John Morris, Stephen Miller, Simon Pritchard and Joy Drummond gave evidence.

Q 197

Good morning. Welcome to all the witnesses. May I ask you each to introduce yourself for the record? If there are particular areas of the Bill on which you feel unqualified or less qualified to comment, or areas on which you would particularly welcome questions, please say so.

Joy Drummond: I am Joy Drummond, a solicitor with about 30 years’ experience specialising in employment law, from Simpson Millar. The areas of the Bill that I most think need further discussion are how it is envisaged that pre-action conciliation will be implemented—I think that there is a much better way of doing it—and the confidentiality of negotiations before the termination of employment; I have a bit to say about that too. There are other aspects, but those are the two main ones.

Simon Pritchard: I am Simon Pritchard, a competition partner at Allen and Overy, formerly of the OFT. I will be speaking in a personal capacity on the competition aspects of the Bill.

Stephen Miller: My name is Stephen Miller, and I am a solicitor in private practice in a firm called MacRoberts. I am also a member of the employment law sub-committee of the Law Society of Scotland, not the tax law sub-committee, as it says in one of your papers. You will probably gather from that that I will be speaking about the employment aspects. I am particularly interested in the reduction of the compensation limit and the introduction of protected compensations, and the definitions surrounding that.

John Morris: My name is John Morris, and I am senior partner of a firm called Burnetts in Carlisle. I have practiced employment law since 1974. I am a member of the employment law committee of the Law Society—the immediate past chairman—and I have been a part-time, fee-paid employment judge since 2000.

Q 198

I would like to focus on part 2 of the Bill—so, Mr Pritchard, you can relax for a couple of minutes—and three aspects in particular. May I start with clauses 7 to 9? I was really interested in the Law Society’s submission, because sitting on the Committee one could be forgiven for thinking that the reason why we are in a double-dip recession is the number of employment tribunal cases going through at the moment, but Mr Morris’s submission says that they are actually  falling. What is your view in terms of the number of tribunals and the impact that that is having on economic growth in this country?

John Morris: The Bill is predicated on the increasing number of employment tribunal claims—unmeritorious claims, at that—which simply is not supported by the evidence that we have seen. I was at a meeting on Monday afternoon with senior members from ACAS, the employment tribunal system and other such organisations, where the statistics were given. The figures have fallen year on year, except for the multiples, equal pay, as someone mentioned, and the airline dispute with the repeated submission of claim every three months. Take those out, and the figures have fallen year on year.

Q 199

Is that your experience as well, Mr Miller?

Stephen Miller: Yes.

Q 200

Is that your experience, Ms Drummond?

Joy Drummond: Yes. Delays are mentioned, but I think that is more to do with resource. We have had situations where tribunals cannot sit for as many sessions as they might be able to because of budgetary constraints; they are getting near to the end of the time. In fact, I am involved in the airline litigation. We are lodging claims every three months against about eight airlines—there are hundreds and, sometimes, thousands of claimants—so no doubt that will affect the figures, quite apart from the equal pay claims.

Q 201

Everybody seems to recognise the general point that early conciliation is a good thing, although some reservations have been expressed that the proposals in the Bill are somehow too complex or technical. Will you expand on that? What do you think could be done to amend what is in the Bill to allow early conciliation to be much more fluid and efficient? May I start with you, Ms Drummond?

Joy Drummond: I agree: pre-action conciliation is a very good idea, and I am not even against the idea of making it compulsory that people try conciliation before an employer has to respond to a claim. The difficulty is that the method proposed by the Bill, as currently drafted, is unnecessarily complicated and will lead to more uncertainty, more litigation, more cost and management time for employers—not to mention that it places additional hurdles in front of claimants with valid claims.

I can expand on that, if you like, to say why. Briefly, it is completely unnecessary, because there is a solution that is much more simple and straightforward, which will not have all those adverse effects. The problem with what is drafted is that, whereas now you lodge one claim on one form within one time limit and then the tribunal sends it to ACAS for conciliation, under the new proposed arrangements you would have to lodge two prescribed forms within two different time limits, and the second time limit is going to be hard to work out. I tried to work through the Bill with an actual example and I would say, as an employment lawyer, that I found it quite difficult.

