Official Report (Hansard)

Alternative Dispute Resolution

14 January 2009

Members present for all or part of the proceedings:
Ms Sue Ramsey (Chairperson)
Mr Robin Newton (Deputy Chairperson)
Mr Alex Attwood
Mr Paul Butler
Rev Dr Robert Coulter
Mr Alex Easton
Mr David Hilditch
Mr William Irwin
Ms Anna Lo
Mr David McClarty
Mrs Claire McGill

Witnesses:
Ms Julie Anne Clarke )
Ms Penny Holloway ) Labour Relations Agency
Mr Jim McCusker )
Mr Roden Ward )
Ms Carolyn Brown )
Mr John Friel ) Federation of small Businesses
Mr Wilfred Mitchell OBE

The Chairperson (Ms S Ramsey):
I welcome the witnesses from the Labour Relations Agency and thank them for attending this evidence session on workplace dispute resolution. Instead of me providing a preamble to your briefing, I ask that you introduce yourselves and ensure that your presentation lasts no longer than 10 or 15 minutes. After that time, members can ask questions and make comments so that the discussion can begin as quickly as possible.

Mr Jim McCusker (Labour Relations Agency):
I thank the Committee for inviting us to speak on this issue.

The Labour Relations Agency is a tripartite body, which is overseen by a chairperson. Its three constituent parts are the employers, the trade unions and the neutrals or independents. My colleague Roden Ward is an employer representative on the board, and Julie Anne Clarke is a lawyer from the neutral independent group. My background is trade unionism. Penny Holloway, the agency’s director of conciliation and arbitration, is standing in for our chief executive, who is ill.

The agency’s statutory duty is to improve employment relations. Essentially, we do that in two interconnected ways — we promote good employment practices and we help to solve disputes. We are here today to talk primarily about resolving disputes. However, I will say something briefly about good practices, because they underpin the entire system.

We run an enquiry service, and anyone can ring and ask for clarification on an employment matter. That enquiry line deals with nearly 3,000 calls a month, and it is used heavily by both employers — particularly smaller employers — and employees. The volume of calls has increased by more than one third in recent months, which is largely due to the economic downturn and, unfortunately, the increasing problem of redundancies.

We also run an advisory service. We had 153 cases in the first six months of the current year. To put that in context, 146 of those cases involved firms that employ fewer than 10 people and another 49 involved firms that employ between 10 and 50 people. It is clear, therefore, that our service is skewed towards the problems that face smaller businesses in Northern Ireland. We have workshops and seminars, which receive embarrassingly high ratings. In 99% of cases, the people who attend our seminars and workshops say that the courses were good or very good. We rarely receive feedback that says that the courses were poor or merely fair. We also have information guides on codes of practice and an extensive website that is frequently used by people seeking answers to queries on employment law. That is an outline of the good-employment-relations side of the agency.

The other side of the agency’s work is dispute resolution. Disputes, essentially, fall into three types: individual, collective and multiple. The present review is focused on the individual disputes. In an individual dispute, a claim can be lodged with the industrial tribunal or the fair employment tribunal, and it is then referred to the agency for conciliation. We have conciliation officers who work with both parties to try to resolve a dispute. Only 20% of claims that are lodged proceed to a tribunal hearing, so 80% are resolved in another way; claims are sometimes withdrawn, for example. The agency is very active in helping to ensure that disputes are resolved at the lowest possible level.

One issue for consideration is that the current legislation contains a requirement for conciliation to be provided for a seven-week — or sometimes 13-week — period. Our colleagues in Great Britain adhere fairly rigidly to that timescale, but we have adopted a more flexible approach in Northern Ireland. We do not tend to withdraw our conciliation services quite as rapidly as our GB counterparts do. We have an officer in attendance at the tribunal office, who tries to resolve disputes right up to the door of the tribunal, and sometimes even during the hearing.

We also deal with what we call pre-claim disputes, which have not been registered with tribunals. In the last financial year, for example, we helped to resolve 530 cases that were never registered with a tribunal. In the first nine months of this financial year, the figure has increased to 660 cases. That rise is, unfortunately, a further indication of the current economic situation.

