Employment Relations Bill

Public Bill Committee, 2 March 2004.

Standing Committee D

Employment Relations Bill

Gerry Sutcliffe (Labour, Bradford South)

On a point of order, Mr. Forth. Good morning, and welcome to the Chair. For the Committee's benefit, I would like to make an announcement about the intimidation of workers during statutory recognition ballots. The Committee will recall that that issue was raised a number of times on Second Reading and was touched on during earlier sittings of the Committee. At that time, I stated that the Government were considering the matter and would come back to the Committee. I am now pleased to announce that the Government intend to bring forward amendments to the Bill on Commons Report to deal with the intimidation of workers by either unions or employers during a statutory recognition ballot. We will of course seek to give hon. Members ample time to consider those amendments.

I hoped to bring the matter to the Committee's attention last Thursday during consideration of an amendment tabled by the hon. Member for North-West Norfolk (Mr. Bellingham), but as the amendment was not moved I was unable to do so.

Eric Forth (Conservative, Bromley and Chislehurst)

I thank the Minister.New clause 7 Dismissal after end of protected period

New clause 7 - Dismissal after end of protected period

Gerry Sutcliffe (Labour, Bradford South)

I beg to move, That the clause be read a Second time.

I welcome the hon. Member for Huntingdon (Mr. Djanogly) to his new and improved position on the Front Bench. I look forward to his contribution this morning.

On Second Reading, the Secretary of State for Trade and Industry announced that the Government would come forward with an amendment in Committee concerning protection for employees taking official lawfully organised industrial action. New clause 7 fulfils that commitment. The Employment Relations Act 1999 introduced major new protections in that area. As a result, dismissals are unfair if they occur in the first eight weeks of such protected industrial action, or if they occur after the end of that eight-week period but the action had ceased within it.

As the Committee will recall, clause 21 amends the law by discounting lock-out days when calculating the eight-week period. However, the protections under the 1999 Act have an important second leg, which is often overlooked. A dismissal is unfair at any time if the employer has not taken reasonable procedural steps to resolve the dispute that led to the taking of industrial action. New clause 7 concerns the protections under that second leg.

The current provisions relating to such protections are found in section 238A of the Trade Union and Labour Relations (Consolidation) Act 1992. The obligation on the employer to take reasonable procedural steps is contained in subsection (5)(c).

Subsection (6) of section 238A then lists a number of matters towards which regard must be had when determining whether reasonable steps have been taken. Those include the issue at subsection (6)(c) and (6)(d) of whether either the employer or the union had refused an offer to use the services of a conciliator or mediator.

Such provisions are in place to encourage parties to try to resolve the dispute. The effect of subsection (6) is to ensure that the actions of both the union and the employer can be taken into account when assessing whether the employer has done enough in procedural terms to resolve the dispute.

The review of the Employment Relations Act 1999 brought renewed attention to that area of the law. Many respondents referred to the Friction Dynamics case, where the employer was perceived to have used various tactics to undermine the intentions of the law. In particular, the employer agreed to go to conciliation but did little or nothing when conciliation meetings took place. Indeed, the main employer representative reportedly left a key conciliation meeting after 30 minutes or so to go shopping. In other words, the employer showed contempt for the process, paying lip service to what he thought were his legal obligations.

We do not want to see any repetition of such behaviour by another employer or, indeed, by a union. Therefore, we wish to set out in greater detail in statute what obligations follow when parties agree to use the services of a conciliator or a mediator. Conciliators and mediators perform similar functions, but there is an important distinction between their roles. Conciliators facilitate discussion between the parties. They do not make recommendations to resolve either the procedural or substantive issues in dispute. In contrast, mediators are entitled to make non-binding recommendations to the parties about the dispute. In the context of these provisions, the mediator might make recommendations about the further procedures that the parties could use to resolve the dispute.

New clause 7 works by inserting through new paragraph (e) of subsection (6) of section 238A new matters to which the tribunal is to have particular regard when the parties have accepted that the services of a conciliator or mediator will be used. Those matters are detailed in subsections (2) to (5) of new section 238B. Those subsections set out the essential actions that the parties should take to demonstrate that they have properly engaged in the process. I will go through them in turn.

The first, set out in subsection (2), is the issue of whether the person who attends conciliation or mediation meetings on behalf of the employer or employees is an appropriate person. Clearly, it would not be acceptable for employers to send along junior employees of no standing to be their representatives. However, we recognise that the most senior person may be unable to attend all meetings themselves, especially if the organisation is a large one.

Jonathan Djanogly (Conservative, Huntingdon)

Will the Minister explain when a junior employee becomes a senior employee?

Gerry Sutcliffe (Labour, Bradford South)

I hope to. If not, I shall return to the subject.

An appropriate employer representative is defined in subsection (6) of new section 238B as a person who has the authority to settle the matter on behalf of the employer, or a person authorised by that person to make recommendations to him or her with regard to the settlement of the matter. That makes sense, and it ensures that the right people will be engaging in the conciliation or mediation process. On the union side, the appropriate person must be responsible for handling the matter subject to conciliation or mediation on behalf of the union.

The second matter, set out at subsection (3), is whether the employer or union co-operates with the conciliator or mediator to make arrangements to set up meetings. That will ensure that employers and unions cannot use delaying tactics to put off such meetings. In other words, the law would make it clear that both parties must treat approaches by the conciliator or mediator as a priority, and they must treat them seriously and constructively.

The third matter, set out at subsection (4), is whether the employer or union carries out the actions agreed with the conciliator or mediator. The additional requirements of subsection (7) are designed to ensure that these actions are carried out in a timely manner.

The fourth matter, which is set out at subsection (5), is whether, at meetings with all parties present, the employer or union should answer reasonable questions. That formulation recognises that there will be occasions when either party should be entitled to refuse to give a response to a question. For example, neither party should be required to divulge confidential information about individuals, or about the bottom line in its negotiating strategy. All those provisions are sensible. They map out the basic procedural features of conciliation or mediation.

Subsections (8) and (9) of new section 238B concern the evidence that conciliators or mediators may give to tribunals. We recognise that they may be required to give evidence. After all, no other person is as well placed to know what went on. Moreover, the conciliator or mediator has no vested interest. Their evidence must, therefore, carry particular weight. However, the work of conciliators and mediators is based on trust. Respect for their impartiality and professionalism is essential. Most are either ACAS officials or, in the case of mediators, individuals appointed by ACAS. In order that trust be maintained, the parties must know before they enter the process that confidential information passed to the service provider will not be revealed. Further, it is not appropriate that the service provider should give a subjective opinion, however professionally derived, on the behaviour or reasonableness of either party. We need to place some limits on the evidence that conciliators or mediators must provide.

Subsection (8) therefore ensures that case notes taken by service providers will not be admissible in evidence. The service providers are also required not to give evidence on anything without the consent of the party who communicated it that in their judgment would mean divulging either commercially sensitive information, or information as to the position of the party on the matter subject to the conciliation or mediation. Nor can they be required to offer an opinion as to the reasonableness of the questions that any party was asked at a meeting.

The net effect is to limit the evidential role of the conciliator or mediator to the provision of the essential factual information relating to a case. It will be for the tribunal to assess the reasonableness of the parties' behaviour, based on that factual information and the arguments advanced. If we did not make such a provision, the vital work of ACAS might be undermined. Parties might become reluctant to use those key services.