The arrangement is also based on uncertainty. One thing that it depends on is that you have to take away the time at the ACAS conciliation, which is calculated  by deducting the period of time between when ACAS receives the prescribed form and when the claimant receives or is treated as receiving the certificate from ACAS. I can see all kinds of problems with that, both evidential and legal. I do not know whether you recall the disciplinary and grievance procedures that people had to go through before going to a tribunal, when there was all that satellite litigation, but that will look like a picnic compared with this.

Q 202

Is that your view as well, Mr Morris?

John Morris: It is, indeed.

Q 203

Mr Miller, do you think that the arrangement will be too technical, too complicated?

Stephen Miller: I take a slightly different view. I think it is complicated, but not unnecessarily so. Of course, ACAS already does pre-claim conciliation—it has very high success rates—and one reason it puts that down to is the fact that nobody is putting anything on paper at the moment, so ACAS catches things before people, usually with the benefit of lawyers, take entrenched positions.

We have dual needs here: we have the need for ACAS to do the pre-claim conciliation with as little on paper as possible and then, when it is handed to us, we need quite a lot on paper. The underlying problem is really that very aggressive time prescription—usually three months—operates in employment law, so claims have to be raised quickly. That is generally a good thing, but that builds in its own complexity and means that if the ACAS pre-claim conciliation fails, which it probably will in the majority of cases, there is a need for people to state, with appropriate specification, all the claims they are taking and to get them in.

I agree with Joy that in some cases the period will be as short as a month, after the conciliation fails, for getting a claim in. But I take some comfort from the fact that the individuals will have been through the hands of ACAS, and if ACAS has not effected a pre-claim settlement, it will at least have been able to give them some guidance as to what to do next. That is one of ACAS’s strengths.

Q 204

On clause 13, which is about the imposition of financial penalties on employers, it seems that nobody wins, except perhaps the Government through a tax-raising power. Employers do not win, because there is the sense that financial penalties will provide employees with “additional leverage”, which is the actual phrase used in the Law Society’s submission. Claimants do not benefit from the penalty either. What should clause 13 look like? Should it just be scrapped from the Bill?

Stephen Miller: I said in my three quarters of a page that I thought this was long overdue. Successive Governments have spent a lot of time laying down legislative conditions to improve employment relations, and a lot of employers ignore that. I have some issues around the level of fine and so forth, but in principle I have no difficulty with this. It gives an incentive to good employers who pay attention to what they have been told and comply.

Q 205

Mr Morris, do you agree with Mr Miller?

John Morris: I would not take great issue with the principle of what he says, but employment tribunals started by compensating employees for various things. Penalties were then introduced for not having a contract or not consulting in transfer situations, and the penalty goes to the claimant. This is the first example where the money goes to the Exchequer. If the trigger for that is “aggravating features”, which is what the Bill says, who has been aggravated by those features? Answer: the claimant. So who should get recompense? The claimant.

Joy Drummond: I agree with Mr Morris, but I would add one more point: if they are to come in, I feel very strongly that, in circumstances where the claimant has been granted an award but the employer has not paid it, any penalty should first go to compensate the claimant, because it seems unfair that the employer is likely to pay the Government first, partly because the sooner they pay, the less they have to pay. It would be unfair to have a situation in which the Government benefit but the claimant does not, and possibly has to go through enforcement procedures, which will be particularly difficult for people acting in person.

Q 206

My final question is on clause 14, which is about whistleblowing. Do the Bill and the clause as it stands achieve their objectives? We heard some very interesting evidence on Tuesday that suggested that they do not. What are your views?

John Morris: The problem that is being addressed arises from the decision in the case of Parkins v. Sodexho Ltd, where the Public Interest Disclosure Act 1998 had introduced the provision that if someone discloses a breach of a legal obligation, that person is protected, which is fine. That case, however, said that that could be a discrete breach of obligation in a contract of employment between employer and employee. It is hard to see what the public interest is in that, if it is about the contract between you and me. That is the mischief to be addressed, but it has been addressed by introducing the requirement for public interest and applying that to all the strands—health and safety, environmental safety and disclosure of a criminal offence—which, by implication, are already in the public interest. The requirement for public interest has been introduced for all the strands and not just for breach of a legal obligation. That is the first point.

The second point is that the requirement for public interest has been introduced in terms that the claimant reasonably believes that it is in the public interest, but the test should surely be that the employment tribunal is satisfied that it is in the public interest.

