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Employment Bill


14th July 2008

Jonathan Djanogly debates proposals to reform existing employment law in areas including dispute resolution procedures, enforcement of the national minimum wage and provisions on trade union membership.

Mr. Jonathan Djanogly (Huntingdon) (Con) : For the past decade, businesses of all sizes have had to cope with the steady drip, drip of employment legislation. Since 1997, the Government have introduced some 18 Acts and more than 280 statutory instruments dealing directly with employment, which have often left employers bemused, baffled and bewildered by the negative implications for UK employment. Last autumn, pre-credit crunch, a survey by the Federation of Small Businesses found that nearly 80 per cent. of small business owners handled paperwork themselves, and that a third of those businesses claimed that they would not be hiring new staff because of bureaucratic complexities. It is by that and other means that the Labour Government are continually damaging the flexibility of the UK's labour market.

Only a few weeks ago, a further deal was done between Labour and the trade unions to tamper with the laws on agency workers, which could be very damaging for already overburdened businesses. The Government made that massive and costly concession to their Back Benchers. They have fought in Brussels against the European agency workers directive for the past five years, but the sad reality is that they could no longer handle the pressure back at home. It is a testament to the Prime Minister's weakness that Britain's economic interests are being weighed up as less significant than his political survival.

I am glad that the Secretary of State for Business, Enterprise and Regulatory Reform finally seems to recognise that the Government have gone too far. He recently admitted-of course, this was after the Government had passed 298 employment laws-that there was a

"need to challenge the automatic assumption that the only way to deal with exploitation in the workplace is by passing new laws."

That is certainly something to support, but judging by the latest trade union wish list that has been floating around the media in advance of the Labour party's Warwick discussions, he will have a big fight on his hands. As we enter this period of economic instability, it is critical that the Secretary of State ensures that flexibility remains a cornerstone of our labour market so that if unemployment begins to rise businesses have the proper flexibility to organise their work forces and can weather the storm. It is with that in mind that I shall examine the provisions of this latest Employment Bill.

First, however, may I say that while the Bill's passage through the Lords lasted for months, we were given only a few days' notice of the debate, which was not ideal and not conducive to allowing Members to participate? Additionally, the Secretary of State has pulled out of leading on a Bill that he wishes to push through at such short notice, and we believe that that deserves some explanation from a Minister, perhaps during the wind-ups.

Mr. Angus MacNeil (Na h-Eileanan an Iar) (SNP) : I hear what the hon. Gentleman says about participation. Is it not indicative of what he says that only four Labour MPs are present to hear the debate on the Bill?

Mr. Djanogly: The hon. Gentleman makes a fair point. It is the second time that such a thing has happened; only a few weeks ago, the Secretary of State failed to lead the debate on the Regulatory Enforcement and Sanctions Bill. There are key Government Bills on deregulation and employment law, but the Secretary of State has not led on them. Business can draw its own conclusions from that.

Jim Sheridan: If, as the hon. Gentleman suggests, employment legislation can lead to high unemployment, why is it that when his party was in office, 3 million people were unemployed, but during our party's time in government there has been very low unemployment? What does that have to do with employment legislation?

Mr. Djanogly: I will not answer that question, which is a thesis point, in any depth, mainly because I never said what he claims I said. My hon. Friend the Member for Mid-Bedfordshire (Mrs. Dorries) may have had a point when she said that perhaps the Government wanted to avoid a debate on abortion today because of the by-election on Thursday. We can only speculate.

Emily Thornberry: Will the hon. Gentleman assist us on one point? He seems to be saying that, on the one hand, flexibility is the cornerstone of our economy, but, on the other hand, we do not have flexibility. May I prod him a little more and ask him why, when we have the highest employment rates and the highest number of people employed, he continues to complain about the markets not being sufficiently flexible? Will he please explain that to us?

Mr. Djanogly: The hon. Lady talks as though there are absolutes of flexibility. There are no absolutes. The Conservative Government left a relatively flexible economy in place, but it has steadily become less flexible under this Labour Government.

