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

I was in the middle of my rather feeble peroration. Just to recap, we were talking about the effects of Polkey and I explained how the new regime will strengthen that judgment. Most cases that we examined, which fell under the Polkey judgment, applied to breaches in procedure that are now covered by the minimum standards—the three-steps procedure. I also explained that, crucially, there remains a requirement for the dismissal to be fair, which is what new section 98A addresses. However, there was some perceived ambiguity so I explained that, having checked amendment No. 78 with parliamentary counsel and having had it confirmed that it achieved the desired effect, we were prepared to accept it. We were not prepared to accept amendment No. 27 because it does not have the required effect, so I urged hon. Members not to press it.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

It comes from the wrong party.

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

That is true, but that is not why I asked hon. Members not to press it. A number of examples were given to show the way in which the Polkey judgment has worked and why the restoration of the no-difference test would, in my hon. Friend's view, be damaging. I explained that those examples would still have been unfair dismissals because they would not have met the basic need to be fair in all other respects.

I gave another important example of the way in which the current procedures do not work adequately. An employer who dismissed a number of employees for racially harassing their colleagues lost his case solely because of a procedural error, even though the tribunal acknowledged that it would have made no difference to the outcome. It applied the only measure that it is allowed to apply, which was an award of no

compensation to the employees—the worst of all possible worlds. Although the case was classified as unfair dismissal, there was no compensation and no one felt satisfied with the outcome. The background to the case was that the manager who had been charged with hearing the initial appeal decided to double check the complainants' point of view. Because the dismissed employees did not see transcripts of those second interviews with the complainants—they had had full opportunity to consider and comment on the original witness statements—the tribunal found that dismissal was unfair on procedural grounds. Under the new proposals, the tribunal would have discounted the procedural error since it made no difference to dismissals that were fair in every other way.

The Bill meets the requirement to ensure that dismissals are fair in every other respect. Amendment No. 78 seeks a spelling out of the fact that a no-difference line of defence where a procedure has not been followed does not, by itself, mean that the employer has acted reasonably. The drafting is fine and we are prepared to accept the amendment, but hope that amendment No. 27 is not pressed.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I apologise if this was covered when I was not in Committee before lunch, but can the Minister explain what will be the practical impact of the opening phrase of new subsection (2), ''Subject to subsection (1)''? I can understand how things might work if subsection (1) said,

''An employee who is dismissed shall''

subject to subsection (2),

''be regarded for the purposes of this Part as unfairly dismissed''.

However, I cannot understand what ''subject to subsection (1)'' at the beginning of subsection (2) means. It appears to me that it could undermine the entire purpose of the subsection.

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

I do not think that that is the case. It reinforces subsection (1), making it absolutely clear that the fact that a procedure has not been followed does not by itself mean that the employer has acted unreasonably. Amendment No. 27 was designed to do that, but failed, for the reasons that I gave this morning. Of course, the whole point of Polkey is whether the procedural error, in procedures over and above the minimum standards, would have made any difference to the decision to dismiss. That is the acid test that has to be passed. With that clarification, I urge that amendment No. 78 be accepted, and that amendment No. 27 should not be pressed.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The Minister, in his closing remarks, referred to procedures ''over and above'' the minimum standards. Are we to understand that subsection (2) applies only to procedures over and above the minimum statutory procedures? Is that what the Minister is trying to explain?

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

Yes. That is what I explained at some length this morning. I understand that the hon. Gentleman could not be here.

Mr Tony Lloyd (Manchester Central, Labour)

I have listened carefully to the Minister's explanation. Much of the argument turns on points that are difficult to interpret in such an exchange. In the end, it will be decided on what tribunals do and do not do in practice. The difference between the position of those concerned about the abolition of the Polkey test and that of the Minister is that he says that the tribunal will inevitably have to have regard to fairness anyway, even if subsection (2) is used. In other words, even if the employer can demonstrate that unfair dismissal is not automatic because of procedural failure, he will still have a duty to demonstrate that the dismissal is fair. That is not necessarily the view of all those who have looked at the position.