In opening questioning out to other Members, may I suggest that we first focus on the competition aspects and then move back to employment?

Q 207

This is a question for Simon. The intention was to strengthen the anti-trust regime and make it more efficient. Do you think that the changes in the Bill achieve that?

Simon Pritchard: They might. It is one of the most controversial topics, as I set out in my written remarks, and, somewhat ironically, it is not really an issue that directly relates to the merger of the OFT and the CC. It  is an issue that has been around for many years and has not gone away. If anything, it has got more serious recently. There is a part of me that says that if we are going to do something bold and ambitious—in a way, this reform is bold and ambitious, and I have a lot of sympathy with Sir John Vickers’s view that it could go well or it could go wrong—we will not know for sure until we try. I see a strong case for the prosecution model, which obviously was consulted on. I accept all the risks that that more bold, ambitious and revolutionary change would bring. I think that where I tentatively come out is that the current reforms in which the OFT is engaged should be given a chance. The spirit of where the Bill is at is that the OFT is on probation to deliver on these internal reforms. I think that they are broadly all in the right direction. Had it been all up to me, I might have been bold, but given where everybody else is, a reasonable balance is to go down the intended path—tweaking the administrative model to make it as efficient and robust as possible, but keeping the situation under review, whether by a reserve power or by Parliament revisiting the issue, to give it a chance to move and, in some ways, embrace the logic of our common-law litigation model.

Almost everybody agrees that full-merits review by the Competition Appeal Tribunal is of paramount importance. Once you take that as a cardinal principle, the move to the prosecution model is in some ways still revolutionary, but not as radical as some would suggest. Speaking as a lawyer, that is where I come out. I wish the OFT the very best for delivering in that way over the next couple of years, but I think that there should be a degree of putting to the proof.

Q 208

On the merger between the OFT and the CC, your submission indicates that you are largely in favour, but you emphasise the importance of having a fresh-pair-of-eyes review. We have heard that strong organisational separation will be required. What are the implications for resourcing in that case, particularly in reference to the predicted savings associated with the merger?

My second question is about removing the dishonesty requirement with regard to entering into cartels. You have said that that is one of the more contentious provisions. Is that the right way to address the lack of successful action by the OFT?

Simon Pritchard: On the first question about the OFT-CC merger, and the cost savings and resource implications, one of the key reasons for reform at the outset was to reduce duplication, increase efficiency and save costs. It soon became apparent that that was a small part of the proposition in favour of regime reform. There is certainly potential for that in merger cases, but one should not place too much weight on it. It became apparent that the emphasis on robustness, thoroughness and getting the answer right is also a principle that is at least as important, and probably more important, than efficiency, so you inevitably end up with a trade-off. One thing I like about this country is that the principle of getting it right and being very thorough and robust in decision making means that the Bill has checks and balances—in this case, the grafting of the CC panel model. Once you do that, you sensibly tilt the regime in favour of robustness, but things will not necessarily be a lot quicker.

The case for reform—this is why I am broadly supportive of it, although still somewhat tentative—is that you will get more bang for your buck. It will not be direct savings, in the sense that everything goes through a lot quicker, although you can shave a bit of time off merger cases and market cases. However, there will be an impact on the overall costs of running the OFT and the CC, because the human talent that resides in both those organisations is not necessarily utilised for maximum effect. They are two very separate institutions, which can be a good thing, but, to some degree, they are competitors for reputational capital, with all the bickering that can arise from that. If they are harnessed properly, you could get productivity gains—more output and more cases. That is the economic, cost-benefit side of it, and that is why I am tentatively in favour.

The other reason is—this is more my policy background —that you would get more coherence. Many of these issues are debatable. They are complex, but they would be debated in house, so you would get an answer from a single competition regime to a lot of questions, which would also be valuable for merger policy and predictability for business, and therefore a public good. That is the case for reform, but it is very different from where things started out. Unfortunately, it is certainly not about saving the taxpayer large sums.

On dishonesty, which is perhaps the question I have sweated about most, I should say that I am not an expert in the area. As you well know, there have not been many criminal cartel cases, so I cannot speak from personal experience of having been on either the receiving or the giving end of one. However, I have spoken to my former colleagues at the OFT. My conclusion is that I am in favour of removing dishonesty, because I see the logic, but a lot more work should be done soon to hammer out what you replace it with. Taking the provisions of the Bill and the publication requirements lock, stock and barrel raises a lot of practical issues. I am very sympathetic to the concerns, which are mainstream anti-trust concerns, about how that would work when the rubber hits the road.

