Prepared: 22:44 on 28th March 2012

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I know that the noble Lord, Lord Young, believes that employees should always get a written reason for their dismissal. However, the purpose of the statement of reasons is not to provide employees with a document that can be used as a reference or which could be useful to prospective future employers; it is essentially one of evidence when making a claim for unfair dismissal. It is, therefore, very closely linked to the right to claim unfair dismissal and it is logical that the qualifying period for both is kept consistent. I will return to that in a moment.

The amendments to the Motions tabled by the noble Lord, Lord Young, both call for a report to be placed before Parliament in 18 months’ time. I explained in my opening speech that no employee will have reached the end of the qualifying period by then, so such a report might not be very helpful. However, I can make the commitment today that the Government will report any interim conclusions on extending the qualifying period ahead of the planned post-implementation review in 2016. That means that an indication of the measure’s effect could be made available to noble Lords in late 2014 or early 2015.

I said that I would return to the issue of the statement of reasons which was raised by, among others, the noble Lord, Lord Young, and the noble and learned Lord, Lord Scott of Foscote. The purpose of the statement of reasons is essentially, as I said, one of evidence when making a claim for unfair dismissal. It is therefore closely linked to the right to claim unfair dismissal, and it is logical that the qualifying period for both is kept consistent. I agree with the noble and learned Lord, Lord Scott, that it would be good management practice, and indeed common courtesy, to provide an explanation in writing of why a person is being made redundant. I very strongly agree with that. However, we are not, with great respect, legislating for good management practice. As my noble friend Lord Cope said, this is about a statutory right to a written statement of reasons, the purpose of which is connected closely—as I have said several times—to the right to bring a claim.

A different point—I think that the noble Lord, Lord Beecham, raised it—is that the statement of reasons might be linked to a reference to a new employer. That is not the purpose of the statement of reasons. It is a very formal document and, in my experience, is not likely to be terribly helpful to an employee as a reference. It will simply include reasons why the person was dismissed. If I were an employer I would want rather more—and, dare I say it, rather more positive—information. References are also not regulated by government, and, speaking for myself, I do not think that they should be. The individual is of course able to ask for a reference and—I say to the noble and learned Lord, Lord Scott—it is good management practice that they should be.

The objective of the qualifying period is to provide sufficient time for both parties to get the working relationship right. A benefit of extending the qualifying period is to give the employee two years to prove that he is up to the job, and any subsequent employer a two-year period to confirm that the employee is right for his new job. A further relevant point is that day-one rights currently operate effectively without a written statement in the first year of employment, and there is no reason to suppose that a longer period would change this.

The noble Lords, Lord Young and Lord Whitty, asked for quantitative evidence of the effect on employment of our proposals. I felt that I had given some qualitative evidence in Grand Committee, whether or not noble Lords accepted it. In addition to the service I have already quoted from, perhaps I may make the following point from a British Chambers of Commerce workforce survey. It states:

“Firms looking to grow their staffing levels by more than 50 percent are more likely to see dismissal rules as extremely burdensome, than those looking to stay the same or downsize”.

On the issue of quantitative evidence, I made it clear that we do not see this as a panacea for job creation, or believe that it will create an overnight sea change in employers’ attitudes to recruitment. It is difficult quickly to isolate the impact and evaluate it with certainty. However, as I said to the noble Lord, Lord Young, we will monitor factors such as the number of employment tribunal claims for unfair dismissal, any changes to employees’ length of service, and business perceptions of unfair dismissal regulations, including how they affect business decisions—and, as I also said, we will report on the interim conclusions.

The noble Lord, Lord Whitty, referred to the fact that 1.75 million jobs were created after the qualifying period was reduced in 1999. Of course, a huge range of factors affect levels of employment, and the economic circumstances of 1999 were rather different from those of today. The evidence from business stakeholders is that the change will improve their confidence to recruit.

The noble Baroness, Lady Turner, asked in empirical terms how it could be acceptable to dismiss someone unfairly at any time. Since the introduction of unfair dismissal legislation in 1971, all Governments have accepted the principle that employers must take time to establish a working relationship and decide whether an employee is suitable. We estimate that there will be only a 4 per cent reduction in unfair dismissal claims, so the direct impact on individuals will be limited. We should not forget that many of the potential claims would be settled out of court or decided in favour of the employer. However, those cases would still have a cost to the employer.

