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

I beg to move amendment No. 213, in page 47, line 28, leave out 'employees' and insert 'workers'.

Mr Joe Benton (Bootle, Labour)

With this we may discuss amendment No. 214, in page 48, leave out lines 37 to 39 and insert—

'''worker'' means an individual who has entered into or works under (or where employment has ceased, worked under)—

(i) a contract of employment, or

(ii) any other contract, whether express or implied and (if it is express) whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual; and any reference to a worker's contract shall be construed accordingly.'.

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

Clause 45 will implement the European Union fixed-term work directive, which was introduced following negotiations between the social partners. The explanatory notes that accompany the Bill state:

''The purpose of the . . . agreement is to apply the principle of non-discrimination to those in fixed term employment and to establish a framework to prevent abuse arising from the use of successive fixed term employment contracts or relationships.''

The amendment would address that matter.

The Government have chosen to extend the directive also

''to prevent pay and pensions discrimination against fixed term employees'',

which we shall address later. In one sense, the Government have gone further than the original fixed-term directive requires, but in another, it is questionable whether they will implement the directive correctly.

In the framework agreement, the social partners rejected the term ''employee'' and instead used the wider term ''fixed-term worker''. The employer's side had originally wanted to use ''employee'', but conceded that point. The Law Society briefing states:

''Clause 2 of the agreement states that it should apply to fixed-term workers who have an employment contract or employment relationship as defined in law, collective agreements or practice in each member state.''

On the basis of that framework agreement it seems that a proper implementation of the directive into UK law means that the rights should be extended to both employees, as defined in the Bill, and workers as defined in existing anti-discrimination legislation or the Employment Rights Act 1996.

By limiting the scope of the Bill to cover merely employees, the Government could create a number of difficulties and deny protection to those who may be likely to be discriminated against, such as casual or temporary workers. The TUC points to those who are employed in the hospitality industry and cites the case of an agency worker who is employed by an off-shore crewing agency but works on a P&O ferry that sails from Portsmouth. She is employed on a weekly basis, meaning that officially she is laid off once a week when she comes ashore. She has been employed on that basis for three years. She receives the same hourly rate as equivalent permanent employees, but as she is an agency worker she is paid only for the time that she is on the ship. That means that she receives just £9,000 while her permanent colleagues receive £18,500 a year. Because she is not legally defined as an employee, she will not benefit from the measures introduced in the clause, a seemingly unjust state of affairs.

Another union officer who represents workers from Park Lane hotel refers to the case of a banqueting waiter who has worked 40 to 50 hours a week for 23 years and has been employed as a temporary worker throughout that time. Under the clause he, too, would not be entitled to treatment equal to that of permanent full-time staff.

In addition, the TUC says that temporary work is becoming ever more widespread: 1.7 million people, including many women and part-time workers, are employed on a casual basis in the UK. Under the Bill, employers would continue to have no obligation to provide similar pay rates, sickness leave or holiday pay to temporary workers. According to the TUC, 50 per cent. of employers pay temporary workers on pay rates different from those of permanent workers.

It is argued that those employed on a casual basis accept the lack of equal treatment because of the flexibility that temporary employment gives them and that they get a fair deal in that respect. What use is that to those temporary workers who find themselves

placed on temporary contracts in the same employment over a number of years? What rights do they have under the clause? The answer seems to be none. That needs to be rectified. In addition, by failing to apply the Bill to workers—which would be a correct interpretation of the EU directive—the Government are creating a situation in which decisions by the courts on the definition of an employee are likely to be overturned. That would create uncertainty for employee and employer.

Mr George Osborne (Tatton, Conservative)

The hon. Gentleman is reading very well from the various briefs. However, he did not quote the excerpt from the Law Society brief that reads:

''We are concerned that provisions under clause 45 to introduce regulations outlawing discrimination against fixed term employees will not comply with the European Directive they are designed to implement.''

That is surely the key question. If the clause does not implement the European directive, it is pointless. Will the Minister make a clear statement that, in his view and in that of the Government lawyers, the clause complies with the European directive that it is trying to implement?

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

The hon. Gentleman is correct. I have made that point but he emphasised the concern that lies behind our debate. If the Government feel that this is not the right forum to solve that uncertainty about employment rights, I ask the Minister at the very least for a commitment today that the Government's overdue review of employment status, which was to have commenced by the end of last year, should be commissioned as a matter of priority, to clear up the situation for employers and employees. As my hon. Friend's intervention emphasised, there is grave concern about the rights of workers and about whether we will meet the directive. I hope that the Minister will consider the point carefully. We may wish to return to it later.

Miss Judy Mallaber (Amber Valley, Labour)

I welcome the proposals and their extension to cover discrimination in relation to pay and pensions. Fixed-term contracts are appropriate in some circumstances, but that is no reason why people with such contracts should be dealt with less favourably than if they were in permanent employment.

Such a problem can become endemic—in higher education, for example, where quality suffers because of the prevalence of fixed-term contracts, as pointed out in the Betts report; the relevant union has concerns about the draft regulations that I hope will be discussed with the Minister.