From listening to what the CBI representative said on Tuesday, it sounds like I am in a similar place. I was interested to hear that the CBI could see the logic of the case for change, rather than saying, “This is outrageous,” as many did to begin with. The knee-jerk reaction is to say, “The criminal offence and the sanctions are particularly severe. It seems perfectly fitting that they should be limited to dishonest conduct. That is the way of separating the small minority of cases that are really egregious and criminal from others that should still be punished, but in a civil way, via sanctions on the companies—financial penalties.”

I did not find the case on paper compelling, but then I listened to people for whom I have a lot of respect who are trying to bring these cases and are under great pressure to do so. The reality is a little more complicated when it comes to jury trials, dishonesty and the subjective element of people knowing that what they did was dishonest. On that element, people are very good at rationalising that what they are doing is perhaps not strictly above board or something that they would shout from the rooftops, but nor is it that bad either. We have all been able to rationalise aspects of our past when we were perhaps not at our best. You find ways of saying,  “There was good a reason for it.” That is not the only reason why the dishonesty offence is a problem, but it is a key one, so I very much see the logic of tweaking it.

Q 209

Do you think that the powers to investigate practice across markets are sufficient? Will they have the desired effect of ensuring that competitiveness and consumer protection are the order of the day?

Simon Pritchard: If I remember correctly, the OFT said that the power would be rarely used, but that it was useful to have. I certainly agree that it would be rarely used in respect of market investigation references, in part because other tools are available, not because a practice that was causing an issue would necessarily be left unchecked.

I can see the argument for the idea that it should be in a toolkit. That is a respectable position. I would caution against expectations that it would be used many times, which relates to a more general point about market investigation references. I was interested to hear what Sir John Vickers said about that. It is a valuable tool, but for much more sparing use than mainstream opinion suggests. It is a very heavy tool. In some ways, it is a sledgehammer—it is suitable for boulders. In many cases, the problem is not a boulder; it might be a bowling ball or a walnut, but it certainly does not lend itself to that kind of instrument. As Sir John said, this is a case where nobody has done anything wrong in terms of breaking the law, and yet one is intervening to tweak how markets work. I support the logic of that. It is just that a lot can go wrong, and it is far and away often not the best tool. I think the idea of a steady diet of five or four market investigation references a year, although I accept that was the original premise, is misguided. I would be worried if the CMA, as part of its programme, had n of these investigations a year. They are part of a toolkit, and every now and then they deserve to be used.

Q 210

Another tool in the kit—I would suggest that it is a smaller one—is the power of the Secretary of State to think about public interest issues and to ask the new organisation to explore those issues in parallel with competition issues and so on. Do you think that that will be useful?

Simon Pritchard: It makes me very nervous, perhaps unjustifiably. I was interested to read that the OFT was, on balance, opposed to the idea and I very much sympathise with the reasons for that. It is true that in merger cases the Competition Commission has been asked to investigate public interest issues, and I would say that in the case of Sky-ITV, there were media plurality issues. That worked very well and the CC did a very good job of that—that is neat.

The big thing I think is a difference is that in a merger case, the issue is what difference the merger makes to plurality, national security, or indeed financial stability. That is one thing. It is very different in the market context to involve the CMA in tricky public interest questions, and although at the moment it is only national security that is one of the specified things, I would worry about expanding that list. As a former competition official, I do not think that the OFT was very comfortable or very good with those kinds of issues. One could of course bring in the expertise, but that raises the question  of whether it would be more sensible to have these very important issues looked at in parallel, but not necessarily woven together under the same roof.

Q 211

My question is to Simon. In his evidence, Sir John spoke about the importance of CMA decision making being consumer-focused. I was just thinking about what you were saying earlier, about where there is a conflict between public interest and competition, and how the CMA might deal with that. One example to bring that to life would be the recent Competition Commission inquiry into the bus industry, where the public interest would have called for re-regulation of bus services, but competition did not. Do you think there will be a greater focus on the consumer as a result?

