Employment Rights Bill

Baroness Noakes Excerpts

2nd reading
Thursday 27th March 2025 Lords Chamber

[Baroness Noakes (Con)]

My Lords, this is a very bad Bill for many reasons, and I will have to ration myself to just two areas.

First, the Bill is unequivocally bad for businesses and therefore bad for growth. It is not pro-growth to impose £5 billion-worth of costs on businesses. It would be pretty bad if this Bill existed in isolation, but it is not in isolation; it is part of a triple whammy which involves the jobs tax, which will add over £20 billion to private sector wage bills, and the national minimum wage increases, which will add many more billions.

The Government seem to have forgotten that they need private sector businesses to grow if they are to achieve their overall growth objective. The economic impact analysis which accompanied the Bill claims the possibility of a small positive impact on growth, but the probability is a big negative impact, as suggested by the OBR in its spring forecast yesterday. For that reason alone, the Government should have killed this Bill at birth. The country cannot afford it.

In response to the triple whammy, most businesses are expecting to raise prices and reduce pay increases and employee headcount. That will lead to inflation, lower employment, reduced profits and reduced taxes. It will create an environment in which businesses will not invest, thus hobbling another leg of the growth ambition. A key plank of the UK’s ability to attract inward investment has been the flexibility of our labour markets. This Bill destroys that competitive advantage. It is an economic disaster zone.

SMEs are particularly hard hit by this Bill. The economic impact assessment is clear about this. Of course, anything which is bad for SMEs is also bad for growth, but policies which bear down excessively on SMEs are particularly destructive to the foundations of the way we do business in this country. At the last count, there were more than 5.2 million micro-businesses with fewer than 10 employees and a further 220,000 small businesses with 10 to 49 employees. Between them, they have nearly 13 million employees. Why would the Government want to put this huge group of employees at risk? I will be looking at amendments to this Bill to protect SMEs from its excessive burdens, and I look forward to working with the noble Lord, Lord Londesborough, on that.

My second area of concern is that the Bill is bad for some significant employee groups. For example, people with a history of health-related absence and young people with no track record will be less attractive as employees because of day-one rights and higher sick pay. There are many people who value zero-hours contracts, but they may be deprived of that opportunity because employers will be trying to avoid the risks of getting involved in conferring rights to guaranteed hours. This Bill will make life worse for many who want to work.

There are many aspects of the Bill which will need to be explored in detail. Your Lordships’ House has a responsibility to ensure that the Bill, as a minimum, does no harm. That will be a difficult task because it has deep flaws, but we must try.

Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Tuesday 29th April 2025 Lords Chamber

[Lord Moynihan of Chelsea (Con)]

My Lords, I support this important amendment and endorse the serious concerns just now expressed by the noble Lord, Lord Fox, and my noble friend Lord Hunt of Wirral. I declare my interests as a businessman, an entrepreneur and an investor.

The noble Baroness, Lady O’Grady of Upper Holloway, questioned the need for a stated purpose for the Bill. I am not sure what the logic is there: the most likely reason for a Bill having no purpose is a lack of clarity by its sponsors as to what they are trying to achieve. The noble Baroness, Lady Carberry of Muswell Hill, complains that the list stated in the amendment is non-exhaustive, which I agree with, and then somehow jumps to the conclusion that no list at all would be preferable. Again, I am afraid the logic of that escapes me.

I am far less experienced than my noble friend Lady Neville-Rolfe, but I feel that there is always an obvious advantage in having a purpose clause. In the case of this Bill, I am sure the Government must agree that those who will face the task of interpreting the meaning of the Bill in the future should be given as much clarity as possible, through a purpose clause, as to why the Bill was passed and what its purpose was. Courts in the future will far prefer to have a lucid statement of what the new law sets out to accomplish, rather than being given too wide latitude and freedom to interpret the Bill in this way or that. So I commend the overall objective of the noble Lord, Lord Fox, and hope that the amendment, or similar, will form part of the eventual Bill.

This very lengthy Bill will, if passed without a purposes section, be more open to abuses of the extensive powers it contains. This amendment would put a few appropriate, albeit modest, restraints on the ability of a Government to go too far in applying these powers. To be clear, this proposed purpose clause from the noble Lord, Lord Fox, is just a start and, for me, not completely satisfactory by any means. The list is indeed not exhaustive. In addition, the additional amendments would burden companies with yet another compliance code of conduct, which will serve to send sensible non-executives screaming from the room and possibly off to Dubai. We have to let boards focus on managing their businesses, serving their customers and making sure it is a well-run business, not having to implement new compliance code after new compliance code that will only ever be observed with lip service.

On this point of a non-exhaustive list, I wish to add to the list of purposes of the Bill, in addition to the wording that my noble friend Lady Neville-Rolfe suggested, an additional purpose of supporting, improving and not reducing flexibility in employment relationships. We will move on to the issue of flexibility in the next group of amendments, so I will not expand on that point here, but I recommend the addition of that purpose, as well as the wording proposed by my noble friend Lady Neville-Rolfe, to the list in Amendment 1.

[Baroness Noakes (Con)]

My Lords, I have never been much enamoured with purpose clauses, although they are a convenient way of having an early debate on the principles of a Bill before we get stuck into the detail. Indeed, we can see that the opportunity and attraction of another Second Reading debate is irresistible to noble Lords. Part of the reason is probably that when we have Second Readings nowadays, at most about four minutes are allowed, but when we get into Committee we have 10 minutes, which is a wonderful way of proceeding.

The noble Lord, Lord Fox, has tried to encompass the Government’s aims for the Bill in his wording of Amendment 1, but in doing so he has not covered the whole content of the Bill. I agree with the noble Baroness, Lady Carberry, on that, although we probably will not agree on much else during the passage of the Bill. For example, Clause 75 repeals the Strikes (Minimum Service Levels) Act 2023, which we knew the party opposite hated when we enacted it. That Act empowered employers to set minimum service levels in a few defined public services so that service users, such as NHS patients and commuters, did not have to suffer the massive disruption that we have seen inflicted by the unions that are active in the public sector. Repeal of the 2023 Act takes away the power to protect public service users, and does nothing that fits within the purposes put forward by the noble Lord, Lord Fox, in his Amendment 1. Does that mean that Clause 75 should not be in the Bill? If not, what is the purpose of a purpose clause? Perhaps the noble Lord can answer that.

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Moved by

[Baroness Noakes]

5: Clause 1, page 2, line 9, after “employer” insert “, other than a small and micro business,”
Member’s explanatory statement
This amendment, along with another in the name of Baroness Noakes, takes small and micro businesses (and similarly sized undertakings) out of the ambit of Part 1 of the Bill.

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[Baroness Noakes (Con)]

My Lords, I rise to move Amendment 5 and will speak also to Amendment 124 in this group. I thank the noble Lords, Lord Londesborough and Lord Vaux of Harrowden for adding their names to the amendments. The noble Lord, Lord Vaux of Harrowden, was hoping that we would be progressing rather more rapidly during Committee. Unfortunately, he has now had to leave us, but he has assured me that he remains fully committed to the principles behind these amendments.

Amendment 5 seeks to amend new Section 27BA of the Employment Rights Act 1996 as inserted by Clause 1 of this Bill so that the new right to be offered guaranteed hours will not apply to small and micro businesses. Small and micro businesses should not be dragged into any of the changes made in this part of the Bill, which is why I tabled the more extensive exclusion in Amendment 124. The Public Bill Office would not let me table that amendment at the beginning of Part 1, which is what I wanted to do, but it suggested Amendment 5 as a mechanism to enable us to have an early debate on the impact of the Bill on small and micro businesses. It is such an important issue that it has already arisen in the speeches of several noble Lords on the other two groups that we have debated, so now is a good time to have an initial debate on small businesses.

My blanket Part 1 exclusion—in Amendment 124 —applies to small and micro businesses. I have used the definitions in the Small Business, Enterprise and Employment Act 2015, so that a “small business” is one with fewer than 50 staff and a “micro business” has fewer than 10 staff. The 2015 Act also encompasses other types of undertaking, so small charities et cetera would come under that definition.

I have some considerable sympathy for Amendment 282 in the names of my noble friends Lord Sharpe of Epsom and Lord Hunt of Wirral, which is also in this group. It is similar to mine, but it instead also covers medium-sized companies, which are those with between 50 and 250 employees. I believe that the greatest harms done by this Bill will be to those at the smaller end of the scale, because they have the fewest management resources to cope with the kinds of burdens that the Bill will inflict on large swathes of our business community. I am not opposed to my noble friends’ amendment, but if we could see where the biggest harm would be, it would be at the very smallest end.

According to the latest Department for Business and Trade statistics, there were 5.5 million businesses in total, employing nearly 28 million employees. The micro-business segment—those with up to 10 employees —accounts for 95% of the total number of businesses, 5.2 million. However, 4 million of them do not have any employees. The rest—1.2 million businesses—have over 4 million employees between them. So we are talking about businesses with an average size of three employees; these are very small operations.

The 220,000 businesses that have between 10 and 50 employees have 4.3 million employees in total. The average for this category—small businesses—is around 20 employees, so it is still a very small operation. The rest, large and medium-sized businesses, account for only a bit over 1% of the business population—that is the number of businesses—but they employ 53% of the workforce.

If my amendment—to take Part 1 out of scope for small and micro businesses—is accepted, it would still apply to private sector businesses employing around 15 million employees, plus, of course, the 6 million employed in the public sector. It would not apply to around 1.4 million businesses with around 8.3 million employees.

The Government’s economic analysis cites a figure of 13 million employees who would be excluded for small and micro businesses, but that seems to include the 4 million businesses with no employees, which I have assumed are things such as sole traders, who are not actually employed. If the Minister responding to the amendment has any better analysis of the numbers, I would be grateful if he would write to me, because I find them a little confusing.

The Government’s assessment of small and micro businesses shows that five of the nine largest measures and two of the four medium-sized measures have a disproportionate impact on small and micro businesses. I am genuinely astonished that the Government would even contemplate bringing forward measures which are so disproportionately skewed in terms of harm to small and micro businesses. Those that have the biggest impact are found largely in Part 1 of the Bill.

Several noble Lords have already raised the problems that the Bill will create for those small businesses, and at Second Reading a number of noble Lords spoke to exactly the same issues. At the weekend, I went back to the closing speech of the Minister, the noble Baroness, Lady Jones of Whitchurch, at Second Reading. She did not even refer to the problems for this important sector of the economy; she talked about business more generally, but not about the small and micro businesses, or even the medium-sized businesses, that will be impacted.

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[Baroness Noakes (Con)]

My Lords, I think the Minister will find that the only amendment that can be withdrawn at the moment is Amendment 5. The others have not been reached on the Marshalled List.

I thank all noble Lords who have taken part: the noble Lords, Lord Londesborough and Lord de Clifford, on the Cross Benches, and all my noble friends who have spoken in this debate. Between them, they have communicated the very special issues that arise for smaller businesses right at the beginning of their life, when those early decisions are made about taking people on as they grow, and the risks and opportunities that come thereafter. I do not think that the Minister has begun really to internalise all the additional impositions that the Bill will place on that group of people.

I have a couple of small points. The Government’s economic analysis says that there are 13 million employees in small and micro businesses. I may not have been listening carefully to what the Minister said in response to my question on the numbers, but I did not hear him mention 13 million. I am hoping that I can get an analysis of where that 13 million comes from in due course. That is probably the most straightforward of the questions that arise.

The important thing here is that small and micro-businesses are very prevalent in our communities and involve really small numbers of people in their businesses, and it is a question of understanding what effect the additional imposition of the rights that are being conveyed in the Bill will have on their businesses. Small businesses, as the noble Lord said, know that they are about people and that their whole success or failure depends on the people they get and the people that they can develop to grow with their business. But they also need significant flexibilities because, when you are that small, you need to be able to cope with the situations that arise in relation to those small numbers.

