Clause 22 - Employment tribunals
Employment Bill

Amendment proposed [6 December]: No. 12, in page 32, line 16, at the end to insert the words—

'(dd) to make an order prohibiting a representative of a party to proceedings before it from representing parties before Employment Tribunals or Employment Appeals Tribunals for a specified period of time by reason of the representative's conduct of the proceedings.'—[Mr. Hammond.]

Question again proposed, That the amendment be made.

10:30 am
Photo of Mr Joe Benton

Mr Joe Benton (Bootle, Labour)

I remind the Committee that with this we are taking amendment No. 21, in clause 23, page 32, line 41, at end insert—

'(dd) to make an order prohibiting a representative of a party to proceedings before it from representing parties before Employment Tribunals or Employment Appeals Tribunals for a specified period of time by reason of the representative's conduct of the proceedings.'.

Photo of Mr Philip Hammond

Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I was responding to a point made by the hon. Member for Wolverhampton, South-West (Rob Marris) about extending the provision to cover barristers and solicitors. The hon. Gentleman said that that would cut across the principles of professional self-regulation, with which I do not disagree. However, the amendment's purpose is to cover a wider group than that and to deal with an omission in the Bill. If the Minister insists that the Bill provides that financial penalties should bite only on those who are remunerated for their services, how does he intend to deal with those who abuse the system—those who are vexatious or whose conduct of a case is inappropriate—who are not remunerated and not subject to the other remedies provided in clause 22?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

Good morning, Mr. Benton.

The amendment would increase the sanctions against representatives who charge for their services. Although I sympathise with the wish of the hon. Member for Runnymede and Weybridge (Mr. Hammond) to strengthen the tribunal's powers to rein in rogue representatives, we must not lose sight of the fact that the function of employment tribunals is to determine employment law disputes.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The Minister is correct to say that the amendment would broaden the sanctions available against representatives who charge for their services,

but that is not its principal purpose, which is to provide the tribunal with a sanction that could be used against those who do not charge for their services.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

That is true and I was coming to that, but the amendment would primarily introduce another form of sanction against the representatives that we have cited—those who charge for their services. The tribunal chairman has the power to ensure that proceedings before the tribunal are dealt with justly and expeditiously, but it is not for the tribunal to act as a regulatory body for bad representatives, paid or unpaid. It would be inappropriate for a tribunal chairman to pass judgment about the potential bad behaviour of representatives by prohibiting them from representing clients in employment tribunals in future, which would be the effect of the amendment. The chairman's powers should be limited to the proceedings before the tribunal.

We must also bear in mind the important point made by my hon. Friend the Member for Wolverhampton, South-West. He started to receive a little sympathy from Labour Members, but we have recovered from that in the intervening few days. He raised an important point about the risk of undermining the self-regulation of the legal profession. The fact that a representative has been the subject of a wasted costs order should be sufficient deterrent against further bad behaviour. It would be a foolish representative who persisted in behaviour that cost money rather than made money.

I am satisfied that the new provisions in respect of representatives will deter poor conduct, as well as ensuring that wronged parties are properly compensated for their loss. The same arguments apply to the employment appeals tribunal, to which amendment No. 21 relates, and I ask the hon. Gentleman to withdraw the amendment.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

In our short progress to date, I have found the Minister's responses constructive and helpful, but he seems to be departing from that. I am unsure whether the Minister is deliberately or inadvertently misinterpreting the amendment, but it is clear to me that its purpose is to allow the Minister the scope to provide the tribunal with a remedy against representatives who are not paid. The Bill already contains remedies for dealing with representatives who are paid—we shall return to the issue of defining who those are—but contains no remedies for dealing with those who are unpaid. The purpose of the clause is to ensure that those who abuse tribunal proceedings can be dealt with properly. In the case of paid representatives, that will be achieved by the imposition of financial penalties.

The Minister has made it absolutely clear that he does not favour the imposition of financial penalties on those who are unpaid, so I am proposing a non-financial remedy to ensure that someone who abuses the procedure can be penalised. The Minister has not addressed the purpose of the amendment and has said

nothing about how he intends to deal with those unpaid representatives who abuse the tribunal proceedings.

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Mr Norman Lamb (North Norfolk, Liberal Democrat)

I should declare that I am a member of the Law Society and a consultant to a law firm, although a somewhat non-active consultant.

I question the hon. Gentleman's assertion that the penalty is non-financial. Clearly, it could apply to both paid and unpaid representatives, and it could have a substantial financial impact. I appreciate that the hon. Gentleman probably does not like the Human Rights Act 1998, but I wonder whether he has considered the implications of the amendment for the individual's right to work. In that context, what rights of appeal or challenge to a banning order would a representative have? Such an order is like a sin bin or red card, and would prevent someone from working for some time. I cannot see any provision for that in the amendment.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am interested to hear that the hon. Member for North Norfolk (Norman Lamb) is a member of the Law Society. I trust that he was not responsible for drafting the amendments that it proposed, which the hon. Gentleman and his colleagues originally tabled verbatim, but I shall say a little more about that later.

I am not suggesting that the drafting of the amendment is perfect or that the amendment is all-embracing; it may not be, but it has been tabled to explore the Minister's intentions. It is customary for Ministers to accept that an amendment raises a good point, even though it is not perfect, and to agree to introduce something similar on Report. I was hoping to hear something similar from the Minister today.

The hon. Member for North Norfolk raised a point, as did the hon. Member for Wolverhampton, South-West, about the impact of the amendment on paid representatives. I acknowledge that it would constitute an additional sanction against paid representatives and I understand the concern of the hon. Member for North Norfolk that it might fall foul of the Human Rights Act 1998. However, I suspect that those who drafted that Act did not imagine that it would prevent vexatious lawyers from appearing in courts whose procedures they abused.

I accept the hon. Gentleman's concern and assert again that, however imperfect the drafting, the amendment's purpose is to explore how the Government intend to deal with vexatious or improper conduct by non-remunerated representatives. If the provision is to be even-handed, it must deal with both lawyers and unpaid representatives—such as union representatives, citizens advice bureau advisers or officials of employers federations—who abuse the tribunal process or otherwise act inappropriately. It is perfectly reasonable to raise the issue, and the Minister needs to have an answer.

I was surprised to hear the Minister say that tribunals were not appropriate bodies to pass judgment on the conduct of representatives. Surely,

that is precisely what they are being asked to do in clause 22, which allows them to make an award of costs against paid representatives on account of their conduct of the proceedings. The tribunal is, therefore, clearly considered an appropriate body to pass judgment on the conduct of a representative. It has a remedy in the case of unacceptable conduct on the part of a paid representative, but not an unpaid representative.

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Mr Rob Marris (Wolverhampton South West, Labour)

I draw the hon. Gentleman's attention to line 10 at the top of page 32. Surely, much of what he is driving at is covered by proposed new subsection (b), which refers simply to a representative, not to a paid representative. The next line refers to ''costs or expenses'' that are incurred by a party, not by an opposing party.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The hon. Gentleman highlights the weakness that we object to in the Bill's architecture. He will find no reference to a paid representative anywhere in the Bill because there is none. The Trades Union Congress brief tells me that the Government intend to limit the application of the clause to paid representatives, but the Government have not told me that in the Bill. We have been exploring the issue, and I suspect that the Minister will be happy to confirm that proposed new subsection (1A)(b) will indeed be limited to paid representatives. That is the import of what he has told us.

There is a gap in the armoury that the Minister is giving tribunals through regulations, and I must admit to a tad of suspicion that it is being left for political reasons. I want an even-handed approach to be taken with those who abuse the tribunal, regardless of what type of representative they are or whom they represent, and we shall come to that in a moment. The Minister is arming himself to the teeth to deal with vexatious remunerated representatives, but—if I understand his rejection of the amendment even in principle—he refuses to empower the tribunal through regulations to deal with unremunerated representatives.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

I am sure that the hon. Gentleman will accept that the question is what sort of behaviour an unpaid representative is engaged in. There is a difference between a paid representative, who knows what they are doing, and an unpaid one, who does not. We must be careful because unpaid representatives might unwittingly cause a problem.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I accept that point, which is probably at the root of the Minister's reluctance to introduce financial penalties for unpaid representatives. However, I do not accept that unpaid representatives are necessarily unskilled or do not know what they are doing. They might be union officials who regularly represent people in tribunal cases.

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Mr George Osborne (Tatton, Conservative)

Surely the point made by the hon. Member for Weston-super-Mare (Mr. Cotter) reinforces my hon. Friend's case. If unpaid representatives do not know what they are

doing, they should not appear before tribunals, waste tribunals' time or add to the number of tribunals that companies and employees have to deal with.

10:45 am
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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

My hon. Friend makes his point well. The purpose of the clause is, bluntly, to combat the compensation culture. For example, a lawyer working on a contingency fee might push a case that has no real merit, abusing the tribunal procedure in the hope of financial gain for both the applicant and, by implication, himself. That must be in the Minister's mind when he says that there is a distinction between those who are remunerated and those who are not.

We heard at the previous sitting that there were few instances in which union representatives misconducted cases. I have no experience of that, but I am prepared to believe it. That does not alter the fact that, in order to be even handed, the legislation should include a power to deal with any representative, paid or unpaid, who abuses the tribunal. As the Minister has set his face against the imposition of financial penalties on unpaid representatives, the only appropriate remedy that I can think of is to include a power to make regulations disbarring, for a period, an unpaid representative on the basis of the conduct of a case. Will the Minister tell us why he cannot accept such a power and how he intends to deal with an unpaid representative who abuses the tribunal's procedure?

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Mr Norman Lamb (North Norfolk, Liberal Democrat)

I want to respond to some of the points made by the hon. Member for Runnymede and Weybridge. I do not think that the approach suggested in the amendment is necessarily the right way to address the problem, but there is merit in the thrust of what he says. The Government should consider how to deal with unpaid representatives. I was head of the employment unit at a law firm for several years, and I came across cases—albeit infrequently—in which a union representative had abused his role. Knowing that the client was not having to pay for his services, he could put an employer in an invidious position by using mechanisms that were available as part of the tribunal process in order to delay matters or extend the process; to act in an unreasonable way. The Government's intention to limit the scope of the regulations to deal solely with paid representatives will not address that potential abuse.