Simon Pritchard: I would say that competition policy is, and certainly should be, very consumer-focused. To the extent that there is a view from the outside of the authority that competition policy is not being consumer-focused and that other public interest reasons point in favour of something different—for example with small shops or the various kinds of issues that can arise—I am nervous about the CMA making essentially political judgments to weigh up complex issues. I am more comfortable with such judgments being made by democratically elected politicians rather than by CMA officials, no matter how brilliant those officials may be. Ultimately, they are members of an authority who have specific expertise. Obviously they are very good looking at evidence—it is useful to have evidence-based decision making on these public policy issues. Ultimately, however, there is a point about if you want one public policy good to trump another. On financial stability, for example, whatever one thinks about the Lloyds-HBOS case, it was absolutely right that it was not the authority that said that financial stability was more important than competition in that case, and it was absolutely right that a political judgment should have been made by the Government. I am worried that there will be an outsourcing of such judgments by essentially delegating that process, even if there is simply a recommendation, and ultimately just following what the CMA says. I think that that muddies the waters in a way that, again, makes me quite nervous.

Q 212

Would the panel agree that the original thought behind tribunals was that they would be a sort of informal forum in which the applicant and responder could represent themselves and resolve employment disputes, but that that has now moved somewhat to there being far more legal involvement? Would the panel agree that as the award limit has increased, the whole area of employment law has become of more interest to the legal profession?

Secondly, does the panel agree that tribunals are very difficult for small and micro-businesses, who are disadvantaged by and very fearful of the system? If you are only employing three, four or five people, it is highly possible—and it may be in the applicant’s interest—that every member of staff will be called as a witness and spend a day there. Effectively, the business will then cease to function for the time of the tribunal. A great fear for the owners of small and micro-businesses is that they actually will not have a business because there could be several days when they will not be able to trade.

Stephen Miller: I am happy to go first on that because I have some views about what you say. It is regularly cast up that tribunals are no longer as informal as they once were. It can sometimes get lost that about half of parties are still unrepresented, and even if one party is represented and the other is not, the judge gives a lot of assistance to create an informal atmosphere in the proceedings in which people can ventilate their cases. Cases are definitely getting longer and more complicated, but that is only because the law has got more complicated.

As has probably become evident from the discussions about protected disclosures, many claims have a number of different aspects to them and it is no longer in the province of the ordinary lay person to comprehend the different dimensions of a claim. That feature brings in representatives, although not always qualified representatives.

When it comes to the concept of micro-businesses, which, as practitioners, we are just getting a feel for, there is a lot to be said for allowing small businesses a slightly more relaxed regime to spare them the rigours of a long and difficult court case that can be expensive and have financial ramifications way beyond their means.

John Morris: I would add that you are right in what you say about the original intention of industrial tribunals, as they were. However, if you take a right of appeal from an industrial tribunal—employment tribunal—into the court system and then you get legal rulings and precedents from the appeal tribunal, the Court of Appeal and the Supreme Court, it is inevitable that the employment tribunals have to comply with those legal complexities.

I agree with what has just been said—there are more cases in which both parties are not represented than there are with full representation. Cases are getting more complex because of the legal principles that we have to follow. As Stephen Miller says, as an employment judge, I am very aware of the overriding objective to ensure that all parties are on an equal footing and to assist unrepresented parties as much as I can.

Joy Drummond: On the question of the informality of tribunals and the complexity of the law, it is true that when I started 30 years ago, you could count on the fingers of one hand the employment lawyers in London who specialised—certainly on the employees’ side. However, it has increased with the complexity of the law, which has been a result of the policy decisions of society—on race discrimination, sex discrimination and all the other types of discrimination that have followed. It is true that ideally people should be able to act in person; in many cases, they can. What concerns me about the Bill is that it adds to the complications. Regardless of whether you agree with the principles or policies behind the Bill, I have great concerns that the way it is drafted will add to the difficulties of employers—small and large—and employees, especially those trying to act in person.

Regarding micro-businesses, I can appreciate that they have particular problems. However, in my experience, the people who are most in need of basic employment rights—not at the fringes of the new employment law, but the very basics—are very often the lowest paid. Those people are very often employed by small businesses, so small businesses are not always angels. In my experience, it is very often just that those people do not know how to treat employees, or even other people.