I do not think any small businesses are trying to get out of treating their employees with respect and developing them as suits their particular business, but it appears that the Government feel that you can impose the measures such as those in the Bill across the whole of the business community and just rest on platitudes such as, “Oh, well, the direct costs on business are going to be outweighed by the productivity gain”. That productivity gain is not peer-reviewed research; there is no evidence that there is a causative link between giving extra employment rights and getting any productivity. That has not been examined in detail, so it is wrong to keep asserting that the Bill will result in that.

But, importantly, the issue is what is relevant to different categories of business. I and my noble friends, and my colleagues on the Cross Benches, have been trying to convey the particular issues that small businesses encounter and need to be protected from. I had rather hoped that the noble Lord, Lord Leong, with his background, would have understood that and would have understood the need for those small businesses to have some degree of understanding from the Government Benches and not be told, “Well, of course they have to have payroll and IT; they’ve just got to go and get all those things”. We are talking about the wealth-creating segment of our economy. Not everyone is going to be growing fast, but some of them are, and some of them are going to be growing a lot. If we harm those, we harm the economic potential of our country, and that is what we have been trying to argue.

I am sorry that the Government are not in listening mode today. I am hopeful that they might be prepared to listen further, especially if they genuinely engage with the representative bodies that represent the smaller end of the business scale, because I believe that the Bill needs to take some account of the special circumstances in which small and micro-businesses find themselves. But obviously, today I will withdraw Amendment 5.

Amendment 5 withdrawn.

Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Thursday 8th May 2025 Lords Chamber

[Lord Londesborough (CB)]

My Lords, I will speak briefly to Amendment 19A in the names of the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, and offer my support for Amendments 20 and 21.

My main concern, as I expressed on the first day in Committee, is over the impact of guaranteed-hours contracts on the small and micro-business sector, specifically those with fewer than 50 staff. Amendment 19A is particularly relevant to start-ups and scale-ups, and we cannot ignore their high-risk operational context. Again, I declare my interest as set out in the register: I chair, advise and invest in a range of start-ups.

Clause 1’s right to guaranteed hours will inhibit job creation but also job mobility and flexibility, as we have heard, if applied to such businesses, to the detriment of both employer and employee. Rigidity—I think the noble Lord, Lord Hunt, used that word—is especially dangerous in a flat economy environment such as we have at the moment.

Small business planning requires agility and flexibility when creating new jobs. As we know, business circumstances will change, often on a month-to-month basis, given the natural volatility around budgeting, forecasting revenues, forecasting bookings and indeed anticipating demand. When we talk about

“the reasonableness of entering into a limited-term contract”,

we simply cannot afford to ignore the early-stage development of these companies and watch them avoid risk-taking.

The Member’s explanatory statement to Amendment 19A quite rightly points to

“unforeseeable changes in business conditions”,

and that is especially relevant to small businesses. As I know through bitter experience, as both an employer and an investor, there is often a huge delta between entrepreneurs’ forecasts and the actual outcomes. This is about not just seasonality, events or the weather but unpredictable customer demand.

We should therefore not handicap entrepreneurial risk-taking, which this economy so desperately needs to encourage, and specifically the creation of new jobs, by applying such blanket restrictions on limited-term employment contracts. We need a more nuanced approach, as this amendment suggests, and I ask the Government to give it serious consideration.

[Baroness Noakes (Con)]

My Lords, I support the amendments in this group in the names of my noble friends on our Front Bench. I have a number of concerns about the guaranteed-hours provisions in the Bill, one of them being that they are drafted almost wholly from the perspective of workers and pay little heed to the needs of employers. I do not believe that is a good way to create employment law to underpin a healthy economy.

On our first day in Committee, the noble Lord, Lord Barber of Ainsdale, who is not in his place today, and the noble Baroness, Lady Carberry of Muswell Hill, both spoke about the work of the Low Pay Commission on zero-hours contracts. I was grateful to them for being pointed in that direction. I have a great deal of time for the work of the Low Pay Commission, which is always balanced and very careful, so I went back and looked at the 2018 report. Unsurprisingly, I found that it does not provide the copper-bottomed support for the Bill that noble Lords opposite have claimed—I should also say that the employment bodies represented on the Low Pay Commission have told us that as well.

The Low Pay Commission did indeed recommend that workers should be offered guaranteed-hours contracts, but, importantly, it also recognised that there would be circumstances in which it would not be reasonable for the employer to have to do that. There is not a trace of that in the Bill. The Low Pay Commission was clear that the Bill should set out specific circumstances in which the employer would not have to offer guaranteed hours. The commission cited with approval some equivalent legislation which was at that stage going through the Irish parliament, which provided, among other things, that adverse changes in the employer’s business or the existence of temporary factors would allow employers not to offer guaranteed hours.

Like the noble Lord, Lord Londesborough, I believe that Amendment 19A is eminently reasonable in that context. It does not give an employer carte blanche to ignore guaranteed hours but allows for some genuine business circumstances to be taken into account by the employer when looking at whether guaranteed-hours contracts should be offered.

At the end of the day, if we do not have successful businesses, there will not be any jobs on any kind of contract available. As I said on our first day in Committee, I am particularly concerned, as is the noble Lord, Lord Londesborough, about small and micro-businesses, which really need to be allowed the flexibility if we are to protect the work opportunities of around half the private sector workforce.

Even if those small and micro-businesses survive the incredible bureaucracy associated with these guaranteed hours, they will potentially not survive the substantive impact of the hours if they are required in all circumstances to offer guaranteed-hours contracts. Of course, this is particularly the case in the hospitality sector, the largest user of zero-hours contracts; my noble friend Lord Hunt spoke about the problems in that sector. There are also very large numbers of small and micro-businesses in that sector.

Recognising some very limited flexibility, my noble friend’s Amendment 19A is actually very modest. It would go some way towards making this new requirement to offer guaranteed hours work in the context of businesses that have to face difficult circumstances, and at the moment the Bill pays no attention to that.

[Baroness Coffey (Con)]

My Lords, I support the amendments tabled by my noble friends. I am just thinking of my career. I have had quite a conventional career in many ways, but I have also had many extra roles, particularly when I was a student—I am conscious that we will come to Amendment 19B separately later. It is important to reinforce the challenges in starting up or expanding a particular business. It is well said that a coffee shop will know within the first week whether it will succeed. You could argue that there are different factors, but within the first month a business will certainly know whether the footfall and the sale per customer justify the number of people it is employing and adapt accordingly.

As my noble friend Lord Hunt of Wirral mentioned, there is also this extended element about things such as holidays. It may surprise your Lordships to know quite how many jobs are, frankly, based on whether it rains and people cancelling going out to do different things. That is one of the reasons why, in particular but not exclusively, many hotel chains have started having a price differential: basically, you get a better deal if you book up front, but you cannot cancel or get your money back. Indeed, it is why even more restaurants are, effectively, starting to pre-charge an amount of money that is expected so that people do not cancel. Having lived in touch of the coast for most of my life, I can assure your Lordships that the fluctuation in how many people actually turn up to a resort for the day in a town is real, and what that means for temporary jobs.

That is why I think my noble friend Lord Hunt has found a good way of trying to help the Government to consider some of the everyday decisions that employers have to make as to whether they open up in the first place, whether they try to expand, and whether they try to get the growth. If I go further on to Clause 20, at the same time that the Government are trying to encourage businesses to go into artificial intelligence and see all that can be embraced in that regard, they need to bear in mind that businesses will not invest in such technologies if they are concerned that the other costs will be so detrimental to them.

We keep having this Catch-22 situation: if the Government want growth, they need to recognise the success where employers have been given the chance to scope and to be flexible, although I understand entirely the Government’s intent that the employer should be reasonable with the people that they take on. It is for these reasons—and I will speak more in the next group—that I believe that the Government should seriously consider how they operationalise this. We keep hearing about more and more consultations. We have heard people from the British Retail Consortium, from retailers and from hospitality saying that these are the real issues. We are almost doing their consultation for them by putting forward these amendments, so I hope that the Minister will look on them carefully in his consideration.

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[Baroness Lawlor (Con)]

My Lords, I speak in favour of Amendment 22, which would allow the duty to provide reasonable notice not to apply in certain cases, and Amendment 24, which would do likewise for the duty to provide compensation under new Section 27BP(1). The Bill’s approach is likely to damage the effective working of the labour market, for which any sensible law needs to take account of the delicate balance between the needs of a business, which needs a workforce, and those of a workforce, which depends on a business succeeding to provide work and income for the future.

If a Bill does not account for exceptional circumstances, it becomes a straitjacket on all parties. In the case of this Bill, in providing for exceptions to guaranteed-hours, reasonable notice and compensation obligations, it should take account of the difficulties businesses have to navigate to keep afloat and continue to make a success of things, as well as contribute to the whole economy and the country’s overall welfare, provide jobs for the labour market, and offer opportunities for people to work, earn and, sometimes, get their first job on the jobs ladder.

We understand that businesses have both quiet periods and busy periods—such as hospitality events—where they need extra hands. A business must allow for periods of extra business as a matter of course—some of these are predictable, others not. Businesses know there are times when cover is needed with no notice, such as when a team member is off sick or at a funeral, but by the same token they need to be able to avoid adding to their problems and costs when they are a victim of circumstances that unexpectedly change. Yet the Bill requires the employer to give notice of changes and make provision for compensation if a shift is cancelled, moved or shortened without sufficient notice.

These amendments simply ask that a Government can make regulations so that the duties under new Sections 27BI and 27BJ need not apply. That would give power to a responsible Government to ensure that there can be exceptions, so that businesses are not burdened with the costs and time involved in the tribunal process and potential compensation payments in cases where, due to unlikely and unforeseen circumstances, the guaranteed-hours work was not available at short notice.

We have already heard examples, but no business is exempt from the difficult changing circumstances with which they contend. Given the burden that the business sector will face under the guaranteed-hours clause, a Government will have few tools at their disposal to tackle what could be an unfair obligation—one that might be mitigated by circumstances in the normal course of events—to exempt the reasonable notice required for changes or cancellations that have an impact on the business, and the compensation obligation, which will add unfair costs to a business.

I will take three sectors—each very different—to illustrate a potential example. The first is the retail sector, where extra help is needed to deal with a delivery and prepare it for the shelves overnight. What if the delivery van does not arrive, or the motorway is closed due to an accident or roadworks? The business has little or no notice of the failure, yet it will lose custom and income on lost sales. None the less, there is no provision in the Bill to allow for it to give less than what, under the measure, will be reasonable notice, or to protect it from paying compensation.

In the care sector, extra hours may be needed to help with certain residents needing extra support, or someone due to arrive on a given day. What happens if the person dies or the resident falls ill, has a heart attack and must go to hospital right away? There is no notice of that, and the extra work does not materialise. The care home will lose income on its empty room and overhead, yet payment will be expected. Where is the money to come from—the local authority, the care recipient, or the estate if it is a death? What will the care home do to tide over an income shortfall when having to pay its suppliers for everything from food and cooking to linen, room cleaning and care?

The CEO of the Carers Trust explains that social care providers are often forced to rely on zero-hours contracts because of a “lack of funding” from local authorities. She says:

“If zero-hours contracts are banned”—


or, I would add, made more difficult or costly—

“social care providers must be given the funding to afford the increased costs that brings”.

The CEO of the National Care Forum says that

“these measures must be accompanied by the financial and wider support necessary for providers to implement them, as well as interim measures to boost care worker pay”.

These changes must be reflected in its funding so that it can continue to do its vital work. So are the Government prepared to make a commitment to cover the costs that will be incurred if these clauses go through unamended?

Another example would be a conference organiser where the IT system fails. Despite a service contract in place to repair it instantly, nothing can be fixed because the failure lies elsewhere: a cyberattack or an energy blackout. This can happen overnight. The business loses its data, it loses customers, who are unable to pay an entry price, and it loses an overhead. Depending on how long it is before the system can be got back to normal, it may lose so badly that, ultimately, if the problem recurs, it may have to curtail operations and overheads. Without the amendments allowing the Government to provide for exemptions from the clause, there will be higher costs that may ultimately lead to the failure of the business.