The suggestion is that once the Bill becomes law, the tribunal will be guided by a different test, that which is in the Bill. Nowhere is there a duty on the tribunal to examine the question of fairness. More to the point, nor is there the opportunity for it to use the test of fairness. Much will turn on the decision made about that. The Minister is right to argue, with regard to the tribunal's judgment in, for example, cases of racial harassment, that it is unfortunate if matters proceed simply because of non-relevant procedural detail. I do not think that anyone is arguing for that. However, it is not such an unsatisfactory judgment if the tribunal rules that technically the dismissal is unfair but, in practice, no award is made because it is a hollow victory, of a kind that the courts more generally are used to giving. At best, a hollow victory is an indictment of those who took the case forward.

I hope that the Minister can reflect on the serious points that have been raised, although I do not think that he will change his mind this afternoon. This is not, as I said this morning, a question of people digging themselves into trenches and trying to defend the indefensible. It is a concern generated by real cases that have been through the tribunals and have been found to be unfair. There is a strong fear that there will now be no basis for tribunals to deliver the judgments that were delivered in such cases.

We have time before Report, and certainly before the Bill goes to another place, to consider such matters. I hope that Ministers will continue to listen to the debate. It is an important one that is causing anxiety outside.

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

I shall not press amendment No. 27.

Amendment agreed to.

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

I beg to move amendment No. 49, in page 38, line 12, leave out 'Chapter 1 of'.

Clause 34(2) states that a tribunal will find that there has an unfair dismissal where the employer has, by their own fault, failed to follow the ''relevant statutory procedure''. That is achieved by amending the Employments Rights Act 1996. Schedule 2 sets out the relevant statutory procedure, which is known as the standard dismissal and disciplinary procedure. However, clause 34 fails to make an explicit reference to the modified procedure found in chapter 2 of part 1 of schedule 2. The modified procedure is therefore

outside the remit of clause 34. That means that if the employer uses the modified procedure, which may be appropriate to his circumstances, he can still be judged to have unfairly dismissed the employee even if all steps have been taken correctly to adhere to the modified procedure.

That has important implications, as according to the Library notes accompanying the Bill the modified standard is intended for use in cases of gross misconduct where summary dismissal is justified without notice. So, for example, I as an employer may have decided automatically to dismiss an employee because he has assaulted another employee. In doing so, I have ensured that I have conducted the dismissal in an appropriate manner by following the modified procedure set out in schedule 2. However, because clause 34 does not cover that modified procedure, I can still be deemed to have unfairly dismissed my employee.

The amendment would ensure that if an employer dismisses an employee for gross misconduct, the modified procedure, correctly followed, will protect him from claims that he has unfairly dismissed them.

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

Well spotted, as someone might recently have said at Athens airport.

I am grateful for the amendment, which highlights a significant oversight in the drafting of clause 34 relating to protection against unfair dismissal where the modified dismissal and disciplinary procedures set out in chapter 2 of part 1 of schedule 2 have not been followed.

Clause 34 inserts new section 98A into the Employment Rights Act 1996, making it unfair to dismiss an employee without completing the new statutory procedures. That means that employers will have to carry out the standard three-step procedure when dismissing an employee in order to avoid liability under new section 98A(1). Therefore, if an employer complies only with the modified two-step procedure set out in chapter 2 of part 1 of schedule 2, he will always automatically be found to have dismissed unfairly, as the hon. Member for Weston-super-Mare (Brian Cotter) said.

We intend to make regulations under clause 31 to provide for the modified procedure to apply where an employee has been summarily dismissed—in other words, dismissed without notice on the grounds of gross misconduct. It is important that in such circumstances employers should not be required to complete the full standard procedure.

However, much as I welcome the amendment because it draws attention to the problem, it would not achieve the desired end. The matter is more complex, in that further revision of the clause is needed to ensure that under new section 98A(1) there will be a finding of unfair dismissal in cases of summary dismissal only when the modified procedure has not been completed and that any question about the application, completion or failure to comply with either procedure is judged by the same criteria that will be used for the purposes of clause 31. That is best achieved by ensuring that the regulatory powers in clause 31, which deals with mitigation, apply equally to clause 34 so

that there is complete consistency. That will be essential if employers and employees are to have a clear understanding of when the modified two-step procedure, rather than the full three-step procedure, needs to be followed. I therefore intend to table an amendment on Third Reading and invite the hon. Gentleman to withdraw the amendment.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

Can the Minister explain why he is about to invite us to vote that the clause stand part of the Bill when he has just said that it is flawed, understood to be such by the Government and requires amending, although he has failed to table the necessary amendments? That is a serious abuse of the Committee's procedures. We cannot possibly vote that a clause stand part if the Minister says that it is flawed.

