HC Deb 14 May 1986 vol 97 cc778-90
Mr. Trippier

I beg to move amendment No. 1, in page 1, line 9, leave out 'of his' and insert 'employed by him'.

Mr. Deputy Speaker

With this it will be convenient also to consider Government amendments Nos. 6, 48, 49, and 51.

Mr. Trippier

These amendments change the phrase "worker of his" to "worker employed by him" wherever it occurs in the Bill, and make changes consequent on such rewording. They reflect concern which was expressed by the opposition in Committee about the infelicitous, although unintended, inference which could be drawn from the original wording.

The point—eloquently put at the second sitting of the Committee by the hon. Member for Bow and Poplar (Mr. Mikardo)—is that "worker of his" could be taken to imply ownership, reducing the worker to the same status, I recall him saying, as a machine tool or workbench, something that is the property of the employer. "Worker employed by him" avoids any such implications of ownership.

Ms. Clare Short

My hon. Friend the Member for Bow and Poplar (Mr. Mikardo), who moved the original amendment in Committee, cannot be here now. I am sure that he would be pleased at his symbolic victory. It is a pity we could not win more real changes in the Bill. None the less, for the Government to bring forward in 1986 a Bill which talks about workers belonging to their employers shows something about their attitude. My hon. Friend's efforts have amended the Bill in a desirable direction.

Amendment agreed to

Mr. Trippier

I beg to move amendment No. 2, in page 1, line 12, leave out 'term' and insert 'provision'.

Mr. Deputy Speaker

With this it will be convenient also to consider the following: Government amendments Nos. 7 and 8.

Amendment No. 9, in page 2, line 7, leave out 'shown' and insert 'given'.

Government amendments Nos. 10, 11, 12 and 17.

Mr. Trippier

This is my attempt to be fair and reasonable, despite the hon. Member for Birmingham, Ladywood (Ms. Short) has just said. These amendments have been tabled in response to an undertaking that I gave, which I think is referred to in column 65 of the report of second sitting of the Committee.

On that occasion I undertook to consider a proposal put forward by the hon. Member for Bow and Poplar that the written term which sets out the circumstances in which a deduction from wages may be made should be given rather than shown to the worker.

I think that Opposition Members will agree that these amendments achieve this intention. Their effect is that, where the employer relies on a written term of the contract to authorise a deduction he must, in advance of the deduction, give the worker a copy of the term authorising the deduction or give him an explanation of the term. Indeed, the amendments go further by providing that, where the employer has to rely on two or more terms, a copy of each of these terms must be given to the worker or the combined effect of such terms must be explained to the worker.

These amendments improve the Bill and give added protection to the worker against unlawful deductions from wages. I commend the amendments to the House.

8.45 pm
Mr. Nellist

I remember taking part in that debate in Committee. I ask the Minister the same question now as I asked then. He has made a halfway house attempt with this set of amendments. Why, given the Government's view that a contract of employment is a quasi-legal document which is solemn and binding, is he not prepared to introduce Government amendments which say that the question of deductions and so on should be in a document signed by the worker and the employer to show that both agree to its provisions?

Mr. Trippier

When we are talking about a contract of employment, as we discussed in Committee at some length, it does not have to be a written contract. With this legislation we have insisted that at least there should be a written term of a contract which makes it clear that there is a power to deduct. A written term has to be handed to the worker and there must be proof that that has taken place. I think that the hon. Gentleman should be satisfied. Amendment No. 9, tabled in the name of the Opposition, will have a similar effect to the amendment I am moving. I hope that, under the circumstances, the Opposition will feel it necessary to withdraw that amendment.

Ms. Clare Short

This again is a small but welcome amendment. Under the Bill as drafted it would have been possible for an employer to make a deduction simply having waved a piece of paper under the nose of a worker and only showing the written terms of the contract to the worker and not having to give a copy to the worker. That is rectified by the amendment. The amendment is a concession—only a small one but it is something—that the Government have been forced by the Opposition to make. We are grateful for that and, of course, we shall withdraw amendment No. 9.

Mr. Deputy Speaker

That does not arise on the question before the House. We shall deal with that, if necessary, when we come to it.

Amendment agreed to.