There are enough uncertainties and costs for employers without making these worse, but the obligations of the Bill and these clauses could add significantly to costs and complications. Who will pay these extra costs? We know that this Government have been in the habit of saddling the taxpayer with additional costs in respect of workers in the public sector but not for businesses or charitable trusts, or indeed independent schools in the case of imposing VAT. What about the care homes taking local authority work? What about the costs of the uncertainties of the Bill itself? Although the compensation clause stipulates that compensation will not exceed pay for the lost shift, we do not yet know what the amount will be, what “short notice” is supposed to mean and what is meant by “qualifying shift”. We have to wait for regulations.

There are good reasons for these amendments. If we want businesses and the labour market to flourish, and to enable businesses to navigate the unwelcome outcomes of unexpected problems preventing expected workloads without adding to their costs, there are good reasons for the Government to accept them and for the regulations to respect the spirit in which they have been made.

[Baroness Noakes (Con)]

My Lords, I will comment briefly on my noble friend Lord Sharpe of Epsom’s Amendment 28, which replaces the test of reasonable belief with that of formal confirmation. I mentioned earlier the work done by the Low Pay Commission on zero-hours contracts when it reported in 2018. It also examined the issue of compensation for short-notice cancellation of shifts. It emphasised in its report that there would need to be fairly rigorous record-keeping. It said that both employers and employees would need

“proof a shift had been offered”.

That speaks to the content of Amendment 28. It does not seem to me to be sensible to have something that rests solely on reasonable belief, because that is impossible to prove and would result in difficult questions being put to an employment tribunal. Although I am obviously not in favour of imposing bureaucratic requirements on employers, this is one area where the legislation should point towards there being some formality of record-keeping so that there can be no dispute about whether shifts have been offered or cancelled.

[Lord Fox (LD)]

My Lords, in the main, this is a reasonable debate—or, rather, a debate about “reasonable”. We have yet to hear the proposal from the noble Lord, Lord Sharpe, on Amendments 22 and 24, which sit outside the theme of the other amendments in this group, which I expect to be about Henry VIII powers. We shall see.

My noble friend Lord Goddard proposed his amendment, and I am here to speak to my Amendment 27. My amendment is about the definition of “reasonable notice”, and what that means. The noble Lord, Lord Lucas, proposes a different time for reasonable notice in his Amendment 21A. Either way, this is an opportunity for the Minister to walk us through what the Government are thinking around reasonable notice.

My noble friend set out a probing amendment to ask about “reasonably believed”, and in Amendment 28 the noble Lord, Lord Sharpe, essentially seeks to replace that. If the noble Baroness, Lady Noakes, is an official spokesperson for the noble Lord, Lord Sharpe, I can see many reasons for adopting something that is clear—albeit bureaucratic. I never thought that I would hear the noble Baroness speak to bureaucracy. However, somehow being able to show that belief is backed up by documentation may well prove to be essential in the good managing of workers’ relationships.

Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Tuesday 13th May 2025 Lords Chamber

[Lord Davies of Brixton (Lab)]

I speak in support of my noble friend Lady Lister of Burtersett, and in support of more being done on statutory sick pay. I welcome the Government’s commitment to strengthen statutory sick pay by removing the lower earnings limit and the waiting period, but they must go further to ensure that people with mental health problems have a secure safety net when they need time off work, and a pathway back into work when they recover.

The UK has one of the least generous sick pay schemes in the OECD in terms of rates and length. It forces people to remain in work while they are unwell, which risks them becoming more unwell and eventually falling out of work. Because statutory sick pay is inadequate, people who rely on it often carry on going into work when they are unwell. This can risk them becoming more unwell, to the point where they fall out of employment altogether. We need a sick pay system that provides real security, is more compassionate, gives people the time they need to get better and supports them to return to work when they are ready.

Reforming statutory sick pay is beneficial to the economy, to businesses and to people with mental health problems. As my noble friend has emphasised, presenteeism—going to work when unwell—is costing UK employers £24 billion a year, according to figures produced by Deloitte. It reduces productivity and business competitiveness, as well as aggravating a person’s illness. Introducing a flexible statutory sick pay model that allows for partial payments alongside wages would help people to gradually return to work after a period of sickness, or allow them to reduce their hours when needed without being signed off completely. Not only is this beneficial for the employer, as employees are able to return to work sooner part-time, but it keeps the employee connected to their workplace and reduces the likelihood that they will fall out of employment altogether.

Extending the length of statutory sick pay being paid from 28 weeks to 52 weeks will enable more people to stay in employment, reduce rehiring costs for businesses and prevent people falling out of employment and needing support from the benefits system. Ultimately, we need to see a higher level of statutory sick pay, and I see no reason why, when you are sick, you should get any less than the national minimum wage.

[Baroness Noakes (Con)]

My Lords, my main concern with the changes to statutory sick pay in this Bill is the impact on smaller businesses, which is why I support the amendments in this group in the names of my noble friend Lady Coffey and the noble Lord, Lord Fox, which provide for rebates for SMEs. Of the two amendments, I prefer that of my noble friend Lady Coffey because it clearly undoes the harms that Clause 10 will cause.

I could not find much data on how much businesses actually pay in statutory sick pay, but I suspect that, unless an employer is unlucky enough to get an employee who has long-duration sickness, most will be paying relatively little at present, because absences are mainly for less than four days. What the data does show is that most sickness absences are for minor illnesses, which are unlikely to exceed three days. The average days lost per worker per year in 2023, which is the most recent data I could find, is just short of eight days. Among smaller and micro-businesses, that falls to around five days.

Extending the days for which payment is made is likely to increase the number of days lost to sickness, as the current incentive to work if the illness is mild will simply disappear. The Government say they have no idea what the behavioural impact of the changes will be—whether positive or negative—but I am prepared to bet that there will be far more short-duration absences, which will qualify for statutory sick pay, than there were before.

If I am right that most SMEs do not currently pay much in the way of statutory sick pay, the changes in the Bill will straightforwardly increase their costs. An average small business of between 10 and 49 employees has about 20 employees, which means that the average for a small business will be to pay for at least 100 days of sickness that they do not currently have, which would amount to around £2,000 in additional costs each year, even if no additional sick days were taken, which I doubt. That is not a huge amount per business, but it adds up to many billions of pounds across the whole economy. It also, of course, comes on top of the jobs tax and the very significant increases in the national minimum wage, which leads me to the likely real consequences of this change on top of the others. Put simply, SMEs will not hire workers unless they absolutely have to. We can already see evidence of that from the surveys of smaller businesses and in the weakening labour market—my noble friend Lord Sharpe of Epsom gave us an up-to-date view on that. It is only going to get worse.

Furthermore, all those groups that we as a nation want to get back into work, in particular those who are long-term sick, will simply not be attractive to employers. Any hint of an illness record in a job applicant’s background will count against them, because no employer would want to take on the additional costs that would automatically come with that employee.

I am sure that I do not need to remind the Committee that SMEs employ nearly half the private sector work- force. A reluctance to hire among SMEs will kill growth and opportunities for many of the groups that we need to be employed in this country. There is a simple way to solve this problem, set out in Amendments 73 and 74. The Government would be wise to go down that route.

[Baroness Lawlor (Con)]

My Lords, I shall speak in support of Amendments 71A and 71B in the name of my noble friend Lord Sharpe of Epsom, Amendment 73 in the name of my noble friend Lady Coffey, and Amendment 74 in the name of the noble Lord, Lord Fox, for a rebate scheme.

Amendments 71A and 71B propose a sensible modification to Clause 11 and strike a more affordable approach for a business paying the employee for time not worked, as well as for the compliance and record-keeping involved. I say “more affordable” rather than “fair” because many businesses—particularly small and micro-businesses, as we continue to hear in Committee —will struggle to stay afloat and in business, given the juggernaut of additional costs, burdens and increased obligations imposed by this Bill. That includes those in this clause and those in previous clauses that we have discussed.

In Clause 11, such costs are to be imposed for those below the lower earnings limit, as we have heard, which will add to the extra costs paid by employers. They will potentially open further problems raised in the impact assessment, the modelling for which suggests a rosier picture for business than the available evidence warrants but also raises questions of behavioural response. Indeed, that consideration was a fundamental principle addressed in the welfare state proposals by Sir William Beveridge in his blueprint Social Insurance and Allied Services in 1942. The original National Insurance Act was framed as a contributory scheme with strict conditions on benefit to avoid creating perverse incentives.

The impact assessment for this measure—which models outcomes on the basis of a variety of factors, including some unproven assumptions—contends that there is evidence suggesting that overall sickness absence may be reduced but, on the basis of evidence considered from other countries, says that it is

“possible that regulation changes induce a behavioural response”

and that

“studies from other countries have found that the incidences of sickness absences are higher when sick pay is more generous. There could be an increased number of sickness absence days taken due to improved financial protection”.

We can read that in whatever way we like, and we have heard different interpretations of more generous statutory sick pay, but it is incumbent on the Government to return to some of the original principles in the national insurance system in this country and to think further about not creating perverse incentives. There will now be days for which the employer will pay for which there is absolutely no productivity gain.

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[Baroness Jones of Whitchurch (Lab)]

My Lords, as noble Lords have identified, we are now continuing the important debate on statutory sick pay and specifically to address the impact of these measures on businesses.

It is important to highlight that the statutory sick pay system, and the changes that we have brought about as part of this Bill, is designed to balance providing support for the individual with minimising the costs to the employer. This group of amendments, Amendments 74A, 74B and 74C, tabled by the noble Lords, Lord Sharpe and Lord Hunt, would require impact assessments on absenteeism, enhanced sick pay schemes, occupational health, and short-notice shift working.

As I mentioned earlier, and as the noble Lord, Lord Fox, has already identified, the Government have already undertaken a regulatory impact assessment which considered the likely direct business impact of SSP changes. This included considering the impact on small and medium enterprises and sectoral impacts.

Overall, in the regulatory impact assessment, the Government estimated that the cost of delivering these measures would be approximately £15 extra per employee, a relatively modest amount when compared to the positive impacts that these changes will have for employees and overall productivity. I thank the noble Lord for the three amendments tabled in this group, all of which would require impact assessments. I look forward to debating those with the other 23 or so requests for impact assessments that the Opposition have already tabled. We have a plethora of requests for impact assessments. I reassure the noble Lord that we are at the same time updating our regulatory impact assessment and operating a post-implementation review of the measures—so the Opposition’s requests are probably not necessary.

On the noble Lord’s Amendment 74A, requiring an assessment of the impact of the changes to SSP in the Bill on absenteeism, we acknowledge that overall sickness absence may increase as a result of this Bill. This is not a loophole, nor are the Government not considering businesses; rather, it is the very objective of these changes to enable the lowest-paid employees to take time off when they are sick. Under the new system, employees will be able to take the time that they need to recover from short-term illness without struggling through work and often risking the spread of infectious diseases such as influenza. Similarly, employees with long-term or fluctuating conditions should feel able to take a day of sickness absence to manage their condition to prevent it worsening. The noble Lord, Lord Hunt, suggested that employees might be encouraged to misuse the system. However, if employers have the right policies and practices in place, the risk of inappropriate absenteeism can and should be mitigated.

Additionally, the noble Lord’s amendment would be quite difficult to deliver in practice. There is not a standard measure of absenteeism versus legitimate sickness absence, and in many instances, it would depend on whether you asked the employer or the employee. The Government intend to build on the regulatory impact assessment and, as I have said, we intend to conduct a post-implementation review of the measures in the Employment Rights Bill.

I turn to Amendment 74B, to assess the impact of the reforms in the Bill on employers’ ability to continue offering enhanced sick pay and occupational health services, particularly in low-margin sectors such as retail. I appreciate the noble Lord’s concern about the potential impact on this matter, and the Government certainly agree that it would not be in anyone’s interest for there to be a rollback of occupational sick pay or occupational health provision. However, the Government’s view is that these changes will serve only to strengthen the link between the workplace and the employee. I question why any business would want to use these changes as a reason to reduce the support that they provide their employees to help them stay in, and return to, work.

The noble Baroness, Lady Fox, asked about the Government’s policy on getting people back to work, and she was right to raise the issue. We are talking about a balance here; when people are sick, they should have the right to be off sick. I also accept the point that she made that being at work can in itself be a healing experience, and we should not lose sight of that—that there can be a positive health impact from being at work.