New clause 7 will improve the operation of the law. It makes it clear that parties must engage in the conciliation or mediation process once they have chosen to go down that path. They should not be allowed to sit out meetings or pay lip service to the process. The new clause will help the mediator and conciliator in their work, while preserving essential safeguards. It will give them the best opportunity, often in difficult situations, to help the parties to find a settlement to their disputes. I therefore commend the new clause to the Committee.

Jonathan Djanogly (Conservative, Huntingdon)

Good morning, Mr. Forth. Although we welcome the Government's intention to bring forward an amendment on intimidation, it is unfortunate that it will not happen until Report, not least because it may involve some sensitive areas that all sides will want to consider carefully. However, I hope that the Government will publish their proposals as soon as possible rather than immediately before Report.

The Minister sent a letter on new clause 7 and the other new clauses that we shall be considering to my hon. Friend the Member for North-West Norfolk on 25 February, with a note saying that he had copied the letter to other members of the Committee. Unfortunately, I did not see a copy until yesterday. It is particularly unfortunate in view of the complicated nature of the new clauses. Other interested parties such as companies, the CBI and trade unions will not have had a chance to see the new clauses and to comment on them. A review of the new clauses will take place following the Bill's Committee stage.

New clause 7 amends section 238A of the Trade Union and Labour Relations (Consolidation) Act 1992 relating to unfair dismissal claims in cases where the employer was conducting a lock-out, or the employee was taking part in industrial action. According to the section as it currently stands, an employee can claim unfair dismissal if the reason for the dismissal is that he took protected industrial action within the period of eight weeks. An employee can further claim unfair dismissal in cases where the dismissal took place after the end of that period if he

had not stopped taking protected industrial action before the end the eight-week period and if the employer had not taken such procedural steps as would have been reasonable for the purposes of resolving the dispute.

In determining whether an employer has taken those steps, regard has to be had to various matters, including whether the employer—or a union—has unreasonably refused the use of conciliation and mediation services. The Minister went into that in some detail. New clause 7 adds further requirements that an employer must fulfil in relation to conciliation and mediation services if he wants to escape an unfair dismissal claim from his employees. That is yet another example of the ratchet effect throughout the Bill. It is invariably against the interests of the employer.

A tribunal has to have regard to certain issues such as whether employers and unions were represented by an appropriate person, whoever he or she may be. I am not entirely sure that the Minister addressed that, so I would appreciate it if he returned to that point. It must also have regard to whether they co-operated fully; whether they fulfilled any commitments given; whether they answered all reasonable questions; whether they kept to the timetable and so on.

Why was the new clause brought forward so late in the proceedings? It does not seem to me to have the political complexities of the new clauses that we will discuss later. The new clauses are procedural but they are the sort of provision on which it would have been helpful to have had input from outside parties. How often are the conciliation and mediation services used in section 238A-relevant unfair dismissal proceedings? Who would request those? What is their success rate? Has the Minister considered that there should be equivalent obligations for employees to participate in a reasonable manner with conciliation and mediation services? If they do not do so, should there not be some penalty such as them losing their right to claim unfair dismissal, or a reduction in compensation? As drafted, the new clause seems a bit one-way and against the interests of the company.

New section 238B(8)(b) states:

''the service provider must refuse to give evidence as to anything communicated to him in connection with the performance of his functions as a conciliator or mediator if, in his opinion, to give the evidence would involve his making a damaging disclosure''.

I have a problem with the phrase ''in his opinion''. Whether it would be damaging to disclose the information may be blatant—it may be blatantly commercially sensitive, for instance—but things may be more complicated than that, or the mediator may not know the reasons for the commercial sensitivity, in which case his opinion about whether that information is commercially sensitive will be irrelevant, because he will not realise the damaging effect that the release of that information could have.

As the Minister knows, I always try to be helpful in these situations. Why cannot there be some private pre-hearing in the tribunal in which the evidence and information that the mediator is likely to produce is

set out before all the parties in private? The employer would then have the chance to argue that the information that will be released in public is sensitive and the tribunal would be able to take an early decision on the status of that information.

It is not the role of a mediator to decide who is right and who is wrong, or to state which party to the proceedings has a case that is over the top. The mediator's role is not to decide things, but to mediate between the parties. That creates a problem with regard to the mediator giving evidence. The new clause tries to deal with that problem, but it does not do so adequately. A union might make ludicrous claims such as that mediation would be a useless procedure.

Let us take as an example the position of Mr. Scargill in the miners' strike. He refused to talk to management and made it obvious that he was using the strike as a socialist manifesto for direct action that went further than miners' pay scales. In such a situation, the employer could fairly say that mediation would have no purpose and that to go through with it because the legislation states that they must do so would be simply to go through with a game for no purpose. I am concerned that an employer in such a situation would still be victimised by the law. That is patently unfair. Can the Minister give his views on what the situation would be in such circumstances?

Gerry Sutcliffe (Labour, Bradford South)

The hon. Gentleman is consistent in his views. It is worth while to talk about what we are trying to achieve, given the debate on clause 21. However, I will start by apologising to him if he has not received his letter. I will look into the matter. The letter should have got to him yesterday, as all the letters went out at an appropriate time.

The hon. Gentleman made a point about the lateness of the new clause. As he knows, Governments consult people. We have done that all the way through our consideration of the Bill. Copies of draft proposals are sent to bodies such as the CBI, the TUC and the Engineering Employers Federation so that they can comment on the issues that the Government are considering. That is appropriate.

The new clause is about resolving disputes. People's minds were focused by the Friction Dynamics case and issues about how the employer operated. The hon. Gentleman should remember that. As for taking reasonable steps, that option was always available under the 1999 Act. It got overlooked on many occasions as a way of resolving disputes. New clause 7 tries to set out clearly the obligations on both the employer and the trade union to act reasonably.

The figures show that 93 per cent. of strikes end within eight weeks, and it is worth noting that in the current industrial relations climate the figures for stoppages are the lowest since records began in the 1920s. I would therefore say that the employment relations environment is pretty good at present.

The hon. Gentleman asked me about the appropriate person, and I explained that, on the union side, the appropriate person is the official who is dealing with the dispute on behalf of the union and

who has authorisation from the union to handle negotiations. From the employer's side, the appropriate person is someone who carries the responsibility and the authorisation from senior colleagues to deal with the issues in the dispute. In the Friction Dynamics case, that did not happen, and the person in the meeting who left to go shopping was a junior person.

Jonathan Djanogly (Conservative, Huntingdon)

It is not relevant whether the appropriate person is senior or junior. The question is whether that person is authorised.

Gerry Sutcliffe (Labour, Bradford South)

Both sides must know that the person carries the weight of responsibility and authorisation during the negotiations. As I said, the provision existed under the 1999 Act and it aimed to ensure that people tried to resolve disputes, because no one benefits if disputes continue for any length of time. If disputes continue for a long time, there is a lot of heartache, and relationships are damaged even when those disputes are finally resolved. In my view, the role of the mediator and conciliator is vital, as is the independence of ACAS and ACAS-appointed mediators. That is why the clause aims to involve such mediators, but to retain their impartiality when they have to give evidence about the issues.

On the question of commercial sensitivity, the clause clearly spells out the roles of the mediator and conciliator. However, the hon. Gentleman makes a fair point about whether an individual mediator or conciliator has experience, and I will examine that issue, because it might be relevant if the tribunal stage is reached. I will get back to him on that matter. It is important that the conciliator or mediator examines the factual position and does not take a view either way. He seems to think that the weight is in favour of the employers rather than the trade unions, but that is not the case; both sides have responsibilities and obligations. Provisions are in place to ensure that both the employer and the employee are protected.