Mr. Caborn

I beg to move amendment No. 5, in page 1, line 15, at end insert—

'(c) the employer makes the deduction within 12 months of the discovery of the act or omission complained of'.
Mr. Deputy Speaker

With this it will be convenient also to consider Government amendments Nos. 26, 27, 29, 31, 32, 33, 38, 39, 41 and 42.

Mr. Caborn

In Committee we argued forcefully about the position of an employer being effectively handed an open cheque in being able to make deductions from a worker going back any length of time that the employer could find to be justified. We thought that that was wrong and, to a large extent, against the natural trend of British justice. Timetables are laid down, and we thought that that was extremely important for the Bill. We did not believe that it was right that an employer could tell an employee that he had committed an act of theft or whatever five years previously and that that was now to be brought against him.

It is evident that the force of argument put by my hon. Friends in Committee has sunk in with the Government because in amendment No. 26, the Government, to a large extent, accept our points. However, their amendment is to a different part of the Bill—clause 2. That is welcome. My hon. Friends' arguments were put forcefully and in a common-sense way. They were born out of their knowledge of industry. The Paymaster General's performance showed that he does not even know who is covered by the Truck Acts. That shows a certain amount of misunderstanding at best and total illiteracy at worst.

Therefore—

Mr. Kenneth Clarke

rose—

Mr. Caborn

The right hon. and learned Gentleman will have plenty of time to have a go.

Therefore, I hope that the Government will concur with what I have been saying about our amendment. Their amendment No. 26 shows that they agree with its purpose.

Mr. Trippier

I was waiting to hear the hon. Member for Sheffield, Central (Mr. Caborn) say that he was prepared to withdraw his amendment, because I am about to try to convince the House that the amendments tabled in the Government's name meet his point.

This group of amendments comprise 10 Government amendments and one Opposition amendment. They are all concerned with the same point. We have tabled our amendments because of the commitment that I gave in Committee that we would consider whether an amendment was required to ensure that deductions related to cash shortages or stock deficiencies would be entirely prohibited if there was unreasonable delay between the date the cash shortage or stock deficiency occurred and the date the employer made a deduction from wages in respect of that shortage or deficiency. Having considered the matter in a fair and reasonable light, I believe that something specific is required in the Bill, and I am happy to support the amendments, which I am sure will meet the concern expressed by Opposition Members.

The amendments will mean that, in order to make a lawful deduction on account of a cash shortage or stock deficiency, an employer will have to make the deduction no later than 12 months after either the date on which he established the existence of the shortage or deficiency in respect of which the deduction is made or, if earlier, the date when he ought reasonably to have established its existence. In layman's terms, that means that a deduction will be lawful if the employer makes the deduction within 12 months of finding out about a shortage unless he could reasonably be expected to find out about it earlier, in which case the deduction would be lawful only if he made it within 12 months of the date on which he ought to have found out about the existence of the shortage.

That will prevent employers—I am sure that they are few in number—who decide to victimise a worker, for whatever reason, dredging up a lot of old events on which they took no action at the time and eventually starting to make deductions in the distant future. That was the point that I accepted in Committee. I thought that that was immoral. In addition, the provision will help to prevent disputes over events that happened so far back in the past that memories have become blurred about what actually took place, and to avoid resultant injustices—for example, the wrong worker suffering a deduction or shortage.

I think that hon. Members on both sides of the House will agree that the amendments are an improvement to the Bill. I commend them to the House and ask the hon. Member for Sheffield, Central to withdraw his amendment because ours meets his point.

Ms. Clare Short

This is another series of concessions achieved by the Opposition, and they are of some significance. Under the Bill as drafted, an employer was given the power to go back as long as he wished—10 or 20 years—to find any shortage or damage and act against the worker by making deductions or fines. We said that two people might work together in a friendly way but then fall out, and it might lead to the employer seeking to victimise the worker, going back over many years, claiming that there had been stock shortages and then claiming massive deductions from the worker.

The imbalance in the Government's perspective was clear in the unamended Bill, in that the employer was given the right to go back timelessly, but any employee who intended to go to a tribunal to complain that he had had an illegal deduction had to act within three months or lose his legal right. In this group of amendments, the Government have conceded both points. The employer is limited in that he can go back only 11 months and the workers can take their case to a tribunal within a period that a tribunal judges reasonable. I think that that is a correct understanding of the Government's amendments. Therefore, the three-month time limit is gone.