I am concerned about the worker-employee definition and think that clarification from my hon. Friend on several points would be helpful. As the hon. Member for Weston-super-Mare (Mr. Cotter) said, according to the labour force survey there are about 300,000 part-time casual workers in the UK. I have received differing interpretations of whether the proposals would cover such workers and enable them to claim the protection of the clause. It would be

helpful to have clarification from the Minister about whether they are covered and, if so, about the extent of the coverage.

I have been told of several examples—such as that in the Park Lane hotel, mentioned by the hon. Member for Weston-super-Mare—in which there is confusion about the implementation of the law and the exact terms of the employment relationships. I ask my hon. Friend whether that would be clarified if the broader definition of worker rather than employee were used, which would enable the clause to deal clearly with slightly unusual employment relationships. I welcome the Government review on the inconsistencies and use of the definitions of employer and employee under the Employment Rights Act 1996; while I would prefer it if that were made clear in the Bill, I hope that the Government will look seriously at the worker-employee definition. We need consistency.

In the background documentation, the Government draw a parallel between the provisions affecting fixed-term workers and those affecting part-time workers. The explanatory notes specifically refer to part-time workers being protected by legislation, although fixed-term workers are not. In drawing up provisions related to fixed-term contracts, the regulatory impact assessment draws on the provisions concerning implementation of the part-time workers regulations.

My hon. Friend the Minister will recall that when he appeared before the Select Committee on Education and Employment in 2000 on the implementation of the EU part-time workers directive, we argued that if the worker definition is used for the minimum wage, sex discrimination and equal pay legislation and the working time directive, it was logical to use the definition to deal with the problems facing part-time workers. As highlighted by the hon. Member for Weston-super-Mare, we argued that the terms of the EU part-time workers directive were such that the wording should cover the broader definition of workers, not employees. At that time, I was pleased that the Minister accepted the force of the Select Committee's recommendation that the part-time workers directive should extend to workers.

In the background documents, the Government have made a clear connection between part-time workers and those on fixed-term contracts. I hope that the Minister will consider the worker definition. I realise that other European directives have the same wording as the part-time workers directive and the fixed-term workers directive, which have been transposed into UK law under the employee definition. That demonstrates some of the confusion that exists.

The Government have made a close connection between the part-time workers directive, in which they accepted the worker definition, and the directive in question today. There is some confusion on who would be excluded under one definition rather than the other, and I seek particular clarification on whether the vast number of casual part-time workers would be covered by the employee definition. If they are covered only by the part-time workers directive, is there any reason for allowing confusion caused by their presence

in both directives? In several other cases, confusion is caused by the nature of their employment relationship. It would be better to clarify matters by including the worker definition. If the problem would not affect many people, and few would be excluded through use of the employee definition, would extending that create problems?

I understand that there is a problem concerning agency workers, for whom there is a complex three-way relationship, which might create problems for implementing the changes. It would be helpful to receive some clarification.

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

Does the hon. Lady accept that increasing numbers of people are employed in the categories that we are discussing?

Miss Judy Mallaber (Amber Valley, Labour)

Indeed, there is a strong possibility that those numbers are increasing. That is why the Select Committee considered part-time work and the implications of greater casualisation. I am asking the Minister whether the law covers many people under the employee definition, of which I have heard differing interpretations. I am not clear about whether there is a major problem. The legislation clearly creates confusion about where ''worker'' is used and where ''employee'' is used.

If that cannot be clarified in the legislation in relation to fixed-term work, would the Minister make some commitment on the section 23 review timetable? At the moment, even if casual workers are covered by the part-time directive, they would have to work out which legislation applied. That can be quite complicated for somebody in the work place. It would be helpful to know what the timetable might be when for applying the section 23 provisions.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I suppose that I should start by observing that I, like every other member of the Committee, am a fixed-term worker, my reappointment being dependent on things almost completely beyond my control.

It is self-evident that, partly as a result of the things that the Government are doing in this Bill, there will be an increase in fixed-term work. We are seeing the extension of statutory leave rights, for longer periods and to more people. It will become increasingly necessary for employers to appoint people for specific fixed periods to carry out work that is permanent work in their workplace but, because of the rights that permanent employees have to take long periods of time off, will have to be done by people who will not acquire rights to remain by virtue of having been appointed to that role. This is in addition to the large number of genuinely fixed-term positions that already exist.

The figures from the latest labour force survey suggest that the overwhelmingly largest number of fixed-term workers are employed for a fixed period or for a project, as opposed to being seasonal or casual

workers. There are a significant number of casual workers, but fixed period or project workers are the largest group.

Perhaps it is no surprise that whenever we see legislation being reached for to deal with a perceived problem we find that the good old Government are in fact the largest employer involved in the problem. As I understand it, at the time of the last labour force survey, out of the 797,000 fixed-term or project workers, 441,000 were employed in public administration, health and education. There is clearly a sense that if there is a problem it can be addressed by the Government in their role as an employer or a funder of public sector employers, rather than reaching for the sledgehammer.