The Labour Relations Agency has discussed the issue of the review with our stakeholders, the employers, the trade unions and others. According to the Department’s initial consultation, consensus has been reached that tribunals are not the best method for the resolution of disputes, particularly if there is an ongoing employment relationship. That is not so critical if there has been a dismissal and the employment relationship has ended. However, if the employment relationship is continuing, the tribunal system tends to be very adversarial and does not help employment relations. Furthermore, one must consider the costs involved in going to a tribunal. We have estimated that, in the first eight months of this financial year, we have saved 4,000 tribunal days, which equates to something like 17 working years.

While there is consensus that disputes should be resolved without having to resort to a tribunal, there is no consensus on what other methods should be used. As the Committee will be aware, there is a statutory requirement in the current legislation for a three-step process in cases of dismissal. First, the employer must notify the employee in writing of the dismissal. Secondly, the employee can then ask for a meeting about the dismissal, and, thirdly, the employee can appeal, and a meeting must be held. That provision was enshrined in legislation in Northern Ireland in 2005, but it has been repealed in Britain, and many believe that it inhibits the resolution of disputes. There is a consensus that that provision should be repealed in Northern Ireland also. However, what would replace it if it were to be repealed?

There is consensus that there should be more engagement in alternative dispute resolution, and that raises the question of whether there is a greater role for mediation. However, that is also problematic, because mediation is unregulated. Anyone can call himself or herself a mediator, despite the fact that certain qualities and understanding are required. That makes the promotion of mediation difficult, but it is certainly something that the Labour Relations Agency would like to see more of. We believe that disputes should be resolved in-house, at the lowest possible level, perhaps with some facilitation from the agency. Furthermore, we believe that mediation services should be provided in-house for most parts of the public sector and for the larger firms in the private sector. However, there is a problem in how mediation services can be provided for small firms, and that requires further consideration.

Other issues that are on the horizon for the agency are the provision of simple guidelines on the grievance and discipline procedures and an enhancement of our information and advice services. Furthermore, tribunal forums must be simplified, and we must improve the handling of what we call multiple cases. Those cases arise when employees who work for the same employer submit identical claims. Of particular worry to the agency is the issue of equal pay claims — particularly in the public sector — which arise from a variety of circumstances. How those claims are handled is particularly problematic, as they are different from the normal, individual claims.

Another issue that we wish to bring to the attention of the Committee are the differing circumstances in Northern Ireland and Britain, the first of which is the tendency to link discrimination with employment issues in Northern Ireland. For example, claimants in unfair-dismissal cases here have a much greater tendency than their counterparts in Britain to state that the unfair dismissal is motivated by gender, religious or age considerations. Such a linkage makes those cases much harder to deal with. Secondly, employment here is more dependent on small and medium-sized enterprises. Thirdly, people in Northern Ireland tend to be more litigious than those in other regions.

In summary, our consultations confirm that the Labour Relations Agency is valued and trusted by employers, unions, lawyers and academics. Secondly, we believe the agency to be effective in resolving disputes. A dispute that comes to the agency before being lodged with a tribunal is resolved within weeks or possibly days, whereas a tribunal resolution might take months or years. Thirdly, the agency’s board has a wealth of experience in employment relations, and it is developing ideas on dispute-resolution procedure. As those ideas develop, we would welcome the opportunity to share them with the Committee.

The Chairperson:
Thank you very much Jim. On a personal note, I have often referred individuals who were seeking advice about their jobs to the Labour Relations Agency, and they have achieved positive outcomes. Thank you for that.

I wish to make a couple of points. The Minister for Employment and Learning has indicated all along that he has no particular view on the outcome of the Committee’s inquiry. Does the agency feel that change is necessary? Smaller employers are concerned that having to record everything in writing might create difficulties. The Committee’s next witnesses are from the Federation of Small Businesses. Are two separate bodies needed here, as opposed to the single body that exists in England? I know that the agency was part of the pre-consultation process, but I want to tease out some of those issues.

First, does the agency believe and accept that changes are needed and, if so, for what reasons? Then there is the issue of what small businesses are saying about their opposition. The aim is to get things right from the outset, but if small businesses face additional pressure, how can everyone reach agreement in order to avoid bigger disputes?