I also thank my hon. Friend the Member for Eccles (Ian Stewart) for his support.

Jim Sheridan (Labour, West Renfrewshire)

Does my hon. Friend agree that mediation is the best and most practical way to proceed, rather than the current system, in which employees are told that they must return to work or be sacked? I am sure that a number of Labour Members will have tangible experience of that happening either to them personally or to people whom they know.

Gerry Sutcliffe (Labour, Bradford South)

I agree entirely with my hon. Friend. He makes the point that I was trying to make: mediation is the sensible route to take, and it is in the spirit of what we are trying to achieve throughout the Bill. We want to promote the idea of consensus rather than an adversarial situation, and to try to bring people round the table. He makes an important point.

I believe that I have responded to most of the points made by the hon. Member for Huntingdon. If I have not done so, I am sure that he will tell me so, as he is prone to do. I accepted the point that he made about commercial sensitivity and will consider it further.

I have been informed that the letters went out to hon. Members in the Members' Lobby on 25 February: that may help the hon. Gentleman. I recommend that the new clause be included in the Bill.

Jonathan Djanogly (Conservative, Huntingdon)

Briefly, Friction Dynamics may have been the reason for the introduction of the new clause, but I do not agree with the Minister that that is a reason for it to be included in the Bill, because it will affect other companies and other situations.

I hear what the Minister says about the provision of the letter, but I remind him that, even as it is, that letter does not contain any explanatory notes. I do not believe that any explanatory notes on the new clause have been provided, so there is a need for further review. Generally, I agree that mediation is the preferred option when sorting out industrial and many other disputes. However, the basis of mediation is the consent of the parties involved. Mediation without consent and a willingness to see it through will always fail. The problem with the new clause is that it forces parties into a situation that works best when there is consent.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 8 - Exclusion or expulsion from

Gerry Sutcliffe (Labour, Bradford South)

I beg to move, That the clause be read a Second time.

Eric Forth (Conservative, Bromley and Chislehurst)

With this it will be convenient to discuss the following:

Government new clause 9—Applications no longer to be made to Employment Appeal Tribunal.

Government amendments Nos. 59 to 65.

Gerry Sutcliffe (Labour, Bradford South)

On Second Reading, the Secretary of State promised to table amendments to ensure that unions could deal with political activists who pursue a racist or xenophobic political agenda. Our aim is to ensure that unions can deal effectively with far-right political activists who infiltrate their ranks and sow the seeds of hatred and intolerance. I believe that there is widespread support throughout the Committee for tackling this issue. A great deal of detailed scrutiny has gone into the preparation of the amendments. In particular, we carefully considered the human rights implications of changing the law, and new clauses 8 and 9 and amendments Nos. 59 to 65 all relate to the changes that we are introducing.

The main changes that we propose are contained in new clause 8. The new clause is quite complex, so it will take some time to describe how it works. The current law defines unlawful exclusion and expulsion from trade unions in section 174 of the Trade Union and Labour Relations (Consolidation) Act 1992 as amended, which sets various limitations on the freedom of unions to exclude and expel. Subsection (2)(d) to which the new clause refers is especially relevant to our deliberations today. It provides that unions are permitted to exclude or expel where such actions by the union are entirely attributable to the conduct of the person involved. Subsection (4) defines what conduct means. Importantly, subsection (4)(a)(iii) states that being, ceasing to be, having been or having ceased to be a member of a political party does not count as conduct.

The provisions have caused difficulties for unions when tackling the problem of political activists infiltrating their ranks. Let me describe two of them. First, it has not been clear what membership of a political party entails. In particular, unions and their advisers have been unsure whether any political activities that it might be possible to view as intrinsic to membership are covered by the expression ''membership of a political party''. That means that

it is unclear whether it is lawful to take measures against members who have been active in promulgating racist political policies. Case law is developing in this area, so it is fair to conclude that the current definition probably does not embrace many, if any, political activities. However, case law has not yet settled down, so some uncertainty remains.

Secondly, difficulties have arisen because cases involving conduct are frequently complex. There may be several reasons why a union chooses to act against an individual, and some reasons may be much more important than others. Some reasons may be given by an official or a committee, while other reasons are given elsewhere in a union's decision-making machinery. However, as the law is currently constructed, the union has acted unlawfully even if membership of a political party was a relatively minor reason for expelling or excluding someone. Therefore, if the union wanted to expel a leading activist of a political party who was prominent in the workplace and outside it, it might easily fall foul of the law if any of the officials involved in the decision to expel an individual had unwisely indicated that that individual should be expelled wholly or partly because they were a member of a political party. In other words, there is plenty of scope in the existing legal formulation for unions to make slight errors that result in an exclusion or expulsion being unlawful.

The new clause deals with those difficulties. Our objective is to provide unions with greater latitude when dealing with political activists. We also want to make the law clearer. To achieve those ends, the new clause creates two new categories of conduct for the purposes of section 174. First, it establishes the category of ''excluded conduct'', which is defined in subsection (4) of the new clause. The category includes all the types of conduct other than membership of a political party that are expressly mentioned in existing section 174 as falling outside the definition of conduct. Such matters include the behaviours for which it is unlawful for unions to discipline their members under sections 64 and 65 of the 1992 Act.

The second category is ''protected conduct'', which is defined at subsection (4A) of the new clause as

''being or ceasing to be, or having been or ceased to be, a member of a political party.''

Importantly, new subsection (4B) qualifies the definition by making it clear that political activities of any kind do not fall in the definition of protected conduct. In other words, such political activities constitute just conduct. The various elements are brought together at subsection (2) of the new clause, which sets out the tests for determining whether unions have the freedom to exclude or expel on grounds of conduct. It has various effects and I will mention some of those.

First, the provision ensures that any exclusion or expulsion attributable in any way, even to a small extent, to an ''excluded conduct'' is unlawful. That is the current situation. So, we wish to retain the existing

protections for the behaviours listed as excluded conduct. That also ensures that there is complete consistency between sections 65 and 174 of the 1992 Act.

Secondly, the provision ensures that, if protected conduct is the sole or main reason for an exclusion or expulsion, the union has acted unlawfully. We are therefore retaining the protections for passive membership of political parties. The right simply to belong to a political party is protected.

Thirdly, an exclusion or expulsion is lawful where it is entirely attributable to conduct that is neither excluded nor protected, because any form of political activity falls outside those two categories. It follows that a union is free to exclude an individual for his or her political activities, assuming of course that it complies with its own rules when it does so.

Fourthly, we have ensured that any exclusion or expulsion is lawful where a minor reason for it concerns protected conduct, but the main reason concerns other conduct outside the definition of excluded conduct. That means that a union will have acted lawfully if it expels a political activist principally on the grounds of their political activities where a subsidiary factor was the person's political party membership.

New clause 8 also changes the remedies for unlawful exclusion or expulsion. They are set out in section 176 of the 1992 Act. Under those provisions, an individual who an employment tribunal holds to have been unlawfully excluded or expelled may apply later for compensation. A minimum award applies where, at the time that the application is made, the union has not admitted or readmitted the individual. That minimum award is currently £5,900.