The first aspect of the Bill that I wish to discuss is the clauses dealing with dispute resolution. Clause 1 repeals clauses and schedules of the Government's Employment Act 2002 and removes the statutory procedures for resolving disputes in the workplace in their entirety. We support that conceptually, but it should be appreciated that that is a desperately embarrassing U-turn for the Government, who doggedly defended the procedures when the provisions in the 2002 Act were initially examined by the Standing Committee.

It would serve as a useful reminder of the cost of that change of heart, both in terms of the House's time and taxpayers' money, if I ran through some of the warnings that my hon. Friends gave the Government about the existing statutory procedures, and highlighted some of the Government's reasons, now proven to be flawed, for implementing that legislation. In debate in the Standing Committee, on 13 December 2001, my hon. Friend the Member for Tatton (Mr. Osborne) quoted a number of parties' misgivings about the statutory procedures. The Engineering Employers Federation argued that the

"the proposals are unclear, complicated and might prove counter productive."-[ Official Report, Standing Committee F, 13 December 2001; c. 139.]

The Law Society said that they would "undermine the ACAS...Code."

ACAS has been in existence since 1975, and it is dedicated to preventing and resolving employment disputes. When the Employment Act 2002 was passed nearly 30 years later, it made reference to the ACAS code but did not implement it in full. That was clearly a mistake, and it has led to much confusion for both employers and employees.

Mr. Heald: Is not my hon. Friend being characteristically generous in his comments about the Government? Did not a 1994 Green Paper include the proposal, although the Conservative Government did not go ahead with the idea of internal procedures having to be dealt with first? Ian Lang, the Secretary of State for Trade and Industry, said at the time that the

"the reservations expressed by many responding to the Green Paper that the proposal to require employees to attempt to resolve disputes with their employers before being able to make an application to an industrial tribunal might lead to increased delays and complexity in tribunal procedures, rather than alleviating them."-[ Official Report, 20 November 1995; Vol. 267, c. 20W.]

In other words, he got it right three or four years before Labour came to power.

Mr. Djanogly: I thank my hon. Friend for his important contribution. The issue goes even further. If we look through the record, we see that even the trade unions, the Labour party's close friends, had misgivings at the time. The TUC expressed its concerns over the "potential confusion" between the proposed legislation and the widely supported ACAS code.

However, the right hon. Member for Kingston upon Hull, West and Hessle (Alan Johnson), then Minister with responsibility for employment relations, was undeterred by such criticism. His response was to say:

"We have set out a minimum three-step procedure because that is the right direction in which to move"-[ Official Report, Standing Committee F, 13 December 2001; c.142 .]

He even implied that employment disputes would be simplified, as the Employment Bill as it was at that time had fewer provisions than the ACAS code. However, at some point the Government decided that the three-step procedure was not the right direction to take. The measures came into force in October 2004, and the Government spent the following years trying to undo the legislation that they themselves created.

In March 2006, less than two years after statutory procedures were introduced, the Government published a policy statement rather grandly called "Success at Work", in which they announced that a review of the dispute resolution regulations was necessary. In the course of the next few months, they came clean about the fact that a full review of all dispute resolution procedures was needed. The then Secretary of State for Trade and Industry admitted that the time, cost and stress involved in settling disputes could be reduced by making changes.

As my hon. Friend the Member for North-East Hertfordshire (Mr. Heald) has noted, the consequent review, undertaken by Michael Gibbons, found that the procedures, as they stood at the time, involved a high administrative burden for both employers and employees; that they resulted in the need to use formal mechanisms such as the laying down of red tape, although previously disputes could be informally resolved; and that they were over-complex and the penalties for failing to observe them resulted in employers and employees seeking external legal advice earlier than in the past. That last consequence is of particular interest as the Government claim in their explanatory notes to the new Employment Bill that it was unforeseen. We beg to differ.

In a Committee discussion on 18 December 2001, my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) pointed out to the Minister with responsibility for employment relations that the Government's dispute resolution procedures

"would open the door for yet another lawyers' bonanza."

My hon. Friend continued his warning to the Minister by arguing that there existed a need

"to establish certainty so that employers and employees can enter contractual arrangements knowing that they are compliant with the law without having to get involved with lawyers."-[ Official Report, Standing Committee F, 18 December 2001; c. 178.]