If you are an employer, you have responsibilities. Yes, that has to be balanced against being able to run a business and to hire people. Although the Bill tries to encourage small businesses to hire, which is of course a good thing, I fear partly that it will lead to more problems for both employers and employees in litigation, and partly that it will lay traps for unsuspecting employers to fall in—I can explain that later if you want. I do not think that it will help small businesses. You could say, “Well, even if it is not going to help them, if they think that it will help them and make them hire more people, isn’t that a good thing?” I would say, however, “Isn’t it more responsible for a Government to educate small employers and publicise the traps and how they should behave, rather than to legislate on the basis of a myth which, in itself, will, through implementation in such a way, cause more problems for everybody?”

Q 213

May I come back to a question that I tried to raise earlier about the absence of lay officials from tribunals? Will the panel comment on whether they think that that will help or hinder the work of tribunals?

John Morris: They have been removed only recently—I assume that you are referring to the recent change on 6 April. They have been removed only in the unfair dismissal jurisdiction. It depends on your point of view. I sit as an employment judge. There is no doubt that I used to find lay members of considerable assistance in finding facts. If the view is to speed through the tribunal process, as was mentioned earlier, the absence of lay members has had that result, as has the related point about taking witness statements as read.

Q 214

So it will be faster law, but possibly worse law.

John Morris: That is a view, yes.

Joy Drummond: I agree. Lay members were introduced at the outset for a very good reason: to bring practical industrial experience from both sides. I think that something will be lost if they are no longer to be used. Really, that is the beginning and end of it.

Stephen Miller: I think that if there is anywhere in the employment jurisdiction where you can make a case for lay members, it is in unfair dismissal, which turns on the question of what is reasonable. Going back to this question about creating an environment in which lay people are comfortable enough about taking cases, what could be better than going in front of a panel that is majority lay and not professional? As professional representatives, we probably underestimate how much comfort lay people get to see a panel of three when all but one are not legally qualified.

Q 215

Coming on to clause 10, it is suggested that legal officers should be given responsibility to make decisions. Both Mr Morris and Ms Drummond made the point that that should only be allowed when there is access to a judge afterwards. Is not that potentially going to make the process even more cumbersome than it is now?

Joy Drummond: Well, yes, but if you are going to take away judges having an input at the outset, the only alternative would be for an appeal to be to the Employment Appeal Tribunal, if somebody felt that a legal officer  had made the wrong decision, and that would be on a point of law. The costs and delays involved in running an appeal to the Employment Appeal Tribunal would be greater.

Q 216

Would that happen regularly?

Joy Drummond: It is very difficult to know. I think that it might well. Normally appeals can only be on points of law, and errors in points of law are more likely to arise when you have a legal officer who is not a judge making the decision.

John Morris: I agree. There is scant information about these legal officers and about what their qualifications, experience and so on are, so our answers have to be somewhat guarded on that basis. At least initially, one can expect legal officers not to command the same respect as judges. Therefore, their judgments and decisions are likely to be questioned, and therefore the only route, if it is not to a judge locally, is to the employment appeal tribunal, with cost and delay. That is why we say that it should be open, first, to review and then to appeal to an employment tribunal.

Stephen Miller: I agree with those points. I would just say that, as you probably know, there is a parallel review based on the tribunal rules themselves. From the information we have had so far, the rules are going to be slightly relaxed as to how you apply for a review, so, like my colleagues, I think it is essential that if legal officials are taking the decisions, there should be access to a review. As I say, I think the environment will be easier for that with the new rules when they are published.

Q 217

On clause 16, you commented, Ms Drummond, on the renaming of compromise agreements. Can you expand on that somewhat?

Joy Drummond: The Bill as originally drafted was just talking about renaming compromise agreements settlement agreements. You may say there is no big issue with that. I do think that it is probably going to be more confusing, because lots of things are settlement agreements, whereas “compromise agreement” has a particular meaning.

Would you like me to talk about the amendment that was tabled yesterday? It followed on from the press release saying that there was a policy desire to have protected offers. This is a policy that I do think is wrong in principle. The reason why it is wrong is illustrated by the fact that in the drafting, first of all, it has been restricted to unfair dismissal claims. Secondly, the amendment that was tabled yesterday—or Tuesday night, I think—has wide and fairly uncertain exceptions. So the idea that employers can now be confident of having discussions leading to a settlement agreement that will not be admissible to a tribunal is simply wrong. If the Bill is amended as proposed at the moment, I could not advise any employer to rely on that, partly because it applies only in a very narrow circumstance—unfair dismissal, not including automatic unfair dismissals. Secondly, because of the exceptions that were in the clause put forward yesterday, you would have to give evidence about what the discussions were in order to decide whether you fell within that.

