Examination of Witnesses

Enterprise and Regulatory Reform Bill – in a Public Bill Committee at 12:00 pm on 19th June 2012.

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Edward Sweeney, Cathy James, Michael Reed and Mike Emmott gave evidence.

Q 123

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

Good afternoon. We will now hear oral evidence from the Chartered Institute of Personnel and Development, the Free Representation Unit, Public Concern at Work and the Advisory, Conciliation and Arbitration Service. Perhaps I could ask the witnesses to identify themselves for the record and to indicate whether there are any aspects of the Bill on which you would prefer not to answer questions or on which you have areas of specialism.

Edward Sweeney: Good afternoon. My name is Ed Sweeney. I am the chair of ACAS. Areas of concern and interest for us would be the process of early conciliation, so I would be happy to answer questions on that, on how it might look and on how we have been modelling it so far, and I will deal with any substantial questions from that.

Cathy James: Good afternoon. I am Cathy James. I am the chief executive of Public Concern at Work, so I am obviously very interested in clause 14 which inserts a public interest test into the Public Interest Disclosure Act 1998. That would be the area in which I have most expertise, and I will have limited input on other areas of the Bill.

Michael Reed: I am Michael Reed. I am the legal officer, employment, at the Free Representation Unit, so I may be able to assist with the employment areas. I should say that voluntary sector legal advice has not equipped me to help you with directors’ pay in any way.

Mike Emmott: I am Mike Emmott. I am an employee relations adviser at the Chartered Institute of Personnel and Development. My special interests are employment law and employee relations, so I will be focusing, if I may, on the part of the Bill that deals particularly with employment regulation. I would be happy to comment on whistleblowing if anybody is interested in my opinion on that.

Q 124

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

What came out loud and clear in this morning’s session was, I think everybody agrees, about the merits of early conciliation. There are, however, real concerns about whether ACAS is adequately resourced to deal with that, and I would like to hear comments from all members of the panel. Mr Sweeney, in the submission pack you state:

“We are currently discussing with BIS the extra resources we might need to operate the new service but we are confident that BIS will ensure that we are adequately resourced to take on the task.”

Is that not a bit naive?

Edward Sweeney: If we are not, you will be the first to hear about it. As an independent and impartial organisation, we have had a good relationship with BIS. It has been a sensible discussion, but we realised that there were constraints. We have been asked to do something, and we will try and make the thing fit as best we possibly can. I am confident, however, given the conversations that we have had so far and provided that we get the modelling right and deal with some of the other factors in the Bill, that we can probably make early conciliation work.

Q 125

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

What do other members of the panel think?

Cathy James: The resourcing issue is obviously really important, and as a small organisation that deals with whistleblowers, we understand that strains that can come across an organisation when calls rise. When economic times become difficult, employment disputes become more difficult to deal with and resources will be really important. Yes, I agree.

Michael Reed: Everyone who you talk to will always agree that early conciliation is in everybody’s best interests, because it can offer much better solutions for employers and employees, and it can be cheaper. The danger is often that it is seen as a panacea and, in particular, as a way of saving a great deal of money. It can save money, but it also needs adequate resource, without which there is a real danger that it just lengthens and makes more difficult the whole process and has a counter-productive effect that is the opposite of what people want. We have seen that historically with the previous statutory dispute resolution procedure. In this process, what is being proposed looks better, and as long as ACAS is adequately resourced, it is a good thing, but there is an “if”.

Mike Emmott: I agree with that. ACAS conciliation undoubtedly saves money. The worries about funding probably reflect a history of years in which ACAS has been a bit short-changed on resource, partly because of worries in parts of the Government about how it was using its resource. Now that ACAS has this high-profile job and the cost of its not doing it is so obvious in relation to employment tribunal claims and so on, the Government cannot afford to leave themselves open to criticisms that they will not resource their chosen tool.

Q 126

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

Mr Sweeney, I do not want you to play your hand in public too much.

Edward Sweeney: Actually, I would like to try, as everyone is so in favour of giving me money.

Q 127

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

I was going to ask about that. Do you need extra money to be able to carry out the task in the Bill?

Edward Sweeney: I think we need some extra money—the big question is, how much? We do not know yet. It depends on the number of cases that we have and the economic circumstances. I know that this morning some figures were mentioned on what sort of money we have asked for. Publicly or privately, we have asked for no  money yet. We have been looking at the situation and discussing what it might look like with our colleagues in BIS.

Q 128

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

Edward, mediation seems to work well. Your stats are good—congratulations. You have 75% resolution of cases that your organisation mediates. Why cannot other organisations get involved with mediation? There are many small companies out there that are very good firms. Why can they not be involved?

Edward Sweeney: Probably the best way of looking at it is, “Here’s one you made earlier.” We have a long reputation in relation to mediation and conciliation. We have been around a long time, with antecedents going back to the 1890s in real terms. That reputation for impartiality and independence is hard won and hard defended. I would have some concerns about whether outside organisations—third parties—could command that sort of impartiality and independence. The question would be, how would it be paid for? At the moment, the taxpayer pays for ACAS, and the simple fact is that it is good value for money.

Q 129

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

What is your view on claimants having to give ACAS permission before you contact their employer?

