. We have asked the Employment Tribunals System Steering Board to lead work on establishing best practice and ensuring that it is consistently applied. I now turn to the Bill’s provisions relating to the national minimum wage. Incidentally, I should point out that I never did oppose the introduction of the minimum wage. If I had been asked for my opinion at the time—and I was not because I was not at the CBI then—I would have supported its introduction with the caveat that its long-term success would depend on the rate at which it was set and to which it was subsequently increased, and the method of compliance. The minimum wage has been a success because it has not adversely affected inflation or employment, yet it has made a real difference to the lives of many people. Last year’s increase in the minimum wage benefited around 1 million individuals. The vast majority of employers willingly comply with minimum wage legislation; but nearly a decade on from the National Minimum Wage Act some unscrupulous employers continue to underpay. That is unfair to those who are underpaid and to the vast majority of businesses that obey the law and are unfairly undercut in a local labour market. We are determined to crack down on the small minority of employers who fail to comply. Between 2003 and 2006, we completed 15,000 investigations and identified underpayments totalling £9.6 million. In the past year, the Government helped to restore more than £3 million in arrears to more than 14,000 workers. We now want to take that further. The Government consulted during the summer on proposals for a new penalty for underpayment of the minimum wage and a fairer way of calculating arrears. As a result of this consultation, we have concluded that the enforcement regime for the national minimum wage should be strengthened in several respects. Clause 8 amends the method of calculating arrears owed to those who have been underpaid. Currently, these are paid at the rate in force at the time the underpayment took place. The Bill will change that so that all arrears owed are paid at the current rate. That helps to compensate for the potential loss of purchasing power since the offence took place by taking into account the length of time that arrears have been owed. Clause 9 introduces an enhanced penalty regime that reflects the serious view taken by the Government of employers who do not comply with the National Minimum Wage Act nearly 10 years after its introduction. Under the new regime, an employer will be liable to an automatic penalty if it is found to have underpaid. The penalty will be equal to 50 per cent of the total amount of underpayment—summed up for all those who have been underpaid by that employer—thereby ensuring that the penalty is proportionate. The minimum automatic penalty will be £100 and the maximum £5,000. We want to encourage employers to rectify any underpayment as quickly as possible, so we will reduce the penalty by one half if the employer complies with a notice of underpayment within 14 days. Clause 10 ensures that officers enforcing the minimum wage can take records relating to it in order to make copies of those records. Clauses 11 and 12 enhance the way we are able to deal with the most serious offenders, by increasing criminal investigative powers and enabling offences to be tried in a Crown Court, with the prospect of an unlimited fine. The minimum wage is a key right introduced by this Government to ensure fairness. We make every effort to ensure that those who are underpaid get what they are owed; but the best protection we can offer is to strive to ensure that arrears do not arise in the first place—and no business should be allowed to get away with unfairly undercutting legitimate business by this exploitation. Those changes will ensure that everyone who is caught not paying will be punished, with a potentially unlimited fine for the most serious cases. This is to send a very strong message with the aim of changing the behaviour of non-compliant employers. Coupled with an increase in the enforcement budget of £11.6 million over four years, the changes underline our commitment to securing the fairest outcome for employer and employee alike. When the minimum wage was introduced, Parliament ensured that the voluntary sector would be able to continue to operate successfully and with certainty within the law. At the same time, the National Minimum Wage Act has minimised the chances of low-paid jobs emerging which could be unfairly badged as ““volunteering””. Our recent consultation has shown that, by and large, these rules are working well. However, it has also shown that cadet force adult volunteers occupy a unique role in our society. There are currently around 26,000 cadet force adult volunteers, who, despite facing a number of demands and challenges, devote large amounts of their time and energy to engaging 130,000 young people in the cadet forces. I think that noble Lords will all agree that we should be very grateful for their dedication to making a positive difference to the lives of many young people and their wider communities. Any confusion that might arise about eligibility for the minimum wage could seriously damage the ability of the cadet forces to continue to provide their services. For that reason, Clause 13 amends the National Minimum Wage Act to clarify that cadet force adult volunteers do not qualify for the minimum wage. This will enable cadet force adult volunteers to operate exactly as they do at the moment and will not affect any entitlement to the minimum wage that they might have outside their cadet force activity. Clauses 14 to 16 make changes to the enforcement of employment agency standards. Under the Employment Agencies Act 1973, any breach of regulations governing employment agencies is a criminal offence capable of being tried in a magistrates’ court. This has proved an inadequate tool to tackle the few seriously non-compliant agencies that seek to avoid their legal responsibilities at the expense of both agency workers and the great majority of reputable agencies. By making offences triable either way, we aim to increase deterrence against non-compliance. Stronger investigative powers, including the right to take documents away to copy and request financial information held by financial institutions, will enable more successful prosecution of the worst offenders. Alongside the strengthening of those enforcement powers, we will also double the number of employment agency standards inspectors. This will provide an additional resource for legitimate agencies seeking to abide by the law and will also crack down hard on non-compliance. Our proposals have been welcomed by the sector. The Recruitment and Employment Confederation said: "““We welcome the Employment Bill as it aims to crack down on those employers and agencies that are breaking the rules””." Finally, the Bill amends trade union law to ensure that it complies with the European Convention on Human Rights following the judgment of the European Court of Human Rights in the case of ASLEF v UK. According to that judgment, the current limitations on the ability of trade unions to exclude or expel individuals on the grounds of their membership of a political party breach Article 11 of the convention. Clause 17 therefore amends the relevant sections of the Trade Union and Labour Relations (Consolidation) Act 1992 which gave rise to the ASLEF case. The case involved the inability of ASLEF to expel BNP members, whose views are clearly incompatible with those of the union. Our proposed changes to the 1992 Act would give sufficient scope for unions to act decisively against such political extremists. I should add that, to the best of our knowledge, no other membership-based organisation in this country is required by statute to ignore political-party involvement when setting its membership rules. In that sense, trade unions are currently subject to special treatment. Clause 17 has the effect of placing trade unions on an equal footing with other similar associations. In summary, the Employment Bill makes important changes to key areas of employment law. It will save businesses and individuals time and money through reform of the workplace dispute resolution framework. It provides stronger enforcement of the national minimum wage and employment agency standards to the benefit of individuals and the vast majority of law-abiding businesses in this land. It also clarifies the position of cadet force adult volunteers and makes necessary changes to trade union membership law. This country has one of the lowest levels of unemployment in the developed world and one of the most flexible labour markets. Whatever those whose vested interest lead to their selective observation may say, that is not a coincidence. We do not want to put a sign up in the UK saying, ““Don’t invest here””. We want to continue to be the location of choice in Europe—second only to the United States in the world—for the inward investment that my department of UK Trade and Investment is privileged to promote every day around the world. This Bill does nothing to harm our jealously guarded flexibility. The United Kingdom has a stable economic framework capable of absorbing global financial shocks in a way that predecessor governments of both parties, over many decades, could not achieve. That, coupled with our flexible labour market, helps law-abiding businesses and helps the individual in the community and in the workplace. I commend the Bill to the House.