I once again draw noble Lords’ attention to the Keep Britain Working review. As I set out earlier in the debate, Sir Charlie Mayfield will consider recommendations on how the Government can support and enable employers to promote healthy and inclusive workplaces and support more people to stay in or return to work from periods of sickness absence. That review is expected to produce a final report in autumn this year. I believe that much of what the Keep Britain Working review is doing will address the noble Lords’ concerns, and I hope this reassures them that the Government are taking this matter seriously. We look forward to the results of the review.

Finally, I turn to Amendment 74C, which seeks to review the effects of the SSP changes on shift management and short-notice scheduling in the workplace. As discussed in relation to Amendment 74A, the number of sickness absences may go up as a result of these changes. This is because it would enable employees to take time off when they are sick.

I again reassure noble Lords that the Government are committed to understand the impact of these changes on businesses. We intend to conduct a post-implementation review of these measures in the Employment Rights Bill within five years of implementation. Additionally, as I set out in the earlier debate, the Department for Work and Pensions conducts regular employer and employee surveys and will continue to do so, providing further monitoring of the impact of SSP changes on a range of employers and employees.

However, this amendment would require the Government to collect a significant amount of data from businesses on what noble Lords will understand is quite a wide range of issues. We believe that this would be administratively challenging for them to provide, particularly in less than six months. This is the very thing that the noble Lord is seeking to avoid—the extra bureaucracy that he has talked about. For example, asking employers, including SMEs, to accurately record and report to government the frequency of shift cancellations and redeployments because of sickness absence is not practical or reasonable.

We have had a worthwhile, short debate on these issues, but I hope I have persuaded noble Lords that we are on the case and therefore that the amendment can be withdrawn.

[Baroness Noakes (Con)]

My Lords, the Minister said during her remarks that there would be a cost per employee of £15; I think she said that in the earlier group as well. Can she provide any more information on this? It seems counterintuitive. If the average number of sick days per employee is around eight, which is what the most recent survey data showed, that implies that employers are already bearing the cost of something like seven and a half days and are going to pay only for an extra half day. That does not seem to be consistent with the evidence of the nature of absences that also exist, which implies that most are at the shorter end and probably are going to be below the level at which they are currently being reimbursed by statutory sick pay.

It has been troubling me for some time, but I hope that the Minister will be able to provide some further information. I do not expect it from the Dispatch Box, although I would be delighted if it were to come from the Dispatch Box right now, but if she could write to me, I would be most grateful.

[Baroness Jones of Whitchurch (Lab)]

I suppose the simple answer to that is that it is in the regulatory impact assessment, which the noble Lord, Lord Vaux, acknowledged was one of the things that we got a fair rating for. I refer the noble Baroness to that, which I think will give more details.

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[Baroness Noakes (Con)]

I have read it. There is no more detail in that impact assessment on the £15. That is why I am asking whether the Minister can provide further detail on how that £15 was arrived at.

[Baroness Jones of Whitchurch (Lab)]

I am happy to write to the noble Baroness.

Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Monday 19th May 2025 Lords Chamber

If Clause 20 is unamended, it will plunge employers into a legal quagmire, force them to spend a fortune on obtaining and then implementing legal advice and inevitably have a chilling effect on free speech in those very places—pubs, bars, restaurants, football stadiums and universities—where people should be free to speak their minds. Who will bother to pop into their local for a drink if there are banter bouncers in every beer garden, a pronoun policy on every wall and the need to produce proof that you have had DEI training before you can get served? If this clause ends up on the statute book unamended, the only growth it will achieve is in the debt restructuring business, in law firms specialising in equality law and, above all, in the dole queue. I beg to move.

[Baroness Noakes (Con)]

My Lords, I have several amendments in this group. I also support all the amendments in the name of my noble friend Lord Young of Acton. The extension of the Equality Act harassment provisions is not new territory. In 2023 it was included in a Private Member’s Bill, which became the Worker Protection (Amendment of Equality Act 2010) Act 2023. A number of us were concerned about the extension of employer liability for non-sexual harassment and tabled amendments to remove that part of the Bill. In the event, that aspect of the Bill was dropped, and we all heaved a sigh of relief until we saw this Bill published last autumn.

The provisions of Clause 20 are, in many respects, worse than the 2023 Bill, which at least tried to address the issue of freedom of speech. It did not go far enough, but at least it tried. This Bill proceeds on the basis that freedom of speech is not an issue. My noble friend Lord Young’s amendments are absolutely essential if there is to be a workable and fair extension of employer liability for harassment.

I will not repeat the arguments put forward but will emphasise how burdensome such a requirement can be for a small business. Since most businesses in this country are small, accounting for a bit less than half of private sector employment, Clause 20 is a very big problem. It is already hard enough to run a small business and cope with all the regulatory burdens that the state imposes. This new requirement will extend into the realms of impossibility. How can a small hospitality or retail business realistically cover itself against every possibility that a member of staff might perceive that they have been harassed by a customer or even a passer-by?

I have a specific question for the Minister on the territorial scope of Clause 20 or, more accurately, Section 40 of the Equality Act as amended by Clause 20. Does the duty to prevent harassment apply only to UK-based employees or does it also apply to those who are overseas?

I am sure that noble Lords who have dealt with overseas call centres recognise that it can be a somewhat vexing experience. Recently, a young man who was almost certainly in India insisted that he must educate me for 10 minutes on frauds and scams before he would unblock one of my credit cards, which had hit one of those fraud trip-wires in connection with a perfectly straightforward transaction that I had already completed on another card without any problems whatever. I explained that to the young man. I explained that I knew quite a bit about frauds, scams and financial services, but he was absolutely adamant about my educational needs. I hope that my responses were not perceived as harassment, but one can never tell these days. Does Clause 20 mean that my card provider will be liable if I intentionally or otherwise harass its overseas employees? If so, how on earth does that work?

My Amendment 87, in seeking to avoid single incidents being treated as harassment, is a softer version of my noble friend Lord Young’s Amendment 86. I stress that I am not talking about sexual harassment—a single incident of sexual harassment is one too many. Rather, I am talking about the kinds of harassment that my noble friend Lord Young has described. We really cannot expect employers to be able to prevent every single incidence of hurt feelings, if only because the highly subjective nature of workers’ perceptions means that employers face an impossible task.

My Amendments 89 to 96 concern Clause 21, which empowers the Secretary of State to make regulations about “reasonable steps” in the case of sexual harassment. I always thought that the Equality and Human Rights Commission was the correct source of guidance on the application of the 2010 Act. But if we accept that it is right for the Secretary of State to get involved in the specifics of sexual harassment and the “reasonable steps” that are necessary, logic requires that it should extend to all forms of harassment where an employer has to take all “reasonable steps”. That is what my Amendments 89, 93, 95 and 96 seek to achieve.

Furthermore, if the Secretary of State issues rules about what constitutes “reasonable steps”, we need to see what the consequences of that are. If employers can establish that they have followed the steps set out in the regulations, I believe there should be no question of falling foul of the revised harassment regime in Section 40 of the 2010 Act. It should be for the Secretary of State to ensure that the rules set out in regulations are comprehensive and for employers to follow them. My Amendment 94 would then give employers protection from the harassment provisions.

Lastly, and for good measure, I included a may/must amendment in Amendments 90 and 91, so that the Secretary of State would be required to issue regulations dealing with all “reasonable steps”. This is such a difficult area for employers, particularly in customer-facing businesses, but it should be incumbent on the Secretary of State to set out clearly and comprehensively what employers need to do.

--- Later in debate ---

The noble Baroness, Lady Noakes, also seeks to extend requirements to other forms of harassment under Section 26 of the Equality Act 2010. This would broaden the intended scope of the regulations under this power, which is to assist the employment tribunal when considering whether an employer has taken all reasonable steps to prevent sexual harassment. Any such broadening would require careful consideration and consultation with employers, or would otherwise risk unintended consequences. That is why we will ensure that any regulations that are made add clarity for employers and employees, hoping to avoid the need for claims being brought to an employment tribunal at all.

[Baroness Noakes (Con)]

My Lords, can the Minister explain why Clause 21 gives power to the Secretary of State to make provisions in relation to reasonable steps only for sexual harassment and not non-sexual harassment? I think she said something about it being an area in which there is evidence that this would be useful—I cannot remember her exact words. I cannot understand why the Government have not extended the logic of giving assistance in this area to tribunals beyond sexual harassment, especially given the broadening of the extent of non-sexual harassment by including third parties.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I can say only that it is for the reasons I have outlined previously in my speech. We want to make sure that where we broaden the protections, it is done on a very careful basis and achieves the desired effect.

[Baroness Noakes (Con)]

We are not talking about broadening protections; we are talking about setting out what constitutes reasonable steps in the case of sexual harassment, which is included in Clause 21, and other kinds of harassment, which, incomprehensively, are not included. I am simply asking why the Government have gone down that particular route.

[Baroness Jones of Whitchurch (Lab)]

My Lords, the easiest thing is for me to write to the noble Baroness to explain this. It is obviously based on previous experiences of case law and so on. I will write to the noble Baroness.

Her previous question was about the Bill’s jurisdiction over overseas employees. While I cannot necessarily speak to the example that she raised, the Bill does not broaden the jurisdiction of employment tribunals beyond their current jurisdiction over any overseas employees. The situation will remain as it stands.

[Baroness Noakes (Con)]

Can the Minister explain what the current jurisdiction is? What is the current territorial extent for all tribunal cases?

[Baroness Jones of Whitchurch (Lab)]

My Lords, I presume that it is where employees are based here in the UK, but if I am wrong I will write to the noble Baroness and clarify that.

In conclusion, I am grateful to all noble Lords for tabling these amendments but, for the reasons set out, the Government cannot support them. The Government are on the side of workers, not abusers. We will ensure that workers have the fair protections at work that they deserve. I therefore ask that Amendment 83 is withdrawn and that Clause 20 stands part of the Bill.

Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Wednesday 21st May 2025 Lords Chamber

[Baroness Noakes (Con)]

My Lords, I have added my name to the amendments in the name of my noble friend Lady Neville-Rolfe, but I also support all the other amendments in this group. Both the noble Lord, Lord Vaux, and my noble friend have already fairly comprehensively treated the issues that concern a number of us, so I will not repeat all those points.

I just underline three brief points. We are trying to look for a balance between the legitimate expectations of employees and employers, because we need those to work in harmony. At the end of the day—as my noble friend Lady Neville-Rolfe pointed out—employers will be producing the growth that the economy needs, so their hiring plans will be critical and anything that harms this balance will damage the economy.

From an employer perspective, anybody who has undertaken recruitment as an employer knows that most employers approach this extremely responsibly—it is not a cheap process to get the right people into the jobs—but we also know that, however diligent you are in screening, interviewing and assessment processes, you do not always get it right. You can usually test whether a person has technical skills, although sometimes you need to see them in practice before you know whether they really have them. The important area is whether an employee fits with an organisation. That is really difficult to tell until the person turns up and starts working. Do they share the same values as the rest of the workforce? Do they have ways of working that are just not compatible with the culture of the organisation? This is particularly important for small organisations: if you have one employee who does not fit in a very small organisation, that is a significant proportion of the workforce and can be very damaging to the business of a small business.

The last point that I underline is that this Bill will make it much more difficult for the difficult categories of people who want to find a job but cannot. There has been much talk about NEETs, and ex-offenders are another case. Why would any employer want to take on an ex-offender with day-one rights? We know some of them make excellent employees but quite a lot of them do not. They can become quite difficult to handle in the workplace. If employers fear that they will not be able to easily overcome mistakes in recruitment they simply will not hire, which will harm people who want to work.

[Baroness Verma (Con)]

My Lords, as an employer who has employed people over the past 40-odd years, I know that the difficulty for an SME—any small business such as my own—is the ability to manage all the bureaucracy that is entailed with it.

For businesses in the social care sector, for example, unfortunately you cannot really understand how good or bad a care worker will be until they have worked a little while in the organisation, even with the training. However, if we are to give the rights from day one, the difficulty will be that we will end up with a sector already very short of workers needing to hire more workers in case any are not suitable for the role. We would have to release them, knowing that they may then apply workers’ rights on day one without proper probation periods and take us to tribunal. It is a difficult sector.

