Employment Rights Bill

Lord Moynihan of Chelsea Excerpts

Committee stage
Tuesday 3rd June 2025 Lords Chamber

I conclude by saying that the net benefit to employees, I would argue, is minimal, but the cost to certainty and proportionality is high. The protective award is an important tool, but it must remain proportionate, targeted and fair. A 90-day cap already represents a significant financial consequence for non-compliance. Doubling it will not double the benefit; it will only double the risk.

[Lord Moynihan of Chelsea (Con)]

My Lords, good evening. I rise in support of Amendments 141BA, 141C and 142B, and it is a pleasure to support the noble Lord, Lord Hunt, on these amendments. I declare an interest as a businessman and as one who wishes to see the wheels of commerce and thus the economy moving smoothly and not unnecessarily clogged up.

As far as insolvency goes, this Bill presented an opportunity—one that I still urge the Government to grasp—to make insolvencies more efficient and less destructive of the economy. The law currently says that, in most cases where workers are to be made redundant, a 90-day consultation is required, regardless of insolvency or not. But, if a company is insolvent, consultation is necessarily spurious. The employees have lost their jobs, period, and the receivers have to move instantly, not wait 90 days to realise the assets. So, they do not wait 90 days and, because of this rule, they then break the law, because they are required to give 90 days. Two laws are in conflict with each other and one of them has to be broken. The more swiftly the assets of a failing organisation can be reorganised, the more likely it is that productive economic activity can be continued from these assets.

In the US, where these things are done much better, a study some time ago found that only 4% of assets were lost in a bankruptcy: 96% went on to be productive assets under a new organisation. Anyway, because the law has been broken, necessarily, in these cases, because the receivers are doing their duty to achieve a speedy liquidation, the lawyers move in.

The noble Lord, Lord Pitkeathley, who I am delighted to see is in his place, referred earlier to ambulance chasers. There are many lawyers in this House and every single one of them is, of course, honourable and valuable; but we are talking about no-win no-fee lawyers, who can be deeply pernicious in both practice and effect. These lawyers advise all affected employees that they have a case they can take to the employment tribunal because they have not been consulted, and that they will certainly win that case. These no-win no-fee lawyers refer to this case as “free money”: “Dear employee, you’ve got free money because you haven’t been consulted on a 90-day period”. These employees already get their redundancy money, their statutory sick pay, their holiday money and so forth. They get it all ahead of any other creditors. They are not disadvantaged.

This 90-day money that they get by going to the employment tribunal is three months’ bunce on top of everything else. I do not think that can have been intended, but it is certainly what the outcome has been. Who pays for this—because, as we know, there is no such thing as a free lunch? If the company was truly insolvent, there will not be enough money for everybody, so there will be losers when this money is paid to the employees: losers such as suppliers and HMRC, also known as the taxpayer, of course. And they will lose more as those workers get their 90 days’ pay.

I refer to one of many examples, Go-centric, a Glasgow-based call centre that suddenly went bankrupt on 19 December 2022, laying off around 600 employees just before Christmas. There is a whole story behind that that all of us can derogate. The receiver was faced with 600 employees who had to be laid off immediately. That is what receivers do, and they are honourable people running a very important economic activity for this economy. Enter the lawyers into this Go-centric situation, writing to redundant workers and advertising “free money”. That is what they actually wrote in the letters to employees, which the employees replied to. They went to the employment tribunal and the money was obtained for 200 workers who had already received all their statutorily due redundancy payments. I really do not think this can have been intended when the legislation was written, but so it was.

Now we have a wonderful opportunity in the Bill to rectify this, most likely unintended, clash of legislation by removing the 90-day consultation requirement in an insolvency, since, as we know, consultation is irrelevant, indeed impossible, in a liquidation. Have the Government wisely seized this opportunity? Have they rushed to validate their claims of fiscal prudence? They have not—far from it. Indeed, they have, bizarrely, proposed in the Bill to increase the 90 days to 180 days. A full six months of free money on top of statutory redundancy money, taking precedence over HMRC, suppliers and others. This all makes it more likely that their claims cannot be met, potentially precipitating further bankruptcies among suppliers. Noble Lords will have heard many pitiful stories of suppliers stiffed out of payments by a larger company going bankrupt and themselves then having to go bankrupt. This provision makes that more likely. There is no free 180-day lunch here.

We have a further problem, which may not have been considered by the Government in putting forward the Bill, which is that, if these payments fall short, which necessarily they will in many cases, the redundancy fund is called upon to pay moneys to workers. That is the redundancy fund that reports to HMRC, which reports to the Treasury. Have the Secretary of State and the Minister informed the Chancellor that they are legislating to increase the Treasury’s outgoings by a significant amount in future years, not to mention increasing the nation’s welfare bill, which the Government actually have a commitment to reduce? I suggest that the Government should speak to themselves and have a discussion about that.

The same concerns apply to the extension of the limit to 20 employees across an organisation to which the noble Lord, Lord Hunt, referred, and to encompass distressed businesses—businesses that are in distress, which are calling for financial advice, but have not yet gone into immediate insolvency. An opportunity is being missed to sort all that out.