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

I have served on many Committees in which similar things have happened, including Committees on Finance Bills with the hon. Gentleman. If, during the proper scrutiny of a Bill, a member of the Committee spots a technical error, it is perfectly reasonable for the Minister to say that it will be amended at the first available opportunity and to ask the Committee to agree that the clause stand part on that basis. The wording of the amendment is faulty because it does not apply consistently to clause 31, and we shall ensure that our amendment does so.

Mr Norman Lamb (North Norfolk, Liberal Democrat)

I want to press the Minister a little further on his response to my hon. Friend the Member for Weston-super-Mare. We are pleased that he recognises that the clause needs further amendment, and appreciate that it is sensible to ensure that that has the desired effect. However, will he say more about when the modified procedure will apply? That procedure entails dismissal without any hearing at all, and only the right of appeal following dismissal. During the sitting on Thursday 13 December, the Minister said that it would apply only in extreme cases of gross misconduct.

I find it hard to imagine in what circumstances it would be appropriate to dismiss someone without any hearing, and with only the right of appeal following dismissal. In cases of violent misconduct, for example, the right way to deal with the situation immediately is to suspend the employee, not to dismiss them without the right of a hearing. There may be all sorts of reasons, such as provocation, that need to be investigated to determine whether dismissal is the right sanction. Will the Minister clarify the hopefully limited circumstances in which it would be appropriate to dismiss someone with no hearing?

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

We touched on this when we debated schedule 2 and its relevant clauses. For the absence of doubt, under the two-step disciplinary procedure for gross misconduct an employer may legally be entitled summarily to dismiss an employee without notice if his or her misconduct has been so serious as to amount to a fundamental breach of contract. That is often described as gross misconduct. The law does not specify what conduct justifies summary dismissal, and it is for the courts and tribunals to decide in the light of all the circumstances whether it is justified in a

particular case. We envisage that the modified dismissal and disciplinary procedure will apply in such special cases. That requires employers only to write to the employee after dismissal, but gives the employee an opportunity to appeal the decision.

Mr Norman Lamb (North Norfolk, Liberal Democrat)

Is the Minister saying that in all cases of gross misconduct it will be fair to dismiss without a hearing, allowing the employee only the right to an appeal?

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

In my experience, if someone in the Post Office was watched for a period of time and was accused of stealing letters or interfering with the mail, that would be classed as gross misconduct, as would severe violence against an employer. There is no disagreement about that and there is nothing new about the procedures. We have already debated and agreed the fact that there needs to be a modified procedure for discipline in such cases, and that in cases involving grievance procedures, where an individual has already left the employment for various reasons, it would be illogical to ask them to go back and reform a bond with the employer, which has already been broken, to go through the third step.

Mr Norman Lamb (North Norfolk, Liberal Democrat)

Does the Minister agree, especially in the light of his experience with the Post Office, that in many cases of alleged gross misconduct the facts are complex and that it is essential in the interests of natural justice to have a hearing before reaching a decision to dismiss? If he is saying that the modified procedure will apply in all cases of gross misconduct, then in all those complex cases where the facts need to be canvassed at a proper hearing, the employee will have no right to such a hearing.

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

We are talking about workplaces where there is no procedure whatsoever and where a procedure is being applied for the first time. We accept the need for a different approach to cases of gross misconduct. We have already debated that at some length. Under the modified discipline procedures in schedule 2, the employer must set out in writing the employee's alleged misconduct that has led to the dismissal and the employee's right to appeal against dismissal, and send a copy of the statement to the employee. The employee must inform the employer of his or her wish to appeal and the employer must invite him or her to attend a meeting.