Edward Sweeney: If you are dealing with a conciliation of any type, whether an individual or a collective one, you have to have the agreement of the party to approach the other party. If that party says, “I don’t want you talking to my employer,” or “I don’t want you talking to my employee,” conciliation will simply not work. It is a process of two parties coming together that need to feel trust.

Q 130

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

Surely, there are two sides to a story. Sometimes, there must be vexatious or daft claims, and a quick call from ACAS to the employer to check them out would clarify the situation quite easily.

Edward Sweeney: That may be possible, but if we do that, the risk to our reputation is tremendous. People might say, “We put our faith and trust in ACAS, and you broke that trust.” It does not take much for those sorts of stories to start to permeate around the workplace.

We have considerable experience of handling such situations, and the best way to deal with them is to say to the party, “Look, we’re going to contact your employer to seek where we are,” or “We are going to contact your employee,” because it can be either way, “Are you comfortable with that?” If the answer is yes, we are at least half way to making the approach and finding a sensible solution. If you simply cold call one of the parties, the reaction from either side may be quite difficult for the parties to deal with later, when we are no longer there.

Q 131

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

Cathy, you know that people have been making out like bandits with the whistleblower situation. It is a sensible reform—huge amounts of money are spent by companies to settle cases—so what is the problem with it?

Cathy James: I agree that it is a perception that the system is being used as a bolt-on to an employment dispute, and I agree that something needs to be done to deal with it.

Q 132

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

So you would agree that people have been making a lot of money out of it?

Cathy James: I do not think that people have been making a lot of money. When we assess the cases that come through the employment tribunal, 10% of the final cases that go through to a hearing have a private employment dispute at their heart. So it is not that every single case being fought in the employment tribunal is ending up with a private employment dispute at all, but the perception is—I think that this will become stronger as the period of time that you have for bringing a normal unfair dismissal claim is extended from one to two years—that you have no other rights and therefore throw in the Public Interest Disclosure Act. Certainly, anecdotally, that is what we have heard. But our primary issue here is that the law is straining with all sorts of other gaps and loopholes. There is an issue around vicarious liability. There is an issue around the workers who are covered by the legislation—the original intention of the Act to cover student nurses, student doctors. Perhaps non-executive directors should be more clearly covered in the whistleblowing legislation. That would help with financial accountability in the financial sector and in boards—talking about the discussion just now. So there are a lot of areas where the law needs further consideration and that is our primary issue. This is an issue that needs to be dealt with, but in addition to a number of other issues around the protection.

Q 133

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

So you accept that it has been abused reasonably heavily?

Cathy James: No, I do not accept that it has been abused heavily. I do not accept that at all. I think the perception among lawyers, and they are the people who end up with the difficult case on their desk, is that you throw it in. So, among claimant lawyers, you throw it in perhaps. But I do not think it is played out in the employment tribunal process that everybody is being successful in bringing these types of claims, or that it is being abused to the extent that perhaps the perception is that that is the case. But that does not mean that we do not think it needs to be looked at, but it needs to be looked at in the balance, looking perhaps at the issue of good faith and the motive of the whistleblower. Could that be a countervailing issue that could be taken away from the legislation to justify having a public interest test in the legislation?

Q 134

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

Can I go back to the ACAS early conciliation points again, Mr Sweeney? Given some of ACAS’s own figures and from the analysis it has undertaken, you are looking at an increase of some 24,000 early conciliation cases, which, again on ACAS’s own figures, may cost up to an extra £10 million. In response to a question from my hon. Friend the Member for Hartlepool, you said that you were trying to make it fit. Is it the case that you need substantial amounts of additional money, or are you basically taking a good idea and trying to make it fit into the organisation you have currently got, which may be to the detriment to the process working properly for employers and employees?

Edward Sweeney: No. It has to be an element of the former, but we have to the get the figure work reasonably right. We cannot simply pluck a figure out of the air. There have been one or two figures bandied around in the economic impact assessment, but they are not our  figures from ACAS. We want to be able to scope this particular work sensibly, trial it out and see where it goes. We have a fair idea of how it might work from our pre-claim conciliation, on that side of it, but we keep being asked the question by everybody, “How much do you want?” It is a bit like, “How long do you want a piece of string?” We are determined to try and get it as accurate as we possibly can and it will depend on the number of cases.

If I may, there is a slight misconception about the number of cases. If you look at the number of tribunal cases that go through, we get an extra 60,000 to 75,000 a year, but we count them differently than the way others do. For instance, if we have an equal pay case with 200 or 300 people against a trust, we class that as only one case because that is only one conciliation, even though it may be 300 tribunal applications. So we are looking for a sort of steady-state approach. We think that we might get 27,000 or 28,000 pre-claim conciliation, which is what we have now, and we may get the additional figures on top. But that is dependent on the economy and on where we need to be. I do not want the organisation to take a shot in the dark, because that is a reputational risk. A lot of people are putting faith in our early conciliation. We are saying that we want to do it. We are saying that we need to be equipped to do it. In terms of measuring that arrangement, I want to get it as accurate as we possibly can for all our sakes.