Mr George Osborne (Tatton, Conservative)

Let me reinforce the point that my hon. Friend is making. According to the brief from the Library, the public sector also accounts for over 70 per cent. of the fixed-term workers who have been in their jobs for over two years. One of the things that is missing in the regulatory impact assessment—perhaps, through my hon. Friend, I can ask the Minister about this—when it talks about costs to employers—indeed, it says that the cost is between £19 million to £29 million for pay and somewhere between £33 million and £38 million for pensions—is how much of that cost will actually be borne by the taxpayer because the employer in question is a public sector employer.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

My hon. Friend raises an important point and no doubt the Minister will address it in his response.

We are essentially talking about two different things here. We are talking about non-discrimination against fixed-term workers—which is the essential purpose of the Bill—and the Government's decision to extend that parity of treatment significantly beyond the EU directive requirements. In this amendment we are talking about the definition of fixed-term workers or employees that should be covered by the provision.

Some examples of fixed-term workers have been given. Although it is dangerous to make snap judgements without knowing all the facts, on the face of it, these examples look like abuse. It appears that people are being called fixed-term workers when they are clearly permanent workers. We are not in the business of supporting abuse or artificial mis-categorisation of employees or workers, simply to avoid them receiving what they should, or preventing them from receiving what other members of the permanent work force are entitled to.

People should be treated as fixed-term workers only when they are fixed-term workers. The public sector example is good, and I will use the health service as the classic example. It is irresponsible for a public, or private, body to appoint someone permanently if it does not have the funding to support the position. However, it is common in the health service and, I am sure, other parts of the public sector, for funding to be made available for a specific period of time. If there is two years' funding, why not appoint someone for two years? It would be grossly irresponsible to offer

someone a permanent job if a body knew that the budget funding for that position lasted for only two years.

That is the principal reason why people are appointed to fixed-term positions in the national health service, and why there are many people who have carried out repeated fixed-term contracts for a long time. When it comes to the point of letting X thousand nurses go, the Government rightly realise that they have to put up more money, and the nurses get another fixed-term contract. Unless long-term budgets are permanently raised, there is not the scope to make those positions permanent. I ask the Government to consider the problems that they have in dealing with those issues and realise that private sector employers will have them as well.

The issue goes beyond those employment areas in which one would expect to find fixed-term workers—for example, construction projects, which often have a fixed lifespan of one, two or three years. In the case of some construction infrastructure projects, it would be perhaps more realistic to appoint people on a permanent basis, but let us take the millennium dome as an example. If the project is supposed to last two and a half years, it makes sense to appoint a person involved in its management for a fixed term of two-and-a-half years.

A flexible work force is in the interests of UK plc, and consequentially the greater work force in the country. We must have the ability to deploy a flexible work force, and a fixed-term work force will be a part of that. That does not mean that we will stand by and condone or allow abuse of the system. If the Minister is focused on dealing with cases of abuse, we will support him in that, but I have not seen evidence of a substantial problem. The consultation document does not appear to find any evidence of substantial abuse.

The examples quoted have typically been people in low-paid employment. If we examine the TUC survey from last year and the breakdown between different occupations, we discover that 27 per cent. of fixed-term workers are managers, administrators or professionals. A further 9 per cent. are associate professional and technical staff. Those are not typically the people who find themselves abused by employers. Indeed, I have spoken to employers who are given the run-around by highly skilled professional people who are in short supply, particularly in information technology, and will simply not become permanent employees. They want to work on fixed-term contracts, and they extract a high price from the employer for the privilege of being able to employ them.

Mr George Osborne (Tatton, Conservative)

May I reinforce my hon. Friend's point? The Department of Trade and Industry's own regulatory impact assessment says that outside the public sector—about which my hon. Friend has already spoken—the industry sector with the largest number of fixed-term employees is the banking, finance and insurance sector, which is not one noted for paying its employees nothing.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I am grateful to my hon. Friend for reinforcing my point, and I hope that the Minister will tell us where the abuse is with which he wants to deal. Just to continue the numbers: a further 19 per cent. of fixed-term workers are in clerical and secretarial roles—that is not too surprising—and, interestingly, 15 per cent. are in personal and protective services. I do not know quite what those services are, but the Minister may be able to help us. I guess that it does not just include the bouncer at the nightclub door. That is an interesting mix of occupations, and many of those people will be at the upper end of the income scale.

On the worker-employee debate, the Government have substantive legal advice that the Bill complies with the terms of the European Union directive. The TUC has legal advice to the contrary, which just goes to show that if two lawyers spot the opportunity to earn a fee, people can get as many opinions as they want to pay for. My understanding is that the TUC intends to challenge the Government on the issue in court. As public money is involved, if the Government take on the TUC, I hope that they are marginally more successful than the last time. They stared down the TUC on the parental leave directive and then settled on the steps of the court, agreeing to pay costs and fees without having the strength of their position tested. The Minister will remember that.