There are many sectors like the care sector, and it is particularly challenging for small businesses in the wider sector of delivering something that is so important. If the care worker is not the right fit, it does not really matter how big or small the organisation is—that person is just not suitable for the role. We need to have the ability to dismiss the person without having to go through the bureaucracy of all the Government’s intentions in this part of the Bill. I therefore support my noble friend and the noble Lord on these amendments.

It is time to have a strong rethink about how we can come to a good middle ground, where employers are not fearful of employing. I have been talking to a lot of SMEs over the past few months, and the difficulty that noble Lords across the House will have found, when they have talked to businesses in their own communities, is the worry around what will happen when the legislation in this Bill is enforced.

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[Lord Hendy (Lab)]

My Lords, I get the impression that there is a bit of a misunderstanding around the nature of employment tribunals. I spent the first half of a long career at the Bar doing employment tribunal cases, many of them unfair dismissal cases. In fact, the first case I ever did—pro bono, by the way—was an unfair dismissal case in 1972, under what was then the very new unfair dismissal legislation. Unfair dismissal cases are difficult for employees to win. Most cases that go to a full hearing result in the employer being vindicated.

I want to make two points. The first is that employment tribunals now have robust procedures for weeding out vexatious cases; such cases never go to a full hearing. Secondly, I remind your Lordships of the law on unfair dismissal in Section 98 of the Employment Rights Act 1996. The test is in two parts. First, the employer must demonstrate that the reason for the dismissal is capability, qualifications, conduct or redundancy or the fact that the employment is in breach of some enactment. Once the employer has shown that that is the reason, the test for the tribunal—I shall read it out—is whether the dismissal is fair, which,

“depends on whether in the circumstances (including the size and administrative resources of the employer’s undertaking) the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the employee”.

So all the factors that one would expect to have to be taken into consideration are taken into consideration.

The tribunal then has to determine that,

“in accordance with equity and the substantial merits of the case”.

The Court of Appeal has added yet another burden. When the tribunal decides whether the employer acted reasonably or unreasonably, it is not about what it considers was reasonable or unreasonable; it is about whether it considers that the dismissal fell within the band of responses of reasonable employers. It is at two stages removed. It is not like an ordinary negligence case where the court decides whether an employer was reasonable or not reasonable in putting a guard on the machine. It must decide. Even if it thinks that the decision was unreasonable, if it finds that, nevertheless, reasonable employers would say that it might be possible that the reason was fair, that would be legitimate.

[Baroness Noakes (Con)]

The noble Lord referred to the likelihood of cases succeeding if they got as far as the tribunal. Does he accept that the vast majority of cases that are initiated never get as far as a tribunal because there is a huge incentive in the system for employers to settle? The costs of taking a case right the way through are huge—not just in the monetary cost of employing clever employment lawyers but, in particular, in the diversion of management effort within the organisation. I have seen this in large organisations, where swathes of the management team can be tied up for long periods of time. Employers cannot afford that in the broadest sense. If you put that in the context of smaller organisations, they absolutely cannot cope with it.

Whatever happens at the tribunal and whatever the law says, the mere initiation of an action nearly always results in an economic decision, made by the employer, to settle. That is one of the most difficult aspects and is why extending that into the early period of employment causes so many worries for employers.

[Lord Hendy (Lab)]

I absolutely agree that most cases never get to a full hearing; only a tiny minority ever do. The noble Baroness is right that many cases settle, of course. Many are conciliated, because there is now compulsory conciliation by ACAS, but many are withdrawn by the employee. You have to visualise it, as I am sure the noble Baroness does: most employees bringing an unfair dismissal claim are completely unrepresented. They are on their own, so all the expense, research and preparation that have to be done must be done by them personally. That is a huge disincentive. Many claims—tens of thousands of them—are simply not brought because it is not worth the employees’ while to do it.

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[Baroness Jones of Whitchurch (Lab)]

I will talk about the impact assessments in more detail shortly, but the noble Lord will know that it is a lot easier to identify the costs in impact assessment than the benefits. We have worked with academics who are looking at this subject. I reassure the noble Lord that we have looked at this and are confident that the benefits in this particular case will outweigh the risks.

I will pick up the point made by other noble Lords about cultural fit and other reasons why an employer might want to dismiss somebody during their probationary period. Dismissal for “some other substantial reason” is a catch-all category designed to allow employers to terminate an employment contract where no other potentially fair reasons apply. There can be cases where dismissal is legitimate and reasonable; “some other substantial reason” dismissals depend on the facts and circumstances of the employment relationship. “Some other substantial reason” is broad, and case law supports personality clashes in workplace teams or a business client refusing to work with an employee being a potentially fair reason for dismissal. The Government do not believe that an employee not being a cultural fit within an organisation should be a fair dismissal per se. We would expect an employer to be able to dismiss someone fairly only if any cultural misfit was relevant in a reasonable manner to the employer’s business objectives and the needs of the workplace.

The noble Baroness, Lady Noakes, mentioned employees with spent convictions. I gently point out to her that dismissing an employee solely for having spent convictions is currently unfair and potentially grounds for an unfair dismissal claim—

[Baroness Noakes (Con)]

I never mentioned spent convictions; I referred merely to the risk of employers taking on ex-offenders. I cannot think of a point I could have made in relation to spent convictions. The issue is these categories of potential employees who a represent higher risk in terms of judgment to employers, and I was using former offenders as one example of that.

[Baroness Jones of Whitchurch (Lab)]

I apologise if I misunderstood the noble Baroness’s point. I can only reaffirm the point I was making: with all these issues, there can be reasons for fair dismissal during the probationary period, and we have set out quite clearly what the grounds for that would be.

Amendment 107A was tabled by the noble Lord, Lord Lucas. As always, he thinks outside the box and comes up with interesting ideas, including the idea of a probationary period here in your Lordships’ House, which I am sure we all have strong views about. Going back to the specifics of his proposal, the Government have expressed an initial preference for a nine-month statutory probationary period. We intend to consult with stakeholders and the wider public before committing to a duration, which will be set by the Secretary of State through secondary legislation after this consultation has taken place. Maintaining this flexibility allows the duration and calculation of the statutory probationary period to be adapted in light of future changes in employment practices.

Amendment 108, tabled by the noble Lord, Lord Vaux, would also amend Schedule 3 to the Bill. It is of great importance to this Government to get the length of the statutory probationary period correct. The Government have already stated in Next Steps to Make Work Pay their preference for the statutory probationary period to be nine months in duration. However, this is subject to consultation, and I hope that this reassures the noble Lord, Lord de Clifford, on that matter.

On Amendment 334, tabled by the noble Lord, Lord Vaux, while I recognise what the noble Lord is seeking to achieve with his amendment, I reassure him, and the noble Baroness, Lady Meyer, that the Government have no intention of removing the two-year qualifying period until the regulations setting out the statutory probationary period are in force. We will, of course, give businesses time to prepare, and we are engaging with them already. These provisions will not commence before autumn 2026, which will give time to prepare. I hope that this reassures the noble Lord, Lord Goddard.

I move on to address Amendments 103 and 123, from the noble Lords, Lord Sharpe and Lord Hunt, in respect of their mandates for further impact assessments. The Government have already produced a comprehensive set of impact assessments, published alongside Second Reading, and based on the best available evidence of the potential impact on businesses, employees and the wider economy. Our analysis includes an illustrative assessment of the impact on employment tribunal cases, which we intend to refine over time by working closely with the Ministry of Justice, His Majesty’s Courts & Tribunals Service, ACAS and wider stakeholders. I am grateful to my noble friend Lord Hendy for setting the record straight about the impact of tribunals, and the thorough ways in which they conduct their proceedings. Many cases settle in advance, and we want to encourage more cases to reach a settlement with proper advice and support. I am also grateful to my noble friend Lord Barber for putting the scale of the problem in perspective, with only 5,000 cases referred to ACAS in 2023-24.

We will publish an enactment impact assessment once the Bill receives Royal Assent, in line with the requirements of the Better Regulation Framework. This will account for ways in which the Bill has been amended in its passage through Parliament, to the extent that those changes significantly change the impact of the policy on the enforcement system. This impact assessment will then be published alongside the enacted legislation.

To follow up on the impact of this, we acknowledge that the policy is expected to benefit close to 9 million employees, driven by well-being benefits arising from increased job security for those with under two years of tenure. There will be costs to businesses, including familiarisation and compliance costs, from this change. However, businesses could benefit through improving their people management and hiring practices, which could deliver medium to long-term benefits, such as higher labour productivity. In addition, increasing employee well-being could increase worker productivity. These benefits will be tested further during consultation.

The Government have also pledged to conduct a consultation on unfair dismissal policy, to collect feedback from employers and employees. Specifically, the Government have outlined that we will consult on the length of the statutory probationary period, and the potential cap on compensatory awards for unfair dismissal occurring during the statutory probationary period. I can reassure the House that there is no need for the Bill to require the Government to undertake further assessment of the impact on tribunals before commencement. We will be updating our impact assessments in any case, alongside the consultation on implementing the various provisions in the Bill.

I turn to Amendment 113, tabled by the noble Lord, Lord Sharpe of Epsom. The Government are not proposing to expand the five potentially fair reasons for dismissal that have been a central part of employment law for decades. An employer’s decision to dismiss an employee in the early stages of their employment or otherwise will have to be underpinned by a fair dismissal reason, such as capability or conduct. It stands to reason that these would be the most likely dismissal reasons when employees fail their probation.

I am grateful to all noble Lords for tabling these amendments but, for the reasons set out, the Government cannot support them. I therefore ask that Amendment 103 be withdrawn.

Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Monday 16th June 2025 Lords Chamber

[Baroness O'Grady of Upper Holloway (Lab)]

My Lords, I oppose Amendment 254 and the other amendments in this group.

I also admit to a certain degree of pleasure that they have been tabled, because they draw attention to the fact that such was the rejection, not just of unions or the minimum service levels Act but of the public and employers, that not a single employer used the minimum service levels Act and not a single work notice was issued. That was because the Act was so widely regarded as unfair and unworkable and, in addition, that it would put fuel on the fire of difficult industrial disputes when all decent people wanted to resolve those disputes. Finally, it ignored the fact that life-and-limb voluntary agreements are in place in the industries and sectors where safety is genuinely at stake.

I thank the Benches opposite for putting forward the amendments.

[Baroness Noakes (Con)]

My Lords, the noble Baroness, Lady O’Grady of Upper Holloway, and I took part in the debates on the 2023 Bill when it went through your Lordships’ House—obviously, on different Benches. She is right that no employer sought to use the powers in the 2023 Act, but the Act had only a relatively short existence in which it was available to employers before, in effect, we went into an election period.

I accept that, at the time, employers did not wish to take advantage of the Act’s provisions. The main purpose of the Act was to protect individual citizens to ensure that they had the levels of service that they needed. That goes beyond safety issues, which are the minimum levels to which unions tend to sign up for, so that ordinary citizens have minimum service levels to get themselves to work, to get themselves to their hospital appointments and so on. We did not give that Act enough time to see: first, whether it would work in practice, which I believe it would; and, secondly, whether it would be popular with the British public, which I am absolutely certain it would have been, if it had had a proper amount of time to come into effect.

I accept that those in the party opposite, throughout the passage of that Bill, registered their strong opposition to it. So I understand that, in power, they seek to expunge it from the statute book. However, that is a grave mistake that ignores the needs of ordinary citizens and places unions above the needs of ordinary citizens.

I particularly support the amendment in the name of the noble Lord, Lord Fox, which seeks an impact assessment on SMEs. I will always support an impact assessment on SMEs, because we have not had a proper one yet. I do not believe that Part 4 of the Bill will have the biggest impact on SMEs—other parts, particularly Part 1, will decimate SMEs—but I support any opportunity to get full public exposure of the impact of the provisions throughout the Bill on the health of our very important SME sector.