What is missing is a provision relating to the case having to be properly investigated. This morning—when the hon. Gentleman was not here—we discussed the case of an employee who had been dismissed for theft in the context of the lack of an investigatory clause in the basic two and three-step procedures. I explained that if the employer had not taken reasonable steps to investigate the allegations made against the employee, the employment tribunal would be unlikely to agree that the dismissal was fair. That plays a part in the case having to be reasonable in all other respects.

Mr Rob Marris (Wolverhampton South West, Labour)

Does my hon. Friend agree that some cases of gross misconduct justify summary dismissal and some do not, and that the Government's proposed regulations could clarify those two categories?

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

That is exactly why we intend to set out in regulations the kinds of cases to which the modified two-step procedure could apply. Those would be subject to the affirmative resolution procedure.

The amendment, which relates to chapter 1, but not chapter 2, identifies a technical fault in the Bill. We are pleased to concede that it was well spotted, and we shall table an amendment on Report.

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

I do not intend to labour the point because the Minister has graciously accepted our argument. It is gratifying when we raise a point in Committee that needs to be addressed. On the Minister's assurance, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

I beg to move amendment No. 28, in page 38, line 16, at end insert—

'(c) references to 'a procedure' or to 'the procedure' in subsection (2) refer to non-statutory procedures that the employer is obliged to follow.'.

The amendment would further clarify the types of procedures to which new subsection (2)—in lines 3 and 5 of page 38—refers. The new subsection refers to the fact that an employee shall not be considered to have been unfairly dismissed because of a failure to follow procedure, if following it would still have resulted in dismissal. On reading the explanatory notes, the Government seem to intend that to apply to any procedures outside the minimum statutory ones. For example, the procedure referred to in lines 3 and 5 is assumed to include additional procedures such as those included in the employee's contract, or those based on union agreements. However, as it is currently unclear that those are the procedures to which new subsection (2) refers, the amendment is designed to tighten the wording of the Bill and ensure that the procedures that the employer is required to follow are the non-statutory ones. It would make it explicitly clear that the principle is intended to apply to procedures outside the statutory minimum, such as those used in the workplace taken from the employer's handbook.

Lines 3 and 5 of the new subsection refer only to ''a procedure'' or ''the procedure'', so it is not explicitly clear that the procedures referred to are those outside the statutory minimum. The amendment would ensure that an explicit reference is made to them and I look forward to the Minister's response.

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

The amendment is unnecessary. One effect of clause 34, which inserts new section 98A, is to reinforce the new minimum disciplinary and dismissal procedures by making it automatically unfair to dismiss employees without following the procedures. That is achieved in new subsection (1). The affect of new subsection (2), is that it will not be unfair to

dismiss an employee without following a dismissal procedure if the employer can show that following it would have made no difference to his decision to dismiss. That new subsection begins with words that are relevant to a comment made by the hon. Member for Weston-super-Mare: ''Subject to subsection (1)''. An employer will be able to escape a finding of unfair dismissal only by showing that following a procedure would have made no difference to the decision to dismiss, and only if it was a procedure that is not covered by new subsection (1)—a procedure other than the statutory procedure.

Failure to follow statutory procedures will always be unfair and the wording achieves the desired effect. The minimum procedures, which will always be unfair, and the no-difference test, which is a partial reversal of Polkey in some respects and a strengthening of it in others, will only apply to disciplinary procedures over and above the basic minimum.

Mr Norman Lamb (North Norfolk, Liberal Democrat)

To return to the point that I was making, I understand the Minister's comments to mean that a large organisation might have complied with the modified procedure in a case of gross misconduct—a complex case with complex facts. The organisation might have chosen to dismiss without a hearing; the employee has gone and an appeal has been allowed, and then dismissed. In those circumstances, an employer could go to a tribunal and say that the person would have been dismissed anyway, thereby establishing that the procedure followed had been fair.

A large organisation such as the Post Office will be able to dismiss people for all the different and complex types of gross misconduct without having had a disciplinary hearing if it can establish that conducting such a hearing would have made no difference.

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

We went through the issue this morning. The Polkey judgment was made in 1979 and reversed in 1988. The question is whether the employer would have made the same decision had the procedures been followed. We cannot get away from that.