The substantive worker-employee point seems to concern the question of abuse. It has been suggested that there may be attempts to use captive employment agencies to avoid the scope of the legislation, and if the use of the term ''employee'' allows abuse of what is intended by people being recategorised, that would seem to be abusive. If extending the legislation to all workers captures those whom it would not be proper or appropriate to include—in particular, people who are employed by an agency for a fixed-term period to fill a gap in an employer's work force—the case is much more suspect. I am not an absolutist; we are at the margin. We want to ensure that the intention is properly implemented so that there is not scope for massive evasion, but I would not want the measure to be extended to all workers, because that would go much further than what is required to deal with the kind of abuse that was mentioned by the hon. Member for Weston-super-Mare, who described how two workers employed by the same employer and doing the same work could have different conditions of employment.

We do not support the Liberal Democrat amendment because it would take a blanket approach, which is inappropriate. I have no doubt that the Minister will tell us that he is sensitive to the concern that is being raised and that it will be addressed in much more detail in the review that is about to be undertaken. I hope that there will be a good opportunity for parliamentary debate on its findings before any legislation is proposed.

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

The whole argument revolves around several issues, some of which were mentioned by the hon. Member for Weston-super-Mare. I want to cover them to explain why we believe that the amendment is misguided and should be withdrawn.

The first point, which was made by the hon. Gentleman, is that we are not interpreting properly the European directive. We are clear that we are. The directive requires us to legislate in respect of

''fixed term workers who have an employment contract or employment relationship as defined by national law and/or practice''.

The Law Society says that we are following an incorrect interpretation of the directive. We used the same words in the parental leave directive that applied only to employees. The point made by the hon. Member for Runnymede and Weybridge was not about that aspect of our sensible settlement out of court, but about children born before 15 December 1999. We are implementing the legislation in the same way in which we implemented a directive almost three years ago, and we are sure that it covers the directive. I would love to chat with the man in the hotel on Park lane, as he has been mentioned so many times in dispatches. We should all troop up there afterwards to talk to him, like a jury that goes to the scene of a crime.

The hon. Gentleman gave the example of an agency worker. We must be clear that the directive not only used the wording that I quoted about the interpretation of national law, but specifically excluded agency workers, half a million of whom are, by definition, on fixed-term contracts. Many Government Members were brought up to believe that agreements are always abided by once they have been made. The social partners' framework agreement states:

''This agreement applies to fixed-term workers with the exception of those placed by a temporary work agency at the disposition of a user enterprise''—

in other words, agency workers.

''It is the intention of the parties to consider the need for a similar agreement relating to temporary agency work.''

The social partners considered what they classified as atypical workers: part-time workers, agency workers, and fixed-term workers. Agency workers were specifically excluded. Pay and pensions were specifically excluded but are included in the Bill. It would be foolish for us to include employment agency workers with all the problems that that would bring when another directive will address the issue. Negotiations broke down between the social partners, but the European Commission is taking it forward. The amendment would include agency workers.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I do not disagree with the Minister, but does he not see a problem? The NHS is trying increasingly to hire short-term cover staff directly rather than going through agencies, to avoid paying enormous sums. Is there not a danger that such sensible moves will be undermined and that employers will be tempted to pay agencies' sometimes large margins to have fixed-term staff who are clearly outside the scope of the legislation?

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

I do not see such a danger, but I will come to the NHS shortly. I confirm that the legislation complies with the directive, which specifically excluded agency workers. On the question of whether there is a problem, we all believe that no one should be exploited just because of the category in which they work, as my hon. Friend the Member for Amber Valley (Judy Mallaber) elegantly put it. In all our consultations on the issue, there was no evidence of that sort of abuse. The numbers of fixed-term workers are lower in this country than in most other European Union countries. Only 7 per cent. of workers in this country are on fixed-term contracts. The figure is double in France and is around 33 per cent. in Spain. Most employers use fixed-term contracts as they should be used, and do not abuse the system. Nevertheless, the purpose of the directive is to stop abuse—one is too many—where employers are using fixed-term contracts as a substitute for permanent employment. We are addressing the problem of employers repeatedly extending fixed-term contracts to deny individuals the rights that they would receive as permanent employees.

We have found no evidence of the problem that the hon. Gentleman describes. When we examined the use of casual workers—for instance, in agriculture—those workers were employed on a daily or hourly basis, with no obligation on the worker or hirer to work or provide work beyond that day or hour. They should be regarded as employees and covered by the directive, in the same way that Christmas casuals would be.

Mr Norman Lamb (North Norfolk, Liberal Democrat)

Does the Minister accept that grey areas, such as the description that he just gave, cause concern? A legal argument could be made that a mutuality of obligation sufficient to constitute a contract of employment exists between the employer and the worker. It would be more sensible to use the term ''worker'', which would clarify whether such a person came within the scope of the legislation. One could still exclude agency workers if they were subject to a separate directive.