--- Later in debate ---

[Lord Sharpe of Epsom (Con)]

My Lords, as my noble friend Lady Coffey mentioned a short while ago, we have been told by this Government on numerous occasions that growth is their number one priority. Growth, growth and more growth has become something of a mantra for Ministers, but the harsh reality is that their actions are consistently undermining this stated objective, and their latest economic performance demonstrates the urgent need for the amendment before us today.

The UK economy shrank more than expected in April. The standard measure of economic output, GDP, contracted a sharp 0.3% according to data from the Office for National Statistics. Additional costs on businesses were also levied during that month as employer national insurance contributions took effect, which businesses told the ONS played a part in their performance. The biggest part of the economy, the services sector, contracted by 0.4% and manufacturing dropped by 0.9%. The Government are manifestly failing to reach their stated growth target.

It is not enough for the Government to tell workers, businesses and the British public what they want to hear about growth while simultaneously implementing policies that actively undermine economic competitiveness. The trade union provisions in the Bill represent a perfect example of this contradiction: they expand the protections and rights that will inevitably increase costs, reduce flexibility and diminish our international competitiveness, all while the Government claim to be prioritising growth.

My amendment would require the Certification Officer, when discharging functions under the Bill’s expanded trade union framework, to advance the objectives of international competitiveness and medium to long-term economic growth. It represents a vital safeguard against the economic damage that unconstrained implementation of these provisions could inflict. The Certification Officer oversees trade union administration from registration to financial transparency to complaint procedures. Under the Bill, these functions will expand significantly as new rights and protections are introduced. Without a growth duty, there is no mechanism to ensure that the Certification Officer considers the broader economic implications of how these expanded powers are exercised.

We operate in an intensely competitive global economy. Our European neighbours and international competitors are not standing still while we load additional costs and restrictions on to British businesses. When the Certification Officer makes decisions about trade union regulation, registration and oversight, those decisions must be made with full awareness of their impact on our ability to compete internationally. Countries such as Germany, despite having strong trade union traditions, maintain regulatory frameworks that prioritise economic competitiveness. Singapore, Ireland and other successful economies have demonstrated that worker protection and economic growth are not mutually exclusive, except when regulators are required to balance these objectives explicitly.

This amendment ensures that as we expand trade union rights and protections, we do so in in a way that enhances rather than undermines our economic position. It requires the Certification Officer to ask not just whether a decision serves trade union interests but whether it serves the broader national interest in maintaining a competitive and growing economy.

The concept of growth duties is well established across government precisely because regulators have learned that narrow focus on single objectives can create unintended economic consequences. Financial regulators have competitiveness objectives because financial regulation that ignores competitiveness can drive business overseas. Planning authorities must consider economic impact because planning decisions that ignore economic consequences can destroy local economies. Environmental regulators operate within frameworks that balance protection with economic considerations because environmental regulation that ignores economic reality becomes counterproductive.

The offshore employment trend demonstrates exactly why such balanced approaches are essential. When regulators focus solely on enhancing protections without considering economic consequences, they risk creating conditions where the protections become meaningless because the activity they are meant to regulate simply moves beyond their jurisdiction. It would be extraordinary if trade union regulation, which directly affects workplace costs, flexibility and productivity, were exempt from such considerations. This amendment brings the Certification Officer into line with best practice across government by requiring explicit consideration of economic impact.

The Government may argue that trade union regulation should focus solely on worker protection without economic considerations, but this position is fundamentally flawed for a number of reasons, and recent evidence makes it increasingly untenable. For example, it would create an artificial separation between industrial relations and economic policy that exists nowhere else in government and has proven counterproductive in practice. Every other area of regulation requires consideration of economic impact precisely because regulators have learned that ignoring economic consequences undermines policy objectives. It would also contradict the Government’s stated priority of growth while simultaneously demonstrating the practical impossibility of separating worker protection from economic performance.

When companies such as The Legends Agency can build multi-million-pound businesses by helping UK employers avoid UK employment law, the Government’s approach has clearly failed on its own terms. I beg to move.

[Baroness Noakes (Con)]

My Lords, I am a great fan of international competitiveness and growth objectives for regulators. When the first one was introduced for financial services regulators in the Financial Services and Markets Act 2023, I thought it was an incredibly important addition to the way regulation of financial services is undertaken. Just last week, your Lordships’ Financial Services Regulation Committee issued its report on how that international competitiveness and growth objective is working, and I commend it to noble Lords.

I support what my noble friend Lord Sharpe of Epsom has said about applying the duty to the Certification Officer, but I invite him to consider whether there is a much more important area where such a duty should be applied in this Bill, which is to when the Secretary of State makes decisions about, for example, the enforcement provisions or making the various regulations that we know are necessary to make Part 1, and indeed other parts of the Bill, operate effectively.

The most important aspect of the Bill is going to be driven by what the Secretary of State does once it is enacted, but there is not an equivalent requirement on the Secretary of State to take into account the needs of international competitiveness and growth. It is essential for the Secretary of State to have that at the front of his mind when making regulations that will have such a big impact on the way that businesses operate in this country. I therefore commend my noble friend’s amendment, but if he is considering bringing something back on Report, he might consider something a little broader.

[Lord Fuller (Con)]

My Lords, this nation must earn its place in the world, and, regrettably, we are losing to some of our industrial competitors, particularly in energy-intensive industries such as steel, aluminium and so on. We must live by our wits, and that means increasingly leaning on highly skilled, knowledge-based employment in an economy that values strong intellectual property rights, the rule of contract and property rights themselves. That requires an economy with flexibility and agility.

Earlier today, along with other noble Lords, I sat on the Home-based Working Committee. We are seeing firsthand how the world of work is changing, not just in the way that we go to work but in the way that we sometimes work from home. The entire technological underpinning of our economy is changing too. We have not yet seen the end of artificial intelligence and what it might do to low-skilled, somewhat transactional arrangements.

It does not help the economy, and by extension those who work in it, if all participating employers and unions do not recognise that we have a duty to move with the times. We cannot put a wall around our economy and create some high-cost walled garden as the rest of the world trades its way to prosperity, leaving us behind. I strongly support Amendment 256 and want to give more power to the officer who, more than anyone, can cajole and encourage workers’ representatives to recognise the world as it is, rather than the world as they might wish it to be.

Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Monday 16th June 2025 Lords Chamber

[Lord Leong (Lab)]

I would not say all, but most of them were members of B Corporations.

[Baroness Noakes (Con)]

Further to that point, will the Minister clarify whether he is talking about medium-sized companies, which might just about cope with the bureaucracy of being a B Corp, or about the vast majority of businesses in this country, which are small and micro companies? There is a big difference between companies with fewer than 50 employees, or fewer than 10 in the case of microcompanies, and those that run up to 250 employees. The issues are quite different.

[Lord Leong (Lab)]

I thank the noble Baroness for her question. I am very clear about micro-businesses, medium-sized businesses and small businesses. At the event I attended, we had everybody. Not all were B Corps. We had owner-run businesses, businesses with just one or two employees and medium-sized businesses as well.

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Finally, my amendment provides that a framework agreement setting out governance and accountability arrangements for enforcement officers should obviously mirror the April 2025 framework agreement, which the Government recently agreed with the Gangmasters and Labour Abuse Authority. Again, why should there be any difference?

[Baroness Noakes (Con)]

My Lords, the amendments just spoken to by the noble Lord, Lord Carter of Haslemere, are clearly very important. I hope the Government will take them extremely seriously. I have three amendments in this rather strange group, which seems to be the dustbin for amendments broadly about the fair work agency but which have not found their way into a separate group through the degrouping process.

My Amendment 269 calls for some transparency about the advisory board which Clause 90 requires the Secretary of State to set up in connection with their enforcement functions. Under Clause 90, the Secretary of State decides on what matters the board should provide advice, but there are no provisions about what happens to that advice. The Secretary of State can ignore it and no one, importantly including Parliament, will be any the wiser. My amendment is modest, requiring a report setting out the advice given to the Secretary of State at least once a year. Importantly, that report would be laid before Parliament, which would be an additional tool allowing it to hold the Secretary of State accountable for the discharge of the huge new powers under the Bill. I am sure that the Minister supports effective parliamentary accountability, so if this amendment does not find favour, I invite her to set out how the Secretary of State will be held accountable by Parliament in relation to the enforcement functions.

My Amendments 270 and 279 return to one of our recurring themes on this Bill: its effect on small businesses. I am grateful to the noble Lord, Lord Londesborough, for adding his name to the amendments. Amendment 270 is directed at the labour market enforcement strategy that the Secretary of State is required to produce under Clause 91. My amendment merely requires a separate analysis of, and a strategy for, enforcement for small and micro businesses—that is, those with fewer than 50 employees. Enforcement really should not be one size fits all. What is reasonable to expect from a large corporation with a well-funded HR function is not the same as can reasonably be expected from a business with 10 employees.

I am not seeking to say that small businesses should not comply with employment legislation; I am trying to ensure that the circumstances and needs of smaller enterprises will be taken into account in the enforcement strategy. For example, the impact of heavy-handed use of the entry and seizure powers would be drastically different for a well-resourced organisation compared with a small organisation. In a small business, the burden of dealing with enforcement activity would almost certainly end up at the door of the business owner, who would inevitably then be distracted from running the business.

We have to remember that small and micro businesses account for the vast majority of businesses in the UK and are the backbone of the UK economy. We all in your Lordships’ House want to see growth in the economy, but—as the Minister will be aware—growth does not come from what Governments do, it comes from what businesses of all shapes and sizes do. Therefore, imposing onerous enforcement mechanisms and powers could threaten the ability of small businesses to operate and play their part in the success of our economy.

We need small businesses to thrive because they employ nearly half the private sector workforce in our country, and because small businesses are where large, successful businesses start; without the success of small businesses, we will not have businesses that grow to be large ones in due course. So my point is that enforcement needs to be sensitive to the circumstances of small businesses; that is all my amendment is seeking to achieve. I hope that the Minister can support that.

My final amendment, Amendment 279, is inspired by the same concerns about the impact of the new powers on small and micro businesses. Clause 141 creates a new set of offences for officers of corporate bodies and makes those officers personally liable for prosecution if they have consented to whatever action has broken the law or been negligent.

Again, we have to look at how this is likely to impact on small businesses. They are often family affairs. The directors are often the main entrepreneur, together with the entrepreneur’s spouse and maybe some representatives of the adjacent generations; outside directors are not common at the small end of the spectrum. Under this Bill, a small company will already be liable to be prosecuted for the full range of offences set out in the Bill. So what is gained in public policy terms by allowing the enforcement authorities to proceed against individuals as well in such cases?

Let us say that the directors include the business leader’s husband and business leader’s father, who founded the business. Such companies operate on informal lines, unlike the large corporations, which have legal teams and all sorts of compliance functions with adequate forms of documentation. It would be too easy for enforcement to be aimed at individuals just because they were directors of very small companies that did not see the need for highly formalised decision-making processes. That is not how small businesses actually operate in practice. They would probably be very soft targets for enforcement teams, especially those trying to earn their spurs by securing some convictions. My contention is that we should not let that happen.

My amendment takes small and micro businesses out of the scope of Clause 141 entirely. If the Government do not like that—and I suspect they will not like it—can the Minister explain what protections will be built into enforcement to ensure that prosecutions are aimed at the most egregious behaviour rather than at the most convenient targets?

[Lord Londesborough (CB)]

My Lords, I rise to speak to two amendments in this group, 270 and 279, which are both under the name of the noble Baroness, Lady Noakes. I support and have added my name to both of them. I will start with Amendment 270, which addresses Clause 91 and calls—quite reasonably, in my view—for separate analysis and proposals for a labour market enforcement strategy for small and micro businesses.

As the noble Baroness pointed out, here we have another section of the Bill where the one-size-fits-all approach will be very difficult to enforce without running the risks and incurring the costs of applying the proverbial sledgehammer to crack nuts—the nuts in this case being the small and micro businesses with fewer than 50 staff.

Given the huge scope of this Bill, which has approaching 200 clauses, small businesses are very likely to have much higher levels of non-compliance—much of it inadvertent—compared with their medium-sized and larger counterparts. This is for two principal reasons. First, they simply do not have the in-house HR compliance or legal resource to cover all this legislation, and very often it will fall on the business owner or manager to keep up, while he or she struggles with all the other challenges of trying to run a business profitably and sustainably in the face of all sorts of macroeconomic and microeconomic headwinds.