He then questioned the suitability of the proposed and subsequently implemented legislation for achieving that certainty. The Minister's response was that the procedures were designed to be simple and easy to understand and that uncertainty should not arise. At least now, by proposing to repeal said statutory procedures, the Government are admitting that that over-simplistic assessment was utterly wrong.

The problem is that this is yet another occasion on which Labour has got it wrong. Last week's Regulatory Enforcement and Sanctions Bill, which the Minister and I recently debated, was its third attempt at reform, and this is its second attempt on dispute resolution procedures. What the Secretary of State said about less employment legislation is the opposite of the case-not only are we seeing more and more employment legislation, but a good part of it is an attempt to patch up previous, failed labour laws.We support the existence of a national minimum wage and the continual monitoring of the legislative provisions dealing with it. We also support action to ensure that workers who receive the minimum wage do not lose out in real terms when they are owed arrears as a result of underpayment. The current law gives almost no deterrent to underpayment, and we would welcome its amendment.

However, we have concerns about certain aspects of this area of the Bill and we would like to hear more from the Government. They claim that they expect the new penalty measures under clause 11 to increase the deterrent effect on businesses that do not currently pay the national minimum wage. The Minister has said that some 1,600 employers were found to be non-compliant, but last year only very few cases of underpayment were deemed bad enough to lead to the issue of one of the Government's penalty notices. Other cases led to the employer paying arrears, but in no way being punished for the illegal underpayment. The Government have also said that only 5 to 10 per cent. of cases will result in the imposition of a penalty under the new legislation; it is therefore unclear to us how the new penalty, applied to only a small fraction of cases, will act as more of a deterrent than the currently rarely applied penalty notice. The Minister shook his head at my figure of 5 to 10 per cent., and I would be grateful if he put me right on that. While the proposal to allow enforcement officers to be able to withdraw and replace notices of underpayment is beneficial as errors may be corrected, the potential disadvantage, as with the current penalty notice regime, is that there are no real incentives for officers to get the notice right first time. Officers may issue an incorrect notice, put the employer to the trouble and expense of appealing it, and simply start again when they recognise their error. As with so many of the Government's attempts to make things better, there is potential for red tape and bureaucracy to mar the process.

We strongly oppose the suggestion made in the other place on 13 March that the national minimum wage be extended to foreigners working on British ships and foreigners working on any ship at any time when it is within British territorial waters. Broadly speaking, we are concerned that those changes could be made prematurely, and we shall look to the Minister to address those concerns. I note that he did not comment on the report by the TUC's commission on vulnerable employment. Perhaps he could comment on the Government's findings on that report in relation to the proposals in the Bill. I urge that any changes that are made be implemented with maximum publicity. All employers must be given the opportunity to assess their companies and to correct any failings in payment of the national minimum wage before the new penalties are imposed. Have the Government yet given any indication of the expected costs of the new powers in enforcing the minimum penalty? If not, it is difficult to assess whether the proposals are the best way forward in protecting low-paid, vulnerable workers.

The Minister concluded with the provisions on trade union membership, and I shall do the same. I therefore turn to clause 18, which, as he said, represents a response to the judgment made on 27 February last year by the European Court of Human Rights in the case of ASLEF v. the UK. The clause enables trade unions to prohibit or expel from their organisation an individual who belongs, or has belonged to, a particular political party. It amends the relevant sections of the Trade Union and Labour Relations (Consolidation) Act 1992. To our mind, the clause represents yet another rewrite of inadequate provisions that the Government introduced just four years ago.

Jim Sheridan: The hon. Gentleman clearly has a jaundiced view of trade unions. Perhaps I could point out that his party's candidate in the Glasgow, East by-election goes out of her way to tell people that she is a member of a trade union and has said as a matter of public record that trade unions are a force for good. What does he say to her?

Mr. Djanogly: I can only tell the hon. Gentleman that the shadow Secretary of State for Business, Enterprise and Regulatory Reform and I joined the TUC's commission on vulnerable employment, contributed to its report and attended one of its evidence sessions. We have taken an interest in the trade unions' viewpoint on this matter, which is why I ask the Government to do likewise. Perhaps they are embarrassed and do not want to bring them into the discussion. I am helping the hon. Gentleman by bringing the unions' case on to the Floor of the House.