Q 135

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

That is a very useful answer. Can I broaden this out slightly more in general terms and ask if any of the panel members can point to any significant evidence that shows that the Bill would generate additional employment or growth in the economy?

Michael Reed: It is an interesting question. It is perhaps an interesting question for an economist, rather than an employment lawyer, as to whether changing employment regulation can have a significant effect on growth and matters like that. I can only speak as an employment lawyer. From the point of view of what rights and employment laws it affects, this is a relatively low-impact Bill in terms of people’s rights. It does not make massive, significant changes to most employment rights and most people’s cases. The most significant impact is around conciliation and possibly changes to settlement agreements. We all have views on whether some of those are good or bad things. To be honest, I do not think that it is the sort of radical change that is likely to revolutionise what is going on.

Mike Emmott: I think that both the proposals on conciliation and on settlement agreements have the potential to be useful in terms of making workplaces more harmonious and taking out some of the conflict. There is no doubt that conflict undermines employee engagement, and there is a direct link between engagement and output. The question on settlement agreements is how they will be used. At the moment, they are a safety valve for the tribunal system.

The tribunal system is too intimidating and expensive in every sense for both employers and employees to use as a first choice. So compromise agreements have developed as a way of letting off the pressure. Settlement agreements have the potential to expand the area in which compromise agreements are used and to give employers some confidence that, simply by broaching the subject of performance,  they are not going to be subject to some sort of claim at a tribunal, for example, of discrimination or constructive dismissal.

The impact of the change in law on settlement agreements and opening up the possibility for more without-prejudice conversations depends on how it is used. We have not seen the Bill yet. There is the potential, if the door is open too wide on those conversations and there is no protection for the individual taking part, it could be quite damaging and encourage a lot of bad practice.

Cathy James: I was just going to add something around protected conversations. I would mirror concerns raised by the unions earlier today. There is already an extension of the time for somebody to have entitlement to employment protection. I can see all sorts of areas where that might be a door open to bad practice, especially where somebody has raised a concern about malpractice. It is a common route for a bad employer to question the performance of an employee who has raised a concern. Suddenly, they have a route to get rid of them like that. We would be very worried about that development.

Q 136

Photo of Ian Murray Ian Murray Shadow Minister (Business, Innovation and Skills)

My final question relates to what Mr Emmott just said. In terms of settlement agreements, if the Secretary of State, as provisioned in the Bill, has the power to alter the amount of compensation to anything as low as median earnings at £25,000 or £26,000, does that not essentially give rise to compensated no-fault dismissal by the back door? Somebody could be earning significant amounts in addition to that and, therefore, it is easier just to go through this process to pay the money in compensation and get rid of an employee than go through the process properly.

Mike Emmott: The obvious difference between settlement agreements and no-fault dismissal is that settlement agreements require an agreement and that is quite important. Obviously there is a disparity of power in many cases, which means that the employee needs a bit of looking after. I do not see expanding without prejudice conversations as Beecroft by the back door.

I have not understood that through a greater use of settlement agreements there is any intention to prescribe how much employers might agree by way of compensation. In some cases, the people who leave might be quite highly paid. Compromise agreements are quite often used for high-value individuals as a way of moving them out of the door without too much hard feeling. I cannot anticipate that it would work. This is an area where employers have flexibility. It would be a great shame, under the banner of settlement agreements, to start trying to second-guess what a sensible level of compensation would be.

Michael Reed: The particular difficulty with settlement agreements is not around settling cases once they have crystallised and once both employer and employee know that they are in dispute and are negotiating. The difficulty is that the current regime provides protection for employees, because it requires there to be legal advice so that they can be told what the settlement agreement means and can have their options explained to them. The real danger that I see is employees being dismissed, sacked, offered a settlement agreement there and then and put under significant pressure to sign on the dotted line, particularly because when employees are dismissed, they have immediate concerns such as about receiving their  latest wage packet. Unfortunately, there are many employers who will take the opportunity to say, “We are letting you go. If you sign this piece of paper, you can have your cheque now, but we are not giving it to you unless you sign.”

The current regime, in which you require legal advice in order for the agreement to be binding, prevents that sort of unscrupulous behaviour. And the fact is that there is nothing in employment law that prevents an employer having discussions with their employees about their performance or work. Sometimes you can get the impression in the press that employment judges and the tribunals who decide these cases are terribly unworldly sorts who would regard the very suggestion that someone might be underperforming and therefore might be let go as something uniquely shocking. We are talking about people who deal with a lot of employment tribunal cases and who have seen a lot of employer and employee behaviour. Certainly my experience from appearing in front of them is that, if one runs that sort of point, one is met very quickly with robust good sense from the panel, who say, “You are reading far too much into this sort of behaviour. We know what is common and what is ordinary in employment situations.”

Q 137

Photo of Anne Marie Morris Anne Marie Morris Conservative, Newton Abbot

It seems to me that, of the two objectives of the changes in the employment regime, the first is surely the need to simplify and speed up the process and, secondly, we need to reduce the cost, both to the employer and to the employee. Does the Bill achieve that, or is there a risk of the law of unintended consequences? Let me explain. Before the Bill, there was no such concept as the settlement agreement. After the Bill, we will have settlement agreements, ACAS conciliation if you do not reach agreement under the settlement and then, if ACAS does not work, the tribunal. So in fact, whether you are employee or employer, you land up with three possible stages. Clearly, the intention must be to keep both sides at the earlier stages, to reduce the cost and, frankly, the emotional trauma. Do we run the risk of unintended consequences, and how might we avoid it by making sure that at least the first stage works in the best way possible?