Mr McCusker:
The evidence is that people are dissatisfied with the present situation, because too many cases are referred to tribunals. The agency’s track record in Northern Ireland is better than its counterpart’s in Britain, in that only 20% of the claims that are lodged with tribunals proceed to a hearing, and even fewer are actually heard.

There is a consensus that the resolution of more disputes outside tribunals must be encouraged, which shows a definite need for change. There is also agreement on more active engagement in methods of alternative dispute resolution.

The question of the direction in which we move remains a subject of debate. The agency has looked at the experiences in Britain and in the Republic. Each has good elements, but whether either of them ideally suits Northern Ireland’s circumstances is questionable. The agency wants the way in which cases are handled in Northern Ireland to be considered. As I said, there is a tendency in Northern Ireland to attach discrimination to what, in Britain or the Irish Republic, would be straightforward employment issues. That issue must be carefully considered.

I said that the agency runs an advisory service that is heavily skewed towards micro-businesses. The agency’s workshops and seminars are greatly appreciated and heavily attended by representatives of small businesses. However, the agency constantly seeks to enhance its services to small businesses in Northern Ireland. My colleague Roden Ward may wish to comment on that from the employers’ view.

Mr Roden Ward (Labour Relations Agency):
It is in the best interests of everyone if disputes are handled at the lowest level possible, because the exacerbation of a dispute is the worst thing that can happen in any business; it makes the situation worse and more expensive.

The Labour Relations Agency has been involved in this game for the past 30-odd years, and it has a wealth of experience. As Jim said, employers, employees and everyone concerned in the field have a high regard for the agency staff. The Labour Relations Agency will do all that it can to ensure that disputes are resolved at the lowest level possible.

Further to what Jim McCusker said, a reduction in the amount of paperwork and forms that are required would be a bonus — especially for small businesses.

Ms Julie Anne Clarke (Labour Relations Agency):
The Chairperson mentioned small businesses. I am a lawyer who specialises in employment law. The resolution of workplace disputes is my bread and butter; it is what I am required to deal with daily. The complexity of employment law is such that I have difficulty keeping up to date with it, so I am sympathetic to employees and small employers; it is difficult enough for them to understand the law, let alone the way in which they should access it.

Processes should not be unduly legalistic or formal. To that end, an alternative dispute-resolution mechanism would be in the best interests of the employers and the employees. The Labour Relations Agency has always recognised that many small employers are the managers of their organisations, have responsibility for 101 different things and do not have the luxury that I have of specialising in one area. The agency has always recognised those difficulties and has tailored its services to meet that need, and it intends to continue to do so.

However, the guidance and codes of practice that might be drawn up as a result of the review should take account of the circumstances of the smaller employers and the fact that — due to difficulties in access — some employees are not aware of their rights. The reviews that were held here and in Great Britain showed that the introduction of the statutory dispute resolution resulted, initially, in a reduction in claims. No one was clear whether that reduction was due to the resolution of more disputes in-house — which would have been wonderful — or to the requirement for the completion of an eight-or-nine-page tribunal form, which was more difficult to complete than the previous four-page form.

The two issues to be addressed are access to justice and the provision of adequate information to employers about the legislation and the way in which they should treat their employees.

Ms Penny Holloway (Labour Relations Agency):
Following the introduction, a few years ago, of the statutory dispute procedures, the link between the procedures and the tribunal processes caused a great deal of difficulty for employers and employees. Evidence shows that one outcome of that was that informal — in the workplace — resolution of grievances was adversely affected because employers went into formal mode and started writing everything down. That was an unexpected result of the introduction of the statutory dispute procedures, and it had a negative impact on resolving disputes at the earliest stage possible. That is why there is a lot of pressure for doing away with the statutory dispute procedures.

However, there is no doubt that small employers in particular will be looking for a code of practice or information pack that will give them clear guidance on what will be required of them if they have to deal with a grievance or discipline a member of staff.

The Chairperson:
Ok, I will open the discussion for questions. It seems that there will be an exciting time ahead. Everyone hopes to achieve a resolution and to arrive at the same answers on how to make progress.