As I went to great lengths this morning to explain, the words ''not automatically unfair'' do not mean the same as ''fair''. If an employer says at an employment tribunal that they would have made the same decision anyway, the tribunal will not say, ''Okay, that is fine''. The employer must prove that the procedural errors, which by definition will be procedural errors over and above the basic minimum, would have made no difference to their decision to dismiss.

An employer may say that their failure to follow an investigation set out in the disciplinary code of the Post Office made no difference to their decision, but they are hardly likely to get away with that at an employment tribunal. Indeed, we said this morning that in most cases that we have seen, the failure was in carrying out the basic three steps. An appeal was not held, the employee was not told of what they were accused and so on. We also said that if we did not have a change to Polkey and introduce the no-difference test over and

above the minimum standards, we would be discouraging employers from having more elaborate and sophisticated procedures than the basic minimum.

The fear that the hon. Gentleman raises has been expressed to me many times, but is not well founded. The Bill will ensure what we mean it to ensure. The basic minimum standards must be met, otherwise the dismissal is automatically unfair. We take a judgment on procedural issues over and above the minimum. That in no way detracts from the need for the employment tribunal to judge that the dismissal was fair in all other respects.

I hope that I have reassured hon. Members that the amendment is unnecessary. I ask the hon. Member for Weston-super-Mare to withdraw it.

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

On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I beg to move amendment No. 64, in page 38, line 26, leave out 'be required to'.

Mr Joe Benton (Bootle, Labour)

With this we may discuss the following amendments: No. 66, in page 38, line 28, at end insert

'and in determining whether such an award would result in injustice the tribunal shall have regard to the resources available to the employer to enable him to ensure compliance with statutory procedures'.

No. 67, in page 39, line 10, at end add

'and in determining whether such an award would result in injustice the tribunal shall have regard to the resources available to the employer to enable him to ensure compliance with statutory procedures'.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

Clause 34(3) states:

''An employment tribunal shall not be required to make an award under subsection (5) if it considers that such an award would result in injustice to the employer.''

The tribunal will therefore not be required to make an unjust award, but it will not be prevented from making one. Removing the words ''be required to'' would make it clear that the tribunal would not make an award if it would result in injustice to the employer. It is difficult to imagine how the Minister will justify leaving in words that will allow a tribunal to make an award that would explicitly result in injustice to the employer. I hope that he recognises the need to deal with that.

If I may stretch the scope of my amendment, the same point applies to new subsection (1B), where the words ''shall not be required'' are found again. An amendment that dealt with that subsection was technically imperfect and was not selected, so if the Minister deals with the substantive point, I will be happy to withdraw the amendment and see if it can be covered later.

Amendments Nos. 66 and 67 would add to the definition of injustice to the employer. I seek an assurance that there will still be a size or sophistication test and that when the tribunal examines questions of injustice to an employer in making an award, it will take into account the size of the employer and the

resources that are available. It would not necessarily have to judge the size of the employer. A small law firm that specialised in employment law might be expected to have the resources, but a motor repair workshop, to use an example that we have used before, that employed three people might not have enough resources to ensure compliance.

Again, these are probing amendments. I will be happy to hear the Minister tell us—as I believe that he may—that the existing procedures will remain unaltered and that size, sophistication and employer resources will be taken into account. I should be grateful for that confirmation.

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

As the hon. Gentleman explained, amendment No. 64 is designed to ensure that tribunals will never give a financial award on reinstatement or re-engagement if they believe that it would result in injustice to the employer. Subsection (3) already states that tribunals are not required to give the award if it would result in injustice to the employer. It is almost impossible to imagine a situation in which the tribunal would make an award that it considers to be unjust when it is under no statutory obligation to do so. I fail to see the necessity for such a change.

Amendment Nos. 66 and 67 would appear to lessen any burden on a small employer by directing tribunals to have regard to the resources available when deciding whether applying either the minimum award or award on reinstatement or re-engagement would result in injustice. It would be wrong to attempt to guide tribunals on what constitutes injustice. Circumstances will vary enormously, and tribunals will want to consider all relevant factors when considering whether it is just to make the award. I would not want to fetter their discretion, but it is likely that they might want to take into account the potentially greater impact of a fixed award on a business of limited resources. I repeat that it is right that tribunals should decide.