In cases where the union has failed to admit or to readmit the individual, the application for compensation is at present made to the Employment Appeal Tribunal. I will return to the division of responsibilities between the EAT and the employment tribunal when I discuss new clause 9. We believe that the minimum award of £5,900 is simply too high to apply to all cases. It is quite a substantial sum of money for the deserving and less deserving alike. We therefore think that the tribunal should be given greater discretion to decide the amount of the award. That is achieved in subsection (4) of new clause 8, which inserts a number of subsections into section 176 of the 1992 Act. In combination, the new subsections remove the £5,900 minimum in cases where the exclusion was unlawful because it was mainly attributable to protected conduct—namely, to membership of a political party—and the other reasons for the union's decision, wholly or mainly concerning conduct, were contrary to the union's rules.

That sounds complicated, so let me give an example. The union has expelled an individual on the grounds of both his political party membership and his party activities. The main reason was the person's membership. However, a contributory factor concerned the individual's engagement in political activities that were contrary to the union's rules. So,

the political activity was an important contributory factor but not the dominant one. Under new clause 8, the expulsion was unlawful, but the minimum award would not apply. If the union failed to readmit the individual, the tribunal would make an award that it thought ''just and equitable'', subject to the contributory fault attached to the individual.

New clause 9 changes an unusual feature of the law. At present, an application for compensation must be made to an employment tribunal.

Jonathan Djanogly (Conservative, Huntingdon)

In that example, what if the individual concerned was a member of a political party and also conducted himself in a way that was adequate for his expulsion, but he argued that he was wrongly expelled because the union used his membership of a political party as the excuse? In such a situation, could he not be expelled for a conduct point?

Gerry Sutcliffe (Labour, Bradford South)

No, he could not.

Jonathan Djanogly (Conservative, Huntingdon)

If that is the situation, then if someone is a member of a political party, how can he be expelled in any circumstances?

Gerry Sutcliffe (Labour, Bradford South)

I accept that the issue is very complicated. It relates to whether a person's activities are related to the activities of the union. If his political activities were in contradiction to the aims, objectives and rules of the union, he could be excluded. The hon. Gentleman may want to consider that and return to the matter as part of a wider debate. It is a particularly controversial area.

Jon Cruddas (Labour, Dagenham)

I know that this is very complicated, but what about when the anti-racist position of the union is contained not in its rules but in its general preamble and statement of objectives? In that instance, the activities would not break the rules of the union. Does the union have any recourse if it wants to exclude a person in that case?

Gerry Sutcliffe (Labour, Bradford South)

I am grateful for my hon. Friend's contribution. That is something that we may need to consider. We have been very careful, for the reasons that I outlined—the legal advice that we have taken and the spirit that we have tried to achieve, which was evident on the Floor of the House on Second Reading—to try to resolve the issue. We are talking about the rules at present, but I am prepared to consider strengthening that further. Hon. Members on both sides who feel that amendments could be made should note that we can consider the matter again on Report. We considered the matter in great detail with the support of independent legal minds, and then looked to parliamentary counsel for advice on how to draft the provisions. We are trying to achieve a perfectly reasonable step.

It is the far right political party that is trying to infiltrate unions that announced that, should the new clause become part of the Bill, it would launch a national recruitment campaign. I say to that party, ''Go on and do that,'' because it should be out in the open attracting the attention of trade unions if that is at all possible. What it should not be doing is infiltrating organisations, whether they be political parties or trade unions.

On new clause 9, at present, an application for compensation must be made to an employment tribunal when the individual wrongly excluded or expelled from a union has been admitted or re-admitted to the union when he applies for compensation. However, as I have explained, the application must be made to the Employment Appeal Tribunal when he has not been admitted or re-admitted. A similar arrangement also applies to the law on unjustifiable discipline.

We think that that arrangement is unnecessarily complex. It is confusing for the parties who have to go to different tribunals at different stages of a case. It involves unnecessary cost in so far as the Employment Appeal Tribunal needs to acquaint itself from the beginning with the facts of a case that has already been considered by the employment tribunal. There is no other jurisdiction when the Employment Appeal Tribunal is involved in assessing compensation in this way.

New clause 9, read with subsection (4) of new clause 8, therefore has the effect of amending section 176 of the 1992 Act to ensure that the employment tribunal, and not the Employment Appeal Tribunal, sets awards when an unlawfully excluded or expelled individual has not been admitted, or re-admitted to the union when he makes his application. It also makes corresponding changes to section 67 of the 1992 Act concerning the remedies for unjustifiable discipline. The Employment Appeal Tribunal will of course retain its standard appellate function in regard to both jurisdictions.

Finally, I will deal with Amendments Nos. 59 to 65 inclusive. Those amendments are consequential to new clause 9. Various provisions in employment law cross-refer directly or indirectly to the role of the Employment Appeal Tribunal in making awards of compensation under sections 67 and 176 of the 1992 Act. They also need to be deleted or amended to allow for the proposed removal of the Employment Appeal Tribunal's jurisdiction to set compensation.

The Secretary of State for Trade and Industry set out the Government's purpose in bringing forward these amendments at the Labour party conference last September. She said:

''It is wrong that racists should be allowed to hide behind their political party membership to prevent unions from excluding or expelling them for their offensive conduct''.

New clause 8 removes that possibility. It helpfully clarifies the law, yet it retains the essential freedom to belong to a political party. Our other amendments tidy up the division of legal responsibility between the Employment Appeal Tribunal and employment tribunals and give greater scope to tribunals to use their judgment when awarding compensation. I urge the Committee to join me in commending the new clauses and consequential amendments for inclusion in the Bill.

Jonathan Djanogly (Conservative, Huntingdon)

The new clause amends section 174 of the 1992 Act relating to the right to exclude or expel from a trade union. I read it on Friday when it first came in. I read it on Sunday. I read it yesterday, and I read it again this morning. Having read it several

times, I find the drafting unintelligible and the purpose vague to the point of obscurity.

Under the 1992 Act, the exclusion or expulsion of an individual from a trade union is permitted if, among other things, exclusion or expulsion is entirely attributable to his conduct. As the Minister suggested, the Government are proposing to substitute ''his conduct'' in section 174(2)(d) with the massively cumbersome phrase,

''conduct of his (other than excluded conduct) and the conduct to which it is wholly or mainly attributable is not protected conduct'',

which makes anyone's eyes water. As I said earlier, the new clause will be looked at by a lot of people between now and Report, so it is not the be all and end all but the start of the process.

Excluded conduct is conduct that may not lead to exclusion from a trade union. It includes being a member of another trade union, being employed by a particular employer, failing to support industrial action and so forth. Protected conduct, which is conduct that may not in itself lead to exclusion from a trade union, consists in the individuals being or ceasing to be, or having been or ceased to be, a member of a political party.

The new part of the Government's proposal lies in the introduction of new subsection (4B), which states:

''Conduct which consists of activities undertaken by an individual as a member of a political party''

is not protected conduct. That means that, for instance, a member of the British National party cannot be excluded from a trade union just for being a member of the BNP. However, he could be excluded for activities or conduct taken as a member of that party.

Let us start putting it another way, because the new clause does not deal with the BNP. Let us say that the anti-racist cause goes badly, the BNP starts winning more seats in Burnley, it consolidates a power base, consolidates a power base in unions, and unions suddenly realise that BNP members whom they had considered to be entryists and troublemakers are beginning to enter the mainstream and to establish power bases.

In more likely circumstances, let us say that the BNP's influence grows and there is a big bust-up in the union, the BNP people are expelled and they set up their own union. In the new union or one that they have taken control of, a member of the Communist, Labour or Conservative parties could not be excluded from the union just for being a member of one of those parties, but they could be excluded for activities undertaken as a member of the party. That could presumably mean being involved in events designed to enhance race relations, as long as exclusion was not done in a racist way, in which case the union would be prosecuted under other statutes, such as the Race Relations Act 1976.