The noble Baroness, Lady Donaghy, spoke about the need for better management. The noble Baroness, Lady Drake, referred to an aspect of this. I agree with them and spoke about this earlier. That is why we are refocusing the Leadership and Management Advisory Service, set up by the previous Government—I give them full credit for that—to emphasise coaching and mentoring for management, and rapid access to trusted sources of specialist advice and support and to business and knowledge networks. We accept that we must do better and we are addressing this. We want to go further. We are working with a wide range of organisations, including ACAS, to ensure that information and practical help such as mentoring is available to management to improve capability.

On changes to employment law, the noble Lord, Lord Young, asked if we could expect to see more in this vein—I think that those were his words. The department is leading a cross-government review that will last the length of the Parliament into all aspects of employment-related law. Adrian Beecroft has contributed to that review. The aim is to make it easier for business to take on staff and give them the confidence to do so, without compromising fairness for employees. We set out an ambitious programme of reforms as part of the employment law review that began in the summer of 2010.

The orders have been consulted on publicly, affirmed in another place and debated at some length in your Lordships’ House, both in Grand Committee last week and today. They will have a positive impact on businesses, on the economy and—as the noble Lord, Lord Jones, said so eloquently—on those who would otherwise be out of work. Together with the wider package in which they sit, they will help make a difference by improving the efficiency of the system while maintaining a level of service to the users who rely on it to deliver justice. I commend the orders to the House.

Lord Young of Norwood Green: My Lords, I thank the Minister for his extensive reply. I will keep my remarks very brief. I see that I am getting support for that intent. It is not because I think that the issues are unimportant, but because my noble friends did ample justice to the reasons for both amendments to the Motions.

I will pick up a couple of points. The noble Lord, Lord Jones, invited us to leave ideology at the door. I like to think that we did in this debate, and that there were sincerely held views on both sides. All of us in the Chamber care passionately about youth unemployment. That is why the previous Government spent so much time rebuilding the apprenticeship programme, which was practically at death’s door.

Because we hold a different view on these issues, that does not mean that we do not care—we do care, passionately. However, the noble Lord is being over-optimistic if he believes that this measure, described by the noble Lord, Lord Razzall, as “modest”—again I must part company with him there—will somehow ensure that we do not have, in his view, any spurious claims. I still firmly believe that if you really want employers to protect themselves, the way is to have proper personnel procedures and not imagine that somehow they can deal with this at the 11th hour.

Because of the time, I am going to telescope my remarks to a large extent. I welcome one point by the noble Lord, Lord De Mauley. I do not know whether he called it a “review” or a “report” in a two-year period approximately, but I welcome it, even though we are totally opposed to these changes. As for the composition of the tribunals, we believe that this is a profound change in their nature. I am not going to test the opinion of the House on the first amendment to the Motion, not because we see this issue as less important, but mainly in the interest of time; it is for that reason alone. We are still fundamentally concerned about it; we are still not reassured by any means when the noble Lord tells us that there will be more to come. We believe that this will again diminish rights. However, for the reasons I gave, I beg leave to withdraw the amendment.

Amendment to the Motion withdrawn.

Motion agreed.

Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012

Motion to Approve

3.17 pm

Moved By Lord De Mauley

That the draft order laid before the House on 6 February be approved.

Relevant document: 41st Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 19 March .

Amendment to the Motion

Moved by Lord Young of Norwood Green

As an amendment to the above motion, at the end to insert “but that this House regrets that the Order will unnecessarily diminish the employment rights of employees, will have little or no effect on employers’ likelihood of taking on new staff, encourages the use of dismissals in place of good management practice, and is opposed by trades unions; believes that employees should always get a written reason for their dismissal; and calls on the Government to place a report into the effect of the changes before Parliament, 18 months after the approval of the Order”.

Lord Young of Norwood Green: My Lords, I will again be brief because we have explored the arguments in great detail and I have partially covered them in my previous contribution. I will refer to one aspect, in relation to the contributions of the noble and learned Lord, Lord Scott, on reasons for unfair dismissal. I listened carefully to what the Minister said, and I must admit that, again, this is totally the wrong signal to give employers—that this will somehow be used as a legal document. It is but a small and necessary example of good management practice and something that ought to be an employee right. They should understand why they have been dismissed. If that means that employers have to think long and hard about how they treated an employee, I would hope that that process takes place before, rather than when they produce this letter. That would improve both management and employee rights.