I recognise the important role of trade union representatives in pursuing claims in the employment tribunal on behalf of members; I am not looking at the matter from an anti-trade union perspective. However, there is scope for unpaid representatives, from trade unions or elsewhere, to abuse the system, so it is necessary for the Government to consider how to rein in such representatives. They should reconsider provisions to require a trade union representative to pay the other side's costs if that union or that representative—or a non-union, unpaid represen- tative—has abused the process in a way that impacted unfairly on the other party to the proceedings. I urge

the Minister to respond positively and to consider further my concerns and those of the hon. Member for Runnymede and Weybridge.

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Mr Rob Marris (Wolverhampton South West, Labour)

Can the Minister tell us whether anyone has raised the problem of what I might call rogue advocates in response to the Government's consultation on the Bill? I am concerned that making tribunals into courts of law is going too far. Tribunals are not courts of law. The way in which they are conducted will result in more latitude being extended to the advocates that appear before them. Can the Minister say whether anyone has raised that potential problem, or is the amendment trying to deal with an evil that does not exist?

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Does the hon. Gentleman acknowledge that it is not apparent that the Bill would allow adequate remedies against all representatives? It is only because the Minister has made it clear that he intends to limit those remedies to paid representatives by regulation that the need has arisen to deal with the issue of unpaid representatives.

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Mr Rob Marris (Wolverhampton South West, Labour)

The question is whether we include in the Bill a remedy for an evil or mischief that is not perceived to exist.

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Mr Norman Lamb (North Norfolk, Liberal Democrat)

I realise that the employment tribunal was originally meant to be a non-legalistic forum, but I am sure that the hon. Gentleman knows from his previous existence that it has now moved far from that. The reality is that a lot of law is involved and representatives, paid and unpaid, now have the scope to exploit that and to act in a way that can unfairly disadvantage the other side. That problem needs to be addressed. I am sure that the hon. Gentleman knows how tribunals work today.

Photo of Mr Rob Marris

Mr Rob Marris (Wolverhampton South West, Labour)

In some ways I agree with the hon. Gentleman about the drift in the work of tribunals, but I am anxious to avoid something appearing in the Bill that could penalise unpaid representatives.

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Mr George Osborne (Tatton, Conservative)

The hon. Gentleman asked whether the Minister had received representations on the matter. I do not know whether he has seen the brief from the Law Society, his favourite organisation. It states:

''The Society . . . is concerned that attempts to draw a distinction between those who charge for their services and those who do not will be difficult to justify and even harder to maintain''.

Representation has been made, and I am surprised that he has not read it.

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Mr Rob Marris (Wolverhampton South West, Labour)

As I said last week, when an amendment was tabled that used the Law Society's wording, I had not then received anything from the society. I received something, rather belatedly, in the post this morning. I am sure that the Minister, with his omniscience, will have received it. However, we must be careful not to penalise unpaid representatives because they are thought not to know the law as well as lawyers; many of them know the law better than lawyers.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The hon. Gentleman uses the word ''penalising''. A financial penalty would obviously penalise someone, but the power proposed in the amendment would simply say to someone, ''Frankly, you are not a suitable person to appear before a tribunal. You have mucked it up, you have wasted the tribunal's time and you have behaved vexatiously.'' It would prevent their appearing before an employment tribunal for a period of time. It would not be a penalty to someone who was not remunerated. It would simply smooth the procedure by removing from the system vexatious or difficult people who do not abide by the procedures.

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Mr Rob Marris (Wolverhampton South West, Labour)

The hon. Gentleman may say that that is not a penalty, but we have already heard about union representatives. If someone who does legal work for the Engineering Employers Federation was banned for a specified period of time, and if it was an integral part of that person's job to conduct tribunals, that would indeed be a penalty because that person might lose his job. Whether he would deserve to lose it for incompetence in tribunals is a separate issue. It would still be a penalty.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I am sorry if the hon. Member for Runnymede and Weybridge thinks that I am being unhelpful, but I disagree with the amendment for several reasons. Let us be clear that the amendment would add an extra sanction to paid representatives. Amendment No. 21 mentions employment appeals tribunals, at which it is almost unheard of for anyone not to be represented legally. People from citizens advice bureaux, law centres and trade unions do not go to employment appeals tribunals on points of law.

To put the record straight, I should make it clear that I did not say that the job of the tribunals did not involve dealing with bad behaviour. I said that it was not for the tribunal to act as a regulatory body, and that it was not for the chairman to pass judgment on a representative's potential bad behaviour. That applies to future cases and to sanctions on the taking of tribunal cases for a fixed period. Let us reiterate that the job of the employment tribunal is to decide the point in question, not to act as a regulatory body.

I am not a member of the Law Society—I knew that that needed to be clarified—but the nub of the argument is about what happens to unpaid representatives, as we will discuss on other amendments. My hon. Friend the Member for Wolverhampton, South-West was right to say that a problem had not been highlighted. The tribunal judiciary clearly made the point about paid representatives. The hon. Member for Runnymede and Weybridge accepts that the problem, which has been seen in other areas of law, is about barristers and other lawyers who pursue cases for profit.

On employment tribunals, no problem has been reported about unpaid and unremunerated representatives. I fear that if a measure was taken such as that proposed, it might damage a system that was crucial to the tribunals. If we want to reverse the trend—it is not irreversible, and the majority of respondents and applicants are not legally represented

at employment tribunals—we should not discourage the voluntary sector, which does an enormously valuable job. So often at employment tribunals, the resources for paid representatives are not available, and we do not want to discourage them.

The hon. Member for Tatton (Mr. Osborne) has left us a so-called Law Society circular. I am not sure whether it is a briefing on tribunals, but I cannot remember seeing any representation during our long consultation on ''Routes to Resolution'' that suggested that there was a problem with CAB and trade union representatives. If a problem had emerged from ''Routes to Resolution'' or we now discovered a specific problem, a cost award could still be made against either party to the dispute, applicant or respondent. Such people may be represented by trade unions. We said last week that trade unions, citizens advice bureaux, law centres and employers associations would sometimes be left out, although we do not want to penalise them. They sometimes give valuable judgments to the applicants. The applicant says that he pays his subs and so is entitled to representation, and the case goes forward despite advice. We are talking more about conduct than anything else in relation to the clause.

The hon. Member for Runnymede and Weybridge is right in that we intend to apply the provisions, but that intention is not politically motivated. I am surprised at him for making such a suggestion. If it were, how would he explain the almost unanimous support that we have had from organisations? They cannot all be accused of being politically motivated. We want to deal with a specific problem with paid representatives. We oppose the amendment because additional sanctions should not be applied to those representatives, and because we do not think that there is a problem with unpaid representatives. We certainly do not want to damage the extremely valuable voluntary sector involvement in employment tribunals, which the amendment would do.

There is no case for the Government to make the usual helpful statements. I would love to say that we shall consider what the hon. Gentleman suggests, but no problem has been identified. I have listened to what the hon. Member for North Norfolk said, and the provision would be a sledgehammer to crack what may be a very small pistachio in north Norfolk but is not a particular problem elsewhere.

11:00 am
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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

What the Minister said goes to the heart of a problem that will crop up in many of our debates. A specific problem with paid representatives has been identified; he does not, therefore, think that the amendment is necessary. However, if there is a problem with paid representatives and no sanction is necessary against unpaid representatives, why does the Bill not refer to paid representatives? The Minister has given himself discretion in making regulations, and nothing limits the Bill to paid representatives.

My amendment was intended to give the Minister scope, should it be required, to make regulations that would allow the disbarring of representatives, paid

and unpaid. I cannot understand, in spite of the Minister's two attempts to explain it, how the amendment would damage the existing system of unpaid representatives. I understand, but do not necessarily agree with, the argument that financial penalties against unpaid representatives might damage that system, but I cannot really understand the argument that the chance of being prevented from appearing in an unpaid capacity would undermine a system in which unpaid representatives are willing to appear and take their chance. The only penalty might be that they could not appear again for a period.

I understand the Minister's point about the possible inappropriateness of extending the provision to employment appeal tribunals, and I accept that it is almost unheard of for people not to be legally represented at employment appeal tribunals. I also accept that the amendment would perhaps have been better drafted if it had been specifically limited to those who were excluded by regulations from a potential award of costs against them. Therefore, in view of the Minister's strong resistance to the amendment, I shall shortly seek to withdraw it.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I do not want to take up too much time, so I will deal with this point in an intervention. Yes, we will issue regulations. The hon. Gentleman is right—the Bill contains nothing about paid representatives. However, we have always made it clear that that is who the regulations will deal with.

There will be an opportunity to discuss the matter because we will hold consultations on the regulations. I made a mistake before, and said that the regulations would be subject to the affirmative procedure; as with all employment tribunal rules, they will be subject to the negative procedure. Nevertheless, we will consult on them, and, if Members want one, there will be a debate on them. To offer a glimmer of something helpful to get the week off to a better start than we already have, perhaps the hon. Gentleman's case should be made in such a debate. We have not been persuaded, in current consultations, that there is even a problem that needs tackling. There will be an opportunity for further consultation.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The Minister makes my point for me, because, sadly, there will be no opportunity to make that case when consultation begins on the regulations. If we do not include a power to introduce a provision allowing the disbarring of unpaid representatives, the Minister can listen all he likes but will have no power to make that regulation. The amendment is designed to give him that power, whether or not he chooses to use it later.

Mindful of the Committee's desire to move on, I give the Minister notice that I will certainly want to return to the issue. I note the helpful comments of the hon. Member for North Norfolk. If the Liberal Democrats think the issue important, it might be worth exploring when the Bill goes to another place for further consideration. I beg to ask leave to withdraw the amendment

Amendment, by leave, withdrawn.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I beg to move amendment No. 14, in page 32, line 16, at end insert—

'(1AA) Regulations made under subsection (1A) above may not discriminate between different classes or types of representatives or between representatives on the basis of whether they represent applicants or respondents.'.