Mr Newton:
I welcome Mr McCusker and his colleagues to the meeting and thank them for coming. My comments will be much the same as those made by the Chairperson. I want to pick up on what Mr McCusker said about the agency’s service being valued and trusted by folk across the board. I suppose that there is some sort of assessment of the effectiveness of the current system, upon which you are attempting to build.

Ms Clarke said that there was an attempt to make the system less legalistic and formal because, perhaps, in its current state, it puts folk off. If the legislation becomes more specific to small and medium-sized enterprises (SMEs) — because it seems to me that we are trying to assist SMEs — is there any danger of making the system much more expensive to run, because you will offer a more bespoke service? Mr McCusker referred to the seminars that the agency runs. Is a higher level of financing and budget needed in order to run the system in that way?

The Chairperson:
Never ask a lawyer about money. [laughter.]

Ms JA Clarke:
Certainly, the agency has a statutory duty to improve employment relations. We believe that, as we currently stand, we go a long way towards doing so. We could do much more on the conciliation side of our work to be more proactive, rather than reactive, in resolving disputes, if we had more resources.

With regard to the advisory side of our work, we have a website, run seminars, and provide codes of practice. However, we could do much more, particularly with our enquiry line. Mr McCusker mentioned the number of enquiries that we receive at present. Unfortunately, because of current budget and staffing levels, we have a relatively high percentage of lost calls. The potential with each of those lost calls is that an employer or an employee who does not have access to our advice and information will go ahead and, perhaps, do the wrong thing. That dispute might not be resolved internally and might end up as a tribunal claim.

We have always been convinced that the agency is a cost-effective way of improving employment relations and resolving disputes. Therefore, if more funding were to be made available, we would be delighted to have it and would make good use of it. We have said often that money that is spent on us is money that is saved on tribunals in a cost-effective way. Certainly, we could do more.

Mr Newton:
Is there not a value-for-money aspect to your work? Has assessment of that been considered?

Mr McCusker:
In our written submission to the Committee we quoted a GB figure for the estimated cost of a case that goes to tribunal, which is £250,000. If our sister organisation in Britain resolves a case, it costs £9,000. Although there is argument about exact figures, the degree of difference is marked.

As Julie Anne said, one area where funding would be useful is our enquiry line. Previously, we were unable to deal with around 25% of calls because we did not have enough staff. Unfortunately, because of the economic situation, that percentage has increased. At present, we lose around a third of calls. Those people might ring back eventually and we might, therefore, deal with them. Nevertheless, that illustrates the difficulty.

We must husband our resources carefully. One service that we provide for small firms is that we vet their procedures. We will go through a firm’s disciplinary or grievance procedures and advise it on where it should make changes or improvements. That is expensive in staff resources. Therefore, we encourage firms, particularly small firms, to attend our seminars and workshops. It is better to address ten people about their procedures than to do that on a one-to-one basis. We attempt to utilise our resources to their best effect.

Interestingly, we conduct follow-up surveys to those workshops, and most employers that replied told us that they had done something as a consequence of attending one of our courses. That demonstrates that we are contributing something of value to the economy and to the management of employment relations.

Mr Butler:
Thank you for your presentation. You touched on the subject of equal pay claims, the cost of which has come up in the Assembly. I assume that most of those claims relate to the public sector. Will you expand on the level of increases in equal pay claims that have arisen in recent years? In addition, you said that approximately 80% of claims are settled before they go to tribunal; what is the Labour Relations Agency’s position on the settlement of equal pay claims?

Mr McCusker:
To date, increases in equal pay claims have not greatly impacted on us. Nevertheless, we have been monitoring the situation, particularly as it has developed in Britain, and we picture such cases as a train coming down the track — they will be difficult to manage.

Several members of the Committee are local councillors, so they will know that the single-status agreement has generated problems in England and that those problems are about to hit us. One local authority has indicated that it will be bringing its cases to the agency in an attempt to resolve them. Furthermore, members will also probably be familiar with the Agenda for Change in the Health Service, which has implications for equal pay. There is also the Civil Service situation, which the Minister of Finance and Personnel is attempting to resolve with the unions. In that case, there might be tens of thousands of individual claims, which people are able to lodge because of the way in which the law has been designed on equal pay. There is a question about how those claims might be managed.