The Employment Relations Act 2004 introduced measures to allow trade unions to expel members with extreme political views. The then Minister with responsibility for employment relations, the hon. Member for Bradford, South (Mr. Sutcliffe), hailed the new provisions as striking the right balance between workers, trade unions and employers. He argued that they would provide "protections for workers" and said that he believed that successful workplaces are founded on partnerships between employers, workers and their representatives. That is all well and good-how different, though, from the position of the Government today. The current Minister seems to have no qualms about throwing the interests of the aforementioned workers and employers out with the bath water in order to allow the trade unions to sit at the top table and call the shots. These, of course, are the same trade unions that now provide more than 90 per cent. of the Labour party's donations, as opposed to the 55 per cent. they provided when the earlier provisions were on the table. I agree that it is appropriate to respond to the ASLEF decision, but we have concerns about clause 18.

We are pleased that the Government have accepted the much-debated amendment to clause 18, first proposed by the Joint Committee on Human Rights, and introduced by the Liberal Democrat Lord Lester of Herne Hill in the other place on 13 March. The decision to expel a trade union member will be unlawful if

"the decision to exclude or expel was taken otherwise than in accordance with the union's rules"

or established procedures, or if the exclusion or expulsion would prejudice the individual's livelihood or conditions of employment. That is a fair starting point for dealing with the sometimes conflicting rights of trade unions and their own members. It should ensure that a heavy-handed union boss cannot usurp the internal rules to which members sign up. It prevents trade unions from throwing out members purely on the basis that the opinions of the member differ from the union's own ideals. It should also prevent unions from exerting power beyond their remit, thereby protecting the employment status of union members expelled under the clause. However, in order to protect union members from over-bearing union officials who may wish to impose their will unfairly, it would be preferable for stronger boundaries to be drawn around the clause.Clause 18 is silent on determining the organisations that are classified as political parties. That could allow trade unions to flex their muscles and evict individuals who are members of organisations with which the union clashes. Is it truly the intention of the ASLEF decision that membership of politically active organisations such as Greenpeace or Amnesty International should be grounds for eviction from a trade union? I do not think that that is intended. More thought needs to be put into the drafting of clause 18 if we are to prevent unions from imposing their political biases on their members.

I also find the application of the clause to former membership of a political party somewhat worrying. Why should a 40-year-old employee, for instance, face the possibility of being evicted from a trade union on the basis that he was a member of a certain political party for a short time when he was a student? That aspect of the clause represents a one-size-fits-all approach typical of much of the union legislation of the old days, and maintains a definite air of retrospective punishment.

Lord Bach argued that tighter wording in clause 18 was not necessary, as disgruntled expelled trade union members can make a complaint to the certification officer. I met the certification officer recently to discuss his role and the powers that he has been given, and on the basis of what he reported in that meeting I do not think that the Government's argument holds much sway. By his own admission, the certification officer has very weak powers of inspection, and is not able to issue penalties to unions. That regulator is a relic of the trade union settlement of the 1940s and 1950s, rather than an effective, modern-day regulator, and it requires reform. The situation shows how little the Government think about the protection of individual trade union members as opposed to the unions themselves.

Finally, we may be looking at the response to ASLEF from the wrong perspective. All in the House today would agree that many, if not most, of the BNP's policies are abhorrent, but it is still classified as a political party, membership of which is not, per se, illegal. Should not eviction from a trade union still essentially be for reasons of improper conduct, rather than based on a blanket, one-size-fits-all attitude towards membership of a particular political party? On the final day of Grand Committee in the other place, Baroness Perry of Southwark said that the Minister remained open-minded on clause 18, and Lord Bach said that the Government remain open to others' views on the clause. I hope that that is truly the case, and that the Government take full account of the arguments made today.

Looking at the Department for Business, Enterprise and Regulatory Reform legislative programme, I find increasingly that we are on some kind of merry-go-round, with Ministers calling for fewer laws, but doing the exact opposite. Ministers try to give the impression that they know where their party is heading, while in reality their union-led Back Benchers are not only calling the shots but regularly rebelling when they do not get what they want. At a time when British business is entering difficult waters, the last thing it needs is a Government who say one thing and then cannot deliver.

5.29 pm



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