Examination of Witnesses

Small Business, Enterprise and Employment Bill – in a Public Bill Committee at 12:00 pm on 14th October 2014.

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Iain Birrell gave evidence.

Photo of Martin Caton Martin Caton Labour, Gower 10:15 am, 14th October 2014

We will now hear from Thompsons Solicitors. For this session we have until 10.45 am.

Welcome, Mr Birrell. Could you please introduce yourself?

Iain Birrell: Yes, Mr Chairman. Good morning, everybody. My name is Iain Birrell. I am a partner at Thompsons Solicitors. For the better part of a decade I was the regional head of employment for the north.

Photo of Martin Caton Martin Caton Labour, Gower

Ian Murray is going to lead the questioning in this session.

49 Ian Murray:

Hi, Iain. Good morning to you and thank you for giving evidence this morning. I shall go through your evidence, if that is the easiest way to structure this in terms of the order in which its subject matter appears in the Bill, and examine some issues that you raise.

On whistleblowing, you say that you cautiously welcome the provisions in the Bill but you have concerns about definitions of disclosure of information. Will you tell the Committee why you are cautious about the provisions in the Bill and what could possibly be done to strengthen them?

Iain Birrell: Certainly. All the studies in relation to whistleblowing indicate that people are more likely to blow the whistle if they feel that they are in a secure environment. So we would cautiously welcome this as an attempt to create that secure environment.

The publication of reports could seek to promote that safe environment, by making it clear that an organisation, or various organisations, are taking matters seriously and are pursuing and investigating them. There is a risk that the contrary may be proven by somebody looking at those reports and considering that, actually, there is a lot going on in that organisation that would worry them.

In relation to the definition of disclosures of information, I think it is important to be very clear as to what is being proposed to go into the report. The definition of whistleblowing at the moment is actually quite a tricky one. My experience over the years is that there has been a wide range of attempts to bring issues within the whistleblowing definition, only some of which have been successful. That inevitably means that some reports of whistleblowing are not actually reports of whistleblowing at all and others indeed are. So if one of these reports reflects simply reported matters, that would give one view of what is going on in a particular sector or organisation. If it is a report of matters which have been investigated and found to be actual, genuine instances of whistleblowing, showing public wrongdoing, that would produce a different type of report. Both kinds of report will give different impressions. That is why I urge caution.

50 Ian Murray:

May I take you on to employment tribunals and the failure to pay sums? There was significant debate during the passage of the Enterprise and Regulatory Reform Bill, about two years ago, about the number of employment tribunal awards that are not paid. Most of that was, of course, to do with insolvency, but some was to do with just not paying. The biggest concern about bringing in fines for non-payment was about whether that gets allocated to the Government’s own books before the person who needs to be granted the award is paid. You seem to raise that in your response as well. This will obviously help, to a certain extent, in terms of  its being the stick, but is there not enough carrot in terms of the legislation, as it is written, to get people to pay the awards?

Iain Birrell: I think that the clause as drafted is silent on a few key issues. We would absolutely welcome any attempts to ensure that outstanding employment tribunal awards are made. The system that introduces the penalty system certainly, in our view, would encourage some employers to make those payments and hopefully to do so in a more timely manner, so that is something that we welcome.

There is an issue in relation to the reasons for non-payment. Insolvency certainly is one. The difficulty with insolvency is that if you are insolvent, you are not paying not because you are just being mean-minded about it, but because you do not have the money. In relation to those circumstances, the concern that I raised in the document that was submitted was that if you simply add to the overall debt pool, there is less in the way of distributable funds to go round at the end of the day. The imposition of a penalty in those circumstances could be counter-productive to ensuring that an individual gets their money.