Mr Butler:
How would the Labour Relations Agency deal with thousands of claims?

Mr McCusker:
That is Penny Holloway’s problem.

Ms Holloway:
Northern Ireland public-sector employers are a little bit behind those in Great Britain on implementing the single-status agreement and the Agenda for Change, so we anticipate claims coming through when the various appeals processes have been sorted out. Consequently, we have had discussions with our colleagues in the Advisory, Conciliation and Arbitration Service (ACAS) to investigate how it has managed local-authority equal pay claims.

We envisage dealing with cases on a pre-claim basis; we would like them to be resolved before they are lodged with a tribunal, and that is the line that we have been taking in discussions with one particular local authority. We will attempt to reach agreement with each individual before he or she lodges a claim, which will mean, in effect, agreeing on a settlement. If the anticipated number of claims comes to us, assisting the relevant parties and dealing with settlements will be quite resource intensive. However, dealing with them in that way will be much better than having tens, and even hundreds, of thousands of claims lodged with the tribunal. Merely lodging a claim causes a lot of administrative work.

Mr Butler:
Have all the local authorities agreed on how to deal with equal pay claims? You mentioned one local authority; however, some of them appear to be reluctant to face up to the problem that is coming towards them. Do you agree?

Mr McCusker:
It is not for us to comment on one party’s approach to a dispute. If we are to act as an honest broker, we must deal with disputes, if they are disputes, as they come to us. It is not for us to adjudicate on the merits of particular cases.

All we can say is that there have been difficulties in implementing the consequences of the single-status agreement in Britain. We would be surprised if there were no similar difficulties in Northern Ireland.

Mr Attwood:
I apologise for arriving slightly late. I know what you would like the outcome of the review to be. However, based on what happened in Britain as a result of the Gibbons Review, are you concerned that elements of that review may be applied to the North and that, given the unique circumstances that you identified, those would not be welcome?

Mr McCusker:
The one area on which there is consensus is that the statutory three-step procedure should go; I do not think that anyone supports it. A more difficult area is the statutory requirement to provide conciliation for seven or 13 weeks, and there is more debate about that. We have tended to be more flexible about that in Northern Ireland, and, therefore, it may not be too much of an issue.

The other issue that has not been thought through, and must be thought through carefully, is how we should provide mediation better. Michael Gibbons’s background is as a family lawyer, rather than in employment relations. With no disrespect to him, he underestimated some of the complexities of the practice of mediation in the employment situation. I do not want to be critical of our colleagues in GB, but I sometimes wonder whether they got it right. An area that should be further investigated is how exactly we can provide alternative dispute resolution, particularly mediation, in the Northern Ireland context.

Mr Attwood:
It would be useful to know about any further examples of the way in which practices here should be differentiated from those in the Gibbons Review, because members of the Committee have a fair bit of experience of policies and programmes that apply in Britain being parachuted into the North when they are not fit for purpose or are less fit for purpose.

My second point is broader: you want to see greater use of in-house, early dispute-resolution processes. Recently, I received a report from a person who attended a private seminar organised by the Northern Ireland Civil Service. During the seminar, one of the foremost employment lawyers in the North shared her observations on the public service. She said that, because the public service had access to public monies, it was reluctant to enter into proper early dispute resolution processes, particularly in the more serious disputes. Her view was that that reluctance was based on the public service wanting to drag disputes out because it had access to public funds, and, therefore, the complainant would eventually go away.

Do you have any sympathy with the view that, in some areas of the public service, there is a culture of unwillingness to become involved in dispute resolution because the process can be delayed until the other party eventually runs out of money, patience and time?

The Chairperson:
Before you answer, Mr McCusker, I am conscious that that is a leading question. If you are comfortable with it, answer from the Labour Relations Agency’s perspective — Mr Attwood has a tendency to put people behind the eight ball.

Mr McCusker:
That is a politician’s privilege.

That view does not square with our experience. Public sector organisations vary, and some are probably better than others. A current example is that the Minister of Finance and Personnel is encouraging a resolution of the equal pay situation in the Civil Service through negotiation and discussion. We welcome that because we do not want to be faced with the union lodging 10,000 equal pay claims.

