Lord Leong (Lab)

My Lords, I thank all noble Lords who have spoken in this debate. This Government are absolutely clear that the use of unscrupulous fire-and-rehire practices must end. Employers should not be able to impose contract changes through threats of dismissal, except in the most limited and justified circumstances. We recognise that, at times, businesses may need to restructure to survive and protect jobs. The legislation accounts for such cases where there is genuinely no alternative and a business faces immediate financial difficulty. Fire and rehire may be used, but only following a proper good-faith process, grounded in open dialogue and mutual understanding. Let me begin by addressing Amendments 113ZA, 113B and 118 from the noble Lords, Lord Sharpe and Lord Hunt, Amendment 115 from the noble Lord, Lord de Clifford, and Amendment 116, spoken to by the noble Lord, Lord Goddard, on behalf of the noble Lord, Lord Fox. These amendments aim to exclude certain types of contract variations from the clause, such as those relating to terms other than pay, benefits, hours or location, or to allow changes made for good or operational reasons. When a change in contract is essential and the employee will otherwise become redundant—for example, due to a move in location—or where the changes are necessary to reflect a change in the law, the employer will still be able to explain to the employee when proposing these changes. However, such changes should always be a result of meaningful consultation. Employers and employees must reach mutual agreement, allowing both sides to understand and assess the impact of the proposed changes. Open dialogue is key. I turn to Amendment 114 from the noble Lord, Lord Sharpe, and Amendment 115. These propose broadening the permitted use of “fire and rehire” to include changes that are reasonably necessary to improve workforce productivity. The Bill is the first phase of delivering our plan to make work pay. We are supporting employers, workers and unions to get Britain moving forward. Alongside this and a new industrial strategy, the Bill will support the Government’s mission to increase productivity and create the right conditions for long-term, sustainable, inclusive and secure economic growth. The Government do not support these amendments. We believe this practice should be allowed only where an employer faces no reasonable alternative and is under imminent financial threat. The noble Lord, Lord Hunt, mentioned what happens if a company is facing insolvency. I am sure most noble Lords know that insolvency does not come straight away. There is a whole process, and it is during this that consultation should happen between the employer and employee. When it comes to the last resort, when until and unless something happens the company is going to go belly-up, there may be a practice of “fire and rehire”, but before that, there should be consultation along the way. These amendments would significantly widen the exemption and make it necessary for employers to use “fire and rehire”. That is not our intention. While businesses can still agree changes to boost productivity, such changes must come through proper negotiation, not coercion, as I just mentioned. I now turn to Amendment 119, also from the noble Lord, Lord Sharpe, which proposes allowing “fire and rehire” if the changes are reasonable and supported by a majority of affected employees. This issue here is subjective. What is reasonable for one employee may be deeply unreasonable for another. Our goal is to protect individual rights. Clause 26 is designed to reduce the use of “fire and rehire” as a means to push through significant changes without individual consent. I will address Amendments 117 and 122 from the noble Lord, Lord Fox, and Amendment 120 from the noble Lord, Lord Sharpe. They focus on whether dismissals for redundancy or the end of a fixed-term contract should be considered automatically unfair under Clause 26. The Government’s position is that, where a role is no longer viable under current terms, employers should follow due process, including meaningful consultation to seek agreement to vary contracts. If employees do not agree, and if the employer no longer requires the work to be done, redundancy may still be appropriate. In such cases, redundancy procedures must be followed, including consideration of alternative roles. Where the principal reason for a dismissal is redundancy, the dismissal will not be automatically unfair under Clause 26. Now I turn to Amendment 121 from the noble Lord, Lord Fox, which concerns variation clauses in employment contracts. I wish to reassure the House that existing case law already governs the enforceability of such clauses. This clause applies only where there has been a dismissal, and so would not apply where a lawful variation clause has been lawfully exercised. Courts and tribunals will not uphold variation clauses if they are oppressive and exercised unreasonably. This amendment is therefore unnecessary as a legal protection already exists. I now turn to Amendments 120A and 120B, which relate to the factors a tribunal should consider when assessing the fairness of a dismissal under the clause exemption. It is appropriate that tribunals should consider where the employer offered the employee something in exchange for agreed-to changes. Fair contract variation should be built on dialogue, not pressure. It is right that the Secretary of State should have the power to specify additional relevant factors for tribunals to consider in future. These regulations would be subject to affirmative resolution procedure, ensuring full parliamentary scrutiny. Finally, Amendment 113 from the noble Lord, Lucas, seeks to limit the clause to only substantial contract changes. We reject that. Even minor-seeming changes can have major consequences for individual employees. Individuals must be allowed to consider proposed changes without facing dismissal threats. That principle underpins the clause.