The suggestion that small employers—including our famous garage in Hull—will struggle to put the core procedures in place and follow them whenever necessary underestimates small firms and overestimates the complexity of the procedure. We have ensured that the statutory procedures represent basic and fundamental fair minimums and are not pitched at a level where following them will create difficulties for any employer of any size. Small employers that do not use procedures can only benefit from adopting the statutory minimums, because doing so will increase the likelihood of resolving a dispute before it reaches a tribunal.

I acknowledge that there clearly will be circumstances in which it will be reasonable for the employer not to follow the minimum procedures, or not to follow all of them, as we have discussed on various occasions during the Bill's consideration. We will make provision in regulations to ensure that employers will not be penalised in such circumstances, but in the vast majority of cases it is right that employers who do not meet their obligations to complete the basic procedures should face a penalty, except when a tribunal considers that such an award

would be unjust. That may well have taken into account a minor breach of the statutory procedures that apply to small businesses, whose resources would be severely affected by the penalties in the clause. I therefore invite the hon. Member for Runnymede and Weybridge to withdraw the amendment.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

For two and a half weeks I have listened to the Minister handing himself enormous powers by regulation to fetter the discretion of the tribunal in every imaginable direction. It is therefore a bit rich for the hon. Gentleman now to say that he would not want to fetter the discretion of the tribunal. That is not the tenor of what the Government propose to do with the regulation powers they are giving themselves in this part of the Bill.

I am not persuaded by the Minister's argument. I am anxious about the direction and the packaging of clause 34, which is perhaps the most sensitive clause in the Bill. Some Back Bench amendments have been accepted and the Minister said that others need to be made, but unfortunately he did not tell us precisely what those amendments will be. I had hoped that the Minister would be more robust in suggesting that he would not expect small and less competent employers to be treated harshly and that the provisions would take into account a genuine lack of capacity and the innocent failure to comply, as we discussed earlier.

In view of the Minister's determined resistance to the uncontroversial proposal that the words ''be required to'' be taken out, I will not press the amendment to a vote. We shall return to the matter when we discuss the general issues in the clause stand part debate.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause, as amended, stand part of the Bill.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The Question before the Committee should include the words ''and as to be amended''. At the risk of repetition, which does not worry me much, I say that clause 34 is a sensitive part of the Bill and I am surprised that the Government have accepted amendments that may upset its delicate balance. It was not apparent to me that the hon. Member for Wolverhampton, South-West (Mr. Marris) tabled a Government-planted amendment or, indeed, one that the Government agreed to in advance. I am not sure that that was understood outside the House, although it may have been understood by the TUC.

The hon. Member for Manchester, Central (Mr. Lloyd), who is back in his place, urged the Minister to go still further and revisit some of the essential issues in clause 34 at a later stage of the Bill. The Minister has already embarked on the slippery road of accepting amendments and he has been urged by his hon. Friend to make more changes. The slightly grudging consensus about this part of the Bill will be

undermined if changes are slipped in now as a result of pressure from Government Back-Bench Members or from outside bodies.

Mr Tony Lloyd (Manchester Central, Labour)

For understandable reasons, the hon. Gentleman was not with us this morning. If he had been, he would have heard several of his hon. Friends sympathising with the Minister's objectives. The debate concerned whether the Bill will achieve what we want it to: there was no difference in objectives or ambitions. The hon. Gentleman should agree with fairness in industrial relations.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The hon. Gentleman knows that I am in favour of fairness. One of the principal objectives of all legislation is that people should be treated fairly, and I abhor unfairness in all its forms. However, the hon. Gentleman's approach is slightly naive. This is the most sensitive clause in this part of the Bill, and it is, unfortunately, being tampered with. If the Minister is tempted to tamper with it any further, as has been suggested, he will provoke a reaction.

Since the debate, I have examined the briefing from some of the small employer organisations. It may surprise the Minister to learn that the significance of the words at the beginning of proposed new section 98A(2), ''subject to subsection (1)'', has not been fully appreciated by those outside the House. Some commentators have interpreted it as restoring the state of affairs before the Polkey judgment. Clearly, that is not the Minister's intention, so some people will be disappointed that they over-egged the pudding in their interpretation of the Government's actions. They will also be disappointed that the Government are to retreat further from their previous position, which they defended vigorously.