The Bill is still highly unacceptable, but at least the Opposition have gained improved protection for workers, little as it might be. I imagine that in the circumstances, my hon. Friend the Member for Sheffield, Central (Mr. Caborn) will be willing to withdraw our amendment, although it is notable that the Opposition amendment takes up only two lines but the Government found it necessary to have 10 lines to achieve the same objective.

Mr. Caborn

I thought that the Government might accept our amendment, based on what my hon. Friend the Member for Birmingham, Ladywood (Ms. Short) has said—that ours is much shorter and will take up less space and paper. Obviously, that is not so. When one sees a ray of common sense from the Government, one has to grasp it with both hands. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 6, in page 2, line 2 leave out `of his' and insert 'employed by him'.

No. 7, in page 2, line 4 leave out 'term' and insert `provision'.

No. 8 in page 2, line 5 leave out from 'contact', to 'on' in line 7 and insert 'means any provision of the contract comprised— (a) in one or more written terms of the contract of which the employer has given the worker a copy". No. 10, in page 2, line 12 leave out 'any other express or implied term of the contract' and insert 'in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing)'. No. 11, in page 2, line 13 after 'effect', insert ', or (as the case may be) combined effect,'. No. 12, in page 2, line 17 leave out 'term' and insert 'provision'.—[Mr. Trippier.]

Ms. Clare Short

I beg to move Amendment No. 13, in page 2, line 17 leave out from 'contract' to 'or' in line 18

Mr. Deputy Speaker (Mr. Harold Walker)

With this it will be convenient to take amendment No. 14, in page 2, line 23, leave out 'the variation took effect or (as the case may be)'.

Ms. Short

The purpose of the amendment is to check that the Bill means what the Minister claimed in Committee. We were concerned that under the Bill it would be impossible for an employer to produce a version of the contract—we have to be clear that an implied term of a contract can justify a fine or deduction—wave it in front of an employee's nose and then say that he was therefore making a deduction that was allowed under the contract. The Minister assured us that that was not possible. He told us that under the Bill it was absolutely necessary that the terms of the contract were clear and shown to the worker before the act or omission complained of led to the deduction or fine. Indeed, the Minister spoke in quite strong language. He said that it would be immoral if it were otherwise. I am sure that what he said was sincere and that that was his honest reading of the Bill.

I do not claim to be right on this matter, although we think we are right on shop assistants. It is notable that the Paymaster General got that wrong as well as so many things in the Bill, but I am sure we shall come back to that.

Let us look at clause 1(4). The protection that the Minister relied on in his arguments in Committee seems to apply only to a variation in the term of a contract, not to the provisions of the original contract. The amendment will change subsection (4) to read: For the purposes of this section—

  1. (a) Any relevant term of a worker's contract or
  2. (b) any agreement or consent signified by a worker as mentioned in subsection (1)(b), shall not operate to authorise the making of any deduction, or the receipt of any payment, on account of any conduct of the worker, or any event occurring, before the agreement or consent was signified."
I hope that the Minister will respond fully to this point.

The Bill as drafted does not guarantee the position that the Minister said would be the correct one. The amendments are necessary to bring the Bill into line with the undertakings that he gave. That is the purpose of the amendments and we will be interested to hear the Minister's response.

Mr. Trippier

It might be helpful to the House if I tried to explain, in speaking to these amendments, exactly what subsection (4) of clause 1 achieves. The previous subsections established that a deduction from pay may be lawful if it is provided for in the contract of employment, with any provision that provides for a deduction being given or explained in writing to the worker to ensure compliance with subsection (3) before a deduction authorised by such provision is made.

We start from the position that both sides, employers and workers, know the rules about deductions and observe them. Subsection (4) means that, if a contract is changed so that an employer can thereafter make deductions if certain behaviour occurs, the employer is prevented from making deductions in respect of conduct that occurred before the change.

9 pm

We cannot provide that no change in a contract can ever be made. If we did that, contracts would be set in stone for all time. We can start, and we intend to start—this is the assurance that I gave the Committee—making changes retrospectively authorising deductions, and subsection (4) achieves that. I believe that that is sufficient protection.