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Mr Joe Benton (Bootle, Labour)

With this we may take amendment No. 24, in clause 23, page 32, line 41, at end insert—

'(2A) Regulations made under subsection (2) above may not discriminate between different classes or types of representatives or between representatives on the basis of whether they represent applicants or respondents.'.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Amendment No. 14 takes a familiar form. It relates to clause 22, and amendment No. 24 would similarly amend clause 23, in the matter of employment appeal tribunals. It is a probing amendment. We want to understand exactly what the Government will have in mind in bringing in the regulations. The amendment would require that regulations made to be inserted into the 1996 Act under the new subsection (1A) should not discriminate between different classes or types of representative, or between representatives on the basis of whether they represent applicants or respondents.

We probably all agree that the starting point in legislation should be non-discrimination between classes or types of a given category of people. If the Government want to behave in a discriminatory manner as regards certain classes of individual, there is an imperative for them to make an intellectual case and, perhaps, a moral case, for it. What the Minister has told us of his intentions to discriminate between certain classes of representative is based on the representative's—and perhaps to some extent the applicant's—view of the world.

I am not convinced that the route favoured by the Minister will benefit applicants. It strikes me that it might sometimes lumber applicants with costs that would have been better directed at their representatives, where those representatives are unpaid. What is missing from the debate is recognition that the bad behaviour of a representative in relation to a tribunal imposes costs on third parties. In my understanding, under the regulations, the damage and loss suffered by those third parties as a result of the representative's conduct might be made good, or it might not, depending on the class or category into which the representative fell. That seems unfair to third parties.

Last week I was confused about the definition of unpaid representatives used by the Minister. The Minister initially suggested that lawyers working on contingency fees would not be considered as paid representatives, then corrected himself and said that they would. The House of Commons Library brief, usually referred to here as authoritative, states that the regulations

''will also be able to define 'representative' so as to exclude those who do not charge for their services. This would mean that costs could be awarded against solicitors, barristers, in-house lawyers and employment advisers acting in a commercial capacity''.

I am confused. If an in-house lawyer, an employee of a trade union or an employee or respondent, who happens to be a lawyer, is to be included in the

definition of those who are paid—as is a lawyer working on a contingency fee who loses and does not earn anything—it is not clear to me how the Minister can distinguish between the group considered to be paid representatives and the group that is considered to be unpaid. I think that I know what the Minister has in mind. The terms ''paid'' or ''unpaid'' are a parliamentary draftsman's way of achieving what he wants, but the Minister clearly has in mind CAB and trade union representatives as the group that should not be subject to these penalties. It may also include representatives of employers' associations, although I suspect that we may inadvertently be creating loopholes by including unpaid representatives of respondents who are provided by employers' federations or trade associations.

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Mr Mark Prisk (Hertford and Stortford, Conservative)

I welcomed the Minister's comment about changing the position on contingencies, but to pursue the point a little further and in order to define ''paid'' and ''unpaid'' more clearly, will my hon. Friend comment on the following difficulty? Someone might join a trade organisation or union organisation in which the legal services are provided as part of a general membership fee. Someone else might join an organisation in which legal fees are defined separately. Would a case where an additional supplement was paid, such as a gold star membership, be included within the definition of paid representative?

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

My hon. Friend asks a good question that is probably better directed to the Minister than to myself. I am sure that the Minister will respond in due course. It is not inconceivable that a trade union would choose in some cases to support its members by using outside support, which might be legally qualified support. It is rather an odd distinction that if a trade union uses an in-house person who happens to be a lawyer, that person is exempt from these penalties, but if it hires a less qualified person from an outside law firm, that person is vulnerable to them. [Interruption.]

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Mr Joe Benton (Bootle, Labour)

Order. Could I prevail upon the hon. Gentleman so that we can hear the announcement on the alarm system in the Corridor? [Interruption.] We must apparently stand by for further announcements.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I shall stand by, Mr. Benton.

I am seeking to explore how the Minister intends to draw the distinction between what I refer to as the group who will be vulnerable to the provisions of the subsection and that group who will not be vulnerable. It is important that we do not create what I believe is usually called second-order discrimination by identifying a group who will be treated differently from another group. There is effectively discrimination against a class of applicants or respondents because, de facto, they happen to be represented by the excluded group.

Although the regulations will probably be neutrally worded and will talk about representatives being paid or unpaid, regardless of whom they represent, employers fear that if unpaid representatives who appear before tribunals represent applicants in 95 per cent. of cases and respondents in only 5 per cent. of cases, the regulations clearly would be discriminatory. Behaviour that treats part-time workers differently from full-time workers discriminates against women because of the composition of the work force and the much larger numbers of women in part-time employment. That principle has been well established in the courts.

I am anxious to hear what definitions the Minister will use, how he will deal with awkward cases, such as in-house lawyers and contingency fee arrangements, in order to ensure that the playing field really is level, given, for the moment, that he insists on maintaining a distinction between paid and unpaid. The amendment is intended to explore the practical working arrangements for making that distinction.

11:15 am
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Mr Norman Lamb (North Norfolk, Liberal Democrat)

The amendment continues the theme of several amendments tabled by the hon. Member for Runnymede and Weybridge. The more one thinks about it, the more plain it is that it will be difficult for the regulations to define sensibly a paid representative. There are complicated grey areas with, for example, contingency fee lawyers who will not be paid anything if they lose, perhaps partly because they behaved so appallingly in the tribunal. They are not paid representatives in the context of that hearing. Should we include an in-house lawyer, whether that is for a trade union or employers' organisation, as a paid representative?

There will be enormous problems of definition in the regulations. Rather than limiting the potential for awarding costs to being only against paid representatives, would it not be better for the tribunal to have the capacity to award costs against any representative as long as it takes into account the basis of their representation? In exercising such discretion, the tribunal would clearly not want to impose an unfair penalty on a voluntary or trade union representative who had simply been doing their job. It would give the tribunal the capacity to impose an order where the unpaid representative had acted inappropriately, and would not get the Government into difficulty in defining paid and unpaid representatives in the regulations. I put that forward as a constructive suggestion as a way out of this difficulty.

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Mr Rob Marris (Wolverhampton South West, Labour)

I do not see a problem with the regulations discriminating between different representatives. I will offer my definition, and I am sure that the Minister will give his, but we are reaching for the difference between professionally qualified representatives, trained representatives and volunteers. The duty on a representative towards a tribunal or EAT will vary depending on their level of qualification. Tribunal chairs will rightly expect more of professionally qualified representatives. Conduct that is unacceptable from a professionally qualified

representative might, to many tribunal chairs, be acceptable from a volunteer—for example, the friend who lives next door.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The hon. Gentleman makes a sensible suggestion for where a line might be drawn, but it is not the one that the Minister is proposing. The Minister is proposing to allow the friendly neighbour who is a barrister appear unpaid without jeopardy but leave, as the Trades Union Congress brief says, the totally unqualified

''independent consultants . . . who charge for their services and actively encourage claims''

vulnerable to a cost order.

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Mr Rob Marris (Wolverhampton South West, Labour)

The hon. Gentleman has an advantage over me, because I have not seen the Minister's definition or dummy regulations, if any exist. That is what we are trying to tease out from the Minister today. The hon. Gentleman obviously has an inside track that I do not, and I apologise to the Committee for my ignorance.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I have not seen the Minister's draft regulations, but I have read the TUC brief, which is usually an authoritative source on such matters, as the TUC tends to write such passages for the Minister. The TUC seems convinced that the Minister will use the criterion of whether the representative is paid or unpaid. Indeed, the Minister has made it clear that he will.

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Mr Rob Marris (Wolverhampton South West, Labour)

We should wait for the Minister's response to find out what his views are.

Finally, I believe that the final full line of amendment No. 24 should read ''appellants or respondents'', not ''applicants or respondents'', as the clause deals with EATs at that point.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The way out of that dilemma is to withdraw or oppose the amendments. The hon. Member for Runnymede and Weybridge should accept that neither the Bill nor the regulations discriminate between applicant and respondent. He does not need an amendment to ensure that.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I accept that, but does the Minister accept the concept of second-order discrimination? If he discriminates against one class of representative, and in 95 per cent. of cases it represents one side of the argument, that is de facto second-order discrimination. That is a well established principle in discrimination law.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I do not accept that that is a principle in the Bill. Last year, a third of cost awards went to applicants rather than respondents. That is a different figure from the last time we considered the matter in 1988. There is no set rule because cost awards can be made against either party. We have heard horror stories from both sides about wasted costs. The nub of the hon. Gentleman's argument centres on paid or unpaid representatives.

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Mr Rob Marris (Wolverhampton South West, Labour)

May I assist the Minister? When the hon. Member for Runnymede and Weybridge refers to second-order discrimination, he means indirect

discrimination, which is allowed in certain circumstances. It depends on the circumstances. It can be justified, just as direct discrimination is allowed—some might say sadly—under the Disability Discrimination Act 1995. I am sure that the Minister would agree, in cases such as the Sex Discrimination Act 1975—

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Mr Rob Marris (Wolverhampton South West, Labour)

No. Indirect discrimination can be allowed, and if the figures show that the majority of those causing problems at tribunals are respondent employers, the Minister might agree. The Conservatives may see that as indirect discrimination, but the Government are justified in drafting legislation to deal with it.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I do not want to debate discrimination. However, I am sure that we will not be dragged before the European Court of Human Rights for targeting paid representatives who make a financial gain from cases. I love the concept of the friendly barrister who is a neighbour and offers to work for nothing—that is glorious. If the hon. Member for Runnymede and Weybridge can let us know where those friendly barristers live, we would beat a path to their doors, and we would no longer have so many problems.

The hon. Gentleman raised important points about how we define the provision, as did the hon. Member for North Norfolk and my hon. Friend the Member for Wolverhampton, South-West. We are in danger of losing perspective: the tribunal judiciary is clear about where the problem lies. It deals with such cases day in and day out, and its representation to us concerned paid representatives. It has not moved away from that assertion one iota—not one smidgeon. It is not necessary to read the TUC brief—I have not read it, but the TUC is a marvellous organisation, and its literature is highly recommended. The judiciary does not note a problem in its response to the ''Routes to Resolution'' document.