On the other hand, the public sector, at times, can take the view that a point of principle is involved. No disrespect to lawyers, but they will say that the best, and most economical, way to resolve a case is to pay the individual a sum of money. However, the public sector can say that that is not possible because there is a principle involved. A lot of public funds are devoted to resolving such cases. Sometimes, there is a settlement, and it may appear to be an economic one. It is unfair to characterise the whole public sector in the way in which that person apparently has done.

Ms Holloway:
There can be tensions among the public sector’s various groupings. Tensions can arise, as Mr McCusker said, when a group perceives that a point of principle is involved or when it is conscious of the Public Accounts Committee, because, quite often, a settlement will involve money.

People are sometimes encouraged, or perhaps feel, that it would be better to pursue their dispute through a tribunal rather than through a conciliation agreement. However, we want to encourage a culture of early resolution of disputes. The public sector should set an example for dispute resolution. Early settlement should be viewed as a strong, rather than as a weak, approach to resolving a dispute,because it avoids the need to pursue it right to the door of the tribunal.

It is much better for all parties concerned to have a dispute resolved at the earliest possible stage. By the time that a person gets to the doors of a tribunal, positions have hardened and there is a lot of bad feeling. As Mr McCusker pointed out, early resolution of a dispute is especially important if an employment relationship still exists.

Rev Dr Robert Coulter:
Thank you for your presentation. You mentioned that the complexity of employment law is an inhibiting factor for SMEs and that there are many issues around access to justice. Do you think that those issues are being addressed adequately in the review and in the negotiations that are taking place? If not, how would you resolve them?

Mr McCusker:
The already evident trend of trying to avoid taking a dispute to a tribunal will help small and micro-sized businesses. It will be much easier for them if issues can be resolved without going to a tribunal. To a certain extent, our services are skewed to deal with the problems of small businesses.

We hope that, by talking through the issues, we can enhance the service that we already provide to small businesses. I spoke earlier about mediation services and how to provide such a service to smaller businesses. That is a difficult issue and one which we must debate further. However, we hope that we can help small firms in that area.

Ms JA Clarke:
It is apparent, from the Gibbons Review and this review, that everybody wants employment law to be simplified. It would be fantastic and wonderful if that were to happen. However, it is easier to say that than it is to do it, unless employment rights are rolled back and taken away. I do not think that anyone is advocating that.

The Labour Relations Agency, first and foremost, wants the review to respond to the issues of complex employment law and access to justice by promoting alternative dispute resolution. The cornerstone of alternative dispute resolution is simplicity, whereby disputes are resolved at the earliest opportunity and in a cost effective way. The agency believes that its response to the review will achieve both of those objectives in a realistic way.

The Chairperson:
Thank you very much. That was quite useful. Our next set of witnesses will be from the Federation of Small Businesses (FSB); we are trying to obtain as much information as possible so that we can have an input into the Department’s proposals. We have examined issues such as equal pay and the single-status agreement, and it is important that we have as much information as possible in order to resolve some of the issues before, as Jim McCusker put it, the train comes steaming down the line towards us. I hope that the good working relationship that we, as individual MLAs and as a Committee, have with the agency will continue.

We will now have a briefing from the representatives of the Federation of Small Businesses. Thank you for accepting the Committee’s invitation to come to today’s meeting. We have just had a briefing from the Labour Relations Agency about alternative workplace dispute resolution. We are keen to hear the opinion of the Federation of Small Businesses, and that is why we invited you here today. Please make your presentation, after which I will open up the discussion for questions and comments.

Mr Wilfred Mitchell OBE (Federation of Small Businesses):
Thank you for the invitation to come and talk to you today. Dispute resolution is a very important issue to the FSB, because workplace disputes have a big impact on small-business employers. My colleague, our regional and deputy policy chairman, John Friel, will talk about typical small-business experiences of workplace disputes. John has a sign-making business in Strabane and is an employer himself. Carolyn Brown is our policy manager and our representative on the DEL steering group. She will describe our input into the steering group and give the Committee an outline of our preferred outcomes from the Department’s review. After that, we will be happy to answer questions.