Under those circumstances, are there not dangers in allowing unions to decide what is or is not acceptable

conduct? Would it technically be possible, for instance, for a public sector union to throw out a Labour or Conservative party member for sending their children to a private school or for a using private health care? That clearly goes against the ethos of the public sector union concerned. Would it be possible to throw someone out for going fox hunting?

There are significant problems with the drafting of the new clause, partly because it does not talk about racism or the BNP at all. Therefore, it has become very wide. It might be helpful if the Minister could explain which activities he has in mind. What activities would that BNP member have to undertake? Let us take a narrow version. What would they have to do to be subject to expulsion? The new clause does not deal at all with someone who is not a member of a political party but who is a racist and who could be a lot more racist than someone who is a member of a racist political party. [Interruption.] Well, yes, but why not just rely on other legislation?

Why is the new clause drafted so widely? I assume that that was on the basis of human rights advice that the Minister received. I should be grateful if he could expand on that. The width of the new clause means that, if the circumstances were right and the wrong people took control of the union, the legislation could be used for a purpose almost exactly opposite to that which the Government intend and certainly in a counter-productive way. Could legal and democratic activities, such as taking part in demonstrations and exercising freedom of speech, be banned under the new clause? Clearly, human rights advice has destroyed the original purpose of the new clause, but it harbours dangers that could attack the freedoms that we take for granted. I have raised quite a few issues there. I look forward to hearing what the Minister has to say.

Jim Sheridan (Labour, West Renfrewshire)

May I say at the outset that the aims and objectives of most, if not all, trade unions are made perfectly clear in the union's rulebook? Any applicant wishing to join a trade union is made aware of its aims and objectives. Indeed, most rulebooks are made up from the thoughts and contributions of the membership. Sometimes we get locked into talking about trade unions as if they were abstract organisations. In my experience trade unions operate for and with their members and, indeed, exclusively for them. As a result, expulsions or exclusions are extremely rare in trade unions.

Trade unions have the ability to look forward. Even when expulsions or exclusions take place, the decision is taken not by one member but by the lay members themselves. When a member is expelled from a trade union, they have a lengthy and transparent appeal structure where lay members would ask pertinent questions and they could put forward their case.

I am concerned that far right racist parties are using the trade union movement as a vehicle to spread their racist poison. Any right-minded person who cannot see that gives me cause for concern. It is only right that this Bill should seek to stop that kind of racist intimidation. If trade unions exist for anything, it is to stop discrimination against anyone at the workplace, and I would like to think that that work will continue.

The hon. Member for Huntingdon poses the question about far right organisations becoming power bases in trade unions. That may well be the case. However, the first thing that they will have to do in order to gain the power base is to convince the membership of that trade union of the rights of their case. I find that highly unlikely. Therefore, I do not see that far right organisations such as the BNP would have the ability to convince people and form a power base within the organisations.

It is certainly my experience, and perhaps my hon. Friends would agree, that trade unions are by far the most democratic organisations in this country. Should people wish to join and to participate in the aims and objectives of a trade union, they do have that right. However, they cannot do so surreptitiously, in order to further their own causes, and that is the problem I have with far right organisations.

In terms of intimidation at the workplace, there is plenty of anecdotal evidence that organisations such as the BNP are using intimidatory practices to put forward their own particular view. Membership of a trade union, as I have said from the outset, aims to stop discrimination and racism, and the trade unions have a proud record of supporting that. This Bill goes a long way to protecting those who do not wish to be taken over by such organisations as the BNP.

Jon Cruddas (Labour, Dagenham)

I, too, welcome the new clause, but in contrast to the hon. Member for Huntingdon, who deems it to be drawn too wide, I have one slight concern about it being too restrictive. As we know, trade unions are increasingly a target for infiltration by the BNP, specifically in the railway industry at the moment, although we can assume that it will go further. I do not see why trade unions should have the freedom to decide for themselves who their members are, but I appreciate, given the history of labour law over the past 20 years, why we are in the position that we now occupy.

I mentioned my concern in an intervention earlier, and I would now like to flesh that out slightly. I think that new subsection (1B) overcomes the concerns that the hon. Member for Huntingdon raised about expulsions on the basis of being opposed to fox hunting or of sending a sibling to a private school, because it specifically says:

''that the other conduct to which the exclusion or expulsion was attributable consisted wholly or mainly of acting in a way which was contrary to the rules of the union''.

Jonathan Djanogly (Conservative, Huntingdon)

My whole point in that example was that it was a public sector union, and therefore the concept of private schooling or of private health care would run totally contrary to the ethos and purpose for which the union was established.

Jon Cruddas (Labour, Dagenham)

My point is precisely about the ethos of the union, rather than about its rules. It seems to me quite possible that none of the issues raised earlier by the hon. Gentleman would be covered by the Bill as it is currently drafted, because of its specific reference to the rules of the union. The new clauses as they stand seek to deal with BNP infiltration, but they might not deal with issues of BNP activity that are against the ethos of the union, but that do not fall foul of the rules

themselves. Again, to repeat myself, I acknowledge the point made by my hon. Friend the Minister earlier when he said that we will be looking at this more closely. There might be a case for broadening the definition in new subsection (1B) from

''contrary to the rules of the union''

to one involving the activity being inconsistent with the rules and objectives of the union.

Gerry Sutcliffe (Labour, Bradford South)

This has been a useful debate on the important issue of the infiltration of trade unions by far right organisations. I am not trying to put the hon. Member for Huntingdon on the spot, but I want to be clear that he supports the Government's aims and objectives. I should like him to confirm his party's view on Second Reading.

Jonathan Djanogly (Conservative, Huntingdon)

Our party is against racism in the workplace but the new clause does not deal with that.

Gerry Sutcliffe (Labour, Bradford South)

I understand and accept what the hon. Gentleman says about the new clause. The issue is complex and I do not want to put him under too much pressure. The new clause must be read in the context of tribunal case law, which is evolving as we speak.

The hon. Gentleman's concerns about the boot being on the other foot, and what will happen if things go horribly wrong are unjustified as there is a provision for unions to change their rules. I would hate to see the consequence of that, but I assume that the BNP members of a trade union would change their rules and that individuals' operations would be dealt with under the heading of conduct. As the hon. Gentleman said, unions have powers to expel people who operate outside their rules.

The new clause is specifically about political activity—the hon. Gentleman is right about the human rights requirements. We have been very careful not to be too prescriptive and, as I said to my hon. Friend the Member for Dagenham (Jon Cruddas), I will look at the issue in greater detail to try to sort out the objectives. As my hon. Friend the Member for West Renfrewshire (Jim Sheridan) pointed out, unions are democratic and their operations are open and transparent. They are an integral part of our society. More than 7 million people are members of trade unions. They are powerful organisations and it is wrong for political activists from the far right to try to infiltrate them.

We are operating in the spirit of what we are trying to achieve and I hope that the fears expressed by the hon. Member for Huntingdon will not be realised. We will consider the aims and objectives of the unions as well as their rule books. I commend the proposal to the Committee.

Jonathan Djanogly (Conservative, Huntingdon)

There is an assumption that entryism will not lead to racist activity within unions becoming the mainstay, but I give the example of a textile business in the east midlands in the mid-1970s that reclassified its Asian workers as machine workers rather than cleaners. The unions rejected it on the basis of race and went on strike for months. There was clear evidence of entryism by the National Front, which organised the strike.