I repeat the point made at the last sitting by the hon. Member for Weston-super-Mare. Until this inspiration struck me, my response was foggy. We are out to get the no win, no fee brigade as well. That is an important part of the measure.

We intend the regulations on wasted cost to exclude the not-for-profit sector: trade unions, law centres, citizens' advice bureaux and employers' advisory bodies. We intend them to apply to representatives who charge for their services, including solicitors, barristers and employment advisers. However, hon. Members are correct to point out that poor conduct may come from all types of representative, paid or unpaid; we accept that. We want to encourage all representatives to act responsibly and to accept responsibility for their actions.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I think what the Minister is saying about contingency fees is that his criterion is not whether someone is paid or unpaid but whether they have become a representative with a view to being

remunerated. How will the hon. Gentleman deal with in-house lawyers? Is the Library brief—unusually—wrong in saying that in-house lawyers will be included in the category that can have cost awards made against them?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I hesitate to criticise a Library brief. The hon. Gentleman is right; they are authoritative documents. In such a case, where an in-house lawyer acts for an employer who is a respondent or for an applicant and where they have behaved outrageously, costs awards can be made against the organisation not against the individual making the representation because they are in-house and they do not stand to make a profit from representing that case.

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Mr Norman Lamb (North Norfolk, Liberal Democrat)

Does that mean that if a trade union lawyer were representing a trade union member in the tribunal, the trade union could be subject to an award of costs, whereas if it were a non-qualified representative of the trade union it could not be subject to an award of costs?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The short answer to that is no. We are talking about the conduct of representatives. I thought from the hon. Gentleman's quote from the Library brief that it would not apply to the individual lawyer who was acting outrageously and representing the client because they were in-house, being paid to do their job, but it could apply to the organisation. It could apply to the company in terms of a respondent in that situation.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

That is precisely the difficulty; it could apply to the company in a case where the in-house lawyer worked for the respondent, but there is no symmetry, because it could not apply to an in-house lawyer employed by a trade union, because the trade union is not the applicant. The individual applicant will be the one to suffer the consequences of misconduct by that in-house lawyer. It is precisely those issues of symmetry that we are concerned about: that an in-house lawyer working for an employer will be treated differently from an in-house lawyer working for a trade union if page 41 of the Library brief has got it right.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

May we return to the issue of employment tribunals and their specific nature? The measure provides that a person may be represented by whoever they want to represent them—it may be their next-door neighbour, who is not a barrister, but who is articulate and is someone about whom the person feels confident. With due respect to lawyers, we do not want employment tribunals to become their preserve. It is important to keep that in focus when we discuss extending the proposal to cover people in the voluntary sector, and the amendment provides that that there should be no discrimination between

''different classes or types of representatives''.

Many claims are straightforward claims for small amounts of money. We think of every case as a claim for unfair dismissal but there are many other claims in which it is not appropriate for the legal profession to

become involved. The evidence clearly shows that individuals rely heavily on trade unions, citizens advice bureaux, law centres and employers' organisations. If we include unpaid representatives there is a danger that volunteers will be discouraged from offering their services, or the behaviour of a rogue individual could have a harsh impact on a tightly resourced free advice centre.

The principle is the same for trade unions, which are tightly resourced, where a union has engaged a lawyer to act on behalf of an applicant and that lawyer conducts the case unreasonably. It may be appropriate for wasted costs to fall directly on the lawyer, but otherwise it would not be fair on the organisation and, indirectly, its membership, to suffer as a result of the conduct of one representative. That would place too great a loss on tribunal users.

11:30 am
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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I know that the Minister likes to be even-handed and absolutely fair, so, since he has referred to tightly resourced voluntary organisations and trade unions, perhaps he would like to place on the record an acknowledgement that many small businesses are also extremely tightly resourced.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

Of course we are concerned about small businesses, far more so than the previous Government. We have taken measures in that regard.

The House of Commons research paper refers to

''in-house lawyers and employment advisers acting in a commercial capacity'',

which is the relevant point. There is a delicate process to go through to get the regulations right. The tribunal judiciary believed that this could and should be done. It achieved almost unanimous support from all quarters.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I disagree with the Minister's ingenious interpretation of the wording of the Library brief. Will he tell the Committee what would be the characteristics of an in-house lawyer acting in a commercial capacity? Is he someone who stands to gain a fee on top of his regular salary?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

We shall leave that until we go through the regulations. The hon. Gentleman knows that point; he has made it himself several times. He is suggesting that there should be no discrimination, no different classes of representatives. He is looking to extend the powers either through the sanctions on cost awards or by other sanctions to the voluntary sector. My argument about the voluntary sector is that the employment tribunals service could not function effectively for many applicants who do not have the resources for legal representation. If we extended this to cover CABs, employers' associations, trade unions and law centres, it would be a backward step for the employment tribunals service as a whole. That is the main reason why we are here: to improve the service given to applicants and respondents at employment tribunals. This measure would throw the baby out with the bathwater. I ask the hon. Gentleman to withdraw his amendment. If he will not, I ask the Committee to oppose it.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

As I said, this is a probing amendment. The purpose was not to extend penalties to the voluntary organisations and trade unions to which the Minister referred, but to probe him on how he intends to define those paid or categorised by some other criterion as vulnerable to these procedures, and those who are not. If this short debate has demonstrated one thing, it is that that will be a difficult task and, frankly, the Minister does not yet have a clue how he is going to do it.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I have a clue.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I do not think that he has. At the end of this discussion, I still do not understand whether in-house lawyers are to be included. If the Minister had been able to answer that question crisply and succinctly, he might have persuaded me that the answer to these issues is in the recesses of his mind. I suspect that someone has said, ''We'll make the distinction whether people are paid or not'', and has not yet thought about the fact that that is not a crisp, clean distinction.

Many cases will create difficult issues, some of which might appear very unfair. A highly qualified person who is not defined as paid could act outrageously but not have costs awarded directly against him or her. In another case, an unqualified person may be paid without being the avaricious chaser of large contingency fees whom the Minister clearly has in mind as the target. A person who asks for a modest fee to undertake the role of representing someone at a tribunal and who is not highly qualified but does their best may fall on the wrong side of the distinction. Perhaps the Minister has been a little too dismissive of that concern.

I shall withdraw my amendment on the basis that it is a probing amendment, but the issue will require careful attention before draft regulations are published. I only hope that we shall have an adequate opportunity to consider these matters when the regulations are published. All too often, we have a maximum of 90 minutes in a Standing Committee to consider regulations that are many pages long. That is precisely why these issues, although they perhaps cannot be resolved now, need to be aired at this stage, so that concerns are placed on the record, and the Minister and outside organisations can reflect on them. I hope that that means that the regulations will be more robust than the initial crude definition between paid and unpaid outlined by the Minister. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I beg to move amendment No. 10, in page 32, line 17, leave out 'may' and insert 'shall'.

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Mr Joe Benton (Bootle, Labour)

With this we may discuss amendment No. 19, in clause 23, page 32, line 42, leave out 'may' and insert 'shall'.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Following the familiar structure, amendment No. 10 addresses a change to clause 22, and amendment No. 19 addresses a similar change to clause 23. The aim is to remove the Minister's

discretion to introduce in the procedure regulations a provision for taxing or otherwise determining an award of costs. Clearly, there is a need either for taxation, which sounds like a rather formal system, or for another method of determining costs. However, it is not clear whether the Minister has it in mind that cost awards should be based on a full and complex taxation system as used in the courts or on a simpler system of standard cost awards, with one lump identified for one purpose and another lump for another purpose. That may be a simpler and cruder system, and I should be grateful if he would comment on that.

I suspect that the Minister will say that he intends to introduce a regulation providing for taxation or other determination of costs and expenses and that the use of the permissive word ''may'' rather than the prescriptive word ''shall'' is simply a drafting convention for legislation. If so, perhaps he will explain why that is a convention. I am sure that the Minister will look forward to doing that, as I look forward to the lesson.

We deal more and more often with Bills that are largely empty boxes and that depend heavily on secondary legislation, so I question whether it remains appropriate to provide for discretion in the Bill. We are not talking about discretion as to what it is in the regulations; clearly, the Minister will have that discretion. Why does he also need discretion as to whether even to introduce regulations? Without them, the overall logic of the Bill would fall apart. We live in a world where most or many Bills have the format of permissive primary legislation under which secondary legislation implements the details, so perhaps we should move from permissive to prescriptive phrasing, so that the Committee can at least know that there will be regulations and can ask the Minister to specify what they will say.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The debate is a re-run of previous debates on amendments Nos. 7, 18, 9 and 20. I may not be able to give the hon. Member for Runnymede and Weybridge a seminar on why the wording has traditionally been ''may'' and not ''shall'', but the discretion has always been allowed. The employment appeal tribunal—in which the hon. Gentleman is also seeking an appeal—rather than the employment tribunal, has taken away the Lord Chancellor's discretion. It is a different body.

Under previous Governments, the discretion has existed every time the employment tribunals legislation has been amended. As in other debates, it would be curious to change ''may'' to ''shall'' in this context, when it is used so many other times in the Bill. The purpose of the amendment is to tease out whether we intend to use these powers. In Scotland, the term is ''taxation''. In England and Wales, it is ''assessment''. The answer is that we fully intend to use the powers, and we do not envisage any changes to the regulations with regard to the way in which the costs are determined, which in England and Wales is by detailed assessment in the county courts and in Scotland by taxation in the sheriff courts. There is no compelling reason to change what seems to have been consistent

use of the wording over the years in relation to powers to make employment tribunals procedure regulations. I therefore ask the hon. Gentleman to withdraw the amendments.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am grateful to the Minister for his remarks. He has largely reassured me by making it clear that there will be provisions in the regulations to deal with taxation, which I did not know was an exclusively Scottish system. I understood that matters in the English courts were routinely taxed. Perhaps I need a seminar on that, although I am not entirely sure that I do.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The cavalry is appearing over the horizon, and I am grateful to the hon. Gentleman.