Given the importance of what we believe to be a fundamental change—which, as some of my noble friends have said, would be more proper in primary legislation than a statutory instrument—I wish, for those reasons as well those previously expressed, to test the opinion of the House.

3.19 pm

Division on Lord Young's amendment to the Motion

Contents 125; Not-Contents 193.

Lord Young's amendment to the Motion disagreed.

Division No. 1

CONTENTS

Adonis, L.

Ahmed, L.

Andrews, B.

Bach, L.

Barnett, L.

Bassam of Brighton, L. [Teller]

Beecham, L.

Boothroyd, B.

Borrie, L.

Brooke of Alverthorpe, L.

Brookman, L.

Browne of Ladyton, L.

Campbell-Savours, L.

Carter of Coles, L.

Clancarty, E.

Clark of Windermere, L.

Clarke of Hampstead, L.

Collins of Highbury, L.

Colville of Culross, V.

Davies of Oldham, L.

Desai, L.

Donaghy, B.

Donoughue, L.

Drake, B.

Dubs, L.

Eatwell, L.

Evans of Watford, L.

Falconer of Thoroton, L.

Faulkner of Worcester, L.

Gale, B.

Gavron, L.

Gibson of Market Rasen, B.

Giddens, L.

Glasman, L.

Golding, B.

Gould of Potternewton, B.

Graham of Edmonton, L.

Grenfell, L.

Grocott, L.

Hanworth, V.

Harries of Pentregarth, L.

Harris of Haringey, L.

Harrison, L.

Hart of Chilton, L.

Haskel, L.

Haworth, L.

Hayman, B.

Hayter of Kentish Town, B.

Healy of Primrose Hill, B.

Henig, B.

Hilton of Eggardon, B.

Hollick, L.

Howarth of Breckland, B.

Hughes of Woodside, L.

Hunt of Kings Heath, L.

Janner of Braunstone, L.

Jordan, L.

Judd, L.

Kennedy of Southwark, L.

King of West Bromwich, L.

Kinnock, L.

Kinnock of Holyhead, B.

Knight of Weymouth, L.

Laming, L.

Lea of Crondall, L.

Liddell of Coatdyke, B.

Liddle, L.

Lipsey, L.

Lister of Burtersett, B.

Listowel, E.

Low of Dalston, L.

McAvoy, L.

McDonagh, B.

Macdonald of Tradeston, L.

McFall of Alcluith, L.

McIntosh of Hudnall, B.

MacKenzie of Culkein, L.

McKenzie of Luton, L.

Maxton, L.

Meacher, B.

Monks, L.

Morris of Handsworth, L.

Nye, B.

O'Neill of Clackmannan, L.

Ouseley, L.

Patel of Bradford, L.

Pendry, L.

Pitkeathley, B.

Prescott, L.

Prosser, B.

Ramsay of Cartvale, B.

Rea, L.

Reid of Cardowan, L.

Richard, L.

Rosser, L.

Rowlands, L.

Royall of Blaisdon, B.

Sandwich, E.

Sawyer, L.

Scotland of Asthal, B.

Scott of Foscote, L.

Sherlock, B.

Simon, V.

Singh of Wimbledon, L.

Smith of Basildon, B.

Smith of Finsbury, L.

Snape, L.

Soley, L.

Stoddart of Swindon, L.

Stone of Blackheath, L.

Symons of Vernham Dean, B.

Touhig, L.

Triesman, L.

Tunnicliffe, L. [Teller]

Turner of Camden, B.

Wall of New Barnet, B.

Warnock, B.

Warwick of Undercliffe, B.

Watson of Invergowrie, L.

Wheeler, B.

Whitaker, B.

Whitty, L.

Williams of Elvel, L.

Wood of Anfield, L.

Young of Norwood Green, L.

NOT CONTENTS

Aberdare, L.

Addington, L.

Ahmad of Wimbledon, L.

Anelay of St Johns, B. [Teller]

Arran, E.

Ashcroft, L.

Ashdown of Norton-sub-Hamdon, L.

Astor of Hever, L.

Attlee, E.

Avebury, L.

Barker, B.

Bates, L.

Benjamin, B.

Berridge, B.

Bew, L.

Black of Brentwood, L.

Bonham-Carter of Yarnbury, B.

Boswell of Aynho, L.

Bowness, L.

Bradshaw, L.

Bridgeman, V.

Brinton, B.

Brittan of Spennithorne, L.

Brooke of Sutton Mandeville, L.

Brougham and Vaux, L.

Browning, B.

