Clause 1

Employment Bill [Lords] – in a Public Bill Committee at 10:30 am on 14 October 2008.

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Statutory dispute resolution procedures

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

Photo of Pat McFadden Pat McFadden Minister of State (Department for Business, Enterprise and Regulatory Reform) (Employment Relations and Postal Affairs), Member, Labour Party National Executive Committee

I thank Members of another place who debated the Bill fully. The legislation we pass tends to look forward and to make reforms for the future, but this Bill begins with a legislative look over its shoulder. Clauses 1 and 2 are about returning to past practice in some ways.

Clause 1 provides for the repeal of the statutory dispute resolutions, which I will call “the procedures”, brought into force by regulation in 2004 under powers in the Employment Act 2002. When the procedures were introduced, the then Government Minister, Lord Sainsbury of Turville, said that we

“are committed after two years to a review of how the procedures operate in practice.”—[Official Report, House of Lords, 23 February 2004; Vol. 658, c. 101.]

We did that both internally and through the review of dispute resolution carried out by Michael Gibbons and published last year. It is widely accepted, and the review by Michael Gibbons confirmed, that resolving disputes in the workplace as early as possible is desirable for all concerned. The tribunal system is important for access to justice, but it would be a mistake always to regard arrival at the tribunal as evidence of the system’s success. Very often it is better if disputes can be resolved before reaching the tribunal. Over the years, the Government have tried to create a system that maintains the access to justice in the tribunals, but also encourages earlier dispute resolution. The 2004 procedures should, to some extent, be looked at in that light.

The procedures introduced a legal requirement for the parties in a dispute to seek to resolve it through what has become known as the three-step procedures. They require, first, one side to inform the other of the issue in writing; secondly, a meeting to discuss the matter; and finally, usually, an appeal process. It was  important, and we will touch on it several times in our debates, that the procedures were not only written into law, as it were, but that they affected the balance of content and merit that a tribunal took into account when reaching a judgment. Under the current regulations, tribunals have to reject claims that do not meet the requirements concerning the submission of a written grievance and to increase or decrease awards if either side fails to complete the procedures.

An internal review in 2006 revealed concern among stakeholders about the impact of the procedures, so the then Secretary of State for Trade and Industry invited Mr. Gibbons to undertake an end-to-end review of the dispute resolution process. His terms of reference were to raise productivity through improved dispute handling in the workplace, to ensure access to justice for employers and for employees, and to reduce the costs involved for all parties. His report of March 2007 concluded that while the intention of the regulations had been right, their operation resulted in an unnecessarily high administrative burden for employers and employees and had unintended consequences which outweighed the benefits. Many businesses told the review that the procedures had led to the use of formal processes to deal with problems that could have been resolved informally. In my informal language, Gibbons’s overall conclusion was that the procedures drove disputes into the formal process too early and that they increased legal involvement and costs to all parties. We are, of course, concerned not only with justice, but with costs. If there is a mechanism that can deal with disputes in the workplace while decreasing costs for the parties, but that does not compromise justice, we should introduce it. That is the intention behind clause 1 and other clauses.

The Government published a consultation document alongside the Gibbons review. Respondents endorsed the conclusions of the review. I well understand the principles behind the 2004 changes, which were to set out clear steps that people should go through when there is a dispute in the workplace. Those principles were sound, but in the light of two years’ experience of operating them it is clear that there were unforeseen results when they were enshrined in legislation.

The system that will replace the three-step procedures, which is set out in the following clauses, gives tribunals more discretion and will try to avoid elevating process over merit, which was a key focus for Gibbons. The Government propose through the clause to repeal the 2004 procedures, but at the same time we will put in place a package of measures to encourage the continuation and spread of good practice designed to resolve disputes in the workplace early. Part of that package is a revised ACAS code, which will be principles-based and concise. There will also be an incentive for parties to comply with the code in the form of a power for tribunals to adjust upwards or downwards—I stress that that will be at their discretion—where the parties unreasonably fail to comply with the relevant ACAS code. There will also be enhanced resources for ACAS to run a new helpline, more pre-claim conciliation and so on.

We are abolishing the 2004 three-step procedures and replacing them with a new system that will be better funded and which is designed to resolve disputes in the workplace earlier. There will be up to £37 million of funding over three years for the set-up and running  costs of the enhanced advice service. Additionally, funding for the early conciliation service has already been announced.

The Bill begins with a recognition that the 2004 regulations, while well intentioned, have resulted in an unforeseen formalisation of disputes. We are therefore acting to remove them. That will be the effect of the clause.

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

We open the debate on the opening clauses of the Bill, which deal with dispute resolution and tribunals. I mirror the Minister in noting that significant consideration has been given to these provisions and to the Bill as a whole in another place. It did a pretty thorough job. I say here and now that I do not intend to rerun all of the debates that were held in the Lords where that is not required. Hon. Members will see that from the amendments that have been tabled thus far. However, that will be required in a few instances.

Furthermore, my party recognises that the clause, which deals with employment dispute resolution, is an admission by the Government that their 2002 reforms of dispute resolution have failed and that they need to go back to what was there before and start again some six years later. We support the provisions of the clause, as proposed by the Gibbons review, although we note how unimpressed we are with the process that has come to this position over the last six years.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

My party, too, is sympathetic to the attempt to minimise the amount of paperwork involved in the process and to resolve issues on an informal basis at an early stage where possible. However, an eternal difficulty is that people are informed at the final stage—whatever that may be—of how much paperwork they should retain at the early stages, once they have had the experience. I have seen this matter from many different sides, in various circumstances as a representative of employees in internal disputes and as an employer. The steps to try to resolve things through written submissions rather than a hearing are crucial. The Government should be aware that whatever the final conclusions are, they will inform the early stages.

Although it is good news that the Government have recognised that things have become over-formal, unless serious efforts are made to ensure that the issues of dispute are identified at an earlier stage, we will end up with the same problem in the same circumstances. So this is generally a good direction, recognising the errors that were made previously, but it remains a challenging area to resolve.

Photo of Michael Jabez Foster Michael Jabez Foster Labour, Hastings and Rye 10:45, 14 October 2008

I, too, am honoured to serve under your chairmanship, Mr. Bercow.

This is absolutely the right thing to do. Whatever we think about statutory codes, employers, particularly small employers and certainly individuals who are not members of trade unions, simply do not understand what they are about. Perhaps I should declare an interest. I have a practising certificate and was previously appointed as a part-time chairman of tribunals. It is clear that people do not understand statutory codes. They understand simple, straightforward guidance. May I therefore also  congratulate ACAS on the draft code that the Minister has kindly circulated? If that is to be the new standard, it is a gold standard which certainly could be a precedent for much else in the world of employment law. On this, we are absolutely at one.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.