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Mr Rob Marris (Wolverhampton South West, Labour)

I can assist the hon. Gentleman. On 6 April 1999, the term was changed to ''assessment of costs'' in civil courts in England and Wales.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

That is excellent, although I am always disappointed when an archaic term passes out of use and some rather bland and bureaucratic term replaces it. I once struck up a conversation with someone in a pub. That was before I was a Member of Parliament, which is as well, because as all Members know, when someone asks us what we do and we tell them that we are MPs, it tends to be a conversation stopper. He told me that he was a taxing master and he assumed that I would not know what that was. Fortunately, I did, but I hate to think that that individual would have to tell me that he was an assessing master, which does not have the same ring at all.

The Minister has reassured us that there will be proper provision for assessing the awarding of costs. However, he did not say with any clarity whether it is intended that costs will be assessed individually on a principle of what is equitable, or on time and money expended, or on the basis of some form of tariff—a sort of shorthand assessment procedure whereby an applicant or respondent is entitled to so much for an appearance at a tribunal. I shall speak for a moment longer, in the hope that the Minister will intervene and clarify that matter.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

Will the hon. Gentleman give way?

11:45 am
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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The hon. Gentleman should be wary about conversations in pubs with anyone, let alone taxing masters, now that he is a Member of Parliament.

Cost can be assessed in three ways. First, the tribunal can order a fixed sum to be paid. Secondly, the parties can agree the amount. Thirdly, the cost can be sent for detailed assessment or taxation by the civil courts.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am grateful to the Minister for that explanation, which gives me substantially more understanding of how the Minister intends the system to work. I assume that detailed assessment would be the last resort if the parties failed to agree. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

I beg to move amendment No. 2, in page 32, line 22, leave out subsection (2).

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Mr Joe Benton (Bootle, Labour)

With this it will be convenient to take the following amendments: No. 8, in page 32, line 24, leave out 'may' and insert 'shall'.

No. 17, in page 32, line 25, after 'tribunal', insert 'in specified circumstances'.

No. 15, in page 32, line 27, at end add—

'and such regulations shall make provision for taxing or otherwise settling the amount of payment to be made or for fixed sums to be payable by reference to criteria set out in the regulations.'.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

Amendment No. 2 is intended to probe an important issue. The proposed new section would enable a tribunal procedure regulation to allow the awarding of costs to cover the preparation put into a case. Incidentally, in pub conversations, one can at least down a pint and rush out, but if one gets caught in conversation with a taxi driver, one has to wait until the end of the trip; it is advisable to consider the length of the trip before starting a conversation.

The reasoning behind the amendment is to ensure fairness in the calculation of the costs for both parties. As has been said, the DTI estimate from 1998 states that an employer can typically spend 47 hours of management time preparing a case, which is a long time. At the moment employers are unable to reclaim any of that money, even if the case is judged ill founded. Employers deserve a reasonable amount of protection, and the expense and difficulties that they may face in preparing a case can be considerable. We must recognise that. However, we must also ensure that the calculation of costs is fair to both parties. Although the new section will apply to both parties, there is concern that it will have a disproportionate impact on the applicant. We would like the Minister to clarify how the costs will be calculated and assessed to ensure the defence of both parties.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I want to ensure that I have understood the hon. Gentleman. My understanding is that the amendment would delete the provision that allows costs to be awarded for preparation time. He has made a heartfelt case about the burden that preparation costs imposes on small businesses. Why, in that case, does he propose to delete the provision that would allow them to recover those costs?

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

In order to highlight the issue, we are deleting the provision without having something to put in its place. How would the employer calculate costs, for example? That is an important issue. Would the costs include time spent by other employees, such as human resources department managers, in preparing the case? Would the options include time

spent by other employees such as the human resources department managers in preparing the case or an estimate of productivity lost, as can sometimes occur? That calls to mind an incident that happened in a bizarre company before I took over as managing director some years ago. Someone had been sent to get a stamp and had lost it in the grounds. Believe it or not, the previous managing director stopped the whole factory to look for that 10 shilling stamp. Perhaps that was considered a lot of money then, but a lot of time was wasted. If someone is not producing, how can one calculate staff productivity?

Would an employer include time spent by witnesses giving evidence in a fellow employee's case, for example? The scope of a claim could effectively be limitless for employers. It is always difficult to apportion costs in a company in a fair and reasonable manner. So many factors could be included; perhaps they should be, but perhaps not.

From an applicant's point of view, the potential to receive costs for preparatory work is much more limited—in many cases to the value of his or her time. How can such costs be assessed in a fair manner? How would the costs or time of someone who is unemployed be assessed?

The Law Society is held in high repute, as my hon. Friend the Member for North Norfolk can attest. His constructive contributions demonstrate how much we need to take note of what it has to say. It identified the lack of experience that employment tribunals have in awarding costs. Out of 27,000 cases, costs were awarded in only 247. Despite the small number of awards, costs must be awarded in a reasonable manner. In addition, costs are currently awarded on legal grounds, on the basis of civil jurisdiction established by the civil courts. Tribunals will now be asked to award costs on a non-legal basis, without that framework. That is a further change.

The concerns raised by the Law Society, the legal action group and the TUC must be addressed if we are to ensure that the system benefits both parties. I ask the Minister to clarify the system that will be specified in the regulations to calculate such awards and to say how it will safeguard the rights of both the applicant and the respondent.

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Miss Judy Mallaber (Amber Valley, Labour)

I should begin by saying that I am a member of Unison and that the union has made financial contributions to my constituency party.

My hon. Friend the Minister knows of my concerns about the clause. I, too, would appreciate some clarification and reassurances on exactly what will be included in the guidelines. I am aware that costs are awarded in only a few cases; I am sure that my hon. Friend will say that that will continue and that there will not be many vexatious or frivolous cases that will have costs awarded. I also appreciate that litigants in the third of cases in which costs are awarded to the litigant will be able to apply for costs, even if they are not legally represented.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Would the hon. Lady help me by explaining why she thinks that new section 13A applies only to vexatious litigants? I see nothing in the Bill to indicate that.

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Miss Judy Mallaber (Amber Valley, Labour)

The guidance notes refer to vexatious cases or cases in which the parties have behaved unreasonably in some way. I am sure that the Minister can clarify that in his response.

I am concerned about the examples of cases I have received, especially from the Legal Action Group, in which costs have been awarded against applicants even when it has been perfectly reasonable for them to assume that they did not have a weak, frivolous or vexatious case. Therefore, even if the provision is limited only to such cases, there remains a danger that costs will be awarded against the litigant. I am also concerned that employers may make the threat of potential costs to intimidate litigants into not pursuing cases or to encourage them to drop their cases before they reach a conclusion that might be advantageous to the litigants. I have examples of such cases. I remain concerned, even if costs would be awarded against people only in cases that were vexatious or litigious or where there had been unreasonable behaviour.

Will the Minister assure us on the content of the guidelines? A threat of costs up to £10,000 would be extremely intimidating to litigants, who would not necessarily want to pursue their cases in such circumstances. There are two issues. First, if costs are awarded to the applicant, they may be low if they are allocated in relation to the hourly pay rate of a low-paid employee or someone who is unemployed. Can something be inserted into the regulations to ensure that those people receive a reasonable amount in costs? I am not a lawyer, so I do not know how that could be phrased, but I would be grateful for some guidance.

Secondly, how can we ensure that costs to employers are limited, so that if they claim that they have high-ceiling staff costs, including legal costs, the applicants do not face the prospect of being told that up to £10,000 in costs may be awarded against them, when in fact that would not be the case in practice? Employees should not be intimidated into withdrawing cases that would be perfectly reasonable.

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Mr Norman Lamb (North Norfolk, Liberal Democrat)

I have similar concerns to those expressed by the hon. Member for Amber Valley (Judy Mallaber). I appreciate that the explanatory notes make it clear that a party will not be required to prove how much time has been spent in preparation and that that will be set out in the employment tribunal rules of procedure. However, I would be grateful if the Minister would clarify how he will limit the potential for awarding costs. If the respondent suggested that substantial costs were being incurred in the preparation of a case, costs could act as a powerful disincentive against applicants pursuing proceedings or an incentive to withdraw from proceedings. The explanatory notes say that the award would be made only in the same circumstances as an award for costs is made generally—in other words,

''where the party has behaved unreasonably''.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I was going to raise a point with the Minister to which the hon. Member for Amber Valley has already drawn attention. The Bill says not that an award would be made in the same circumstances as an award for costs would be made generally, but that

''an award could be made only in the circumstances in which a costs award may be made at present.''

The situation at present is different from the circumstances in which a costs award may be made under the Bill. When the clause becomes law, it will no longer be a requirement that vexatious or other misconduct will have occurred.

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Mr Norman Lamb (North Norfolk, Liberal Democrat)

That intervention highlights the fact that we need clarity on the clause.

My other main concern is that, although the Minister may choose to limit the circumstances in which discretion is exercised by way of subordinate legislation, a future Minister or Secretary of State could exploit the power that is proposed in the Bill in a pernicious way, making it much more dangerous for an applicant to pursue, or to continue to pursue, a case because of the possibility of a substantial award of costs in respect of preparation time. Much greater clarity is needed. We are concerned that the Bill allows such wide discretion to use subordinate legislation in a way that could seriously impact on an applicant's assessment of whether to pursue or to continue to pursue a claim.

12:00 pm
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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

This has become a properly structured amendment, although it was not in its original form. That is disappointing, considering its origin. I was surprised to hear the hon. Member for Weston-super-Mare say that he was flagging up an issue without suggesting any solution. He got there before I did. I should have preferred to see the issue probed by way of amendments to new section 13A to deal with the potential problems identified by the hon. Member for North Norfolk. I hope that the Minister will clarify—either by intervening now or when he speaks later—in what circumstances an award of costs in compensation for preparation time could be made.

Explanatory note 63 says:

''It is also intended that the new awards could be made only in the circumstances in which a costs award may be made at present, that is, where the party has behaved unreasonably in some way.''