I do not understand the Government's thinking on the terms. In the national minimum wage legislation, and the working time regulations, the Government used the description ''worker''. In this case, they have used ''employee''. Using different terminology simply adds to confusion for worker and employer. I realise that a review is under way, but it would make sense to simplify the Bill by using the same term.

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

With respect, that added nothing to the debate. I have said repeatedly that there are complexities, and that is why we introduced section 23 of the Employment Relations Act 1999 to review the whole area. Maternity leave applies to employees and not workers. The taskforce that we set up recommended that flexible working arrangements should relate to employees and not workers. Different regulations and directives require different definitions. I agree with the hon. Gentleman that we need clarification in this case, but I am sure that the review will assist that process.

Miss Judy Mallaber (Amber Valley, Labour)

Is the issue of agency workers the only reason that the legislation is being implemented with a different definition? Is that why the worker definition is not included, as the Minister conceded when we were arguing about part-time workers?

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

That is a substantial reason—it is not the only one—but hon. Members can see the logic of not including agency workers when they are specifically excluded in the preamble, and a directive and review of the terms ''worker'' and ''employee'' are on the way. That is why the amendment is not feasible.

I appeared before the Select Committee when we were in consultation and suggested that the part-time workers directive ought to apply to employees and not workers. My hon. Friend the Member for Amber Valley made a powerful case, as did other members of the Select Committee, including a Conservative Member—I cannot remember his constituency, but he was one of the most eloquent on the issue. We were persuaded by the argument, first because of the clear overlap with sex discrimination: 80 per cent. of part-time workers are women and we would exclude all of them if we did not have the definition of worker. Ironically, the 200,000 or 300,000 casuals do not need the protection of these regulations because they are already protected by the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000. That is another reason why we would be wise to stay with the definition in the Bill.

Another argument is about the review. I gave an assurance, as did my right hon. Friend the Secretary of State on Second Reading, that that review would be under way early this year. The mechanics for it are under way as we speak. Hon. Members on both sides have made valid points. The review is the place to look at this matter, not a debate on the back of an amendment. I think that I have covered most of my hon. Friend's arguments.

The hon. Member for Runnymede and Weybridge made the point that, in a way, we are all on fixed-term contracts in a way. Ministers have another fixed-term contract—

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

Not so fixed.

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

Indeed, and of indeterminable duration. One of the reasons why many Conservative Members did not have their fixed-term contract renewed in 1997 was their approach to these issues. They refused to sign up to the social chapter as a matter of principle. They abolished wages councils and any protection for young workers. Those are serious issues. Perhaps I am in tune with the hon. Member for Buckingham (Mr. Bercow) in feeling that the Conservatives were simply not on the side of vulnerable workers.

The further and higher education sectors cannot be lumped in with the public sector. Although they receive public funds, they are self-governing and would not qualify as public sector institutions in the strictest sense. Some 5,560 people in the civil service, including specialists, economists and senior officials, are on fixed-term appointments, which are often for two to five years. When we came into office the figure

was 11,817. There are 12,260 casuals and there were 19,320 when we came into office. All those casuals and all those on fixed-term contracts are covered by this legislation. We have more than halved the number of people on fixed-term appointments and considerably reduced those on casual appointments.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

Could the Minister remind the Committee by how much his Government have increased the total establishment of the civil service? It may be that rather than reducing the level of casual and fixed-term appointments they have established those posts in their massive expansion of Government bureaucracy.

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

No. The fact that we are so superbly governed has a lot to do with the skills and numbers of the civil service. I am not talking about percentages here.

Mrs Joan Humble (Blackpool North & Fleetwood, Labour)

I am sure that my hon. Friend is aware that about 10,000 civil servants, many of them my constituents, are employed on the Fylde coast. Many of those who had casual jobs on fixed-term contracts and are now on full-time contracts are pleased and proud to be civil servants.

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

My hon. Friend makes an important point. Under the previous Government, there was evidence that people on fixed-term contracts could have been on permanent contracts, and those who were defined as casuals could have had more stable terms and conditions. We are addressing that.

In the national health service—the hon. Member for Runnymede and Weybridge has some experience of that from his previous job in Opposition—junior doctors are employed on fixed-term contracts because a series of developmental postings form part of their training. However, the general NHS Executive policy is to encourage the use of permanent contracts, not least to encourage recruitment and retention.

I hope that the hon. Member for Weston-super-Mare will withdraw the amendment and that members of the Committee will understand why we do not think it necessary. First, we are complying with the directive. Secondly, the directive specifically excludes agency workers, and we are discussing a directive that deals with that group. Thirdly, we have uncovered no evidence of a problem. Fourthly, most of the groups quoted and mentioned and most of the people who are considered casuals—in agriculture, in the Post Office at Christmas, and so on—would be covered by their contracts of employment. Finally, and most importantly, we shall review the issue soon and address the anomalies that have been mentioned.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

The Minister said that the consultation uncovered no evidence of a problem in respect of fixed-term employees. I understand that the Government have to comply with EU directives even in the absence of evidence, because that is the way the world is, but why do they wish to gold-plate the directive?