The research of 2013 discovered that 32% of respondents refuse to pay the award simply because they do not want to pay the award, for whatever reason. Hopefully these provisions would assist with that, but one question mark does remain about the way they are drafted. What happens in circumstances in which the employer pays the penalty over to the Crown, but still refuses to pay the individual claimant themselves? We have come across circumstances like that, in which employers have basically said, “Over my dead body.” The current draft of the legislation does not say what happens in those circumstances. It does not indicate whose responsibility it is to carry on enforcing in those circumstances. The definition of the outstanding debt says that the debt is still outstanding, but if the Crown has got its share, it really has no interest in pursuing it any further, so there is a question mark over whether it would continue to apply pressure for the main award to be paid.

51 Ian Murray:

Are you suggesting that if a fine is levied on the non-payment of an award, the award should be paid first, before the fine?

Iain Birrell: Yes.

52 Ian Murray:

There would be encouragement for an employer who did not pay the award to get the Treasury off their back first and then still not pay the outstanding compensatory award.

Iain Birrell: If the purpose of these measures is to try to ensure that a person who has been made an award receives it, and bearing in mind that they will have been made an award because a judicial body has found that they were wronged and are therefore owed an award, I see no good reason why that should not take priority in terms of the two sums that are taken forward. If the purpose of the penalty is to produce that payment, logically that payment needs to be the one that is paid first.

53 Ian Murray:

Could I examine briefly two other issues? Could you give us the benefit of some of your professional experience of postponements of employment  tribunals? You touched on that in your response in suggesting that the current legislative framework would be sufficient if only it was used in the manner for which it has been written in terms of postponements and so on. Then I want to ask you a few questions about zero-hours contracts, but will you talk about postponements in the first instance?

Iain Birrell: Certainly. First, in relation to postponements, it is important to bear it in mind that there are postponements and there are postponements. The tribunals and the employment judges who operate them are subject to the overriding objective—the overriding objective permeates everything—which is to do justice, to do things fairly. That means that when you receive a postponement application, it needs to be considered on its merits.

When you look at what comes up as a postponement application, you see that they vary. Some are very much what the Bill appears to be targeting—people are simply not ready when they should be and they make an application because they are simply not ready to go. Very often that is last minute, and experience suggests that it can be simply because someone has done absolutely nothing in the intervening period, or it can be that they have been running themselves ragged but have simply got a period of time that is not realistic to the task in hand. At other times postponements can come up because someone has fallen ill, and in those circumstances they occur.

A couple of years ago, and around that sort of area, we had a rash of postponements that were caused by the employment tribunals themselves. They were double-booking rooms because they had more hearings to book than they had rooms to book them in, and we would find ourselves with last-minute postponements initiated by the employment tribunals. Now that the volume of cases going through the employment tribunals has reduced, that is not an issue any more.

54 Ian Murray:

That is incredibly useful; thank you. Could I finish off with zero-hours contracts? You will have heard the previous evidence panel suggesting that the Bill’s provisions on exclusivity in zero-hours contracts were welcomed. You call it a missed opportunity. Will you unpack for the Committee what else could be in there to ensure that this is not a missed opportunity?

Iain Birrell: The provisions in the Bill at the moment deal with exclusivity and that is great. I can see no justification for exclusivity in a zero-hours contract; there are other ways of achieving that. However, a feature of the zero-hours contract which is key to the way it operates is that it provides a complete lack of certainty in a situation in which there are no employment rights. It can lead to an enormous abuse of that situation. The standard justification for zero-hours contracts is that they are necessary in order to address short-term needs. The standard argument is that when a colleague rings in sick in the morning you need someone to cover; it is that sort of situation. However, in reality many zero-hours contracts are not used in that way at all.

The Chartered Institute of Personnel and Development research of last November noted that 83% of staff on zero-hours contracts have been engaged for longer than six months and 65% have been engaged for two years or  more. We have a situation, then, in which 65% of staff on zero-hours contracts have been there for two years or more. That is not short-term need; that is a situation in which people are turning up for work day in and day out and I see no real good reason—and Thompsons see no real good reason—why they should not be placed on an equal footing with everybody else who would turn up for work in those circumstances, and receive the same employment rights as are available. The thing that prevents and gets in the way of that is the existence and use of zero-hours contracts. Thompsons believe that it would be far better to abolish the zero-hours contract regime entirely.