At present, before the passage of the Bill, that is the situation. A party must behave unreasonably or vexatiously or there must be an unreasonable delay before a costs award can be made. My understanding of clause 22 is that it changes that, so that there is no longer in the primary legislation a requirement for vexatious or unreasonable behaviour to have occurred before a costs award can be made. If I understand the situation correctly, and the explanatory note is right, the circumstances under which an award under new clause 13A can be made will be different from those under which an award of costs generally can be made. It seems odd to say that the Government want to broaden the range of cases in which a general award of costs can be made so that there is not a requirement for vexatious or unreasonable behaviour per se, yet in the

case of preparation time, they will return to the old definition under the present law and require vexatious or unreasonable behaviour. That is significantly inconsistent. Perhaps the Minister can explain why it is felt to be necessary.

The issue is important; the preparation time required to defend against a tribunal application will impose a significant burden on employers, particularly small employers. I am sure that colleagues have experienced such cases. I have done so myself. A small business faced with a tribunal application may feel that it is in the right and can make a good case—it is not about to say, ''hands up, fair cop''—but not have the spare resources to deal with the preparation of the case, to go back to old records, to research and assess all that has gone before, in order to present its case effectively. Often, small employers—and even large employers—are left in a position of trading or trying to do a deal. An application is made, the employer considers his case and says, ''I think that I have a good case. I am confident that the case would succeed if it went before a tribunal, but I will need to take Fred off his job for three or four days to prepare for it. I will need to spend a day at the tribunal, in a town 30 miles away. It will cost us thousands of pounds and we cannot afford it.'' The sensible business decision is to cut a deal with the applicant, even where the application is unlikely to stand up in court.

A few weeks ago, I met a constituent who is the chairman of a large quoted company that employs about 30,000 people, half of them in the UK. He told me that it is routine in his business to buy off applicants to industrial tribunals because the disruption and cost in management time are too great. The Government's figures suggest that it costs businesses about £2,000 on average to prepare for a case. A sensible business will make an offer even to an applicant who does not have much of a case because its business logic tells it that it is better to pay out £500 or £1,000 and avoid spending £2,000. That stimulates precisely the type of applications that the Minister wants to prevent—applications that are without merit—in the hope that the employer will seek a financial settlement rather than incur disruption to his business.

I suggest to the hon. Member for Weston-super-Mare that there is no equity in the present system, which is unfair and likely to stimulate the sort of applications that we want to discourage. Therefore, new section 13A is an essential part of the Bill and, with respect to the hon. Member for Weston-super-Mare, to suggest deleting it without proposing a more effective alternative is a betrayal of the interests of small business that the hon. Gentleman so ably represents on other occasions.

I do not deny that there are some concerns surrounding the issue. The hon. Member for Amber Valley identified one of them—the fact that the threat of substantial costs may deter applications that are well founded. No one wants to create in the tribunal system a situation that already exists in the legal system, whereby even some people who have very strong cases fear to tread because the process can

become so expensive if they are not ultimately successful. I would be interested to hear the Minister on that.

I suspect that the sensible answer is some sort of fixed tariff approach to awarding preparation costs. That approach would deter the frivolous or speculative case. It would also address the problem which I have outlined of businesses being tempted to negotiate a settlement in cases that they would be almost certain to win were they to go to the tribunal, as long as they could expect to recover a reasonable sum—the figure of £2,000 a case is a good guideline—for their preparation costs. If the hon. Member for Weston-super-Mare does not seek leave to withdraw the amendment, I shall certainly urge my hon. Friends to vote against the proposal to delete new section 13A, while recognising that the amendment raises some important issues that need to be probed.

Grouped with amendment No. 2 are amendments Nos. 8, 17 and 15, to which I shall speak briefly. Amendment No. 8 would delete the word ''may'' and insert the word ''shall'' in its place. Its purpose is to seek confirmation from the Minister that the Bill will definitely include a provision for compensation for preparation time. I have already spoken about the package approach taken in the Bill. A significant part of that package for employers, especially small employers, is the ability to recover compensation for preparation time. I want to be reassured that the regulations will include a provision to authorise a tribunal to order a party to make a payment by way of compensation for preparation time, and that there is no danger of such a provision being lost twixt cup and lip, because when the Minister consults on the regulations he will undoubtedly come under all sorts of pressures from various parties to tilt the playing field one way or another.

Amendment No. 17 is a probing amendment. With the amendment, the clause would provide that an employment tribunal could order a party to make a payment in respect of preparation time in specified circumstances. I tabled the amendment to probe what circumstances the Minister had in mind. Does he intend to leave the matter entirely to the discretion of the tribunal or does he intend to specify the circumstances in which it would be appropriate for a tribunal to award costs?

Amendment No. 15, which mirrors our earlier debate about taxation and assessment, incorporates a provision that I assume will be necessary to allow a tribunal to determine the payments to be made under new section 13A. I expect the Minister to be able to confirm that such a provision will be included in the regulations, but tabling an amendment to the Bill is the only way that we can elicit that confirmation.

In addition to the Minister's answers to earlier questions about the fixed tariff and about how the time of unemployed applicants will be priced, it is important for Committee members to have some understanding of how the whole structure will work in a way that is fair and that achieves the underlying purpose of this part of the Bill. That is, to disencumber the tribunal system from the burden of cases that

should not be brought but that have resulted from the growth of the compensation culture in this country, where more and more people seem to be willing to take a punt on an application, in the hope that they might win or, perhaps more likely, that their employer might make a rational business decision and give them a sum of money just to go away and forget the matter, thus avoiding putting himself to significant costs and trouble in defending the case. I am grateful to the hon. Member for Weston-super-Mare for giving us an opportunity to debate this issue, but his amendment, which would delete a part of the Bill that is important to employers, is not the best way to go about it.

Before I conclude, there is a paragraph in the Law Society briefing to which I do not think the hon. Member for Weston-super-Mare referred, and which I do not understand at all. Perhaps it would be helpful if I were to draw the Committee's attention to it, so that the Minister, drawing on his infinitely greater resources, can deal with it. The Law Society says:

''The more difficult question will be how to compensate an applicant for preparation time when this time has already been accounted for in the calculation of the compensatory award. To include this time in the costs award would be to compensate the applicant twice at the same time, but to ignore this time would be to demonstrate the inherent unfairness to applicants of this provision.''

I must be honest and say that I do not have the faintest idea what the point of that paragraph is.

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Mr Norman Lamb (North Norfolk, Liberal Democrat)

I have written a book on compensation in employment tribunals, but I do not have the faintest idea what the point is, either. The passage seems to be nonsense. The compensatory award is designed to compensate the employee for the loss suffered as a result of dismissal, and is irrelevant to the question of the costs of preparing for the case.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

One hopes that somebody from the Law Society will read the Official Report of the Committee's proceedings.

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Mr Rob Marris (Wolverhampton South West, Labour)

Perhaps I can assist hon. Members. I have neither read the briefing—as I said earlier, I received it in the post only this morning--nor written a book about the matter, but I think that the Law Society is saying that the compensatory award is designed to compensate the applicant for being unemployed for the period between the unfair dismissal and the tribunal hearing. When the Law Society refers to double recovery—I do not agree with this—it means that, if an applicant won his case, he would be paid for that period of unemployment and for his preparation time leading up to the employment tribunal. That is the society's approach.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am grateful to the hon. Gentleman, because that makes sense to me. I think it is relevant to the issue raised by the hon. Member for Weston-super-Mare about an unemployed applicant, who, it could equally be argued, is paid for his time in unemployment benefits. I would be interested to hear

the Minister's take on the issue. I believe that other Committee members wish to speak and I look forward to what they have to say and to the Minister's replies.

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Mr Rob Marris (Wolverhampton South West, Labour)

At first glance, amendment No. 2 seems quite attractive. I hope that the Minister can reassure me, because I am concerned about proposed new section 13A. The way in which it is phrased—guidelines would be issued under it—seems to depart from normal procedure in civil courts. Normally, the litigant in person would recover costs for his preparation time, but if he was professionally represented, he would not. Were the litigant to be successful, his professional representative's bill would be recovered. I hope that that can be clarified in any regulations to be made under proposed new section 13A.

I would also like the Minister to say whether 13A will cover only vexatious and mischievous circumstances, or whether it will be broader than that. The powers in the Bill for employment tribunals to make regulations are broader than that, although I understand that the Minister intends to confine any overall rules on costs to those criteria.

Preparation time is different. However much one may call for equity, there is rarely equity between parties at employment tribunals. For example, managing directors may spend an average of 47 hours preparing a case. Because many of them are overpaid, particularly when they underperform, they will charge a much higher rate for their preparation time—should they be successful—than an unemployed applicant or one who works for the Post Office and has the misfortune not to be a member of the Communication Workers Union and is not therefore assisted in his or her case. The difference would be one of £100 an hour for a managing director against £6 an hour for a postman.

Thus there is a disparity between parties. However much one may wish for equity in employment tribunals, one will never get it. For example, tribunals have the power to order the reinstatement of unfairly dismissed applicants, but even when such orders are made, employers can sidestep them and the unfortunate applicants continue to be unemployed and cannot return to their jobs. There will never be equity between the parties, however much we might try to legislate for it.

I echo the call for the Minister to issue guidelines on new section 13A, because I believe that payments should be capped to a certain percentage of the £10,000 limit introduced in July. Those guidelines should be tight, and should lessen the disparity between poorly paid applicants and employers. I concede that some managing directors can apply to a tribunal—indeed, I once acted for one who was earning more than £50,000 a year, although most applicants earn far less than that.

Will the Minister explain how the guidelines deal with a successful applicant who instructs a solicitor? The solicitor would charge for his time, but could the winning applicant or the winning company's

managing director recover their preparation time? Double recovery would be a departure from what normally happens; if a solicitor or a barrister acts for someone in the civil courts, that individual's time can be recovered and the bill can be taxed or assessed, but people do not recover their own preparation time. That is in contradistinction to civil litigants in person; they are not legally represented and can therefore recover their preparation time. Is double recovery envisaged in the regulations to be made under new section 13A?