Ms. Clare Short

I am carefully following the Minister's comments. However, my reading of paragraphs (a) and (b) of subsection (3) leads me to believe that it would require the employer to show the written terms of the contract or any other express terms of the contract to the worker at any time before making a deduction. The Bill appears to state that. However, in Committee the Minister said that he considered that that would be immoral and that the terms of the contract must have been shown to the worker before the act or omission that led to the deduction. Perhaps the drafting could have been improved. That is the point I am trying to secure and I hope that the Minister can understand that. Paragraphs (a) and (b), as drafted, do not secure that position.

Mr. Trippier

I can only repeat to the hon. Lady the assurance that I gave her in Committee. I have expressed my understanding of the matter and that is the legal interpretation of the Bill on the advice given to me by my Department's solicitors.

The Committee agreed with me that it was objectionable and wrong that an employer should spring a deduction on an employee at a moment's notice. For example, it would be unacceptable for an employer to decide on a Thursday evening—if wages were normally paid on a Friday—to hand a written term to the employee for an event that occurred weeks or even months before. I can assure the hon. Lady and the House that as subsection (4) is currently drafted, there is no way that we would allow retrospective authorised deductions. I believe that that will be sufficient protection.

The amendments appear to be designed to stop employers changing the contract. There is a difference of opinion between the Government and the Opposition on this point. Under the amendments, a deduction arising from a changed term would mean that a change could be made in the term without the written consent of the worker. That is not necessary, as a contract cannot be changed without the worker giving consent, even if that consent is only implied in the fact that the worker does not repudiate it. There is no extra protection in the amendments and no reason to put extra hurdles in the way of the parties if they agree to change the contract.

Ms. Clare Short

I have no alternative but to accept the Minister's assurances. However, I am baffled by the drafting of the Bill in that subsection (3)(a) provides: a written term of the contract which the employer has shown to the worker shall be on any occasion prior to the employer making the deduction in question"—

Mr. Trippier

rose—

Ms. Clare Short

I should like to finish my point. Subsection (4), which authorises a variation in the contract, states that such a variation shall not operate to authorise the making of any deduction, or the receipt of any payment, on account of any conduct of the worker, or any other event occurring, before the variation took effect". It would seem that there is more protection in the case of a variation than in the other case. Therefore, the purpose of the amendment was to apply the protection that applies in the case of a variation to all contracts, not to make it impossible to make a variation. I do not think that we will settle this point tonight. I assume that the Minister and his advisers are correct, although I am not confident of that.

Mr. Trippier

I would like to reassure the hon. Lady. I am truly not being unfair to her. I have been down this track before. She raised the matter with me, quite rightly, on 25 February. I decided to consider it and said that I needed notice to study it in some detail. In Committee on 27 February my first words were: On a point of order, Sir Anthony. The Committee will recall that, on Tuesday, I gave an undertaking to the hon. Member for Birmingham, Ladywood (Ms. Short) to confirm that my interpretation of clause 1(4) was correct. I am happy to assure the Committee, and especially the hon. Lady, that subsection 1(4) ensures that an employer cannot, by any means, introduce a term allowing a deduction to be made for conduct after the incident has occurred."—[Official Report, Standing Committee K, 27 February 1986; c. 113.]

Ms. Short

Given the Minister's assurance, which I hope proves to be right in practice when interpreted by the courts, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Kenneth Clarke

I beg to move amendment No. 15, in page 2, line 26, leave out subsection (5).

Mr. Speaker

With this it will be convenient to take Government amendment No. 50.

Mr. Clarke

The amendment gives me the opportunity to return to a small matter which is causing a little agitated debate between myself and the hon. Members for Birmingham. Ladywood (Ms. Short) and for Sheffield, Central (Mr. Caborn)—whether the main Truck Acts include shop workers in the definition of manual labourers.

I accept that a number of political issues could come between myself and the hon. Lady, and I am sure that she will agree that there are probably more substantial matters that we could argue about than the Truck Act of 1831 as applied by the Truck (Amendment) Act 1887.

But I understand now why there have been these vigorous exchanges between myself and Labour Members. They are relying, in exactly the same way as I would rely if I were in opposition, and as I used to rely, on a letter from the economic affairs section of the Library. I would normally have relied on that briefing and, as I know its author well, I would particularly have relied on her opinion. But those who advise me have shown me the references and I have looked them up for myself and I believe that on this rare occasion the advice from the Library is wrong.

