Employment Rights Bill

Lord Fox Excerpts

Tuesday 16th December 2025 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, at Second Reading in March—nine months ago, although it feels longer ago—I said that

“the Bill will damage growth and, most importantly, the employment opportunities of the most vulnerable people”.—[Official Report, 27/3/25; col. 1907.]

After nine months of debate and scrutiny, it is less damaging, but I still believe it is not a good Bill. It still piles cost and regulation on businesses and on the public sector at a time when we should be doing exactly the opposite.

But this House has done its job well and responsibly. We have pointed out the unintended consequences that the Bill may have, the potential damage to the employment prospects of the young and others, and the disproportionate impact on the backbone of our economy—smaller businesses. We have given the other place several opportunities to think again and, to be fair, it has done so in a number of areas. In particular, the Government have compromised on what I believe was the most damaging aspect, day-one dismissal rights.

We have also quite rightly registered our constitutional disapproval of the introduction of a material change at the very last minute—the abolition of the cap on unfair dismissal, which is the subject of Motion A. The Minister stated last week that the amendments were “context- and Bill-specific”. I take this and her reference to

“discussions with the Leader of the House on how she and other Members would like to conduct business more regularly”—[Official Report, 10/12/25; col. 276.]

as confirmation that the Government accept that this should never be seen as a precedent. This House would be right to reject it if it were ever used as a precedent in the future.

I have a lot of sympathy with the Motion proposed by the noble Lord, Lord Sharpe, but I am afraid I will not support it at this stage. We are in danger of over- egging the impact of the removal of the cap. I do not support it, but the water bosses, for example, will be remunerated if they are fired for contractual reasons, which is unlimited anyway. It is not going to be under the unfair dismissal rules. I am not convinced that it makes an enormous difference, but the noble Lord is quite right that we do not have an impact assessment yet.

Despite our giving it the opportunity to think again on many aspects, the other place has disagreed with our changes and decided that it wants to go ahead. That now also includes the cap on unfair dismissal claims. The time has come for us in this House to respect the will of the elected Chamber and let the Bill pass, regardless of any remaining concerns that I and many others still have. I will vote against the amendment for that reason.

I end with a final plea to the Minister. She will be aware of the latest employment figures and the worsening trend. She will also be aware that what the ONS described as this “subdued labour market” is disproportionately affecting young people. We should all be very concerned about that. The Resolution Foundation is also clear on this:

“As is typical in economic downturns, young people have been hit hardest. With unemployment expected to stay elevated, Government should be cautious about any further increases in labour costs”.


Much of the implementation of this Bill will be by regulation, which will follow over the coming years. I urge the Minister to ensure that the concerns that have been raised in this House and elsewhere are kept front and centre, and that the unintended consequences that may arise, especially for young people, are thought through very carefully while the regulations are being created.

It was encouraging that the Government listened to business organisations in the later stages of the Bill, especially around the unfair dismissal question. I urge the Minister to ensure that the Government continue to listen constructively to the concerns of those who will create the growth and jobs that will drive the economy, and especially that they make a much greater effort to hear the concerns of smaller businesses which are feeling rather ignored and concerned at the moment. That said, it is time to let the Bill pass.

[Lord Fox (LD)]

My Lords, this time last week I said that much had happened in the preceding interval. Today, the opposite is true. We are now down to one issue, but the arguments on that issue remain as they were last week. For that reason, unlike last week, this speech will be short.

There remain concerns about the removal of the cap on compensation, as we have heard. As he did last week, the noble Lord, Lord Sharpe, has taken those concerns and amplified them, to the seeming exclusion of the wider strategic position of what we are discussing. I understand the motives, and those motives became ever clearer just now. If the noble Lord would like to have a face-off on the water industry, I would be very happy to discuss with him the hundreds of thousands of tonnes of sewage that went into the rivers under the Conservative Government and the compensation terms that he very helpfully enumerated, which happened on his watch. However, this is not the arena for that argument, and I will pass without comment. My critique of the noble Lord’s amendment to the Motion is unchanged. We believe there are better ways of dealing with the cap than derailing the package that got the key concession with which we are all very pleased.