Secondly, there are the disproportionate costs associated with being fully compliant that fall on small and micro enterprises. They simply do not have the budget or cashflow to spend on external advisers and employment lawyers who can advise them on how to navigate all the new clauses and conditions that run across the hundreds of pages of this Bill. As we have heard, a visit to a small or micro business from an enforcement officer, however well trained they are, will have a far greater and more unsettling impact on the owner and their staff than a visit to a medium-sized or large business.

As the noble Lord, Lord Sharpe, pointed out, I note that the Government appear not to be planning to provide any material assistance to SMBs to help them understand and comply—or are they? I throw that question to the Minister. As we know, the impact assessment for the Bill rather shrugs its shoulders by admitting that SMBs will be disproportionately hit, in terms of costs and their time, and they are apparently just expected to suck it up. As the noble Baroness said, this is not to argue against an enforcement strategy per se, but it needs to be tailored and proportionate to the size of the business, specifically for micro and small companies.

On Amendment 279, it is for very similar reasons that I support this exemption for officers of micro and small businesses from the extension of liability in Clause 141. I support an exemption because these businesses typically do not have boards of directors or advisory groups, or non-exec chairs or governors; they tend to be managed by one or two principals who hold responsibility for pretty much everything to keep the business going, including finance, sales, marketing, customer engagement, product or service development, not to mention general HR which, as we all know, is going to get more far more complicated.

Finally, speaking from my own lived experience as an adviser to several small companies, and having run an SME myself for nearly 30 years, I say that we really must guard against deterring business owners and entrepreneurs from starting up and scaling businesses, and specifically from creating new jobs, often at high risk, without threatening them or, indeed, their officers with excessive and menacing levels of extended liability. I say this, mindful of the fact that the ONS reported last week that we had lost 109,000 payroll jobs in the space of one single month. It is not a great time to be spreading fear and uncertainty.

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[Lord Hunt of Wirral (Con)]

My Lords, these amendments address important gaps in the Bill, ensuring fairness, clarity and accountability in the enforcement of employment rights. Amendment 267A relates to Clause 89 and the delegation of the Secretary of State’s functions. Currently, the Bill allows delegation of functions, including enforcement, but does not explicitly restrict the delegation of the decision to bring proceedings to employment tribunals.

This amendment would ensure that while the Secretary of State is delegating the conduct of proceedings, the crucial decision to initiate legal action remains with the Secretary of State. Without this safeguard, delegated bodies could independently decide whether to bring legal claims, potentially leading to inconsistent decisions, lack of ministerial accountability and confusion about who holds ultimate responsibility. Maintaining ministerial control over such decisions is essential to preserve political accountability and to ensure decisions are made with proper oversight.

Amendment 271B focuses on Clause 113 and seeks to clarify the scope of claims that the Secretary of State may bring. The Bill currently refers broadly to “any enactment”, which risks allowing the Secretary of State to bring claims on a wide range of employment issues, including individual employment rights traditionally pursued by workers themselves. This amendment narrows that scope to relevant labour market legislation and Parts 1 to 4 of the Employment Rights Act 1996, ensuring that government enforcement targets systemic labour market regulation issues such as pay and working conditions, rather than individual employment rights or disputes. Without this restriction, there is a risk of governmental overreach into private employment matters, diluting resources and causing confusion about the limits of state intervention.

Amendment 271C addresses a practical and vital issue regarding claims that workers have already lawfully settled. Under current law, individuals can settle employment claims following independent legal advice, providing certainty to both employers and employees. This amendment prevents the Secretary of State bringing claims that had been settled in accordance with Section 203 of the Employment Rights Act 1996. Without this amendment, there is a danger that settled claims could be reopened by the Government, undermining the finality of agreements and subjecting employers to repeated litigation, even after fulfilling their obligations. Such uncertainty would damage trust in settlement processes and could discourage both workers and employers from entering into settlements.

Amendment 272ZA concerns the financial protection of workers in tribunal proceedings brought or conducted by the Secretary of State. It ensures that where an employment tribunal orders costs against a worker, such as legal costs or wasted costs, these costs must be met by the Secretary of State rather than the individual worker. This protection is critical, because workers who had not themselves initiated proceedings should not bear the financial burden of litigation costs. Without this safeguard, workers could face significant personal financial risk, deterring them from seeking support from the Secretary of State and ultimately restricting access to justice. Employers might then attempt to recover costs from these workers, imposing unfair hardship and undermining the purpose of public enforcement. I beg to move.

[Baroness Noakes (Con)]

My Lords, I have Amendment 272 in this group. When an Act of Parliament creates rights and duties, it usually then allows those who benefit from the rights and duties to enforce them in law, which in the case of employment matters is via the employment tribunal.

This Bill fundamentally changes that and inserts the Secretary of State whenever he or she wants to intervene to take up cases that employees do not themselves want to pursue. It also interferes in the order of things by providing a back door route to legal aid for employees, which is not covered by the normal legal aid system. This part of the Bill is simply going to increase the number of cases heading towards the employment tribunal. As has been debated on several occasions, that system is already under massive stress, and it does not make any sense to stress it any further. I therefore support all the amendments in this group.

My own Amendment 272 merely states that the Secretary of State has to meet a public interest test if he or she wants to use the Clause 91 power to take over a case that an employee does not wish to pursue themselves. As drafted, there is no constraint whatsoever on the Secretary of State’s use of the power. The Secretary of State can simply find out one morning that an employee has a potential case and is not going to do anything about it, and decide to take it over. A public interest test would at least make sure that the Secretary of State intervenes in matters where there is a genuine national interest in the case being pursued.

I suspect that the Secretary of State will be pursued and lobbied by various organisations, quite possibly trade unions, who will see this provision as another weapon in their armoury to have a go at certain large employers, particularly where those employers have not been particularly interested in playing along with whatever trade unions want to do with them. The power is an important departure from the normal way of enforcing rights and duties, so guardrails in the legislation surrounding the use of the power are essential. There is absolutely nothing in the current Bill.

My first instinct was to delete Clause 91 entirely. As far as I can tell, no case has been made for its existence. But I can just about construct a scenario in which the Secretary of State concludes that there is a genuine public interest in overriding the wishes of an employee and pursuing the case in the circumstances I have described. I would expect such a case to be very unusual, and I hope the Minister agrees. Because of that, we should be looking to restrain the power in some way. The words I have used may not be the right words, but the essence of what I am trying to achieve is to reduce into something more reasonable an unconstrained power to completely subvert the normal way in which rights and duties are specified by Parliament and open to enforcement.

Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Wednesday 18th June 2025 Lords Chamber

Overall, this is a new approach to providing taxpayers’ money, for which I cannot see any reference in Making Work Pay. As I have already pointed out, there is an analogy with the EHRC, but, relatively speaking, we are talking about a very small amount of money there. Again, I just want to make sure that this is going to a person and not to a whole bunch of organisations, and it would be interesting to clarify what that means in terms of the employer. I beg to move.

[Baroness Noakes (Con)]

My Lords, in this group of amendments, I have the stand part notice for Clause 114. I support the several amendments in this group in the name of my noble friend Lady Coffey, many of which are probing amendments to try to find out more about this clause. I could find no clear rationale that the Government have given for Clause 114, in the sense of providing a rationale for the state—that is to say, taxpayers—funding the legal and other costs of civil proceedings in employment matters cases.

The scope of Clause 114 is huge. Not only does it cover the whole of employment, trade union and labour relations law, but the intended recipients seem to be unlimited. My noble friend Lady Coffey referred to the use of “person”. Subsection (1) refers to

“a person who is or may become party to civil proceedings”,

which covers a huge number of persons, and there does not seem to be any clear target for this clause. Of course, as we have heard, the funding can also extend to litigation involving non-employment matters, which seems extraordinary to me. All of this adds up to Clause 114 being very wide.

We already have in the UK a system for providing support for people in legal cases. It is called legal aid. It costs the taxpayer around £2 billion a year, nearly half of which is for civil litigation. That already has rules for employment tribunal support, where there is no funding for legal representation but there may be funding for advice on preparing cases. Successive Governments have had to make hard choices about what will be funded by legal aid in order to keep the cost of it within reasonable bounds for taxpayers as a whole but, now, with Clause 114, the business department is going to undermine that completely by taking powers to fund legal cases completely outside of the structures and limits that have been created for the legal aid system. The Government are again showing that they are, at heart, a two-tier Government, with unlimited legal aid by the backdoor for some favoured employment cases but tough eligibility criteria and financial limits for everybody else.

I now turn to the costings, which my noble friend Lady Coffey mentioned briefly. I could not find out what Clause 114 is going to cost. There is a limited amount of information in the paperwork that surrounds the Bill on the estimate of the overall costs for the fair work agency but, as far as I could find, there is no reference to how much the implementation of this proposal to fund legal costs will be within that totality. So my question to the Minister is really quite simple: what are the Government’s estimates of what Clause 114 will cost?

Going beyond that into the underlying assumptions, how many cases do the Government expect to bankroll every year? Will the Government support only cases with a better than average chance of success, or will they also fund no-hopers? What is the average cost of the cases that they think they will fund using the powers under Clause 114? What are their assumptions about cost recovery? I would have expected to find all these things analysed in detail somewhere in the papers, but I could not find anything. I hope the Minister will be able to answer these specific questions, and maybe also explain the lack of analysis in the documentation that the Government have prepared surrounding the Bill so far.

As I said earlier, I support my noble friend Lady Coffey’s amendments in this group, and I will listen carefully to what the Minister says in response to those amendments and, indeed, on Clause 114 standing part overall. My view is that, in the absence of good justification and a good understanding of the costs of Clause 114, it should not stand part of the Bill.

[Lord Jackson of Peterborough (Con)]

My Lords, I commend my noble friends’ excellent speeches on this clause. I press the Minister on what the Explanatory Notes say about subsection (4), because we have talked about the concept of persons and what that actually means. My noble friend spoke earlier about ministerial powers and the lack of information on costs, which should have been in a proper and more detailed impact assessment but is not. It is not in any supporting material, including the Labour Party manifesto for the general election. Presumably, the Minister will say that such information about the form and function of the clause will be developed in secondary legislation.

The sentence in the Explanatory Notes about subsection (4) is extraordinary, because it touches on what is potentially ultra vires and will certainly, I think, be subject to litigation or judicial review. Given that this is an Employment Rights Bill about labour relations and employment, it says:

“Subsection (4) makes provision for situations where proceedings relate partly to employment or trade union law … and partly to other matters”.


I just do not understand what those other matters can be. This is an employment law Bill. It is about labour relations and the relationships between employers, trade unions and a workforce. What other matters are within the bailiwick of Clause 114? I think we need to press the Minister on that, because we are being invited to give a blank cheque with taxpayers’ money to something that is very opaque, we do not understand, is not costed and is not detailed. On that basis, the Minister should address those specific issues.

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[Lord Katz (Lab)]

I am more than happy to. The noble Lord, Lord Hunt, anticipates the comments that I was just about to come to—but we can address the point now. The noble Lord, Lord Jackson of Peterborough, focused on this as well. This is not expanding legal aid. The power is intended to give the fair work agency a discretion to provide support in employment-related cases. It is not an alternative to legal aid and it will be used in specific cases. The Government will set out how and when the fair work agency will exercise its power in due course and will discuss this with a range of stakeholders. I reassure the noble Lord, Lord Hunt, we have regular conversations with the Ministry of Justice, including on the Bill’s implementation.

I return to what I was saying about the importance of ensuring that the power of legal advice is appropriately bounded. It cannot be used to fund dispute resolution facilities delivered through other routes. Importantly, the clause protects the integrity of the courts and tribunals by confirming that nothing in the clause overrides existing restrictions on representation imposed by legislation or judicial practice. This clause complements the fair work agency’s wider role in promoting access to justice and fair treatment in the workplace. It provides a vital lever for supporting individuals who might otherwise face legal barriers alone or for ensuring compliance with relevant law, and it delivers our manifesto commitment on which Members in the other House were elected.