The definition of manual worker in the main Truck Acts of 1831 was made clearer by the Truck (Amendment) Act 1887. That is explained in pages 1700 onwards of the second edition of Redgrave's "Health and Safety in Factories". There are a fascinating series of decisions about this legislation. The one relevant to shop assistants is Bound v. Lawrence, 1892, 1 Queen's Bench, 226. If anybody wants to know, bus conductors, bus drivers, railway guards and others are not protected by the Truck Acts, and shop workers and assistants could not rely upon the Acts that we are talking about.

On the other hand, when one moves to deductions, one finds that the Truck Act 1896 extends the protection on deductions and fines to shop workers as well as workmen. It was that change which led to the phrase in the letter from the Library and is relevant to these technical amendments which are designed to clarify the definition of the word "deduction" for the purpose of the Bill. I hope that they will be acceptable to the House, including the Opposition, because the principal purpose of deleting clause 1(5) and replacing it with the new subsections is to try to close a possible loophole that a less than scrupulous employer might try to use to evade the protection that we are giving in the Bill to those in the retail trade in relation to deductions.

Let me give brief illustrations of the problem and what we are doing by giving three examples of what might amount to a deduction from pay. First, an employer could disagree with a worker about how much pay is due to the worker. If the employer pays what in his opinion is due, and he has a genuine disagreement with his employee, who thinks that he is entitled to more, that is not a deduction for the purpose of the Bill. That is a dispute about the contractual entitlement to pay and that will be decided by the ordinary courts, not by the industrial tribunal. That is true under any definition in the Bill.

In the second case, the employer might pay the worker concerned less than his ordinary entitlement by taking out of the pay that he hands over some sort of fine or deduction, perhaps for disciplinary reasons or to cover a deficiency. That plainly is a deduction. We covered that in our first attempt to define a deduction and that is principally what this part of the Bill is about.

Thirdly, an employer may deliberately pay a worker less than he owes him and may do so merely for some general reason, perhaps because he simply does not wish to comply with his full contractual obligations.

As the Bill was originally drafted, there might have been room for doubt about whether that deliberate failure to pay amounted to a deduction. The amendments, which would put two new subsections into clause 8, provide that, when the employer pays a worker less than is properly payable, that will be a deduction, unless the reason is an error of computation concerning the amount of wages due.

I hope that I have been reasonably clear about two technical amendments which will clarify the meaning of "deduction" and close a potentially serious loophole through which some employers might have escaped.

Ms. Clare Short

There has been some interesting confusion about whether shop workers are covered by the Truck Acts. The Paymaster General was right when he suggested that we had relied on the briefing from the Library. Such briefings are normally second to none and I am not yet convinced that the Library is wrong in this case. We shall look into the matter, but I accept that it is possible that the Library is wrong and that is why we were misled.

However, it seems that the national multiple chain in Blackburn was misled in the same way as our Library, because it told its workers that they will have cashless pay imposed on them. It seems that that major company is under the same illusion—if it be an illusion—as the Library.

The Government's reasons for the amendment are not objectionable to the Opposition. Indeed, if the Paymaster General answers a question in the affirmative, we shall warmly welcome amendment No. 50. The amendment provides: Where the total amount of any wages that are paid on any occasion by an employer to any worker employed by him is less than the total amount of the wages that are properly payable by him to the worker and the underpayment is not due to an error of computation, it will count as a deduction.

If an employer is paying illegal wages under part II of the Bill, will he be caught? Does the amendment mean that workers who are illegally underpaid will acquire the right to go to a tribunal and to take action immediately, without having to go through the wages inspectorate which never prosecutes? It seems to me that that might be the meaning of the amendment.

What are the wages that are "properly payable" to the worker? Are they the wages that are normally paid or are they the wages that are legally required? If an employer is making illegal underpayments, surely they are not wages that are "properly payable".

The amendment says that a deficiency shall be treated as a deduction for the purpose of this Part", but I cannot see that that excludes my interpretation.

I am enormously interested in amendment No. 50. It could be an enormous change of heart by the Government, although I think that it is probably an accident. The Government may have stumbled into giving workers who have received illegal underpayments a remedy that would be easier than that currently available to them, given that there are too few wages inspectors and that the wages inspectorate is obsessed with being friendly with employers, does not collect adequate information on the needs of workers and has an absolute policy of not prosecuting on first offences. Perhaps my interpretation of the amendment is fanciful, but it seems to me to be a possible interpretation.