Michael Reed: The reason, as I think I alluded to in passing, is that there is this sort of protection and restriction on how you can settle in a public case—it is to protect employees, and it is there so you cannot be told, as a condition of your employment, “You have got to agree never to sue us for unfair dismissal.” That means that there are more limited options of settling an employment dispute than there are other disputes. One of those is through ACAS, and the other is what we currently call compromise agreements, which are to be renamed settlement agreements. My experience of practice is that that does not cause any confusion. People either settle through ACAS or through compromise agreements. Although there are two different options, that does not in practice cause any problems, and I would not envisage any problems being caused by the change of name.

Equally, I have to say, whether you call them settlement agreements or compromise agreements seems to me to be a matter of complete indifference. The real issue is around the sort of protections that you need and whether or not it is right that, out of the blue, employers can have conversations with an employee that the employee is never allowed to refer to later in the course of tribunal  proceedings. That is exactly the sort of evidence that Cathy talks about. You know—“On Monday, I raised all of these concerns about our business practices and my concern that something was going very wrong, and on Tuesday you said, ‘Your performance is not very good and we are going to have to let you go.’” It is often that timeline evidence that is important in establishing a claim later. It also risks undermining good industrial practice. If you are an employer and you have a problem with the performance of one of your employees, the sensible and proper thing to do is to have a conversation with them and say, “Look, Mr Smith, you haven’t been doing your work very well recently. What is the problem? Can we help?” It is later that you go through the process around dismissal and other such consequences. Simply saying, “Well, we’ll give you £500 or £1,000 to go away quietly” is not a good thing to encourage employers to be doing.

Q 138

Mike Emmott: In so far as conciliation and settlement agreements do encourage more people not to use tribunals and to find alternative ways of getting along with their lives, then probably they do reduce costs. I cannot see much evidence for simplification. Compromise agreements have been straightforward partly because they have been untouched and more or less little understood. If compromise agreements as such become a matter of more legislative finessing then I would be slightly worried that it would just exacerbate the problem that tribunals already cause. The cost of tribunals is not just financial; there are also serious costs in terms of health. Almost anything is worth looking at if it reduces the volume of tribunals.

Q 139

Photo of Anne Marie Morris Anne Marie Morris Conservative, Newton Abbot

Is there anything that could be done in terms of these settlement agreements, or the process around settlement agreements, that would mean that they would not be hijacked or face what happened to tribunals, which were originally meant to be nice, cheap, easy ways of resolving problems? What is it that any piece of legislation should or should not do to try to keep things simple, without involving all the advisers, consultants and—forgive me—lawyers?

Mike Emmott: My bid would be to protect good practice and performance management, which is the gold standard for how to deal with difficulties in the workplace. Protecting that means giving more support to small firms. I do not need to discuss that at length because it is a non-statutory approach. Other than that, I cannot think of anything else.

Edward Sweeney: I think that our point of view at ACAS is that the idea of a compromise agreement or settlement agreement does not become the default action of an employer. Most people and employers do not go to work to see what damage they can do to each other. We need to keep a sense of perspective on this particular arrangement. We have set out our view on the settlement arrangements.

Going back to your point on simplifying and cost, the whole process of early conciliation is to see if we can take some costs out of tribunals. Mike is right to say that the implications are not just financial; there is also the stress involved. I regularly talk to employers of all sizes and employees. The only people who enjoy tribunals are lawyers who get paid for them. By and large, the  applicants and respondents find them very difficult and stressful arrangements. Any approach that we can produce at ACAS to try to limit the number of tribunals would be sensible. We do well now, but early conciliation could help us to improve on that particular process.

Cathy James: I suppose there is a risk that the whole process could be lengthened by having a compulsory conciliation process. Presumably, by putting in a discussion with ACAS, you will stop time running in relation to the time that it would take to lodge your claim. There is a risk that the unintended consequence of that, especially if ACAS is not resourced, is that that takes a long, long time so that you are then dealing with the employment tribunal claim months and months after the event, which is already the case. It is certainly true of whistleblowing cases because they tend to be complicated, listed for long periods of time and involve reams and reams of paper. They can be the ones that take 18 months before they get anywhere near an employment tribunal. That is one unintended consequence that I would definitely highlight. The second is around the public interest test itself and the fact that we think that that will result in a field day for lawyers looking at what the public interest is. As far as I can see at the moment, the only legislation where there is a public interest test is with the Freedom of Information Act, where public authorities are required to work out what is in the public interest in relation to the disclosure of information. To have that on an individual’s shoulders will have a chilling effect where they are unrepresented, and will lead to an increase in the costs of ligation where they are represented, with many more satellite pieces of litigation—interim applications—around whether it is a protected disclosure at all because of whether it is in the public interest. I can see that absolutely having an unintended consequence.

