Employment Rights Bill

Lord Hendy Excerpts

Consideration of Commons amendments and / or reasons
Wednesday 10th December 2025 Lords Chamber

[Lord de Clifford (CB)]

My Lords, I will speak on Motions B and B1 and register that I speak on behalf of SMEs and as a small employer of 130 people. I thank the Government for listening to businesses and this Chamber with regard to the change to unfair dismissal. Six months is certainly enough time for businesses to assess employees.

I thank the Opposition, the Liberal Democrat Front Bench and my noble friend Lord Vaux of Harrowden for persisting in trying to change Clause 23. This change could have had the effect of allowing employers, especially SMEs and micro-businesses, to take a chance on a prospective employee who shows the skills and talents for a particular role when the employer, for whatever reason, may have doubts. This could be due to a lack of experience, the different ways in which some individuals need to work nowadays, or an employment gap. This change certainly would help that.

However, the Government’s introduction of the change to lift the compensation cap will potentially significantly dampen down employers’ enthusiasm to take this chance. This is especially true for micro-businesses. The regulatory burden and the risk of starting to take on employees is significant, and the removal of a cap will add to the real fear about starting to employ people. All those businesses hear is an unlimited cap, which is what the focus will be in their minds. They will not know about the average limit being just £7,000 or £8,000. The thought of an unlimited liability if you get the dismissal process wrong will either stop businesses taking on employees or mean that some employee issues are not tackled for fear of the possible amounts. This will have a negative impact on productivity and, possibly, the culture that people work in.

I have listened to the Minister and welcome the impact assessment and consideration, but I ask the Government to reconsider this change and put some limit on the compensation, so that small businesses can assess the liability and not have the fear, even if unfounded, of paying a large fine that could put those businesses or business owners at risk.

[Lord Hendy (Lab)]

My Lords, I will make two points. The first relates to Motion B and the removal of the arbitrary statutory limit on compensation. My noble friend the Minister mentioned the tribunal statistics for 2023-24, published by the Government, and the fact that the median award for unfair dismissal was £6,746. That is the median award, not, as the noble Lord, Lord Fox, mentioned, the average award. It means that 50% of all awards for unfair dismissal are less than £6,746.

But those statistics reveal something that I found even more startling: in that year, 2023-24, the tribunals disposed of 31,000 single-claim cases and 2,000 multiple-claim cases; of those, only 646 awards were made in respect of compensation for unfair dismissal. Of course, one accepts that many cases were settled through ACAS or between the parties and then approved by the tribunal, and that would count as a disposal. But 646 cases out of 33,000 means that this jurisdiction of unfair dismissal is little used.

Of those awarded compensation, the latest government survey, which dates from 2013 and has never been updated, found that only 49% of claimants had been paid in full, a further 16% had been paid in part and 35% of successful claimants receiving a tribunal award had never received a penny of their awards. In 2016, the then Government sought to address this lamentable state of affairs by establishing the employment tribunal penalty enforcement and naming scheme to penalise companies that do not pay within 28 days of the tribunal order and, since 2018, by publicly naming them.

However, the BBC and the Bureau of Investigative Journalism published research two months ago showing that of the 7,000 unpaid claimants using the scheme, no less than 5,000 had failed to obtain any recovery. Some 4,800 penalty notices had been issued, with a combined value of £9 million of unpaid awards, but government records show that only 109 of those notices were actually paid, and none of the employers in question was named, despite nearly 4,000 requests for naming as well as compensation. These are the issues that the Government need to confront, not whether highly paid executives and others who are found to have been unfairly dismissed are entitled to the full measure of compensation for their losses.

My second and final point relates to Motion D, the amendment to it from the noble Lord, Lord Burns, and the discussion there has been, on this occasion and on the previous one, which my noble friend Lord Barber was involved in, about the compromise that was reached in 2016. I will go back a little further in the history of trade union political funds. In 1871, the Trade Union Act gave unions, for the first time in British history, legitimacy under the law. A trade union was materially defined as

“such combination, whether temporary or permanent, for regulating the relations between workmen and masters”.

The Act protected such organisations from illegality, in particular for restraint of trade, what is now called anti-competitive activities, of which collective bargaining as the means of regulating relations was the paradigm example. With various tweaks, the essential element of regulating relations between workers and employers remains the essential element in the current legislation for the definition of trade unions.

The point I want to make is that before the 1871 Act and for 40 years afterwards, trade unions continued to spend money promoting parliamentary Bills for the benefit of working people, such as on health and safety, national insurance, restoration of the right to strike after the Taff Vale judgment of 1901, and so on. At the end of the century, they came to the conclusion that they needed representation in Parliament. The Labour Representation Committee was founded by the TUC in 1900 and became the Labour Party in 1906. All this was largely financed by the unions from their general funds, just as employers financed the Tories and the Liberals. But in December 1909—

[Noble Lords]

Oh!

[Lord Hendy (Lab)]

Thanks for bearing with me. In December 1909, all this changed. The Judicial Committee of this House held, in the Amalgamated Society of Railway Servants v Osborne, that the statutory definition was exhaustive and it was therefore unlawful for a union to spend money on any object other than the regulation of industrial relations. That decision was not a foregone conclusion. Three years earlier in the High Court, in a case called Steele v South Wales Miners’ Federation, Mr Justice Darling had held that the statutory definition —I am getting to the point here, bear with me—

“was not intended to be exhaustive, or to prevent an association from lawfully doing other acts beyond those there mentioned. It is significant that the section is silent about providing benefits for members, which is one of the recognised branches of trade union business. So that even if the purposes mentioned in the rule do not come within those specified in the section, there is nothing to render them illegal. But, further, I am of the opinion that they do fall within those specified in the section. It seems to me that one of the ways of regulating the relations between workmen and masters … is to get laws passed by Parliament for their regulation, and that one of the first steps towards getting those laws passed would be to send a representative to Parliament to promote a Bill for that purpose”.

--- Later in debate ---

[Noble Lords]

Oh!

[Lord Hendy (Lab)]

I am coming to the end.

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

Will my noble friend speak more specifically on the points raised? Perhaps he could wind up his contribution.

[Lord Hendy (Lab)]

I am coming to the conclusion. The Trade Union Act 1913 changed the definition of a trade union to allow it legitimately to spend funds on other objects beyond industrial relations and, if approved by a ballot of the members, a union could have a political fund to be used for specified political purposes. Each member had to be given the opportunity to opt out of payment of that part of the subscription earmarked for the political fund. That was the compromise. In seeking to maintain, in this Bill, the outdated compromise of 1913, the Government have gone further than they needed. What they should have done—and what they could do, if objection is still maintained—is repeal the modern form of the 1913 Act and allow unions, like all other clubs, corporations, partnerships and co-ops—

[Lord Leong (Lab)]

Order. May I ask my noble friend to wind up now, please?