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

I meant that there was no evidence of an abuse in the particular circumstances. However, 5 per cent. of employers in the Department of Trade and Industry's 1998 review did not give the same pay to fixed-term contract staff as to permanent staff, and 10 per cent. did not give the same pension provisions. Some of the evidence submitted in our consultation by the Equal Opportunities Commission and by the TUC, from people working on the shop floor, so to speak, suggested that the problem was greater than that.

We cannot find evidence of the problem for workers—the term used in the amendment—because they are non-employee workers who would not be covered by the directive. We expect most non-employee staff to be covered by the directive.

Mr Norman Lamb (North Norfolk, Liberal Democrat)

Is the Minister at all concerned about a legal challenge? We hear of that from various trade unions, and it happened with the parental leave directive. The Government had to change the regulations, which resulted in wasted time and money for them and everyone else and confusion for those who try to claim their rights. There may be a legal challenge, given that the word ''worker'' was used in Europe, although I accept the point about agency workers. Would it be sensible to use the same terminology to ensure that there is proper compliance with the European directive?

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

I do not accept that. Let me digress briefly to discuss parental leave. We were among the first three countries—Luxembourg, the Republic of Ireland and the UK—to introduce the directive. We all read the directive as not being retrospective.

On the issue of workers, the words of the directive are:

''fixed term workers who have an employment contract or employment relationship as defined by national law and/or practice.''

We are confident that we are complying with the directive. If we worried about legal challenges to legislation on public policy concerns, we would never do anything for fear of a challenge. The threat of legal action always exists. I do not have concerns on that matter, and I hope that members of the Committee, having heard my explanation—particularly on agency workers—will withdraw the amendments.

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

I thank the Minister for covering the contributions of other hon. Members. I was interested by his comment that there is no real problem. I take it that the forthcoming employment review will consider that point more closely. I sat this morning on a deregulation committee dealing with the registration of births and deaths. A proposed Government deregulation had to be withdrawn because there had been no proper consultation or investigation over a long period; the official solicitor had not been consulted at an early stage and the matter had been left to a late stage. Sometimes consultation and investigation is said to have been done, but the details are overlooked. I urge the Minister to look into the problem much more closely.

Having said that, I wholeheartedly support the point of my hon. Friend the Member for North Norfolk (Norman Lamb) that there seems to be a mish-mash so that we cannot include workers or a standard designation. I do not understand all the different regulations and rights that have to be addressed but it seems disconcerting that we cannot find a standard term. I accept that the Minister believes that we will comply with the EU directive, and we all hope that that is correct. I also accept that another directive will deal with agency workers. Bearing in mind all those points, and those made by the Minister, and in anticipation of addressing the issues later, 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. 230, in page 47, line 33, at end insert

'of an employee by an employer where the employment has the nature and characteristics of permanent employment and where the successive periods have, in aggregate, exceeded two years'.

Let me first say something about the architecture of the clause. The whole clause is effectively permissive. It allows the Secretary of State to make regulations for the purpose of preventing abuse from arising from the use of successive periods of fixed-term employment. The amendment seeks to narrow the scope of the Secretary of State's interpretation of what constitutes an abuse of successive periods of fixed-term employment. In cases under subsection (1)(b) where the Secretary of State acts to prevent abuse, we would support measures to prevent abuse by the incorrect categorisation of a person's status.

The amendment proposes two tests. First, the person has to have been employed for successive fixed-term periods, which, in aggregate, amount to a period of not less than two years. Secondly, the employment has to have the nature and characteristics of permanent employment—that is a woolly phrase but I do not think that, given the way in which legislation works, there would be any problem with it. In plain English, that means someone who has been in post for two years on successive six-month fixed contracts and who is to all intents and purposes—according to an objective, common-sense look at the way in which they work, their relationship with their employer and the way they operate in the work place—part of the permanent work force. The Secretary of State would have the power, for example, to treat a shorter period of continuous employment by successive fixed-term contracts as an abuse. She should not, however, have the power to treat as an abuse all cases where somebody has worked for more than two years under fixed-term contracts, if the nature and the character of the work do not suggest that it is abusive. For example, someone may be appointed for 18 months to manage a construction project on the clear understanding that the employment would terminate when construction finished. Let us assume that we are talking about a public sector, Government-funded construction project, that it ran over, as they are wont to do. If it became apparent that it would take not 18 months, but two and a half years, the employee would have two further six-month periods. I suggest to the Minister

that there is no evidence of abuse in that example, because all the circumstances tell us that that would be a proper fixed-term employment.

I seek to narrow the scope of discretion, so that we can actually achieve some consensus and get away from fighting over these issues. We are all committed to addressing genuine abuse of the system, but we will have to make sure that the Secretary of State's discretion is constrained where practices are not abusive.

I have suggested some definitions in the amendment. If the Minister accepts the principle, but has a problem with specific definitions, I would be very interested to hear his thoughts about what would be an abusive situation.