I made unkind comments about the Law Society's amendments earlier, so I am delighted that its efforts today seem to have achieved a 1-1 draw against the Government's draftsmen. I am disappointed that the Minister has not produced the amendments that he says will be necessary for this clause and for clause 31. I find it strange that we debated clause 31 without the Minister mentioning that it has a fundamental flaw. After the debate, and clause stand part, he tells us that he will amend it.

This morning, I mentioned parliamentary sloth. The Liberal Democrat amendments that deal with the Law Society's points, which the Minister has accepted, were tabled on Friday. I would have thought it possible that the parliamentary draftsmen—with guidance from Ministers and civil servants—could have made amendments available today. They would have been starred, Mr. Benton, but you could have used your discretion if you felt it useful for the Committee to consider them.

I am disappointed that the Government have not tabled those amendments that they described as essential. They could have been considered today, but will now come at a stage when detailed consideration will not be possible. As we all know, the Report stage of the Bill will be timetabled. New clauses will be considered first. It may be the case—it often is—that we will not reach amendments in time to debate them

and that they will simply be voted on at the end of the allotted time. That is unfortunate. As there has been a clear failure in the Bill's drafting, the Government should concede that detailed scrutiny of this part of it and of any further amendments would be appropriate and beneficial. That would avoid unanticipated pitfalls requiring further changes to the legislation at a later stage.

I am concerned about tampering with this delicately balanced part of the Bill and I am disappointed that the Minister has not tabled the necessary amendments for us to consider.

Mr Norman Lamb (North Norfolk, Liberal Democrat)

I endorse the comments of the hon. Member for Runnymede and Weybridge (Mr. Hammond) about the importance of proper scrutiny of the amended clause. As it is not available, that opportunity will be missed. I am grateful that the Government have recognised the merit of our amendment, even though it does not achieve the required objective and so a further amendment is necessary. I share the concern about the lack of scrutiny.

I stubbornly stick to the view that the combination of the effective reversal of the Polkey case and the modified procedure will result in a substantial weakening of the protection for employees facing allegations of gross misconduct in certain circumstances. I urge the Minister to look carefully at the potential impact on fairness to employees. It is fine in certain cases where the evidence is stark and obvious, but in the more complex cases there is a weakening of the protection for employees, who can be dismissed under the modified procedure without a prior hearing. I urge the Minister to consider whether that issue could be addressed by an amendment or by the regulations limiting more than has been so far indicated by the circumstances in which the modified procedure would apply. I would expect there to be grave concern among Government Members on the implications of the loss of the right to a hearing before dismissal in complex cases of allegations of gross misconduct.

Mr Rob Marris (Wolverhampton South West, Labour)

I should like my hon. Friend the Minister to summarise one or two of the issues to which we have referred during consideration of this part of the Bill, as clause 34 is the linchpin. He has clarified that under the basic procedure the existing right to be accompanied will continue and that under schedule 3 there will be a right to a fair process rather than a fair hearing. I confess to being unclear as to whether there is a duty on the employer to investigate and I hope the Minister will clarify that.

I turn to the contribution of the hon. Member for North Norfolk (Norman Lamb). Will the Minister clarify a time frame for a review of the procedures in clause 34 and schedule 2 to see whether the problems posed by the hon. Gentleman are realised? I asked this morning whether the change in emphasis of Polkey leads to a dilution of existing procedures that are better

than the schedule 2 minimum, and whether subsection (2) of new section 98A would lead to employers simply not following the enhanced procedures.

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

The hon. Member for Runnymede and Weybridge must have had a bad time at the Adjournment debate, as he is not his usual, charming self. Understandably, he could not be with us in Committee this morning.

I struggle to see what great concessions I have made on the clause. We have had a good debate, and we went into the matter in some detail. My hon. Friend the Member for Wolverhampton, South-West called the clause the lynchpin of the Bill. We discussed clause 29 and schedule 3 and agreed that there should be a statutory minimum procedure. We agreed that there were cases where even those statutory procedures would not apply, such as cases of bullying, harassment and violence, which will be set out in regulations. We also agreed that a modified procedure is needed to deal with certain cases of grievance and discipline.