55 Sheryll Murray:

I take you back to a briefing on the Bill published by your firm about the penalty provision. It said that it was inexplicably limited in scope. Will you expand on that?

Iain Birrell: Certainly. As I understand the provisions, the definition of the relevant sum—the debt owed and sought to be recovered by these provisions—does not cover any costs award that has been made by the employment tribunal. That seems to me to be a very odd omission. In the employment tribunal, costs do not follow the event as they do in the courts system. In the courts system, if you win you can expect the other side to be ordered to pay your costs. In the employment tribunal, however, costs are very much more of a sanction in the sense that you have done something wrong, pursued a case improperly or argued it improperly or in a way which has been vexatious or a nuisance to the tribunal. It is therefore very much a pejorative thing.

To obtain a cost award is very rare in employment tribunals. The last set of statistics I saw suggested that only about 0.05% of cases ended up with a cost award in favour of the claimant and the figure is not that dissimilar for respondent cost awards. It seems to me inadequate, therefore, that a definition should not include a costs award. It has been an adjudication of a judicial body which considers it to be appropriate, it has been awarded and you have gone to the effort of arguing that at some cost—because there is always a cost involved in arguing a costs award; it is often a separate hearing—so it is difficult to see why that should not also be included as part of the definition of the debt which would be subject to the penalty regime.

56 Andy McDonald (Middlesbrough):

I declare an interest as a former employee of Thompsons. Going back to the issue of the penalty, it is set at 50% of the sum owed, with a minimum of £100 and a maximum of £5,000. Is that maximum of £5,000 going to impact sufficiently when a higher award is made? Secondly, given the introduction of tribunal fees and the remarks you have made about costs generally, is there any merit in introducing a cost recovery scheme into the tribunal system and making costs follow the event? Finally, on the issue of the penalty being paid to the state, as I read it, at the end of the line, once the penalty is imposed along with whatever other sanctions the tribunal may make, that debt just sits in the lap of the claiming party to recover. There is no secretariat or system to enforce it, so have we got that right, in that the penalty is paid to the state rather than the claimant? Is that the right approach?

Iain Birrell: Gosh! Let us go through those in turn, then. First, is the £5,000 severe enough? I think in some circumstances, it will be. In terms of the figures for the average unfair dismissal award, the average is about £5,000 itself, so half of that is nowhere near the £5,000. I think that statistic predates the recent change, bringing down the maximum unfair dismissal to be capped at a year’s salary. Currently, the average year’s salary is about £26,000 for the average UK worker.

Where it will have difficulties in causing an impact could be in some of the discrimination awards. Discrimination awards are uncapped and they can be higher. They include, obviously, the injury to feelings awards, which are awarded according to a set of guidelines known as the Vento guidelines. They can run from as little as £500 or £600 all the way up to £25,000. That is quite a large range. The top end of that is quite unusual; it is for the very severe and persistent campaigns of discrimination, but nevertheless, they do exist.

In discrimination awards, you can also have lost earnings, and those can be very high. To give you an example, I ran a case a few years ago—we had a sex discrimination case against a local authority. The chief executive had ended up having a vendetta against this individual. That is basically what the tribunal found and we ended up securing half a million pounds for this individual on the basis of full career loss, because not only had he got rid of her from the authority, but he had made sure that she could not get a job anywhere else, so there was career-long loss. We also got a costs award of £125,000. In those circumstances, a £5,000 slap on the wrist is not going to make a hill of beans’ difference.