I will begin by outlining the small-business context, which is typical of business in Northern Ireland. Ninety-eight per cent of the private sector in Northern Ireland consists of micro-businesses; that is, businesses that have fewer than 20 employees. Nearly 95% of the private sector employs fewer than 10 people. Small businesses employ 65% of the private-sector workforce in Northern Ireland and contribute 60% of all private-sector turnover.

Northern Ireland has the highest concentration of SMEs — small and medium-sized enterprises with fewer than 250 employees — of all the regions in the UK. The Federation of Small Businesses commissioned a report from the University of Westminster entitled ‘Small Businesses in the UK: New Perspectives on Evidence and Policy’, which was published in December 2008.

That report showed that small businesses are considered to be good employers that offer flexible working, and that employees in small firms are more likely to feel fairly treated by their managers. On economic matters, the report confirms the well known, but rarely recognised, fact that small businesses play a crucial role in the creation of the wealth of the realm — particularly as providers of employment — and that the costs of regulation fall on them disproportionately. The report states that small businesses train unskilled employees on the job, demonstrating that they play an extremely important part in tackling unemployment.

On social matters, the report shows that small businesses are a powerful force for good and provide pathways to work. Proportionate to their size, small businesses employ more women, part-timers, older people and long-term unemployed. Small-business employees are happier in their work; have more trust and confidence in their boss; take less time off sick, and prefer contractual informality to a “dear sir” environment. Employees are aware of the important role that they have within a small business and, therefore, engage more enthusiastically in the success of that business.

However, more than one third of small businesses are put off employing staff by the burden of increased regulation. The report shows that only one in five employers feel confident about employment law and that many are put off by what they consider to be excessive regulation. Regulation is a real burden for those employers who cannot keep up with its complex law and red tape. Unfortunately, that is a real obstacle to small companies doing what they do so well — employing people — and that is a real loss to the economy. Legislation is usually framed with regard to large companies, multinationals, and trade-unionised workers in the public sector. A one-size-fits-all solution is not the best way forward for the small-business community in Northern Ireland.

Mr John Friel (Federation of Small Businesses):
My name is John Friel, and I have a couple of small companies in Northern Ireland, employing just over 50 people. In the Republic of Ireland, I have companies that employ just over 200 people. Thankfully, within my own businesses, I have not had many problems with disputes. However, I arbitrate for other small businesses within the community.

I think that is very important to involve an arbiter at the early stages of any dispute, before it reaches the stage of tribunals, solicitors and so on. Most situations can be resolved through talking — it just takes a bit of time. It is better for someone from outside the business who has no great knowledge of the company — no baggage — to come in and arbitrate.

I will not go into all the issues; there would be no point. However, I think that the main thing in any dispute is early intervention by an arbiter, whether it is a case of employee versus employee, or employee versus employer. Whatever the situation, an outside, independent arbiter is the best way to go, and the earlier he or she is brought in, the better. People think that such disputes will fade away; some do, most, however, do not.

The current economic situation has caused a different set of problems for our members, and employment issues are a major knock-on effect of that. Almost 40% of all calls to the FSB in Northern Ireland are requests for legal advice. Eighty-six per cent of all queries to the legal helpline are employment queries. In October and November there was a big increase in the number of calls from members seeking advice on redundancies and short-term working, as well as calls about dissolving partnerships and selling businesses, all of which could lead to employment disputes.

The FSB’s 2008 Lifting the Barriers to Growth survey indicates that almost three times as many respondents in Northern Ireland have been called to an industrial tribunal — 11%, compared with 4% in any of the other regions of the UK. It is clear that tribunals should be avoided because of the cost and the disruption to small companies, and there is usually no winner at the end. Small companies can ill-afford to go to tribunals — in fact, tribunals can, and normally do, put a lot of small companies out of business, especially if compensation must be paid.

Ms Carolyn Brown (Federation of Small Businesses):
We welcome the review of the current statutory dispute-resolution procedures that the Department has initiated. In our view, the current procedures have not been successful in increasing the possibility of resolving disputes in the workplace, particularly for small businesses. On the contrary, since the regulations were introduced in Northern Ireland in 2005, employment grievances seem to be formalised at a much earlier stage, with parties calling in legal advisors, and people have been discouraged from sitting down together and talking things through. The FSB believes that the three-step statutory dispute procedure should be repealed.