Q 140

Photo of Simon Danczuk Simon Danczuk Labour, Rochdale

I will start with you, Mike, but I want to ask this question of the entire panel. On balance, overall, and in just a couple of words, will workers be better or less protected following this Bill?

Mike Emmott: I find that hard to answer. It depends on the fine print on settlement agreements. We know that employees who sign up to a settlement agreement will be able to bring claims on grounds of discrimination. Whether they are successful does not matter, but the right to claim that they have been discriminated against on one of many grounds remains. Whether they will be able to bring claims for constructive dismissal, I am less clear. If they cannot, then to that extent I think their protection will have been reduced.

Q 141

Photo of Simon Danczuk Simon Danczuk Labour, Rochdale

So better or less protected in just a few words then.

Mike Emmott: It is an open verdict as far as I am concerned.

Cathy James: I have no doubt that they will be less protected.

Michael Reed: Obviously less protected.

Edward Sweeney: We have already changed the rules to two years, so that means less protection for everybody. [Interruption.] I would have liked to finish, but I am quite happy to talk about resources if you want to.

Edward Sweeney: The question about the two years is there for everyone to see. The question for everybody to look back on is whether the early conciliation produces, through the law of unintended consequences, a new form of three-step process. We have to try to work to ensure that that does not happen. If the proposal is introduced and done well, I think it is of benefit to employer and employee, trade unions, trade union officials, employer representatives, and not necessarily to lawyers, which I do not think is a bad thing.

Q 142

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

We are getting into a lot of the minutiae and actually forgetting that the whole aim of this Bill is to stimulate growth and not to get people sacked, but rather to create more jobs. Will the panel give their opinion of how they think employers are going to view the proposals? How the behaviour of employers will change is important. Does the panel believe that employers feel that there has been huge increase in employment legislation and that that is a disincentive for them to take on more staff? Is that a given that we are presuming? Does the panel believe, as perhaps I hope, that these moderate—rather than radical—changes will have a psychological effect on employers in that they are seeing the tide turn back disproportionately to the reduction in regulations? There are about three questions there. First of all, as a premise, do you honestly believe that employers perceive that this employment legislation is a disincentive to take on more staff?

Michael Reed: It may be a perception of employers, but equally it is the perception of—

Q 143

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

It really does not matter what your perception is. What matters is the perception of employers, as they are the ones who employ people.

Michael Reed: Equally, it is the perception of employees that they are at the mercy of their employers and that they cannot enforce any rights unless they bring a long, arduous tribunal case, which may not get them very much money. What ought to be considered in terms of making policy is what the reality of employment protection is—

Q 144

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

We are trying to deliver growth, so can we just stick to answering the question?

Michael Reed: What employers or employees perceive about employment law is one thing, but I would hope that both groups’ perceptions are based on reality. The reality is that if you take on a new member of staff, you will not have to worry about any unfair dismissal claims for two years. After the two years, if you want to dismiss an employee for misconduct, you will have to honestly believe that they did it; you will have to have some reason for believing that; you will have to have carried out a reasonable investigation into that misconduct; and you will have to give the employee—after all, they have worked for you for two years—a chance to respond to the allegations and to say what they want to say. I do not think that that is an arduous burden to put on an employer.

If you go to a tribunal, the tribunal will take account of your size and resources, and often, if you are a small employer, those issues will be decisive when the tribunal decides whether you have acted reasonably. If we are saying that employers believe that the law is something different from that, the way of addressing their perceptions  about it is through education, rather than through changing the law on the principle that their perception of it is wrong. If their perception of it is wrong, it does not help to change the law to something else.

Mike Emmott: The debate on the link between the Bill and growth is essentially rather symbolic. I do not think there is much evidence that the Bill could conceivably have a significant impact on growth. How could it do so? I do not see it as a deregulatory Bill but, in any case—I am sure the people this morning told you this—the OECD thinks that the UK is a very lightly regulated country anyway. I think that that is a false debate. There is a debate to be had about the impact not on employers, but on employees. That is about whether the Bill encourages better management and whether it encourages a more engaged work force, which is a source of growth. The idea that this Bill impacts directly on growth through employers’ attitudes is probably mistaken.

Cathy James: I have not seen any evidence that the protection of employment rights affects growth. I was listening to the evidence this morning, and I did not see that. It is not a proven fact. On whistleblowing in particular, most employers would want to receive an ill-founded whistleblowing concern rather than have a culture of silence, as happened, for example, in Mid Staffs hospital and in some of our newspapers. Questions about when the whistle is not blown far outweigh the question of whether the law protects people—well, the law should protect people.

Edward Sweeney: I do not think the empirical evidence is there, but I think that perceptions need to be addressed. There is an argument about perceptions among some employers, particularly small employers, on that side of it, so I think that that has to be addressed.

Q 145

Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member)

I want to come back briefly, Mr Sweeney, to the point about ACAS resources. First, it seems to me that, at a time when we are essentially moving from the divorce courts to mediation—obviously, we are moving from tribunals to settlements—the number of tribunals may vastly underestimate the number of people who would come forward for mediation or settlements. There may be a hidden or lower part of the iceberg that will emerge.