The noble Baroness, Lady Noakes, asked about the costs. These will be set out in due course and will be discussed with a range of stakeholders, particularly employers, trade unions and employees.

[Baroness Noakes (Con)]

That was a rather surprising statement. Is the Minister saying that these costs are not included in the estimates that have already been given for the costs of the fair work agency, which were included in the various documents surrounding the Bill? He has just implied that it will be done later. It is rather extraordinary to produce a clause in a Bill without having a costing for it. Can I press him again on what the costs are, whether they are included in the existing estimates of costs for the fair work agency and, if not, when they will actually be made clear?

[Lord Katz (Lab)]

I thank the noble Baroness for that intervention. The costs are not factored in. As I said, they will be set out in due course, following discussions with a range of stakeholders. I hope that this has persuaded the noble Baroness that Clause 114 should stand part of the Bill.

I turn finally to the amendments on recovering costs for legal assistance. Regarding Amendment 272J, if an individual has received free legal assistance from the fair work agency, any cost award should be returned to where that assistance came from. To be clear, a cost award is separate from any other awards a tribunal may make in favour of an individual. This amendment will prevent the fair work agency recovering costs and could lead to situations whereby individuals receiving legal assistance could receive money for costs they had not incurred. I hope noble Lords will agree that this is completely unreasonable.

On Amendments 272K and 272L, removing the ability to provide for the appointment and expenditure incurred is unreasonable and could lead to uncertainty about what expenditure of the Secretary of State is recoverable. In addition, while Amendment 272L looks consequential to Amendment 272K, it would actually remove the requirement for regulations under Clause 115(5) to be subject to any parliamentary procedure. I am sure that this is not the intention of the noble Baroness, Lady Coffey. Needless to say, we oppose removing requirements of parliamentary procedures in this way.

In response to noble Baroness’s question on why the regulation for Clause 115(5) is negative, this follows precedent from the Equality Act. I indeed note and point out to the noble Baroness that the Delegated Powers and Regulatory Reform Committee has raised no concerns with the Government about this power.

The legal assistance powers within the Bill are necessary to deliver our manifesto commitment to strengthen enforcement and improve outcomes for workers through a fairer, more acceptable system. These amendments would hamper that goal and might even unintentionally limit access to justice. The current drafting has been carefully considered. It is both deliberate and necessary. I therefore ask the noble Baroness, Lady Coffey, to withdraw Amendment 272BA.

[Baroness Noakes (Con)]

In the case of the noble Lord’s response to this group of amendments, and the response to the previous group of amendments by the noble Baroness, Lady Jones, the Ministers have claimed that these clauses are covered by manifesto commitments. The Labour Party manifesto is not something I carry around in my handbag, but, from memory, I do not think it covered these particular clauses. What makes me so sure that this is the case is that these two clauses were introduced in the other place on Report. They were not part of the original Bill that was introduced. That means, inter alia, that they received no substantive examination or discussion whatever in the other place. More importantly, this suggests to me that they were not a part of the original package that can claim manifesto support. I think we will want to examine that extremely carefully. If the Minister has a response now, with a chapter and verse in the manifesto, I will be happy to look it up afterwards, but I think we find unconvincing this part of the Government’s defence of these clauses.

[Lord Katz (Lab)]

I do not have chapter and verse but a page number. Noble Lords can find it on page 16 of the Labour’s Plan to Make Work Pay document, which was part of our manifesto.

Employment Rights Bill

Baroness Noakes Excerpts

Committee stage
Wednesday 18th June 2025 Lords Chamber

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

My Lords, here we go again on impact assessment. I hope that the noble Lord, Lord Sharpe, will forgive me if some of my notes repeat what was said in previous debates, but I will answer some of the points here. First, I thank the noble Lords, Lord Sharpe, Lord Hunt and Lord Goddard, for their amendments relating to impact assessment.

I refer to the point by the noble Lord, Lord Goddard, about what the Government are doing concerning SMEs. I have just recently been appointed as the spokesperson for the Department for Business and Trade, and my priority is to have regular communications with micro-businesses and small businesses. That is what I will be focusing on. Today, we appointed the Small Business Commissioner, who will start work very shortly in tackling late payments and some of the abuses that small businesses experience from big companies not paying them on time. We will be publishing a small business strategy very soon, and our industrial and trade strategy very soon as well, hopefully sometime next week or thereabouts. We are doing a lot—not only myself but the Secretary of State, my noble friend Lady Jones and all the Ministers in the department. We have regular contact right across the business community.

We have had extensive debate already on impact assessments related to this Bill. My commitment in an earlier debate to meet noble Lords to further discuss the impact assessments still stands. The Government have already published a comprehensive set of impact assessments based on the best available evidence on the workers likely to be affected by these measures. This includes an assessment on the economic impacts of the Bill, including on workers, businesses, sectors and regions. This package shows that there are clear, evidence-based benefits from tackling issues holding back the UK labour market. This analysis is based on the best available evidence and consultation with external experts and stakeholders, including academics and think tanks. Further analysis will be forthcoming, both in the form of an enactment impact assessment when the Bill secures Royal Assent and when we consult on proposed regulations to meet the Better Regulation requirements.

Before I conclude, I share with noble Lords some really startling statistics. We already know that healthier and happier workers are more productive workers. The Health and Safety Executive estimates that stress, depression or anxiety accounted for something like 17.1 million working days lost in 2022-23, which is equivalent to a loss of something close to £5.3 billion in output per year. In addition, close to 2 million employees report feeling anxious about hours worked or shifts changing unexpectedly. By increasing the job security of these workers, the Bill would have well-being benefits worth billions of pounds a year. The Bill will therefore create a healthier and happier workforce, which is not only the right thing to do but will help businesses by making the workers more productive as well as resulting in lower treatment costs for the NHS.

Earlier, the noble Lord, Lord Sharpe, asked me what we have done to support growth since getting elected. I am proud to share with the noble Lord that, since the election, 500,000 more people are in work. In recent weeks, we have had the strategic defence review with some 30,000 new jobs building submarines created, and the announcement of the Sizewell C project, which will create some 10,000 new jobs. So, we are creating new jobs.

In addition, we have people who are investing in this country and who have confidence in this Government. Jamie Dimon, who has run one of the largest US banks, JPMorgan Chase, for two decades, told the Financial Times:

“I’ve always been a believer in the UK’s inherent strengths as a place to do business and there’s much to like about the new government’s pro-growth agenda”.


Further, a couple of weeks ago, Jon Gray, president of Blackstone, one of the largest private equity companies in the world, which has invested close to £100 billion in the UK and employs some 50,000 people, told the Times:

“I would give the UK government a lot of credit for embracing business”.


This is not what the Government are saying, but what people with money who are investing in this country are saying to us. Further, every single day, £200 million is being invested in tech companies in this country. I do not call that a small sum, I call it confidence in the UK Government and what we are doing for business.

[Baroness Noakes (Con)]

My Lords, I listened very carefully to that wonderfully rosy picture of the UK economy. Can the Minister reconcile that with the most recent employment statistics, which show a decrease in payrolled employment and an increase in unemployment? That does not reconcile with what he is trying to convince us is the case.

[Lord Leong (Lab)]

I thank the noble Baroness for that. Figures go up and down every month but let us look at it in the longer term. We are creating new jobs and that is what is really important. In conclusion, I ask the noble Lord, Lord Sharpe, to withdraw his amendment.

--- Later in debate ---

Moved by

[Baroness Noakes]

299: After Clause 150, insert the following new Clause—
“Employment Law Advisory Committee(1) There shall be a committee, to be known as the Employment Law Advisory Committee (in this Act referred to as “the Committee”), for the purposes of—(a) giving advice and assistance to the Secretary of State in connection with the Secretary of State’s functions under this Act and any other relevant labour market legislation, and(b) performing such other duties as may be assigned to the Committee under any enactment.(2) The Committee shall consist of no more than 10 members appointed by the Secretary of State and include equal numbers of each of the following—(a) persons appearing to the Secretary of State to represent the interests of workers,(b) persons appearing to the Secretary of State to represent the interests of employers, and(c) persons who have relevant expertise but who do not fall within paragraph (a) or (b).(3) The Chairman of the Committee shall be appointed by the Secretary of State from one of the persons falling within subsection (2)(b).(4) The Secretary of State may by regulations set out matters relevant to the constitution and operation of the Committee.” Member's explanatory statement
This amendment sets up a Committee to advise the Secretary of State on regulations made under this Act and other labour market legislation. It is intended to be similar to the Social Security Advisory Committee which advises the Secretary of State in relation to social security regulations.

[Baroness Noakes (Con)]

As noble Lords know, this is the final group of amendments, and I must say that I am very flattered that so many noble Lords on the Benches opposite have stayed to hear it.

The inspiration for these amendments is the Social Security Advisory Committee, which has been in existence for over 40 years and has established itself as an impartial and expert committee in the highly complex area surrounding our benefits system. Much of the benefits legislation is set out in secondary legislation.

It is an area marked by highly complex law, which has very important real-world effects for the people affected by the secondary legislation. If the Department of Social Security gets it wrong, people can suffer genuine detriment. The SSAC has been an important underpinning to the parliamentary approval of complex social security secondary legislation, and it gives parliamentary accountability some real substance. Parliamentary accountability is the key driver of these two amendments.

--- Later in debate ---

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank the noble Baroness, Lady Noakes, for her Amendments 299 and 300. The Government have already committed to consulting on the detail of implementation and have already undertaken extensive engagement with employers, businesses and workers’ representatives, trade unions and experts. We will continue with this approach as we develop our secondary legislation.

There are some specific instances, such as in the enforcement space, where we are proposing setting up an expert group. Upgrading the enforcement of workers’ rights is an important and complex task, where it is right to draw on expertise from businesses, workers and independent representatives.

That is why the Bill requires the Secretary of State to establish an advisory board. It will play a critical role in providing advice and insight to the Secretary of State on their enforcement function under Part 5 of the Bill, which they will in practice deliver through the fair work agency. This is a proportionate and necessary step to help ensure the agency’s effectiveness. But this is not required across the Bill and wider labour market legislation as a whole. The committee proposed by the noble Baroness would be a repetition of the planned engagement and consultation on the Bill. We have already engaged with more than 190 different stakeholder organisations on our Plan to Make Work Pay, including employers of all sizes, from SMEs to large corporations, trade unions and representative organisations representing thousands of businesses and millions of workers.

We have held round-table discussions focused on particular topics, such as zero-hours contracts, and with particular groups, such as leaders of small businesses or retailers. As a Government, we are committed to engaging closely on our plans, and we will continue to do so. This engagement will continue throughout implementation, including as we develop regulations under the Bill.

On parliamentary scrutiny, the Select Committees will of course scrutinise the government proposals and reforms as they are rolled out. The Economic Affairs Committee had an inquiry on the labour market, and the noble Baroness was herself a member of that committee, so we know that there are already bodies in the parliamentary network that can be used to provide that scrutiny. On the basis of our proposed consultation and the parliamentary scrutiny available, I ask the noble Baroness to withdraw her Amendment 299.

[Baroness Noakes (Con)]

My Lords, I will not detain the Committee for long. With the exception of the expert group, which I was not aware of, I could have written the Minister’s speaking notes myself. They ran along the lines of, “Blah, blah, blah, consultation; blah, blah, blah, Select Committees” and, basically, “We know best”.

My amendment was a genuine attempt to try to enhance the process of parliamentary scrutiny. As I am sure the Minister is aware, Select Committees are simply not set up to deal with the detail of secondary legislation; they are set up to do some things very well—usually broader-ranging topics such as those undertaken by the Economic Affairs Committee of your Lordships’ House—but they never attempt to look at secondary legislation. I can see a lot of secondary legislation coming down the line and the need for a better process and greater information to help Parliament in its job on that.

I am not surprised by the Minister’s response. Before we get to Report, I will consider again what to do with my ideas, which I had hoped would be constructive contributions to the Government’s Bill. I beg leave to withdraw.

Amendment 299 withdrawn.