Mr Mark Prisk (Hertford & Stortford, Conservative)

I support the amendment, not least because my hon. Friend has said that the clause is very open-ended, and he has raised one of the dangers. The amendment is right in the sense that two tests lie at the heart of its purpose. First, it is right because it would be fairer in applying the first steps of the second test that my hon. Friend just referred to, namely that the employment has the nature and characteristics of permanent employment. The amendment genuinely seeks to equate like with like, which is an important principle that seems to be absent from the clause as it stands.

My second reason for supporting the amendment is that it would make the process far more manageable. In that sense, it would try to tackle the real problem that I believe the Government have in their sights, namely situations in which someone is, to all intents and purposes, providing a permanent contribution to an enterprise or an organisation, but is on ever-renewing contracts and is not being treated fairly.

There is also the issue of the third sector. We have heard in this debate, and in previous debates about the public sector and the private sector, but I would like to raise the issues of the third sector—not the third way, but the voluntary sector. One of my concerns about clause 45, is that in excess of 60,000 people work in the voluntary sector for local charities. By the very nature of their work, they depend on small grants and their contracts tend to be short. They are able to look ahead only six or 12 months. As the clause stands, a local charity—for example, one that I am pleased to support: the East and North Hertfordshire breast cancer appeal—would struggle under the clause if it applied for a grant. The danger is that it would not be able to provide permanent employment, yet the clause would require it to make a commitment that it genuinely cannot finance. For those reasons, the amendment makes considerable sense. It brings the nature and characteristics of permanent employment into the clause and sets a limit of two years, which I think is manageable and reasonable.

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

I have listened to those arguments. The hon. Member for Runnymede and Weybridge comes at this point from a different direction than we do. I do not want to send Members Opposite into fits

of apoplexy, but the amendment would probably not comply with the directive. However, let us deal with it on the basis of the arguments.

The amendment refers to a period in excess of two years. Last week, the Government circulated to Committee members draft regulations, which suggest a four-year limit on the extension of contracts. We can argue about two or four years, but the right place to deal with the issue is in regulations, not the Bill. He also talked about putting things into plain English, but inserting the phrase

''the nature and characteristics of permanent employment''

would be a recipe for far more complicated regulations.

The hon. Gentleman talked about the spirit behind the amendment. However, the regulations already achieve his aim and in a way that meets the needs of different sectors without unnecessary complexity. We intend the regulations to ensure—this is the major point, which we mentioned in the previous debate—that fixed-term employees are not employed on a long succession of fixed-term contracts as a substitute for a permanent post. That is our objective.

The power already allows us to define successive fixed-term contracts and to limit their use to prevent abuse. As I said, the draft regulations, on which we are consulting, suggest that the limit should be four years unless the use of such contracts can be objectively justified beyond that point.

Miss Judy Mallaber (Amber Valley, Labour)

What might constitute objective grounds? Various issues have been raised with me, particularly by the Association of University Teachers. As we know, fixed-term contracts are endemic in further and higher education. One example is someone who has been employed for many years but cannot get a permanent contract, because he cannot get a research grant to do the work that will prove he is qualified for a permanent contract. Equally, he cannot get a research grant because he is on a fixed-term contract. What objective grounds will there be for still allowing such a situation? That person is stuck: he will never get a permanent contract because of the terms that the university imposes on researchers.

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

I am enormously grateful to my hon. Friend for asking that question; I thought that it might arise at some point. The phrase ''objective grounds'' is also used in the part-time workers directive, under which a part-time worker cannot be paid a different rate unless there are objective grounds for doing so. In one case involving a part-time worker and performance-related pay, it was established that there were objective grounds.

I think that, in the previous debate, the hon. Member for Runnymede and Weybridge talked about an organisation or charity having funding for a specific period and the possibility of objective grounds. It is difficult for me to place every eventuality on the record, because the situation depends on the circumstances that apply at the time. However, in the sector mentioned by my hon. Friend, I think that the directive will resolve the issues. The employer will have

to start by asking himself whether he is using fixed-term contracts as a substitute for permanent employment. His objective grounds must be able to stand up, particularly at a tribunal if the case ends up there. We should not spend our time considering examples of objective grounds. The directive allows for that, and we are implementing the directive. Over time, we shall see that the clause works well.

We shall make provision for a limit to the duration of successive contracts, but it will be four years rather than two. As I said, that should be done in regulations rather than the Bill. Adding a provision to limit the use of successive fixed-term contracts only where the employment has the nature and characteristics of permanent employment would result in regulations that were either vague or extremely complicated. If the regulations simply repeated the requirement, employers and employees would be left to work out what the ''nature and characteristics'' of permanent employment might be. Specifying what was required would produce complex and inflexible regulations. The provision is unnecessary in any case, because the draft regulations provide that fixed-term contracts may be renewed beyond the statutory limit if their use can be justified. That ensures that where employment is of a genuinely fixed-term nature, employers and employees can continue to agree fixed-term contracts.