I have listened to the debate with great concern. I assumed that in a democratic, freedom-loving country such as ours such things do not happen, but they have happened and do happen. I disagree with people who take the view that we should just ignore racists, or put the matter under the table and not give it oxygen. That is the wrong approach. We must confront these things and deal with them. There is nothing in the new clause that will stop intimidation or racism per se. If there were, we could have a sensible conversation about it.

Jim Sheridan (Labour, West Renfrewshire)

The hon. Gentleman is absolutely right that the Bill will do nothing to stop intimidation or racism, but does he agree that it gives unions a tool to deal with racism and intimidation?

Jonathan Djanogly (Conservative, Huntingdon)

In fact, the Bill may give racists and BNP supporters a platform to question decisions taken by unions and may, in some ways, give such people more air time than they might have got otherwise. The Bill will not deal with the root of the problem.

Gerry Sutcliffe (Labour, Bradford South)

I am grateful to the hon. Gentleman for what he has said and I understand his concerns, but I urge him to read the Bill again or, if he has read it a third time, I urge him to read it a fourth, fifth or sixth time, and perhaps he will be convinced by the strength of the arguments in the context of the cases that have arisen so far and what we are trying to achieve.

The democratic freedom is there. There is a right to be a member of a political party. We have maintained that ability. The issue is activities. As a consequence, I am told, of what the Government propose, the BNP will try to recruit trade unionists. I am prepared to have that argument—it should be out there and up front. The hon. Gentleman talks about giving racists and BNP supporters more air time than they deserve. Currently, they do things behind the scenes—behind closed doors. I want us to bring the issues and the arguments out into the open. The new clause will help trade unions to deal with the matter under their rules, but we need to have the debate in the open. Let us see what the BNP's recruiting strength would be if it did things in a proper way.

Jonathan Djanogly (Conservative, Huntingdon)

While the argument was so interesting on new clause 8, I ignored new clause 9. I do not want to stop the flow of the debate, but I note that that is another new clause that was tabled late. Indeed, I do not believe that it was even mentioned in the Minister's letter of 25 February, so it really was one from out of the blue. In justifying the changes, he mentioned that the current procedure involves unnecessary costs and complications, but he did not give details. It would be helpful if he could give slightly more detail and perhaps some figures and facts according to which the new clause could be reviewed.

Gerry Sutcliffe (Labour, Bradford South)

I shall write to the hon. Gentleman with those details and ensure that I hand-deliver the letter.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 9 - Applications no longer to be made to

New clause 4 - Unofficial industrial action

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I beg to move, That the clause be read a Second time.

The new clause stands in my name and that of my hon. Friend the Member for Gordon (Malcolm Bruce), who cannot be here today. Earlier, the Minister said that the employment relations environment was pretty good, and obviously we very much welcome that. I hope that, in that spirit, hon. Members on both sides of the Committee will welcome the fact that my colleague and I tabled the new clause to rehearse a concern that is on the horizon or,

perhaps, closer than the horizon. We raise the issue in the spirit of ensuring that employment relations continue to be based in a good way and to be good.

Part 2 of the Bill relates to industrial action and is essentially about clarifying the requirements for conducting ballots and issuing notices to employers with regard to official strike action. Part 3 strengthens unfair dismissal protection for striking workers in cases in which they are locked out, as happened in the Friction Dynamics case, to which the Committee has already been referred.

All that is welcome when it comes to clarifying workers' rights and setting out the position of employers. However, one key area that the Bill fails to address is the increasing problem of unofficial strikes. Last week, Royal Mail revealed that it is unlikely to meet its end-of-year targets for delivering letters on time. It is important that post is delivered on time, particularly for small firms receiving cheques. The recent postal action may have a great impact on small firms. Having run a small firm, I know that one can be in a tight situation, just waiting for that cheque to come in to enable one to pay someone else.

There has been much concern about that issue. I asked the Department of Trade and Industry about it, but I believe that the answer stated that there is not enough evidence. Clearly, there is anecdotal evidence that a strike such as that at Royal Mail can have a big impact. That strike was disastrous for the public and businesses, both of which rely on Royal Mail. If a business is delayed in banking a cheque, it can be a big problem. That should be of great concern to us. As I said, I did not get a sufficient answer to my question to the DTI.

Unfortunately, last autumn's strike was not an isolated incident but may be part of a trend. It is worrying that the number of unofficial strikes over the last decade has risen. As Dr. Gregor Gall of the university of Stirling recently pointed out in an editorial letter to The Guardian, while overall strike activity has fallen by around 80 per cent. since 1979, which we all welcome and which is probably the basis of the Minister's comments, overall, unofficial strike activity has fallen by about 40 per cent. Obviously, those figures have not fallen by the same degree. Since 1991, the percentage contributed by unofficial strikes, in terms of strike frequency, has grown—so the proportion of unofficial strikes has grown.

Only when there was a rash of high-profile unofficial strikes at the end of last year was that issue highlighted, although it has been going on for more than a decade. The cycle started in late July 2003 when British Airways check-in staff at Heathrow went on strike to protest against BA's plans to introduce a swipe-card system to record what time staff began and finished work. Not only did that strike affect as many as 100,000 members of the public, but it cost BA £40 million. There was also the postal strike, to which I have referred, and action by fire service personnel. Although the Fire Brigades Union did not publicly condone the strikes by its members, its general secretary, Andy Gilchrist, tried to explain the reasons behind the strike and said that union members were extremely angry at their 7 per cent.

pay rise. That is another example of a wildcat-type strike.

Bill Tynan (Labour, Hamilton South)

Does the hon. Gentleman accept that there are measures in place that can be used when unofficial action takes place? For example, funds can be sequestrated from the union, and members who strike unofficially can be dismissed. What measures does the new clause contain that are not already in place?

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I thank the hon. Gentleman for that question, to which I will return shortly. There are such measures in place, but, unfortunately—and one of my intentions in tabling the new clause was to highlight this fact—such actions were not necessarily taken during the recent strikes.

In the royal commission chaired by Lord Donovan in 1968, unofficial strikes were described as being mainly sporadic and very short, yet at the same time very effective because they provoke an immediate reaction from the officials or the employers. In addition, only a handful of unofficial strikers have been sacked under the Employment Act 1990, and it is debatable how effective current regulations are. I say again to the Minister and colleagues that they might welcome that the environment for employment relations is very good but the purpose of this new clause is to highlight the concern on the horizon. We have had two or three high-profile unofficial strikes in recent times. It is something with which we need to be concerned, because it can be damaging not just to the general public and to individual firms, but to the whole climate between employers and the trade unions.

Jonathan Djanogly (Conservative, Huntingdon)

While not exactly concurring with the wording of the proposed new clause, there is much sense in it. One of the bizarre facts mentioned by the hon. Member for Weston-super-Mare (Brian Cotter) was that the more powers the unions have received under this Government, the more employee regulations—the weighing down on companies—and the more unofficial industrial actions there have been in recent years.

One of the problems I have with the new clause is that the proposal is for the Secretary of State to be in the driving seat, providing for penalties and so forth. We have a Secretary of State who, during the recent unofficial post strike, sat on the fence and refused consistently to come out and say that the unofficial strikers were wrong. Therefore, I would be highly dubious of giving her the powers to curtail the action.

John Lyons (Labour, Strathkelvin and Bearsden)

Subsection (2A) of the new clause really shifts the emphasis back from trade unionists holding responsibility—a point made by my hon. Friend the Member for Hamilton, South (Mr. Tynan)—to individual members of trade unions being held responsible. That would be a dangerous mistake, because all of us agree that there has been a great change in industrial relations. The partnership is working well. Agreeing to the new clause would reverse some of that.

