Employment Rights Bill

Lord Hendy Excerpts

Committee stage
Wednesday 21st May 2025 Lords Chamber

[Lord Monks (Lab)]

My Lords, I do not doubt that critics of this part of the Bill speak with a lot of personal experience as well as commitment to their employees and the way they run their affairs. However, let me remind people that the argument that is really coming from the other side—that the qualifying period would be damaging to employment—is the argument as has been used against just about every bit of progressive employment legislation from the Factory Acts onwards. If noble Lords think that that is hyperbole, they should remember the national minimum wage and the campaign that was run against it. None of that came to anything like what was forecast from that side of the House. I have risen briefly to ask the other side of the House to remember that it was wrong on the minimum wage and to consider whether it might be wrong on this as well.

[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.

[Baroness Verma (Con)]

My Lords, does the noble Lord accept that the case is exactly the same for small employers? They too will be in the position of having to deal with tribunals in the same way—hence why, as often as not, the settlements are taking place.

[Lord Hendy (Lab)]

Of course; that is always the way whenever there is litigation. Whatever the subject matter, people do not want the burden of defending the case and the people bringing the case do not want the burden of bringing it. That is just the reality of litigation.

I will say one last thing before I sit down. The argument that the noble Lords and noble Baronesses opposite have put forward is all about what they perceive to be the consequences of this matter, which my noble friend Lord Monks just addressed. But nobody can seriously advance the case that employers should have the right to dismiss anybody unfairly and without recourse to the law.

[Lord Vaux of Harrowden (CB)]

Does the noble Lord accept that these are not simply arguments that people around this Chamber are putting forward but matters that are in the Bill’s impact assessment? It is the Government’s own statement that the Bill will have these impacts. It is not being made up by any of us: the Government accept that this will be the impact.

[Lord Hendy (Lab)]

That may very well be, but it still does not remove the fundamental point: what is being proposed is a category of worker who can be dismissed unfairly for the most extreme reasons without resort to any justice.