The mechanism in the draft regulations for preventing abuses of fixed-term contracts takes into account the diverse use of successive fixed-term contracts in different sectors. We appreciate that they are used in a wide variety of sectors that range from catering to construction. We had already accepted that separate arrangements needed to be made in the theatre and in sport. It should be possible to tailor the part of the regulations that limits the use of successive fixed-term contracts to match the requirement of different sectors. The clause and the regulations allow employers and groups of employees to agree an alternative mechanism for preventing abuses of successive fixed-term contracts by means of collective or workplace agreements that can displace the statutory mechanisms. The agreements must specify the duration of successive fixed-term contracts and the objective reasons for their renewal. Nevertheless, the industry and the work force are entitled to draw up such agreements according to the sector in which they work.

We believe that the regulations are sufficiently flexible and that we have adopted the right approach. I understand the points made by the hon. Members for Runnymede and Weybridge and for Hertford and Stortford, but we would do employers a disservice if we accepted the amendment.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I do not disagree with much of what the Minister said. When I moved my amendment, I should have said that it was tabled before he issued the draft regulations to members of the Committee. I erred on the side of caution in my attempt to table a consensual amendment that might catch his attention. I could have included four years instead of two years.

The Minister has reassured me that the intention is to deal with abusive cases, and the draft regulations show that the number of such cases should be relatively small. As far as I can see, nothing will stop an employer who is intent on avoiding permanent employment from employing a succession of people under fixed-term contracts. The restriction will be against employing the same person on successive short-term contracts, but it will be impossible to stamp out all practices that the Minister does not like. One must take a pragmatic approach, and the evidence of the problem is small. However, the Minister's approach will deal with the bulk of it, and I shall be happy to withdraw the amendment.

The Minister said that employment that had the ''nature and characteristics'' of permanent employment was difficult to define in regulations. That may be so, but it is an awful shame that something that is a common-sense definition that we can all understand apparently cannot be translated into legislation. Sometimes the common-sense definition works, rather than the tightly defined legal definition through which someone finds a loophole precisely because it has been so tightly defined. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr Norman Lamb (North Norfolk, Liberal Democrat)

I beg to move amendment No. 215, in page 47, line 33, at end insert:

''(1A) For the first two years of an employee's fixed term employment the regulations will not apply to occupational pension schemes.''

Clause 45 goes further than the fixed term directive requires because it extends the remit of the legislation: fixed-term employees cannot be discriminated against in their pay and pension benefits. I appreciate that the first draft of the provisions did not cover those benefits, and was changed by the Government. We welcome that, but recognise that the inclusion of pension benefits could create unnecessary costs for employers. Employer organisations have expressed concern about that. We support measures that encourage people to invest in second-tier pension provision. We welcome the fact that the Government are legislating to improve workers' rights to access occupational pension schemes.

The situation for fixed-term employees is more complicated. Under clause 45, employers must provide all fixed-term employees with access to occupational pension schemes. However, if scheme members leave with less than two years pensionable service, they have no statutory rights to future benefits or to transfer value. The employer is not obliged to do anything with the contributions that it pays in, but any employee contributions would have to be returned.

The CBI has pointed out that the majority of fixed-term workers are employed for less than two years. In such cases, employers would be required to provide access to an occupational scheme that would carry administration costs, but have no benefit to employees. They would not see their money grow because it would remain static in the fund and be returned to them on leaving employment. They would

be better off investing elsewhere, without expense to the employer. To override that problem, the CBI has suggested a two-year exemption before fixed-term workers were brought into the scheme, which is the purpose of the amendment. That is not an ideal solution, because it would mean that any fixed-term worker remaining for more than two years would lose out on two years of contributions. We are keen to stress the difficulties that employers might face concerning the rights to occupational pensions for fixed-term employees who leave after less than two years of employment. The benefit to the employees would be non-existent and they would be better off not being part of such a scheme.

The amendment is a probing one, but employers and employer organisations are concerned about an extra administrative burden that carries no benefit for employees.

Mr Philip Hammond (Runnymede & Weybridge, Conservative)

I am most grateful to the hon. Member for North Norfolk for sitting down at two minutes to 1 o'clock. He has handed me the poisoned chalice of having to remember where I got to in my sentence at 4.30 pm.

I reiterate our principled objection to the Government gold-plating the EU directive. The original intention was to exclude pay and pensions, as the hon. Gentleman pointed out. The trade union movement had an agenda to include pay and pensions in the scope of the legislation. Suddenly, we discover that the Government have decided to adopt the measure. I see that the Minister is marking my card: something nasty is going to happen to my postal deliveries, I suspect.

We cannot ignore the fact that the Government were re-elected following an election campaign supported, through silence on several issues and by substantial financial donations, by organisations that have a public agenda to secure several of the Bill's provisions, including the matter we are discussing. The Government's agenda did not include pay and pensions, but they included them somewhere along the line. The Minister will forgive me if we are suspicious about that sudden change of heart.

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.