Under the new clause, first, employees will be held responsible as individuals, not the trade unions—that has been working well in my opinion. Furthermore, it

will need to be decided what penalty to take against an individual who refuses to comply. One of the great lessons of industrial relations in this country, and the Conservative party learned it very quickly in the 1970s, is that it is pointless trying to take action against individuals. One ends up jailing dockers, the country starts coming to a halt and one needs to bring them back out again. The National Industrial Relations Court and other legislation at that time recognised all that. It was a waste of time. No progress could be made at all. It was one of the strengths of the Conservative party at that time that it understood that lesson very quickly and changed the law for that reason.

The new clause would reverse all that and put back the responsibility on the individual. It will fail; it would be a waste of time. One would need to deal very seriously with the matter if someone refused to comply. Under the new clause, industrial relations would worsen, and the record and climate would worsen. Trade unions would be able to say, ''It is all about the individual, it is not about us.'' In law, the trade unions are now held responsible. That should continue. That makes progress. Anything other than that will turn the clock back and worsen industrial relations.

Gerry Sutcliffe (Labour, Bradford South)

It goes without saying that I support the comments of my hon. Friend.

New clause 4 concerns the law governing unofficial industrial action, a subject that was raised by the hon. Member for Gordon on Second Reading. I think that the hon. Member for Weston-super-Mare will accept that the new clause is deficient in terms of the powers and penalties. The provision on the penalties is not clear at all. However, I shall put the drafting problems to one side, and try to deal with issues to do with policy presumptions that the hon. Gentleman is trying to develop.

The hon. Gentleman is concerned about the level and nature of such unofficial industrial action. He points to last year's postal strike in London as the main evidence that a pressing problem exists. Occasionally, large or high-profile strikes occur. That is part and parcel of living in an open and liberal democracy. Although any breakdown of industrial relations is to be regretted, the freedom to withdraw one's labour is an important entitlement in any democratic society, and we must all respect that, but are such major strikes, official or unofficial, typical of our industrial relations today? The answer is no.

As I said earlier, the number of stoppages in 2003 was at an all-time low, and records began in 1920. In 2003, the number of working days lost through industrial action was less than 500,000. That is a small fraction of the 7 million days lost annually in the 1980s. Official statistics do not distinguish between official and unofficial action. There are therefore no reliable figures on unofficial action. However, because stoppages are at an all-time low, there is no indication that the number of cases of unofficial strike action has

risen significantly. Unofficial action tends to be short-lived and usually represents a spontaneous reaction by the workers concerned to a serious incident at work.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I am not sure on what basis Dr. Gregor Gall of the university of Stirling made the contention that there has been a fall in strikes, but there is a higher proportion of unofficial strikes than before. I do not know on what basis he made his statement. The idea that strikes have gone down is in the public arena, but as big a proportion are unofficial as before.

Gerry Sutcliffe (Labour, Bradford South)

I can only go by the official figures given to me. I will look at the evidence again. If the hon. Gentleman wants to pass on the doctor's evidence to us, we will look at that. Without having looked at that evidence, and certainly on the official figures, I can say that there is no suggestion that we are heading for the development of further major unofficial strikes.

Another presumption behind the new clause is that the current law on unofficial action is ineffective and has major loopholes that ill intentioned militants and unions can exploit. That point has been made. The Government have retained the law on unofficial action that we inherited in 1997. That body of law already contains powerful disincentives for those taking or contemplating unofficial action. For the individuals concerned, there are no protections against dismissal. In my experience, workers think very hard indeed about taking any form of industrial action. An issue has to be very serious for people to take that step. A loss of wages practically always results, relations at work may deteriorate and, in the case of unofficial action, workers risk losing their livelihood.

The hon. Member for Weston-super-Mare maintains that unions can tacitly support unofficial action that their local officials are fomenting. I should point out that unions can lose their immunities if that is the case. Large penalties of up to £250,000 could follow, depending on the number of members in the union. To avoid such serious consequences, the union must repudiate the action as soon as is reasonably practicable after it has come to its knowledge. In other words, the union must take steps publicly to dissociate itself from the action. There are various steps involved, which the law lays down. Let me go through them.

The repudiation must be taken by the most senior figure in the union—that is, by the executive, president or general secretary. That is not therefore a matter that can be delegated to a minor official who carries no weight or authority among the membership. A written notice of the repudiation must be sent to the union committee or official concerned, so that local lay representatives are left in no doubt that they should not be instigating or supporting the action.

The union must do its best to give written notice of the fact and date of repudiation to every employer concerned and to every member who could potentially be involved. That might mean many hundreds of letters. That written notice of repudiation must contain a statutory warning that reminds the members that, while taking unofficial action, they have no right to complain of unfair dismissal, so the individuals know the risk that they are taking. Those

steps are far from trivial; indeed, unions sometimes complain that they are too onerous.

Moreover, after repudiating the action, the law requires the senior figures in the union to behave in a way that is consistent with that repudiation. That prevents the union from repudiating the action one week and then acting to support it soon afterwards. It means that unions must continue to take action to ensure that their lay representatives do not organise or direct the unofficial action.

The hon. Gentleman thinks that unions may use surreptitious means—nods and winks—to give moral or other support to unofficial action. That is a dangerous action for a union to follow. Such actions—or failures to act—can land the union in serious trouble. They would mean that that union had failed to repudiate the action.

The new clause is poorly worded and unnecessary. There are already strong disincentives to taking or organising unofficial acts for both unions and individuals, and there is no evidence to support the case that unofficial action is increasing. I ask the hon. Member to withdraw his the new clause.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I thank the Minister for his response and the opportunity to raise that issue as a warning. I am sure that he will acknowledge the support of Liberal Democrat Members. We want to see good employment relations, and such matters are, generally speaking, resolved in a satisfactory way nowadays.

The Minister has reiterated the steps that can be taken to repudiate unofficial action. I hope that that gets into the public arena, so that we can avoid any possible growth of unofficial action. That could be damaging to employees and to the whole climate of relations. I hope that the Minister is right in saying that those matters will not increase and that those outside the House will take note of what should and what needs to be done. That should help us to avoid the growth of unofficial action, while accepting that people are entitled to withdraw their labour if they feel they have been treated unfairly. On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New clause 6 - Tips, etc., not to be taken into account

Bill Tynan (Labour, Hamilton South)

I beg to move, That the clause be read a Second time.

Although the new clause is simple, it would be effective. Although it stands only in my name, I am confident that many Committee members would support it if it were pressed to a vote. I hope that the Minister will accept it.

I wish to pay tribute to my hon. Friend the Member for Falkirk, East (Mr. Connarty). He promoted a ten-

minute Bill in July. Here we are, nearly a year on, and there has been no progress in the matter. There is an ideal opportunity to insert a new clause in the Bill. I hope that the Government recognise the blatant unfairness of the existing legislation.

Nearly 2 million people in the service industry receive tips from people in one way or another and they could benefit from the new clause. Individual or pooled tips or gratuities should be paid either to the individual or the group. The employer should not be able to use them to subsidise the national minimum wage.

I speak from personal experience. A long time ago, when I was a young child, my sister worked in the service industry as a waitress. In the evening, my parents had to wait to see how much tip money she brought home in order for us to be able to eat the next day. That is how serious the situation was in those days. I am not saying people are in that position now, but they could be. We should look at the matter seriously.