The other concern that I would have about the £5,000 impact is in relation to multiple awards. When I talk about a multiple award, I mean where we are running a claim for lots of individuals. We see them quite a lot. Thompsons is a union firm. We often deal with mass organised claims and with consultation claims. They are your typical large claims, but you also see other large litigation, such as that being run for the airline pilots or for equal pay. In those, you can have hundreds and sometimes thousands of individuals. At the moment, the Bill’s provisions allow for regulations to be made to treat all those individual awards, so if I run a case for 500 people and each of those gets an award of £1,000, for instance, that is £500,000. The Bill currently allows for regulations to treat that as one outstanding debt and not 500 outstanding debts, and for one penalty to apply to that. In those circumstances, that would not be a very effective incentive to get that paid within an appropriate time frame. I hope that answers that part of the question.

In relation to the cost recovery scheme, I think the question was whether we would want to move towards a system where costs follow the event in the employment tribunals. No, I do not think so, is the answer to that one. As much as it has become complicated—I think the earlier evidence session indicated that it has become very complicated and complex—it is nevertheless run on the basis that it is an environment where people can go to seek justice in circumstances where very often they are at their lowest financial ebb. Most of the people who have gone to an employment tribunal have just lost their jobs, for instance. They are worrying how to pay the mortgage or the rent next, or how to put foodeb;normal;j on the table. If they are deterred from  enforcing the rights that Parliament has given them by having a costs regime, that is something we would not be keen on.

57 Andy McDonald:

They would be deterred by the fees that they have to pay up front and the tribunal fee.

Iain Birrell: The fees up front are already a big deterrent. We saw in the period when fees came in, but before the ACAS early conciliation came in—so there was no overlay effect there—a very significant drop in claims being brought, and that was down to fees. If there was a cost regime in employment tribunals, that would have an even more substantial effect in that regard as well. I think that would be the firm’s position on the cost-following-the-event scheme.

58 Andy McDonald:

It is the state that received the penalty.

Iain Birrell: Yes. There were two other parts to that. On the penalty to the state, this is an unclear part of the Bill. When considering it, I was also considering the other penalty that came in recently under the Enterprise and Regulatory Reform Act 2013. There are provisions for a penalty in there when the employer’s behaviour—you will have to forgive me, I cannot remember the exact phrase, but it is basically bad behaviour—exacerbated the problem. In those circumstances, again, the penalty goes to the state, but it is down to the individual claimant to make the application for that penalty in the first place. I cannot see any enforcement provisions to recover that, other than the claimant doing it, when there is no real reason for it to do that. I worry that a similar situation is being set up in the current drafting of the Bill, meaning that the claimant needs to make the running. I do not see a point in the Bill where the state steps in and says, “Right, we’ve got it now. We will run with this and press it forward until we are both paid.” The way I read it at the moment is that it implies that the running is still with the claimant, and not only have they not been paid and must enforce their own award, but they must also try to enforce the Government’s award.

59 Toby Perkins:

On the employment tribunal, I wonder whether you have any statistical analysis of the impact of what has already happened, and potentially the lesson that might teach us about what might happen in the future in terms of the number of people who go to tribunals now. Do you have any analysis of how many cases went through tribunals previously, how many go through now and what the success rate has been?

Iain Birrell: Thompsons does not keep that information. What I can tell you is that those statistics are generally collated by the MOJ. What we have seen and the chronology of it is that fees came in and then there was a period of several months before the ACAS early conciliation came in. We are only just coming into the period when statistics are coming out in relation to the latter of those two events, so the statistics we have at the moment are purely in relation to the impact of the fees. Overall, claims lodged with the employment tribunals dropped by something like 79%, a very high level. Within that, various claims dropped off more than others, so we saw discrimination claims dropping off far more than wages claims, for example, and breakdowns have been done that demonstrate that.

In terms of what has happened, the drop in numbers has been significant. At the moment, that seems to be just in the figures that deal with the impact of the fees, and the figures for the impact of the fees plus early conciliation are due to come out.