In a way, this goes back to the point I was making earlier. You may think employers will think this will make their lives easier and will hire more people. That is a myth and, again, this is going to lead to tremendous  amounts of litigation. Firstly, it would be necessary, when an employee is leaving, to separate out the parts of the conversation about entering into an agreement. In a normal small business, it will be part of another discussion, so you have to tease out that part, and that is completely artificial. Then there is the exception about anything that was said or done that was improper—well, employment law does not have a definition of “improper”, so you are going to have all kinds of litigation about that, in which the evidence of what was actually said would have to be given.

I think the whole thing was an idea that was thought up quickly when maybe support was waning for protected conversations generally, and it has not been thought through, will not be good for anyone and is wrong in principle.

Q 218

Perhaps I can ask John about template settlement agreements. In a sense, they almost overcome the problems that Joy has identified, given that we would like people to be able, in a less emotional way, to settle issues when it is simply a matter of “It’s not working”—the job has changed or the employer’s market has changed. How can we create a system? What do we need to put in legislation and what do we need to put in guidance—nothing to do with legislation—to make these issues simple and not subject to lawyers, dare I say it, running like a rat all over them, so that they work? We would probably all like to see these things dealt with in a way that is less contentious and emotionally draining, and allows both parties to go heads high on to the next role.

John Morris: The first answer is not with this amendment. This is a trap for the unwary. It is a trap for the micro-businesses that are not alert to the pitfalls of what is improper. It applies to unfair dismissal, not to other jurisdictions, so the amendment that came out on Tuesday night will create great difficulties for employers.

The objective is actually not that difficult. It is the sort of conversation that employers have every day regarding performance—at least, a good employer will be having a conversation with an underperforming employee. They will be upfront and say, “We are thinking of taking this into a formal process, unless it can be resolved in another way.” There is nothing wrong with that.

Q 219

Is there anything that we can do in legislation to achieve what we are trying to achieve? You are saying that what we have does not work, so what would?

John Morris: The existing practices, supported with the existing without-prejudice rule, are adequate. That is my personal view.

Q 220

Which then takes us to without prejudice, and Joy’s point about what you do on evidential issues. How would you deal with that, because currently, there is a hole where without prejudice does not work?

John Morris: The hole—to use your word—that has been identified is that there has to be an existing dispute. It is not difficult for there to be an existing dispute. You talk to the employee, as I have just mentioned, and say, “We have issues about your performance. We are going  to take this forward in a formal process”—there is the dispute. “However, we can talk about a settlement if you prefer, without prejudice.”

Q 221

May I ask a specific question to Stephen? I was very interested in your opening remarks, when you conflated settlement agreements and protected conversations. Will you unpack that for the Committee?

Stephen Miller: Perhaps you can just remind me of how I put it, because I am struggling to remember. How did I open that one up?

Q 222

At the beginning, you mentioned the parts of the Bill on settlement agreements and you immediately said that it was a protected conversation. Obviously, we have had the consultation about protected conversations on one side, but I was interested in your view on how you conflated the two, and whether you see settlement agreements as being protected conversations.

Stephen Miller: Now I have been reminded of that, I think I was saying no more than my colleagues have said, that we are trading in what we have seen about the renaming of compromise agreements, as connected with the protected conversation as it was originally termed. Obviously, if that works—in the paradigm situation we have been describing, it would be changed business needs where there is no fault—the settlement or compromise agreement would be the appropriate way to get it on paper and have clarity and finality.

Listening to the debate, if one feature has to be considered, it is that you must exclude misconduct cases. So far, as I say, redundancy or changed business needs are no fault, but misconduct cases can involve, for example, what happened the night before at the office party, when there has been an indiscretion. If there is a conversation about that—“We want you to leave”—it is very difficult to see how, if the employee refuses to leave, there can be a fair disciplinary process, when the employer has already taken the position that the employee has to go. At the moment, my anticipation is that judges will take a lot of persuasion to exclude evidence about that, and therefore, they will use the elasticity around the word “improper”, saying, “It was improper to do that, therefore we can hear evidence about it.”

Q 223

I will not ask you to give us practical examples of office party indiscretions.

Stephen Miller: You can use your imagination.