Most small businesses, especially the micro-businesses that dominate the Northern Ireland economy, are managed solely by the owner of the business. They do not have human-resources managers or in-house legal advisors, and, understandably, the main focus is on the business itself — on manufacturing, service provision, getting suppliers, accounting and financing, and all the other aspects of running a business. They have to be their own experts, and it is simply not possible for them to have a comprehensive knowledge of complex employment law as well as everything else.

In the case of disputes that involve a disagreement between an employee and a line manager, for example, many small businesses do not even have a second line manager who can act as a third-party adviser, as is the case in larger companies or public-sector organisations. There is usually no formal union representation in small businesses, and collective grievances are also less likely.

Small businesses are much less likely to be able to access legal advice, or even representation, except at a proportionately higher cost than that for larger businesses. They are understandably reluctant to seek costly advice until it is absolutely necessary, by which time a dispute may have escalated to such a stage that it can only be resolved formally. It is human nature that both an employee and an employer might be reluctant to express any form of discontent in case it negatively impacts on the employment relationship or accelerates a process that they are not yet ready to enter into.

Both parties need early and easy access to non-judgemental and neutral advice. They need good, clear, accessible advice — a guide or a handbook would be extremely useful to them — and it could be promoted as a benefit to them, rather than another form of regulation. Clear and comprehensive advice should also be easily available through media such as the internet. Advice could be supported by a code of practice, rather than by legislation, which could be taken into consideration if cases were to be heard formally.

There should be a specific set of guidance for very small employers — for example, for those that employ fewer than 20 people. That should also include examples of good practice, including case studies of companies that have good employment relations, which illustrate how those good relations have been created and maintained, and examples of case law where the employer has successfully defended itself through using sound practices and early intervention.

Basically, we want a system that encourages disputes to be resolved as early as possible and in which good employment relations are acknowledged and recognised. We support a system in which there is a greater availability of alternative dispute-resolution services as the main means of resolving disputes that cannot be settled in the workplace.

There are several ways in which such services could be provided, and we will consider those various options in consultation with our members. However, whatever form of mediation or arbitration services are provided, they must be promoted so that they are seen as being accessible by, and beneficial to, small businesses. For that to happen, some work needs to be done to bring about a change in small employers’ perception. Currently, there is a general feeling that the legal system is on the side of the employee, and that employers cannot approach a statutory agency without their queries being recorded and raised at a later date.

If disputes are considered formally, we want small businesses to be treated proportionately, particularly when they have not followed model practices and procedures to the letter, perhaps because they have not been aware of, or have not accessed, them. Good-faith efforts on the part of the employer should be taken into account when any case is heard formally.

Finally, there must be an improvement in the statistical and empirical information that is gathered about applications, hearings, tribunals and such, so that everybody will have a clear idea about what happens in the systems.

The Chairperson:
Thank you very much for the presentation. I will open up the session for members to ask questions. After listening to your presentation and that from the Labour Relations Agency, there does not seem to be much difference between the views. There is a need to get the issue resolved as quickly as possible. The Committee wants to get as much information as possible from those who are either directly or indirectly involved in this issue, so that it can report to the Department. The Minister for Employment and Learning has indicated that he wants to work in partnership with us. We see ourselves as a conduit between those who are directly or indirectly affected by the issue.

Mr Newton:
I thank Mr Mitchell and his colleagues for attending the meeting. Ms Brown, are you, on behalf of the FSB, a member of the Department for Employment and Learning working group?

Ms Brown:
Yes.

Mr Newton:
I get the impression that you are content with the way in which the review is proceeding. Is that correct?

Ms Brown:
Absolutely. We are content that the FSB’s views are being heard, and we are confident that they will be included in the consultation process and in the document. I am very pleased to be a member of the steering group.

The Chairperson:
Do members have any other questions or comments? It seems that we have resolved everything. [Laughter.]

It is helpful that the Labour Relations Agency, the Department and the FSB are trying to resolve the issue. Certain aspects may be tweaked along the way to keep everybody happy. On behalf of the Committee, thank you very much for attending today and for giving us your overview. We should stay in contact regarding this matter — feel free to let us know about any issues that you encounter.