Butler of Brockwell, L.

Byford, B.

Caithness, E.

Campbell of Alloway, L.

Cathcart, E.

Cavendish of Furness, L.

Chidgey, L.

Chorley, L.

Clement-Jones, L.

Cobbold, L.

Colwyn, L.

Cope of Berkeley, L.

Courtown, E.

Craigavon, V.

Cumberlege, B.

De Mauley, L.

Dear, L.

Deech, B.

Denham, L.

Dholakia, L.

Dixon-Smith, L.

Dundee, E.

Dykes, L.

Eaton, B.

Eccles, V.

Eccles of Moulton, B.

Elton, L.

Empey, L.

Erroll, E.

Faulks, L.

Fellowes, L.

Fink, L.

Flight, L.

Fookes, B.

Forsyth of Drumlean, L.

Fowler, L.

Framlingham, L.

Freeman, L.

Freud, L.

Garden of Frognal, B.

Gardiner of Kimble, L.

Geddes, L.

German, L.

Glasgow, E.

Glentoran, L.

Goodlad, L.

Greenway, L.

Griffiths of Fforestfach, L.

Hamilton of Epsom, L.

Hamwee, B.

Hanham, B.

Hannay of Chiswick, L.

Henley, L.

Heyhoe Flint, B.

Hill of Oareford, L.

Hooper, B.

Howard of Lympne, L.

Howe, E.

Howe of Aberavon, L.

Hunt of Wirral, L.

Hussain, L.

Hussein-Ece, B.

James of Blackheath, L.

Jay of Ewelme, L.

Jenkin of Kennington, B.

Jenkin of Roding, L.

Jolly, B.

Jones of Birmingham, L.

Jopling, L.

Kakkar, L.

Kerr of Kinlochard, L.

Knight of Collingtree, B.

Kramer, B.

Lang of Monkton, L.

Lawson of Blaby, L.

Lee of Trafford, L.

Lindsay, E.

Lingfield, L.

Liverpool, E.

Loomba, L.

Luke, L.

Lyell, L.

McColl of Dulwich, L.

MacGregor of Pulham Market, L.

Maclennan of Rogart, L.

McNally, L.

Maddock, B.

Maginnis of Drumglass, L.

Mancroft, L.

Mar and Kellie, E.

Marks of Henley-on-Thames, L.

Marlesford, L.

Mayhew of Twysden, L.

Montrose, D.

Moore of Lower Marsh, L.

Morris of Bolton, B.

Neville-Jones, B.

Newby, L.

Nicholson of Winterbourne, B.

Noakes, B.

Northover, B.

Norton of Louth, L.

O'Cathain, B.

O'Neill of Bengarve, B.

Pearson of Rannoch, L.

Perry of Southwark, B.

Phillips of Sudbury, L.

Plumb, L.

Rana, L.

Randerson, B.

Rawlings, B.

Razzall, L.

Redesdale, L.

Rennard, L.

Renton of Mount Harry, L.

Risby, L.

Roberts of Conwy, L.

Roberts of Llandudno, L.

Rodgers of Quarry Bank, L.

Rowe-Beddoe, L.

Ryder of Wensum, L.

Sanderson of Bowden, L.

Sassoon, L.

Scott of Needham Market, B.

Seccombe, B.

Selkirk of Douglas, L.

Selsdon, L.

Shackleton of Belgravia, B.

Sharp of Guildford, B.

Sharples, B.

Sheikh, L.

Shephard of Northwold, B.

Shipley, L.

Shutt of Greetland, L. [Teller]

Skelmersdale, L.

Slim, V.

Spicer, L.

Stedman-Scott, B.

Steel of Aikwood, L.

Stewartby, L.

Stirrup, L.

Stoneham of Droxford, L.

Stowell of Beeston, B.

Strasburger, L.

Strathclyde, L.

Taverne, L.

Taylor of Holbeach, L.

Thomas of Gresford, L.

Thomas of Winchester, B.

Tonge, B.

Tope, L.

Tordoff, L.

Trefgarne, L.

True, L.

Tugendhat, L.

Tyler of Enfield, B.

Verma, B.

Wade of Chorlton, L.

Wallace of Saltaire, L.

Wallace of Tankerness, L.

Walmsley, B.

Wasserman, L.

Wei, L.

Wilcox, B.

Williams of Crosby, B.

Wilson of Tillyorn, L.

Younger of Leckie, V.

Motion agreed.