60 Toby Perkins:

The likelihood is that the amount an employee will get from a tribunal will be linked to how much they were paid, so I would imagine that, putting words in your mouth, people on relatively low incomes will be much less likely to pursue a case because the financial disincentive will be much greater. So you had a huge drop-off and what it potentially means—I am interested in your view, so I will try to turn this into a question—is that people on low incomes are effectively much less likely to have access to justice in this regard. For people who are pursuing a case because they have lost a £200,000 job, the fees are probably less of a disincentive, so the employment tribunal will become a rich man’s game. What was intended to get rid of frivolous claims actually sweeps out a whole raft of people who will never be able to seek employment tribunal justice, does it not?

Iain Birrell: Does it not? Well, Thompsons is a firm that acts for trade unions. One of the responses to the introduction of the fees in the employment tribunals has been to ensure that the fees do not present a problem for trade union members. Given that Thompsons deals with such people, we have not seen a particular drop-off caused by that. We represent hundreds and thousands of tribunal claimants every year. At most of the employment tribunal venues around the country, you will probably see a Thompsons representative on any given day, because we have that sort of presence. That is not blowing our own trumpet. That leads me to think that when you look at the rest of the drop—the 70-odd% drop—you are looking at the people who do not have that backing and are indeed put off by the fees. There is a big disincentive. Yes, that is causing a lot of people not to go to an employment tribunal.

For the very high wage earners, tribunals were always slightly tricky. If you were looking at an unfair dismissal situation, your claim was always capped, anyway. It was capped at about £12,000 when I started doing employment law. It went up to £70,000-plus. It is now down and is capped at a year’s wage. That is a disincentive as well. The problem is getting access to the forum.

61 Chris White:

Do you think the changes to the national minimum wage fines will deter employers who continue to underpay their staff?

Iain Birrell: I don’t know. It is not an area of the law that I have any professional dealings or experience with. In my experience of fines and penalties generally, as a matter of course they are not imposed at the maximum levels. They are imposed at a much lower level. I am not really able to comment on how much tinkering around with the top limit will affect what I would anticipate to be the bulk of fines levied at a lower level.

62 Mark Garnier:

May I come back to zero-hours contracts? I want to follow on from Mr Murray’s questions, in answer to which you very kindly unpacked your thinking. You welcome some measures, but feel that there are missed opportunities more generally. You  talked about a CIPD report. I think 83% of the staff had been on zero-hours contracts for more than six months, and 65% for more than two years. That is an interesting statistic. Of those 65% who had been on them for more than two years, what proportion of people wanted to be on them because it suited their lifestyle? Do the data unpack that?

Iain Birrell: I think they do, but unfortunately I do not remember the figure off the top of my head.

Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

You can use a ballpark figure.

Iain Birrell: I recall the report indicating that among those people there was a certain satisfaction level. I cannot remember what it was. I am not dissembling. I genuinely cannot.

Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

But it was not vanishingly small or huge? It was not a remarkable number?

Iain Birrell: I do not think it was at one end or the other, but it was one of those figures of the order where the balancing opposition figure was quite significant.

Photo of Mark Garnier Mark Garnier Conservative, Wyre Forest

So more people did not enjoy than did enjoy.

Iain Birrell: I don’t remember. It was one of those middling figures where it does not really swing it to say that people like zero hours.

63 Mark Garnier:

I don’t want to push you too hard. Obviously, it is difficult for you if you do not have the numbers in front of you, but is it not the case that with things like zero-hours contracts, partly they are responding to workers’ needs and partly to previous legislation and employment laws? It becomes the nature of society to react to constrictions in one place by finding a space to go to. Do you think zero-hours contracts have come as a result of over-tight employment regulation?

Iain Birrell: I would be cautious to confuse cause with effect on that one. I think the research demonstrates that there are people who like to be able to pick and choose what they are doing. The research that I can recall indicates that quite a lot of the people in these circumstances were students who were able to fit it in around what they needed to do on a day-to-day basis. Often, there were retired individuals as well—

Photo of Martin Caton Martin Caton Labour, Gower

Order. I am sorry to interrupt, but I have to bring this session to an end. I thank you very much, on behalf of the Committee, for the evidence that has been provided.