Secondly, the economic conditions that we face—basically, zero growth through austerity, and a greater number of part-time staff and people who are insecure—may well again generate more people wanting to go towards settlements. I just find it rather strange that you should run an organisation, in which your resources are presumably almost fully utilised, that will take on this new burden. I am wondering what different scenarios you have pictured of different futures and how big an increment of extra resources you might need in those scenarios. You seem to be saying, “We’ll see how it goes, and thank you very much for offering us some more money, but we don’t really know.”

Edward Sweeney: I am sure you are very aware as an MP that the negotiation that takes place between Departments is a long and strained one on occasions. The reality, from our point of view as the chair of ACAS, is that we are pretty confident, from the conversations that we have had with BIS, that we can find the resources that we would need to make it work, because if it does not work it falls on everybody.

Q 146

Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member)

You are going to do that, but what is the upper limit? How many times do you think your turnover might have to go up?

Edward Sweeney: It is impossible to say, at this point in time, if you look at the number of scenarios. For instance, we do not know whether charging for tribunals would have an adverse effect on either employers or employees. We have to model to find out whether the impact of charging result in fewer calls coming through, or will it result in more calls coming through, because people feel that they have paid their money, and so they are going to go to tribunal? Will there be less, from an employer’s point of view, of engaging in conciliation, and the process we have, because people think employers will not have the money to put up front? We have to look at that side of the equation.

The people who come to us for early conciliation, or conciliation now, normally have a bigger issue than what goes on in their day-to-day lives. The question for us in terms of the process—Mike’s people in the CIPD have done a great deal of work on this—is to make sure that the management processes and the management we have are good managers. They must know how to have difficult conversations, without racing to some form of quick solution that they think will get rid of an employee. It does not work that way, and it never has.

Q 147

Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member)

But in the round, if there is much more settlement activity than there has been tribunal, because people are coming to the surface, and because there are other things such as withdrawal of various rights and human rights and diversity and so on, and whistleblowing—all the other changes in this Bill, which pretends to be about growth—then that may even provoke greater activity at your end?

Edward Sweeney: It may well do, and we have to be ready and quick enough, and astute enough, to see that coming down the track. The helpline we run at the moment is a pretty good barometer of the sort of work we do, in terms of what is coming through in the workplace, so we can see the shape. We take about 1.5 million calls on our helpline. At the moment, that is the access point for pre-claim conciliation. The new process will mean people who are contemplating a tribunal will have to come to us directly first. That is the significant change in this process.

In terms of the volume, it is difficult to say. We have seen, when economic activity rises and falls, that that impacts on our casework. But if people are saying to me, “How much will we actually need?” then at this point in time I am not able to say, accurately. I want to be able to have those conversations with BIS, in an open and honest way, to say, “I need this.” Let me give the assurance: if I feel I am not getting it, then I will simply complain and say “We cannot do what you are asking. It will not work.”

I cannot simply drop off my other activity to try to fit this one in, because the other activity is equally important. People would want me to settle the petrol tankers dispute. The resources I need for that have to go through. People would want me to do the good practice services, going out and explaining new changes. There is a finite amount of money. I do not think what we have now in our budget would cover any sizeable increase. I am quite clear that we would need some additional resource, but I am not sure yet what level of additional resource.

Q 148

Photo of Geraint Davies Geraint Davies Parliamentary Assembly of the Council of Europe (Substitute Member)

May I ask the other witnesses, given their expertise, whether they instinctively feel that ACAS will be short of a few bob, to put it mildly, if they are not able to ignore some of these big disputes, and therefore people’s rights and hearings may fall off the edge in the short term, while Ministers are scratching their heads and looking for money they have not got?

Mike Emmott: I think time scales for claims being considered and the effect of resource on the time it takes to deal with tribunal claims have gone up and down over the years, so I think it might take a few months before we know what the impact has been. I would not be particularly alarmed by the impact on volumes in the short term, because I think if there is an impact it will just be to move ACAS’s intervention a bit further upstream. Hopefully it will actually catch things a bit earlier and reduce the likelihood that individual claims get to tribunal.

Michael Reed: I am very glad to hear that ACAS is so optimistic. I am less optimistic. This is a very significant extra amount of work that they will have to do, and it is certainly possible that some of the other changes in employment tribunals are going to make some elements of their work reduce, or make it easier. However, for example, once people are paying fees to go to employment tribunals, that will make claims harder to settle, because there will be a sunk cost issue, which will make elements of their work harder. I suspect it will come out in the wash, but that still leaves them with a significant expansion of work in pre-claim conciliation.

Cathy James: Will the fee be payable for the conciliation, or after the conciliation? What will happen with that? I would question that, and I think that whistleblowing cases are likely to give you your biggest challenge in relation to making a difference at an early stage, because the early-stage advice is really important with whistleblowing cases. We certainly do not encourage people to take employment tribunal claims, because they are lengthy, stressful and difficult, so I can see a benefit to having that service available—that is, intervening early before issues become really significant interventions.

Michael Reed: There is a real issue around what impact things like these will have on issues such as early conciliation. Under the current proposals—you are waiting to hear back on conciliation—people are going to have to pay a significant fee shortly before getting to an employment tribunal. I am sure that employers will look at pre-claim conciliation, and indeed post-claim conciliation, and say, “Why don’t we just wait and see if they come up with that £1,000, because they might not and then we are out of it?” That will not be good employers and it might not be most employers, or a significant minority, but some will.