Clause 34 deals, in effect, with the no-difference test. This morning's debate made it clear that we have introduced those basic provisions and that employers are expected to comply with them. If they do not, a dismissal will automatically be unfair. We also discussed the fact that the change to Polkey referred to discipline procedures above the minimum.

Several Opposition Members, including the hon. Member for Hertford and Stortford (Mr. Prisk), expressed concern that there may be an inconsistency in having minimum procedures, encouraging people to abide by them and then making it seem as if they did not have to abide by them because the no-difference test would be restored. I explained that we were setting a minimum standard, encouraging people to move to a more sophisticated system and taking account of the ACAS code. If we did not reverse the no-difference test, employers would rightly wonder why they should move to a more sophisticated code if they could be found to be wrong on a minor error of procedure, irrespective of the fundamentals of the case.

I accepted the amendment tabled by my hon. Friend the Member for Wolverhampton, South-West on the basis that we had made it clear that nothing in clause 34 changed the requirement of the employment tribunal to ensure that the case of unfair dismissal was fair in other respects. That obligation is placed on the tribunal. My hon. Friends believed that that was not clear enough in relation to clause 34(2)(c), and I therefore accepted the amendment in the spirit of making clear what we had set out to do. We are criticised for accepting sensible amendments and for not accepting them. The amendment is sensible, and we accept it. I reassure the hon. Member for Runnymede and Weybridge that that makes no difference to the fundamentals of the Bill, to the issues on which we consulted or to the message that we sent out to employers and employees about the new rights and responsibilities in the Bill.

I also accepted the other amendment. Once again, we are damned if we give no warning of forthcoming amendments and we are damned if we listen to a carefully argued amendment and respond by saying

that we will table an amendment. The amendment does nothing other than point out, as the hon. Gentleman did, that there was an error in the drafting. Because of that error, an employer who followed only the modified procedure that we agreed last week under clause 29 would automatically be found to have dismissed unfairly. We must deal with that and we are doing so through an amendment. It is no big deal. Employers' organisations are unlikely to be marching on Downing street tomorrow. This part of the Bill does not fundamentally change anything.

The concerns of my hon. Friend the Member for Manchester, Central are understandable and other Government Members have also asked me to think again. However, I believe that the balance is absolutely right. This morning, my hon. Friend the Member for Wolverhampton, South-West asked whether we would keep the process under review. Once it has been implemented and has had time to take effect, we will consider the employers' argument that reversal of the no difference test will encourage participation in the fuller procedures. As to my hon. Friend's concern—shared by my hon. Friend the Member for Manchester, Central—we would obviously examine the position carefully, but we believe that the balance is just right. None of the amendments—neither the one we accepted, nor the other intended for Third Reading—disturbs the balance. Clause 31 is not being amended. Clause 34 is being amended to make it consistent with clause 31. We are therefore talking about two, not three, amendments here.

If members of the Committee have listened carefully to the debate and examined the explanations offered, they should feel happy that we are amending the provisions for the better, without fundamentally changing the principles. The error pointed out by the Liberal Democrats needs to be addressed.

The hon. Member for North Norfolk articulated his concerns about summary dismissal. On the basis of my long experience of these matters—I know that he has had experience too—I do not share those concerns. If we get the regulations right—there is at present no requirement for these procedures—it is wrong to insist that employers have to keep someone on the premises—

Mr Norman Lamb (North Norfolk, Liberal Democrat)

The problem of the employee being on the premises is dealt with, as now, by suspending that employee. That is not a problem: the person is moved out of the way and a hearing is arranged. There is no need to move straight to a dismissal without going through the proper process. As I argued earlier, the employee's rights are reduced.

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

The ACAS code recommends precisely that an employee should be suspended. We have already been over the argument about setting basic minimum standards. Employment tribunals will still be considered, but as to insisting that the person stays in the workplace, I am pleased that the hon. Gentleman agrees that we need a modified code. His argument is similar to that expressed by some of my

hon. Friends—why do we not implement the ACAS code. We have been round the course on that long enough. I hope that the Committee will accept that clause 34 stand part of the Bill.

Question put and agreed to.

Clause 34, as amended, ordered to stand part of the Bill.

Clause 35 ordered to stand part of the Bill.