Q 224

I want to ask the whole panel a question, which is similar to the one I asked Citizens Advice. Does the insertion of a fee, which is obviously not part of the Bill, but is being taken forward by the Ministry of Justice, into the system before employment tribunals undermine the role of ACAS in pre-claim conciliation?

Stephen Miller: Perhaps I can pick up from where I left off. Imagine that pre-claim conciliation has failed, and it probably will in the majority of cases, but that is not a criticism, because it only needs to succeed in a certain percentage for it to be worthwhile. I spoke about ACAS leaving the claimant with guidance on what to do next; that is all very well, but they may have only a month to raise what could be quite a substantial sum of money. I have a concern that because this is a known  fact, it might inform an employer’s position in the conciliation process. They might say, “We will make this our final offer, because we know that if you reject it, not only do you not get any money, but you immediately have to do some fundraising to get the claim into the system in really quite a short space of time.”

John Morris: If an employer is approached in the early conciliation, and one of their employees has a complaint about them, and if the employer knows that the fee must be paid before it can be progressed, a canny employer will say that they will not engage in conciliation until they have seen the colour of their money.

Q 225

May I ask a quick question on the back of that?

No. Sorry, but we have only five minutes left.

Q 226

I feel as if I am part of a Grimm’s fairy tale with the employers cast as the big, bad wolf. The evidence from many of you is highly biased. A couple of your witness statements refer to compensation. John, you state:

“By definition, compensation is intended to compensate an employee for having been unfairly dismissed by his or her employer. That being so it is difficult to understand an argument that the employee should not be fully compensated.”

What do you mean by “fully compensated”?

Joy, you say about clause 12:

“The power to decrease the unfair dismissal compensation cap…will mean inadequate compensation especially for the middle earners”.

What do you both mean by those statements?

John Morris: Fully compensated means the same compensation that applies in every jurisdiction of employment tribunals and in the civil courts, other than for unfair dismissal. If I have lost an amount of money as a result of my employer’s actions, I should be compensated to that effect. That applies to race discrimination, sex discrimination and the like.

Q 227

It is surely a great idea to define different levels, and different sized employers. Surely a very small company that has just been set up should not face the same compensation levels as a very big company. That is sensible and logical.

John Morris: It depends where you start with your logic. My logic starts: if I have lost £70,000 as a result of my employer’s conduct, why should I be compensated to the tune of only £28,000?

Joy Drummond: I agree—

Q 228

No, on the statement that you made in the submission.

Joy Drummond: Yes. I would agree. If you would like me to take time to repeat what Mr Morris said, I will, but to save time I am saying that I agree with him. I would add only one point, which is one that I made in my submission. This will have a greater effect on middle earners. Most claims for people who are low paid will get nowhere near these levels anyway.

Q 229

So you think a cap at the moment of three times average earnings is fair.

Joy Drummond: Do you mean the cap proposed?

Q 230

The current situation—three times average earnings in this country, which is about £70,000.

Joy Drummond: Any cap is arbitrary.

Q 231

Going up from £12,000 in 1999 to £72,000 or whatever today, is that reasonable?

Joy Drummond: That is true, and that is because successive Governments felt that the policy to properly compensate unfair dismissal was not to have a significantly lower level of compensation for people who have been unfairly dismissed not on discriminatory grounds.

Q 232

I would like you to expand on the last point you were making before the Chair invited me to ask a question.

Joy Drummond: I would not like to second-guess why Governments have set the level for unfair dismissal, but I think it may well be that it was felt that by comparison with discrimination awards, on which there is no cap, to have a fairly derisory level of unfair dismissal would generally be thought to be unfair. As I said, in most claims, this will affect middle and high earners, not low earners who are most in need of employment protection.

Q 233

There was a suggestion earlier that you thought the legislation would generate more employment, that somehow that would generate more problems, and that the processes here would be counter-productive in terms of complexity. Is that right?

Joy Drummond: On the second point, I think that even when the ideas behind the proposals are good ones and should be pursued, the method employed by the Bill will cause more litigation, which is bad for everybody.

We are seconds away from the deadline, so I am afraid that that brings us to the end of the time allotted for the Committee to ask questions of the witnesses. I thank you all, on behalf of the Committee. We will now hear oral evidence from Malcolm Nicholson, the City of London Law Society and Professor Catherine Waddams.