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am fascinated by the hon. Gentleman's argument, but I suspect that it betrays his background in the legal profession. It is self-evident that in many cases the respondent will sink his own time or his in-house time into preparing and extracting details to be passed on to his legal representative. However, to constrain the use of human resources, he can do what many do and ask the legal boys to get on with it. In the latter case, the lawyers will clock up big fees, all of which they will be able to recover. It might be bad news for the lawyers if the respondent uses in-house resources to minimise the legal fees, but it would be good for the system because it would keep costs down. My experience of dealing with lawyers has been that it is cost effective to do as much work as one can, or for the company to do the work in-house, because it provides the best possible base of material to the lawyers and thus keeps down their time and their fees, which can be £200-odd an hour.

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Mr Rob Marris (Wolverhampton South West, Labour)

Would that I had been earning £200-odd an hour when I was practising law. A survey published by the Gazette Weekly Journal of the Society this week said that in-house lawyers are generally considered cheap, but I hope that the Minister will elucidate the matter and say whether the guidelines will be so tight that that disparity will not be a factor. I hope that the guidelines will be at or below the cost of in-house lawyers, that outside lawyers will be subject to taxation or an assessment of costs and that, if the bill is too high, it should be cut down by a tribunal or assessed by a county court assessor. I hope for some strict guidelines.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

This is a culling amendment rather than a probing amendment. It is a strange way to probe, but I am suitably probed. Nevertheless, the amendment gives us the opportunity to discuss an important issue that is of concern also to my hon. Friends. It would be wrong to delete subsection (2), which is the basis for fairer recompense than that currently provided. To avoid doubt, and bearing in mind our curious exchange about the explanatory notes, I should say that we are clear on the fact that the cost awards will not change. Currently, they are made when a party or its representative has behaved vexatiously, abusively or otherwise unreasonably, or when the bringing or defending of the case has been misconceived. That is set out in legislation and no change is intended. The preparation time, which we are debating, is merely another measure to provide for the cost awards and does not change the basis on which they are made.

That is an important point, and I accept that we have to read a large amount in a short period. However, the explanatory notes state:

''It is also intended that the new awards''—

the preparation time—

''could be made only in the circumstances in which a costs award may be made at present, that is, where the party has behaved unreasonably in some way''.

The notes use a shorthand and do not go through the list of criteria, but it is clear that we are not changing the basis on which cost awards are made.

Cost awards relate to 2 to 4 per cent. of cases. The hon. Member for Weston-super-Mare quoted a figure that I did not recognise, which was that last year there were 247 cost awards out of 130,000 applications. I do not agree completely with him about the extent of the problem. There are many reasons for the increase in cases. People are more aware of their rights and, thanks to the Government, they have more rights to be aware of. Under a previous Government, qualification to go to an employment tribunal and claim unfair dismissal was hiked up to two years from one year—I think that it was down to six months for a time—but we have reduced it to one year. Those are relevant factors, but the growth in employment tribunal cases started 10 years ago. In the late 1980s, the then Government considered the rise. There are an awful lot of reasons for it.

We must not get carried away with the idea that a large proportion of applications are vexatious or unreasonable. That is not the case. On anyone's assessment, the percentage is tiny.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

My figure of 247 could increase substantially. My main purpose in mentioning it was to suggest that there has not been a great deal of experience in assessing costs, in spite of the great many cases that are made. The object of the amendment is to highlight grave concerns about cost awards.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

Let us deal with cost awards. My hon. Friend the Member for Amber Valley rightly mentioned our evidence. Much of it is from the consultation on ''Routes to Resolution'' and suggests that the increased limit on costs from £500 to £10,000 at employment tribunals—there has never been a limit at employment appeals tribunals—has been used to browbeat people into not pursuing claims. That is why we have said that we shall have a complete study of cost awards and the way in which they operate. We will issue fresh guidance and ask the employment tribunal system taskforce to consider the issue.

The concern relates to the £10,000, which I think that my hon. Friend suggested was a new complication. The system is fairer. Only 2 to 4 per cent. of cases may be involved, but that is still an awful lot of cases that should not clog up the system, and the numbers are rising. At the moment, either the respondent or the applicant have a cost award made against them. Out of 247 awards last year, 167 were against the applicant. Eighty cases—32.5 per cent., which is almost a third—were made against the respondent, so applicants do not always have the cost awards made against them. In those cases, the primary

way in which a cost award would be assessed would be legal fees, among a few other odds and sods. No compensation can be obtained for the time spent preparing for the case. Fewer than a third of respondents—29 per cent.—use external legal representation at a hearing. Of applicants, fewer than a quarter have any legal representation—that is around 20 per cent., according to information collected three years ago, so things may have changed, but those are the latest figures on which we can work. It is weird, in a system meant to discourage legal representation and encourage a more informal atmosphere, that the person who does without legal representation and spends days at the kitchen table preparing for a rigorous, daunting procedure, cannot be awarded costs.

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Mr Norman Lamb (North Norfolk, Liberal Democrat)

The Minister describes a respondent who is not legally represented. However, someone might be legally represented but use up substantial management time in instructing lawyers and preparing statements. Does the Minister envisage that the regulations will allow an award of both legal costs and preparation time where the respondent is legally represented?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

Yes. I shall come to that, because I want to touch on the points about overlapping.

Under the current rules, parties can recover only costs—primarily legal costs—that they have actually incurred. There is no provision for litigants in person to recover their costs at tribunals, as is the case in civil courts and in employment appeal tribunals. There is no power to compensate a party for time spent preparing for a tribunal case. That makes little sense in a system that we say should not encourage legal representation.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The Minister has painted a vivid picture of an applicant or respondent spending hours or days at the kitchen table preparing a case, and being unable to recover anything under the present system for that time input. However, under the system that he proposes, would not the vast majority of applicants or respondents still be unable to recover anything for that time? I understand that he proposes to limit the recovery of costs to vexatious or improper applications. Where is the justice in that for someone who, having spent large amounts of time responding to a case, wins it, even though it might not be vexatious? That seems iniquitous.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

That has little to do with the amendments. The hon. Gentleman may be under a misapprehension, which is why I made it clear that we are talking about costs awards, not about the 96 to 98 per cent. of cases in which the individuals concerned feel that they have a just case. Those people might turn out to be wrong, but they are not just taking a punt. Their cases are not vexatious. They feel that they have an argument. We are not trying to do anything about those cases. We are dealing with the basis on which costs are now awarded, not extending it.

Preparing for an employment tribunal can be time consuming and costly, particularly if a party is pursuing a case without a representative and must do all the work unassisted in their own time. The current provision fails to recognise that. We also intend compensation for preparation time—the point made by the hon. Member for North Norfolk—to apply beyond litigants in person. It could also apply to represented parties. For example, it might be payable for an applicant who was represented by his union, but who still needed time off to put together his case, or for an employer who engaged representation for the hearing but who had to spend part of the working day putting together the documents and evidence.

As with any new measure, we will take great care in framing the regulations. Specific points raised on these matters included one about the overlap and double counting. Given that the tribunal that will decide on compensation for unfair dismissal will also decide on costs awards, there is no problem. In that regard, the strange arguments advanced by Law Society representatives on both sides of the House cancelled each other out. Neither understood the argument—search me for an explanation! In any event, costs awards will be decided not by a separate body but by the same party.

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Mr Rob Marris (Wolverhampton South West, Labour)

I confess that I am slightly mystified by that explanation. Subsection (1B) states that costs will

''be assessed by way of detailed assessment in a county court''.

Perhaps I have completely misunderstood him, but is my hon. Friend the Minister saying that although the preparation time element of a costs award will be dealt with exclusively by an employment tribunal, other aspects could be assessed by a county court?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I will take a rain check on that. Previously, a costs award of more than £500 could be made, but it would have to go through the county courts. In July, we increased that figure to £10,000. There is a complication in respect of employment appeal tribunals and county courts, but if my hon. Friend will allow me, I shall get back to him on that. The regulations should make it absolutely clear that there must be no double counting, and we shall deal with that point when we frame them.

The hon. Member for Weston-super-Mare raised a number of important points. We envisage compensation in respect of other employees' time, but productivity loss will probably not be included in a costs award because it would be too difficult to calculate. We will bear the point in mind.

We envisage taking witness time into account, although the employment tribunals service already pays expenses to cover that. Calculation of applicants' time, particularly for the unemployed, was raised by several hon. Members, including my hon. Friend the Member for Amber Valley. It should be possible to make such calculations on the basis of the rate of pay of an unemployed person's last job, but we will consult on the regulations. We must have a feasible system for assessing the unemployed.

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Mr Mark Prisk (Hertford and Stortford, Conservative)

How would the Minister calculate the time of the self-employed?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

On the basis of the value of their time. We must find a way to calculate what an hour of a person's time is worth, whether that person is employed or self-employed. I believe that such calculations are made in the civil courts.

This issue is important and requires care. Amendment No. 15, which was tabled by the hon. Member for Runnymede and Weybridge, seeks to ensure that regulations enabling tribunals to make awards in respect of preparation time also contain some mechanism for assessing the amount of such awards. According to the amendment, the mechanism should involve taxation or settlement by other means, or fixed sums should

''be payable by reference to criteria set out in the regulations.''

Taxation or detailed assessment would not be applicable, however. We are talking not about something tangible in terms of legal costs, but about something that is not made under a particular head of expenditure or loss. Determining the amount by reference to proof of costs incurred would be difficult and time consuming, and that would not be the best way to approach the matter. Instead, the tribunal will assess the appropriate amount in the light of all the circumstances. Challenging such an award would not be an exercise in taxation or detailed assessment in the courts, but would involve disputing the way in which the tribunal exercised its discretion in making the award.

A sensible basis in regulation will deal with the disparity between the resources of the employer, given a scenario in which the employer is the respondent, and those of the applicant, who might be unemployed. The tribunal is always obliged to consider such issues on the basis of what is reasonable. That is why the average cost award last year—there were 247 of them—was £295. In all cases of cost awards, the tribunal takes into account the reasonableness of the award, and that will be no different under the regulations. We shall not exceed £10,000 costs; awards must be within that figure.

My hon. Friend the Member for Wolverhampton, South-West suggested that an award could be a percentage of the total. That is a valid point, and we shall look at it in the consultation. I would not rule it out at the moment. However, I would rule out deciding on an issue-by-issue basis. I think that we all agree on the need for clear guidelines for tribunals.