Mr. Martin

May I ask the Minister a few questions about a matter concerning which I have already asked various questions? I do not expect him to recall them because his hon. Friend the Under-Secretary of State for Employment, the hon. Member for Galloway and Upper Nithsdale (Mr. Lang) answered them. It relates to an organisation that runs a Manpower Services Commission project, for which I understand the Paymaster General is ultimately responsible. A complaint about delay was made about that organisation. It was not the first time that such a complaint had been brought to my attention. It was that the sponsors of the project, who were therefore acting on behalf of the Government, had delayed paying the bus fares of those who were on MSC projects.

9.15 pm

In view of what the Minister has said, would this deliberate delay in the payment of fares be regarded as a deduction from wages? If so, would employees be entitled to take the matter to an industrial tribunal? It would be helpful to have an answer to that question.

Wages councils cover only certain people in certain services. The catering industry is one such service; hairdressing is another. The Paymaster General knows that, on certain MSC projects, meals are provided for the elderly. That is perfectly satisfactory, but all the employees involved in those projects are doing a job identical to the job performed by those in the catering industry. They are working in kitchens. They are serving, preparing and delivering food. If necessary, do those employees have recourse to the wages councils and to the wages inspectorate?

Mr. Kenneth Clarke

The previous disagreement between us was because both of us were relying upon what is usually completely reliable advice, but on that occasion it came to differing conclusions. On this occasion I am flying somewhat more blind. If I sail perfectly into error on this occasion, I shall write to the hon. Lady and correct what I am about to say.

The hon. Lady asked a very interesting question about what would happen to those employees who are covered by the wages councils as far as this definition of "deduction" is concerned. I understand that, when a deliberate deduction is made by the employer, it will be regarded as a deduction and will be subject to the provisions of the Bill. The dispute can be solved by an industrial tribunal. If, however, an employer makes a computation error—if, in other words, he makes a mistake—the matter will go to the courts. If there is a disagreement between the parties about what wages are properly due, that also will go to the courts. If, as I say, there is a deliberate deduction from what the employer knows to be due, it will be covered by the Bill and the matter will go before an industrial tribunal.

To relate that to the wages council provisions, if an employer is paying less than a wages council's required rate and if he knows that he is paying less than that which is properly due, which means that he is intentionally paying less than the wages council's rate, my understanding is that the hon. Lady is right and that the protections that are afforded under this part of the Bill will apply. If, however, the employer does not realise that a higher rate is properly due and he makes a computation error, that will not count as a deduction under the Bill and the matter will have to be resolved by the courts if the wages inspectorate is unable to sort it out in the ordinary way.

Ms. Short

I am grateful to the Paymaster General. I agree with his interpretation of the wording of this amendment. May I ask him for an undertaking: that if we are both right he will not amend the Bill; he will leave it as it is, so that workers who are illegally underpaid will have the right to go to an industrial tribunal on the grounds that they have suffered an illegal deduction?

Mr. Clarke

I am content to give that undertaking. When an employer deliberately makes a deduction below that which he knows to be lawfully due, that will be covered by this part of the Bill.

I know that the Bill is more limited in terms of protection than the Opposition would like, but everything that we have said about deductions will apply if an employer deliberately pays less than that which he knows legally to be the entitlement of the employee. An error or disagreement about the rate would be resolved in the courts.

To settle the bus fares issue, we must turn to the definition of wages in clause 7. I shall write to the hon. Member for Glasgow, Springburn (Mr. Martin) about the second part of his question, which I did not follow because I was considering the first part and listening with only one ear. The repayment of bus fares and other expenses is not covered by the definition of wages in clause 7, so a failure to pay extra expenses is not relevant. Clause 7(2)(a) expressly excludes from the definition of wages any payment in respect of expenses incurred by the employee.

Mr. Nellist

I understand that the Minister thinks that it is wrong for an employer wilfully to allow somebody to be paid less than that to which they are legally entitled, and that there should be some redress.

After I argued with the junior Minister in Committee I received a letter saying that anyone in receipt of family income supplement whose wages fell below the family income supplement baseline because of a deduction, would not have the right to claim anything extra from the DHSS because the assessment of FIS is based on the notional gross wage before deduction. Is there not a parallel between that and the concession that has just been made to my hon. Friend the Member for Birmingham, Ladywood (Ms. Short), in that the DHSS would willingly allow someone to fall below the official Government-defined poverty line by disregarding regular deductions?

