Employment and Trade Union Rights (Dismissal and Re-engagement) Bill

I was referring to what I consider to be the breadth of proposed section 187B. I think, with respect, that it creates considerable scope for any employee who is faced with an instance of fire and rehire to challenge it through the employment tribunal. It creates, I think, an obvious and unsustainable tension with common law principles—the common law principles that underpin the entire law of redundancy.

Will the hon. Lady give way?

I will just finish this point.

There could be circumstances in which an employer had made the decision to change the terms of employment, to reduce wages, and the employment tribunal, applying every single correct common law principle, would find the decision to have been fair, but if the employer had breached one element of the consultation requirements—had not put one document or one meeting note before the trade union representative—the dismissal would be found to be unfair.

I have listened carefully to the hon. Lady, and I am very respectful of her knowledge of this particular issue, but nothing she has said today suggests to me that her arguments could not be better deployed in Committee. My hon. Friend the Member for Brent North (Barry Gardiner) asked Conservative Members to work with him to improve the Bill in Committee. I wonder why the hon. Lady is not taking that approach.

I thank the hon. Gentleman for his intervention. I will continue to develop this point.

The hon. Lady did not give me an answer.

I hope that what I am going to say will answer the hon. Gentleman’s criticism.

There is another point that I cannot ignore. I invite every Member to turn to proposed section 187F, which deals with the proposed “Award of compensation” to be made by any employer who fails to comply with the proposed new consultation requirements. It states:

“The amount of compensation awarded shall, subject to the following provisions, be such as the employment tribunal considers just and equitable in all the circumstances”.

That is exactly the same compensation measure that is used in whistleblowing and in discrimination law. It opens the door to uncapped compensation in the area of unfair dismissal, which has a cap. It therefore drives a coach and horses through the entire principle of compensation in unfair dismissal hearings. It would make fire and rehire the only form of unfair dismissal in which the employee could receive an uncapped compensatory award. If the employee had been dismissed for gross misconduct or for being bad at his or her job, the award would have been capped at 80 grand. That cannot be right.

What will all this do to the employer who is thinking about renegotiating terms of employment? The employer will be too nervous to do it, and will lay people off. Let us take the employer in the case of Garside & Laycock v. Booth 2011, who had proposed a 5% reduction in wages which every single balloted member of staff except one had accepted. Employers would not do that; they would lay off the whole workforce. Is it worse for people to take a less attractive variation in their terms of employment or to lose their jobs altogether?

I am grateful to the hon. Lady for engaging so closely with the Bill. I think she knows she is over-egging it, because any tribunal would look at the situation in the round. The Bill is drafted as it is because it chimes with the legislation on redundancy. Again, to be technically proficient, the Bill has to merge with the other Acts.

I am afraid the hon. Gentleman is incorrect. This concern was raised by my head of chambers and it is shared across the employment Bar. We cannot have a just and equitable jurisdiction in the law of unfair dismissal as it does not work.

The hon. Member for Feltham and Heston (Seema Malhotra) raised a point about the aviation sector. The conduct of British Airways was poor, but there is an important issue at stake. If in primary legislation the risks of fire and rehire are so great that employers are more inclined to lay people off, think what that would mean for airline pilots, for example. Airline pilots must fly within a two-year period to retain their flying licence. If they are sacked by British Airways at a time when the entire travel sector is struggling badly, they would be very unlikely to get a job and it could easily be two years. It is not just the loss of a job; it is the loss of an entire career. We need to tread very carefully when we consider primary legislation in the area of fire and rehire.

My hon. Friend is making an excellent speech and some important points. She talks about the risk of moving to layoffs or redundancies; is there not also a danger that businesses will not recruit people in the first place or will not scale up because of the fear that employment legislation is so complex and is increasingly one-sided on behalf of workers? That would deter employment, which is the exact opposite of the situation we all want to see.

We all know there is always a risk that we make employment relations so onerous that there is a temptation to engage consultants. What we are primarily looking at is employers that have larger, unionised workforces. I am not sure how many employers the measures would engage, but the short point is that Conservative Members want a solution that does not make an existing problem worse, drive redundancies or lead to more business failures. Fire and rehire must be a genuine option of last resort when a negotiated settlement cannot be reached, when the business is on the brink of insolvency and when the alternative is layoffs.