One problem with all consultation processes around employment law is that people like us come and talk, and we are the reasonable employees and employers. We are not the badly confused employees and employers who do not know what is going on and find it difficult to navigate the process, nor are we the outright unpleasant employees and employers who are not interested in behaving reasonably.

Q 149

Photo of Chris Ruane Chris Ruane Opposition Whip (Commons)

This morning, we heard from the Institute of Directors that the issue of workers, workers’ rights and regulation is the third biggest issue facing the British economy. Our own BIS  survey said that regulation rates at 6% as an overall concern for businesses, and regulating workers’ rights is within that 6%. You, more than anyone we will interview, are at the coal face, or the chalk face of contact with employers and workers. Do you detect any great movement out there for weakening workers’ rights? Is it the third biggest issue, or is it part of the 6%? Is the Institute of Directors right, or is it the BIS survey? Is there a great demand out there from the employers you meet on these issues for weakening workers’ rights?

Mike Emmott: Not at all, although I have to say that many of our members are medium and large organisations, rather than tiny ones. There is a perception problem. I prefer the BIS evidence, and the BIS survey evidence, and I see no reason to doubt it. On the other hand, people are always putting themselves in other people’s shoes and saying, “Yes, I can see that that would be a problem, wouldn’t it?” It is partly a matter of confidence. When I talk to people who run small businesses, I am always impressed by how they are—I hesitate to say this—normal, humane, intelligent and competent guys. The fact that their business is small does not mean that they are lacking in any way—no more than the people who run big businesses are lacking. There is a perception problem, but we tell each other stories and we believe them, because they are plausible.

I do not get the impression that employment regulation is a major burden on small firms. The surveys that I see, other than the BIS one, talk about taxation, demand, loans and so on, and those are the issues that businesses really care about.

Q 150

Photo of Chris Ruane Chris Ruane Opposition Whip (Commons)

Are those issues that you have come across addressed in the Bill—yes or no?

Mike Emmott: I will say no. If you could tackle the issue of the confidence of the smallest employers in their ability to cope if they recruited—if you can tackle that by reassuring them—it would be fantastic, because it is a real issue. I do not think you could persuade them, for example, that it is worth taking away a lot of actual legislation. It is not the rights that people object to; it is the machinery that is used for enforcing compliance with rights that I think is the real problem.

Q 151

Photo of Chris Ruane Chris Ruane Opposition Whip (Commons)

Can I ask the rest of the panel their opinion?

Cathy James: I would just say that in terms of whistleblowing, enlightened organisations see that it is in their own best interests to have good whistleblowing policies. They see it as part of good governance, risk management and critical information, and they want to know if they are unknowingly harbouring malpractice. Therefore I have yet to see an employer who has said to us, “Oh isn’t it a pain having this protection?” If you get it right you are not at risk in relation to the legislation. It is only if you get it wrong and there has been a failure in some way that people resort to the law. I do not get the impression that business is complaining about the Public Interest Disclosure Act 1998 at all. It has always had cross-party, cross-business support from trade unions and business interests.

Q 152

Photo of Chris Ruane Chris Ruane Opposition Whip (Commons)

Is it the third biggest issue?

Edward Sweeney: From my own experience talking to employers of all sizes, particularly small employers, their biggest concern is probably access to sensible finance.

Q 153

Photo of Chris Ruane Chris Ruane Opposition Whip (Commons)

Is that addressed in this Bill?

Edward Sweeney: It is not part of the Finance Bill is it, on that side of it? I will talk about that for investment in ACAS. The BIS analysis is pretty solid in terms of those arrangements. The biggest concern is a perception issue about employment rights. It impacts on some small businesses. But bad cases make bad law. Anecdotes make bad law. Someone coming up and saying, “I had this bloke come to me last Tuesday.”

Edward Sweeney: I am not going anywhere near that, Chair. As you all know as Members of Parliament, good law requires good empirical analysis. Bad examples are not necessarily sensible for any employment for employers or employees, whether they are large, medium or small.

Q 154

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

With all due respect, you are so living in a parallel universe on what small businesses in this country need. You can come to Skipton and Ripon any day you want and I will introduce you to risk takers who definitely need this burden lifted. Can I clarify very clearly the points you made about settlement agreements? To summarise, you are all positive about settling pre-tribunal, whether through a settlement agreement or through conciliation? As long as that settlement agreement is voluntary and there is no long conversation that could be exempt from lots of legal questions, perhaps in the form of a letter—a voluntary offer—that is fine? As long as there is no predetermined compensation you would be happy? As long as at the end of the day there is a compromise agreement where there is legal representation on both sides you would feel on balance, even though you do not love settlement agreements, even though you will never think they are the panacea that we need, you are all okay with them? Could I go through with you one by one whether that is the case?

Mike Emmott: Yes. The one thing that is not the case is that I would support settlement agreements any more than I would support compromise agreements, as they now are, at the expense of decent management. You only get there when you have screwed up or when you are worried about something that you are not prepared to face in a more intelligent way.