As set out last week, reiterated in the Minister’s letter and by the Minister just now, the Government will publish an enactment impact assessment for the Bill. They will do so prior to commencement regulations which would put in place the dismissal package. That was what we on these Benches were asking for and we were pleased to receive that assurance. Further, the impact assessment will be publicly available, and I was pleased to hear the Minister say that we will be engaging the community of business in the process of developing that impact assessment.

Many UK business associations and organisations share the feeling that there is nothing to be gained from the opposition amendment today. They are asking the opposite. As the Minister set out, six of the major organisations have sent a letter. It is a longish letter, as the noble Lord, Lord Sharpe, demonstrated by selectively picking elements out of it. But as the noble Lord, Lord Pannick, pointed out, the conclusion is clear and actually unambiguous, in saying,

“we believe that the best way forward is to keep working with the government and trade unions to find balanced solutions through secondary legislation. To avoid losing the 6 months qualifying period, we therefore believe that now is the time for Parliament to pass the Bill”.

I said that last week, and it is truer this week.

I also pointed out last week that, as the business organisations said, the key to enacting the Bill will be through secondary legislation. If His Majesty’s loyal Opposition care about how the Bill is brought into life, it is on those statutory instruments that they should focus their attention. Their critical actions must extend to include the possibility of fatal Motions to vote down secondary legislation and keep the Government focused on the needs of British business. That is the real arena that we should be working in.

If the amendment from the noble Lord, Lord Sharpe, is put to a vote and he seeks to extend ping-pong to yet another round, that will clearly be against the advice of the business groups which have been cited. I urge your Lordships to heed the advice of those organisations, and the advice of the noble Lords that we have heard opposite, and pass the Bill now.

[Baroness Lloyd of Effra (Lab)]

My Lords, I again thank your Lordships’ House for its attentive scrutiny throughout the passage of the Bill. There can be no doubt, as the noble Lord, Lord Vaux, mentioned, that this House has discharged its duties as a revising Chamber. Your Lordships’ House asked the Government to look again, and we have worked collaboratively with noble Lords to reach this agreement. I thank the noble Lords, Lord Fox, Lord Pannick and Lord Vaux, for their speeches in favour of the compromise proposed by the Government.

I turn to a number of the issues raised, in particular by the noble Lord, Lord Sharpe. I remind noble Lords that negotiations are successful only where there is compromise, as was so eloquently put in the previous debate by my noble friend Lord Barber of Ainsdale, the former chair of ACAS. The Government and worker representatives moved considerably during negotiations to agree to retaining a six-month qualifying period. Without similar compromise from business representatives on the removal, this deal would have been one-sided and undeliverable.

On the question of the impact of the cap, I do not think I can do better than the noble Lord, Lord Pannick, who said last week that

“the concerns that have been expressed about the impact of the removal of the cap are perhaps … exaggerated”.—[Official Report, 10/12/25; col. 276.]

Just now, he mentioned that he does not believe it will lead to the chaos that the noble Lord outlined earlier. It is not our view, but, in any case, as I mentioned, we will publish the enactment impact assessment as soon as the Bill achieves Royal Assent. It will be public and transparent, and will include an assessment of the impact of removing the compensation cap.

I remind noble Lords of our commitment to convene meetings with shareholders so that those from the City, law practitioners and others can feed into that. Those findings will be taken into account by the dispute resolution task force that we are setting up—it will have all that information to hand. We are obviously very keen to improve the functioning of the dispute resolution system. We inherited something that was not in a good state. We are providing ACAS with over £65 million in resource funding, which is a significant increase. We are working actively to make this a system that works extremely well.

I hope that this afternoon will mark the end of the Bill’s journey through Parliament. I reiterate the Government’s commitment, mentioned by other noble Lords who spoke today, to continue talking to and genuinely engaging with interested parties in the way we have recently about the full range of issues discussed today. The Bill will deliver a generational shift in employment rights. It will do so by working with businesses and trade unions in a collaborative manner. These changes to the qualifying period and the compensation cap are proportional and practical. For those who are concerned about business impact, the joint letter should provide noble Lords with reassurances that businesses support this workable agreement. As they have stated,

“now is the time for Parliament to pass the Bill”.

I hope noble Lords will recognise the progress made over the past nine months, oppose the amendment tabled by the Opposition Front Bench, and, in doing so, support the package to deliver certainty for businesses and fair rights for workers. It is indeed time for Parliament to pass the Bill. I commend it to the House.