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Miss Judy Mallaber (Amber Valley, Labour)

I am unclear whether my hon. Friend the Minister is saying that if the applicant is successful in being awarded preparation costs, those costs will be limited to his hourly pay rate or, if the person is unemployed, to his former hourly pay rate. Even if there is a limit on the costs, there will inevitably be substantial disparity between the hourly rates that could be awarded in costs to the applicant and to the respondent.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The actual costs would be the figure. Some 19 per cent. of employment cases concern professionals, so in the case of, say, Robbie Williams, on whatever he earns each week, the figure would be based on the actual costs.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The hon. Gentleman has just about caught up with the Beatles now that two of them have died.

My hon. Friend the Member for Amber Valley is correct in that disparity exists, but there is disparity only in the amount that an individual would lose. Whether an applicant is a postman or a solicitor, the cost is based on something tangible—the time used. While there will be disparities, they will be fair and just.

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Mr Rob Marris (Wolverhampton South West, Labour)

I should like to probe that point and the broader issue of witnesses, to which the Minister adverted before. Witnesses receive expenses for attending a tribunal. They do not receive expenses for preparation time. More and more frequently, tribunals make orders for witnesses, or parties with their witnesses, to produce statements before the tribunal in order to clarify issues. That often requires the prospective witness to spend an hour or more with a representative or with the applicant.

There is not only disparity between the hourly rates of, say, a managing director and a postman. There is further disparity in that there is generally only one applicant. I know that there can be group actions, but it likely that one postman might get together with former colleagues and fellow workers to put his case.

In the case of a company—particularly a large company—a board of directors would have to meet to discuss, for example, a race discrimination case brought by an individual, as the board of directors of the Ford Motor Company in Dagenham might have done when it faced cases brought by the Transport and General Workers Union. When considering preparation time, should we add in the preparation time of the managing director, the chief executive, the chairman, the treasurer, the company secretary and perhaps 15 people sitting round a table? Upwards of a dozen people on the respondent's side may deal with a case and expend preparation time, whereas there will usually be only one person on the applicant's side, and possibly some witnesses. That increases disparity. Will the guidelines cover that scenario, in terms of caps and percentages?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The guidelines will—but let us return to the basis of the clause. It must be right for cost awards to take into account the time spent by people who are not usually legally represented. The minority of applicants and respondents are legally represented, even now. It must be fair that, when a case is vexatious and misconceived, someone who has spent time coming to court and preparing for the case should be compensated for that time. If we take that as a basic principle, I accept what my hon. Friend says about the need to ensure that we get it into perspective when we

set up the regulations. We shall do that, and we shall consult widely, but his arguments should not override the basic justice of the argument for introducing an element for cost awards on the existing basis.

We intend compensation for preparation time to go beyond litigants acting in person; it may also apply to represented parties. We shall take great care in framing the regulations, and shall set out guidelines that will enable the tribunal to assess what would be reasonable compensation for preparation time. A worker may have to spend time gathering evidence, arranging witnesses and assembling his or her case. Tribunal allowances already cover loss of earnings for attendance at a tribunal, so it is inconsistent that there should be no possibility of compensation for preparing for the tribunal as well as attending it.

Concern has been expressed that the provision could lead to excessive claims. Tribunals have an overriding objective to deal justly with cases, in proportion to the complexity of the issues, and they will not be sympathetic to excessive claims. We are considering how to define the size of preparation time awards, perhaps against average costs per jurisdiction. We shall also consider a ceiling on compensation awards, as suggested by my hon. Friend the Member for Amber Valley. In any case, the regulations will provide that when a tribunal has made an award of both costs and preparation time, the total will not exceed the current limit for costs awards. We shall consult on the regulations, giving full consideration to suggestions about how they should be framed.

On amendment No. 8, I can give the categorical assurance that the hon. Member for Runnymede and Weybridge sought. It is unnecessary to substitute ''shall'' for ''may'', for the reasons with which I have bored the Committee senseless on a couple of occasions.

Amendment No. 17 is a probing amendment. Including the phrase, ''in specified circumstances'' is unnecessary. If the amendment seeks to provide that the procedure will take place in the circumstances already set out for cost awards, it does not need to do so, because that is clear in the Bill. If the hon. Gentleman is suggesting that the amendment goes further than that, we resist it because we have not at any stage proposed to extend the base for cost awards.

On that basis, I ask the hon. Member for Weston-super-Mare to withdraw the amendment and, if he does not do so, I ask the Committee to oppose it.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I wanted to clarify the matter of Robbie Williams, because the Minister said that 90 per cent. of all applicants to tribunals were professionals, and I thought that that was a strange figure.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

No, I said 19 per cent.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Ah, now it is clear. I thought that the explanation could be found in the Minister's wide definition of professionals to include performing artists, but it is now clear.

The Minister and I had an exchange, following which I am clear that only vexatious or unreasonable cases will be capable of having either costs or

preparation time compensation awards made against them, so I understand what the Minister has in mind. If that assurance is to be taken at face value—I appreciate that the Minister is walking on something of a tightrope—and we are talking about only 2 per cent. of cases, we will not have achieved very much, because the mischief of employers being tempted to buy off applications with cash because of the unlikelihood of recovering their costs will not be addressed. In a case where the applicant does not have a reasonable chance of winning, the employer, if he succeeds, will probably recover his costs in defending himself, but the employer might be tempted to offer £500 or £1,000 to avoid going to the tribunal. That will have precisely the effect that the Minister does not want of encouraging cases that are not well founded.

I wonder whether the situation that I am painting and that the Minister has encouraged the Committee to think will occur is as bad as I have suggested. Later in the Committee's proceedings, we shall consider the provisions for conciliation that are to be introduced in the pre-tribunal procedure. Will the Minister tell the Committee how a tribunal will regard a case which the conciliation officer has made clear has no chance of succeeding? The Minister has talked about vexatious and unreasonable applications. I put it to him that, once the new procedure for conciliation has been introduced, a case in which the conciliation officer has told the applicant, ''There is no reasonable chance of you winning this case, you do not have a good claim,'' should be eligible for awards of costs and compensation for preparation time.

Will the Minister tell the Committee whether, in his regulations, the definition of cases where costs and compensation for preparation time can be awarded will be broad enough to include those cases where the conciliation officer has effectively rejected the applicant's claim?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I shall not be drawn on the hon. Gentleman's coming amendment. When we discuss the issue of conciliation, I shall explain why I believe that it would be absolutely wrong and against everything that we seek to achieve to have the conciliation part of the process somehow reporting to the system, for example by saying that a person is acting vexatiously. The conciliation process is about trust, the independence of ACAS and confidentiality, all of which would be breached if we were to go down the route suggested by the hon. Gentleman.

The hon. Gentleman makes an interesting point. He suggests that costs should be awarded to put an employer in a stronger position so that he would not have to settle to avoid a case going to the tribunal. I was in that position when I employed 250 people. People sometimes want to take a trade union to an employment tribunal and we had a minority of such cases. The route that the hon. Gentleman suggests would lead to the loser paying the winner's costs. The CBI, the TUC and everyone involved believes that, if we take that route, we might as well give up and hand over to the ambulance chasers, because we will have

no-win, no-fee legal representation coming out of our ears. As in Germany, people would have to take out insurance to cope with the situation. That is the direction towards which he is pushing us.

Photo of Mr Philip Hammond

Mr Philip Hammond (Runnymede and Weybridge, Conservative)

No, I have been careful not to go down that route. I have asked the Minister--I gave him the opportunity to respond by tabling amendment No. 17, which referred to ''specified circumstances''--whether he plans to define the circumstances in which an award of costs can be made as only where applications are vexatious or unreasonable on the face of it. Will he really make no reference to whether the earlier conciliation process has determined that the case has a chance of success? If an applicant has gone into conciliation and has been told by a qualified conciliation officer that his case has no prospect of success, it would be prima facie vexatious and unreasonable to continue with it. That was my question to the Minister, which he ducked by saying that he thought that such a procedure might cause problems with confidentiality. I am happy to postpone this debate until we consider another amendment that addresses the same question, but whether we are talking about costs being awarded in 2, 10 or 20 per cent. of cases is critical to understanding whether the power to award costs under new section 13A will provide any relief against a current mischief.

Photo of Mr Alan Johnson

Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

Let us postpone that debate until this afternoon when we discuss the other relevant amendment.

It is not only conciliation that weeds out vexatious cases, and we are not changing the basis of the application for wasted costs, which applies to between 2 and 4 per cent. of cases. The Bill will implement grievance and disciplinary procedures in every workplace and will beef up conciliation. The hon. Gentleman is wrong to say that we are not addressing the problems of the employment tribunals service because we have not increased the percentage of cases that could be affected. To do what he suggests would seriously jeopardise employment tribunals as places where people believe that they can seek justice, and would deter people who have a genuine case from pursuing it.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

I feel strengthened in my resolve by having the support of two such knowledgeable Members, my hon. Friend the Member for North Norfolk and the hon. Member for Wolverhampton, South-West, who clearly know what they are talking about.

We have had a good debate. We had no objection to the wording, but we needed to debate several points. The hon. Member for Amber Valley made a valuable point about intimidation, and it is important that that is on the record. The hon. Member for Wolverhampton, South-West made some clear points, with which we agree, about tightening the guidelines, about capping and perhaps introducing tariffs. As the Minister rightly said, the debate is especially important because there are not many cases to draw on. It is important to air the issues and to put them on record in order to get the legislation right. It is also

important that the employment tribunal rules of procedure are improved, and I am sure that they will be.

I am happy with the Minister's responses. The amendment was a probing one and I am happy to withdraw it, so new section 13A will remain in the Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I beg to move amendment No. 16, in page 32, line 27, at end add—

'(3) After that section there is inserted—

''13B Charges for Applications to Employment Tribunals

Employment Tribunal procedure regulations may include provision for authorising an employment tribunal to charge a fee payable by an applicant upon lodging an application with the tribunal, in such amount as the regulations shall provide.'''.

The amendment addresses an issue that was widely discussed at the time of the Government's consultation—

It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at half-past Four o'clock.