Q 155

Photo of Julian Smith Julian Smith Conservative, Skipton and Ripon

But broadly my four points were fair?

Mike Emmott: Yes.

Michael Reed: Conciliation at the earliest possible stage is always good and mechanisms that make that easier are good, but the fact is, it is not difficult at the moment and there is a risk that if you try to make it easier by removing the protections we will find that the protections were there for a good reason.

Cathy James: I would agree save for one really important issue with whistleblowing, which is that there should not be any gagging. We have put forward an amendment that could make it a positive requirement for lawyers who advise on settlement agreements to highlight the anti-gagging provisions in the Public Interest Disclosure Act.

Edward Sweeney: I would not demur from it, no. As long as, as Mike rightly says, it does not become the default reaction for most employers.

Q 156

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

A small employer said to me, “The employees have got the rights and the employers have the responsibilities. The balance has tipped too far. At the end of the week I haven’t got a right to a profit. When I don’t make a profit I don’t have any more employees.” Mike Emmott has said that small employers are bothered about taxation. Well, vexation is the equivalent of taxation and regulation is vexation. That is what they see this as. It is almost a form of taxation by regulation.

Mike Emmott: I think what employers worry about is when the law is changed. They always struggle to adapt. I do not think many people would want to take away maternity rights. I do not think that many people are opposed to flexible working. The employers I talk to do not ask us to remove the actual rights. That is why I said it is the machinery and legislative change that cause the problem. That is when you get the actual protests.

Michael Reed: There is a real danger of having this debate by anecdote. Some small employers struggle with employment rights, get confused and have difficulty, and some small employers believe that paying their employees should be optional, and that it is absolutely outrageous if someone brings a claim. They are not the majority of employers, any more than it is the majority of employees who are vexatious and out to con something out of their employer by bringing a claim. However, if you are going to have employment rights, you must have a mechanism by which they are enforced.

Further on the small employer point, there is a real difficulty if you begin excluding small employers from certain employment rights—

Q 157

Photo of Andrew Bridgen Andrew Bridgen Conservative, North West Leicestershire

So do you believe that employment rights can only ever move in one direction? They have moved in only one direction for the past 50 years. Is that your aim—that they should always move in that direction?

Edward Sweeney: Can I just go into the mediation part of ACAS, in terms of Michael’s response? It is a mixed world out there. There are some very poor employers as there are some very poor employees; that is the reality. To be fair to Michael, FRU does a fantastic job at some of the sharp end of some very difficult cases that no one else wants to represent, so I can understand that. I would not share his view that there are lots of employers who do not—

Michael Reed: I said some.

Edward Sweeney: I would not even say it was some. I think it is a very small percentage, and it gives the wrong impression of work image. That is certainly not the experience of ACAS, and we deal with all types of employers—some good, some bad—and all types of employees—some good, some bad—and, dare I say it, some difficult trade union general secretaries.

Q 158

Photo of Iain Wright Iain Wright Shadow Minister (Business, Innovation and Skills)

Good legislation needs good analysis, not good anecdotes. It also needs good consultation. May I bring you back to clause 14, as I do not think we covered that as much as we should have done? I do not think we have a particularly good settlement when it comes to clause 14 and whistleblowing. This, from you, Ms James, is an absolutely excellent submission, but could you summarise what you think the problems are in the lack of consultation—I think you say that it is a missed opportunity—on what clause 14 should look like in order to make it better?

Cathy James: Our primary point is that it should be removed and there should be a consultation on it, so that there is consideration of the other areas in the Public Interest Disclosure Act 1998. The interplay between the public interest test and the good faith test were mentioned by Dame Janet Smith in the Shipman inquiry—that it would be a good idea to remove the good faith test. We have put in a number of ideas regarding the amendment of that, and one of them is to remove it entirely and have a public interest test. However, we are not suggesting that we have all the answers. There needs to be a proper public debate on that matter.

The other problematic issue is that there is a gaping hole in relation to vicarious liability. There are no vicarious liability mechanisms in the Public Interest Disclosure Act. That has come out in a recent Court of Appeal decision, and it needs to be dealt with. It can be quite easily dealt with by mirroring what is in the Equality Act 2010, but again, with the debate going on the protection in the 2010 Act, we would suggest that there should be a proper consultation on this—the protection of workers, public appointments, non-executive directors, student nurses, GPs, student doctors, volunteers and interns. There are a lot of areas where fresh eyes can come into an organisation and be the first to see something go wrong, but non-executive directors are the least protected in the boardroom, and obviously employees. There needs to be some discussion about those fundamental points. Should the police be a second-tier regulator? Should it always have to be on the shoulders of Government to consider prescribing a regulator every time there is a change in regulation, with the loss of the Audit Commission? What happens with that regulatory point? All those issues need to be considered. Our primary point would be: let us start again here and have a proper consultation, as opposed to merely narrowing the scope without thinking about the wider issues.

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

We have just a few seconds left. Does anyone have a last word on this point?

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

I am afraid that brings us to the end of the time allotted to the Committee to ask questions of these witnesses, whom I thank on behalf of the Committee. We will now move on to oral evidence from the Equality and Human Rights Commission.