I am grateful to the hon. Lady for the conversations we had when I proposed legislation on this issue last year. She says that, had fire and rehire been banned, British Airways might have just made people redundant, and she cites the example of pilots. This has happened already, and Ryanair negotiated temporary changes. Why would British Airways not have done the same, had it not been allowed to fire and rehire?

I will return to that point when I address British Airways in a bit more detail.

As I have said to the Minister, we need more than ACAS guidance. I want to see the rules on dismissal and re-engagement set out in an ACAS code of practice, with financial sanctions to back them up. Parliament specifically envisaged the possibility of doing this when it passed the Trade Union and Labour Relations (Consolidation) Act 1992. Section 207 gives the Secretary of State the power to introduce a code of practice in respect of anything in that Act. Parliament also considered and welcomed the possibility that the Secretary of State would have the power to impose legal teeth. Section 207A addresses the possibility that any compensation can be increased by up to 25% if the employer does not comply with an ACAS code of practice.

We know that ACAS codes of practice can be effective. The hon. Member for Middlesbrough (Andy McDonald) is an employment lawyer and will know that when we think about, for example, the ACAS codes of practice on disciplinaries or grievance procedures, it is vanishingly rare to get into an employment tribunal nowadays and find that the employer was oblivious to those codes of practice. Why do employers know about them? Because there is risk—financial risk. If they go down in the employment tribunal, there could be an uplift on compensation, and they want to avoid that, so we know that it has the right effect.

What should the code of practice say? We have some of the answers already. The BEIS call for evidence, which was published through ACAS, gives us some clues. I think practitioners made such suggestions very well, including, in relation to paragraph 56 of that report, that employers should provide an analysis of whether changes are anticipated to last for more or less than five years with evidence to substantiate that answer, and, in relation to paragraph 76, that they should provide evidence of reasonable alternatives they have explored and evidence of their financial position.

I was one of the members of that Select Committee, and I remember there was very much cross-party agreement that it was such a disgrace for that to happen that the company should not carry the British flag. The point is that the parent company, IAG, had profits in the region of £3.5 billion-plus, there in stages, that it could have used. IAG’s agenda—and this is why I am concerned that what the hon. Member is suggesting may not go very far in discouraging companies—was about driving profits, not about saving the jobs and livelihoods of people, particularly women in their 50s and those towards the end of their careers. It was a restructuring brought in under the guise of fire and rehire.

The hon. Member makes an excellent point, and I just want to pick up on what he said. He points to the fact that the parent company had substantive profits, and that point was made by the Unite representatives who contacted me. I do not think that that case would have survived the employment tribunal in its early stages, as I do not think that it would have crossed the threshold of a sound, genuine business reason. I think the reason why Alex Cruz appeared before your Committee five or six months later and spoke very differently about his plans for pilots, cabin crew and everybody else was because the company was on thin ice, and I think some damaging concessions were made in that session. I think you are right, but I do not think that my solution fails to capture it.

Order. I remind the hon. Lady not to use the word “you”.

I do not think that my proposal is at odds with what the hon. Member suggests.

Just briefly, because I am coming to the end—[Hon. Members: “No.”] I would like to focus the remainder of my remarks on the detailed work that has gone into clause 1 and the extended duty to consult, which is proposed to go into the Trade Union and Labour Relations (Consolidation) Act as new section 187A. One of the things I think is most surprising about this, despite the fact that it is obviously very persuasive at first blush, is that it immediately takes the trade union, the employee and the employer into their very first meeting talking about fire and rehire. When I spoke to my constituents and the Unite representatives who were looking after them, the thing that had been the most stressful was that they had gone into these meetings and found that from the very start, dismissal was already being mentioned as an option. It was, “You will take this pay cut, otherwise we will sack you and get you back.” That seems to exacerbate the problem, rather than improve it.

The law in this area is not working. When I speak to employers about why they have been raising fire and rehire so early, they always cite section 188 consultation obligations, the “in good time” requirement under that, and the genuine fear that they will be hit with a punitive protective award if they have not put all their cards on the table at the start. A much more sensible route would be to take the heat out of these negotiations and make fire and rehire a last resort that only comes in when all other options have been explored.

That is why we should have specific language in a code of practice. It could say something like, “An employer who begins a section 188 consultation only after it has attempted to negotiate a change in terms and conditions consensually will be regarded as beginning that consultation in good time.” Alternatively, it could say, “Where an employer is attempting to negotiate new terms and conditions before any fire and rehire process, that amounts to special circumstances that rendered it reasonably practicable not to comply with section 188.”