My hon. Friend the Member for Falkirk, East spoke about head waiters being able to take 80 per cent. of the gratuities or tips before dividing the other 20 per cent. among the staff to whom the customers believed they had made a contribution. That needs to be highlighted. It is important. The National Minimum Wage Regulations 1999 state that

''service charge, tips, gratuities or cover charge that is not paid through the payroll''

are excluded from payments toward the minimum wage. That means that other tips are counted towards it. The consequences for 1.8 million people working in the service industry, 67 per cent. of whom are women and 40 per cent. of whom are under 25, are significant. Some 1.8 million people may not be getting what they are entitled to. There was a case that went to the High Court, which decided that the ownership of tips through cheque and credit cards first passes to the employer. That judgment was incorporated into the National Minimum Wage Act 1998 and the 1999 regulations. However, the case was thrown out by the European Court of Justice.

I ask the Minister to look seriously at changing the legislation and adopting the new clause to rectify the injustice and unfairness that happens at present. Nearly 2 million people could benefit. It would be a wonderful plaudit for the Government, along with all the other plaudits that they get, to introduce a new clause of this nature into the legislation. I seriously hope that the Minister will accept the new clause.

Gerry Sutcliffe (Labour, Bradford South)

I understand and have some sympathy with the purpose of the new clause. However, it would not achieve the desired effect. As my hon. Friend the Member for Hamilton, South has said, many hon. Members will recall the private Member's Bill tabled by my hon. Friend the Member for Falkirk, East in July. The new clause clearly carries on the spirit of that Bill; it is intended to ensure that any service charges or cash tips paid by customers should belong to the workers and be additional to the minimum wage.

Let me make it clear that any cash or other tips that are not paid through the employers' payroll do not count towards the minimum wage at present. That is the case whether the cash tips are taken off the table by the waiter or paid through a centralised system. It is already illegal for employers to pay their staff £3 an hour and oblige them to make up the difference through tips.

The regulations were drafted to refer to payments that are not made through the employers' payroll for a number of reasons, but primarily because the long-standing approach, taken under previous legislation, including the wages council legislation, has been that money passing through the employers' books belongs to the employer, and that what counts for the pay calculation is the money paid by the employer to the worker. A pragmatic decision was also taken that the Government should avoid getting drawn into regulating the extremely complex systems for the distribution of tips that exist in the restaurant sector.

As I have said, I understand the aim of the new clause. There is probably general sympathy for the view that tips, but not necessarily service charges, should belong to the waiters, although perhaps other workers also deserve recognition.

It might be helpful to explore how the new clause would work. It makes it clear that all service charges, tips and so on should not be counted towards the minimum wage, whether they are paid through the payroll or not. In effect, it says that the employer must put all of these moneys into a separate fund, and that that fund should be shared out between the workers and paid on top of the minimum wage.

The first difficulty is that the new clause does not state which workers should be paid out of the fund, or what proportions of the fund should belong to each worker. That is not necessarily a problem for minimum wage enforcement officers, but it could be a recipe for confusion. It might be possible for an employer to pay almost all the fund to one favoured worker, and very little to all the others. The new clause would not tackle that.

However, the deeper problem with the new clause is that it creates an unworkable situation; it does not prevent employers from passing tips through the payroll. It would therefore be extremely difficult for enforcement officers to decide whether the correct amount of money—cash, in particular—had been carried through the payroll in each pay reference period.

Let me give a practical example. If an employer paid a worker £4.75 an hour, how could an enforcement officer determine whether that complied with the minimum wage? That would be extremely difficult. The officer would need to find out exactly how much was paid to the restaurant in each pay period in the form of cash tips, service charges and so on. Cash transactions can be especially difficult to monitor. The officer would then need to track all those amounts through the employers' payroll to establish whether the correct total figure for tips and service

charges had been passed on to the workers. It would then be impossible for him to decide whether the amounts paid by the employer to each worker were correct, because, as I mentioned earlier, the new clause does not say which workers should benefit from the tips, or what percentage of the total they should be entitled to receive.

In conclusion, legal intervention into this extremely complex area is difficult. Tackling the question of how much employers should pay on top of the minimum wage and how that should be calculated would be a significant change in the Government's approach. I assure my hon. Friend the Member for Hamilton, South that we have considered the matter closely, and it is hard to see a clear way forward at the moment. I understand his reasons for tabling the new clause. Although the Government cannot accept it, I assure him that we will keep the position under review.

Bill Tynan (Labour, Hamilton South)

I welcome the Minister's contribution, although I do not agree with much of it. I honestly believe that it would be easy to identify which workers should receive a tip because when I go into a restaurant—which is infrequently—whoever serves me receives the tip. It would be easy to identify how much is paid to the individual worker within an establishment, and the tips would be an add-on. Under the circumstances, I ask the Minister to consider continuing discussions about this complex issue.

Gerry Sutcliffe (Labour, Bradford South)

I appreciate the spirit of what my hon. Friend is trying to achieve, and I will consider further discussion on the matter. I would be happy for him to meet officials and to work out a way through such a complex area. With his expertise, he may be able to find ways forwards that others have not thought of.

Bill Tynan (Labour, Hamilton South)

I thank the Minister for that intervention and, under the circumstances, I would be delighted to withdraw the motion. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Clause 43 ordered to stand part of the Bill.

Clause 44 - Corresponding provision for

Clause 45 - Citation, commencement and extent

Schedule 1 - Minor and consequential amendments

Schedule 2 - Repeals

Title

Gerry Sutcliffe (Labour, Bradford South)

It is usual at this time for me to thank you, Mr. Forth, and Mr. Stevenson for chairing our proceedings so excellently. You have led us through difficult times, and the Committee is grateful for your advice and support. I also thank the Clerks, the Hansard reporters, the police and the attendants for their support in the work of the Committee throughout its deliberations.

I enjoyed the contributions of the hon. Member for Huntingdon, although I have not always agreed with them, which was evident. I would like to pass on my regard to the hon. Member for North-West Norfolk for leading on the Front Bench, and to the hon. Members for Weston-super-Mare and for Gordon for their work. I also thank my excellent colleagues and hon. Friends for their sterling work throughout the lifespan of the Committee. I am sure that on Report we will have further discussion and deliberation.

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

I, too, wish to thank you, Mr. Forth, and Mr. Stevenson for chairing this Committee. It has generally been very good-natured, and I hope that it will result in an improvement in relations between employers and employees. I also thank the staff and the support staff for their work.

I particularly welcome the attempt by the hon. Member for Hamilton, South to address the issue of tips. I sat on the Committee that dealt with the minimum wage. There was an all-night sitting, which was tiring and difficult. I am glad that we did not have one under your chairmanship, Mr. Forth, and that of Mr. Stevenson. On tips, I always try to slip a few coins into the hand of the person I want to give the money to. That is one of the best things to do.

Jim Sheridan (Labour, West Renfrewshire)

Silver or gold?

Brian Cotter (Liberal Democrat, Weston-Super-Mare)

Gold, of course.

I thank everyone, including Members on the Government Benches whose expertise, knowledge and experience have led to elucidation on some points. Their contributions have been helpful.

Jonathan Djanogly (Conservative, Huntingdon)

I thank you, Mr. Forth, and Mr. Stevenson for your chairmanship, and the Clerks and the support staff for making it a well-run Committee. It has been well managed and there has been a generally positive attitude from all parties—at least to moving the legislation forward—and there has almost invariably been good humour.

Question put and agreed to.

Bill, as amended, to be reported.

Committee rose at seven minutes past Eleven o'clock.