Mr. Clarke

That was a good try. I do not accept the analogy. We are talking about a deduction by the employer. If the employer knows what his employee is legally entitled to, and pays less than that deliberately, he is making a deduction and must be prepared to comply with the Bill's provisions; otherwise, the employee has a remedy.

The way in which family income supplement is assessed and the definition of income for the purpose of making the annual assessment of FIS entitlement is a matter for DHSS regulations. The hon. Member for Coventry, South-East (Mr. Nellist) will have to raise the matter with my right hon. Friend the Secretary of State for Social Services if he wants to argue that the rules for FIS should be changed.

Amendment agreed to.

Mr. Trippier

I beg to move amendment No. 16, in page 2, line 40 at end insert— '(aa) to any deduction from a worker's wages made by his employer, or any payment received from a worker by his employer, where the purpose of deduction or payment is the reimbursement of the employer in respect of any overpayment of wages made (for any reason) by the employer to the worker;'.

Mr. Speaker

With this it will be convenient to take Government amendment No. 18.

Mr. Trippier

Under this amendment the provisions of part I will not apply to deductions made by an employer or payments received by him to recover earlier overpayment of wages. Deductions to recover overpayments of wages should not, in the Government's view, be caught by the Bill and employers should not be hampered in recovering such payments.

Since the Bill was published, representations have been made to the Government that it would lead to difficulties in payroll administration if it was not made clear that deductions from wages made merely to recover earlier overpayments of wages were not covered by the Bill.

It is the practice of some firms to make small overpayments of wages, for reasons of administrative convenience, that are later recovered. An example is where information on bonus or overtime payments are not available in the pay office until after the wages have to be paid—or the computer run—so a standard sum is paid with a small adjustment, up or down, the following week. Without this amendment, such downward adjustments would be deductions for the purposes of the Bill and thus unlawful unless explicitly provided for in the contract.

The effect would be to require contracts of employment to be rewritten to ensure that the employer does not fall foul of the Bill if he ever makes adjustments to recover anything overpaid, accidentally or for reasons of administrative convenience, in an earlier payment of wages. We do not want to cause such an upheaval in personnel practices and consequently propose to disapply the Bill to deductions to recover earlier overpayments.

There is no possibility of injustice arising from that. If a deduction is to recover an overpayment, the worker has received what is due to him. If the worker disputes that the deduction is for that purpose, he can, of course, complain to an industrial tribunal that will have to form a view on the matter.

Amendment No. 18 is required to avoid a situation where the Bill would make the enforcement of court or tribunal orders ineffective. Without the amendment, an employer who had obtained a court or tribunal order against a worker requiring the worker to pay an amount to the employer would be in breach of clause 1 of the Bill when he received a payment from the worker under the order. That would happen because, when the employer received the payment, it would not have been authorised by statute, by the contract, or with the prior written agreement of the worker. So the requirements of clause 1(2) of the Bill would not be met. It would obviously be a legal nonsense if an employer who obtained a court order against a worker found that he could not obtain the amount from the worker without being in breach of the Bill.

The amendment will resolve that by removing deductions and payments in such circumstances from the scope of clause 1. Payments may be received from the worker by the employer to meet the amount specified in the court or tribunal order without complying with clause 1(2). Alternatively, deductions from wages to meet the amount specified may be made without complying with clause 1(1), provided that the worker has given his prior agreement or consent in writing. The latter is a reasonable safeguard for the worker because it ensures that deductions to satisfy the order will be lawful only if he has agreed that the sum that he has been ordered to pay can be recovered by deduction from his wages. Furthermore, it is likely that if the employer decides to recover the amount by deductions, he will agree to do so in instalments, which is an obvious benefit to the worker.

Where the employer fails to obtain the prior written agreement of the worker, the provisions of clause I will apply and the deductions from wages will be in breach of the Bill. A worker would then have the right to complain to an industrial tribunal that an unlawful deduction had been made.

This amendment is essential to resolve an unintended consequence of the Bill and I ask the House to accept it.

Amendment agreed to.

Amendments made: No. 17, in page 3, line 11, leave out 'term' and insert 'provision'.

No. 18, in page 3, line 27, at end insert— '(e) to any deduction from a worker's wages made by his employer with his prior agreement or consent signified in writing, or any payment received from a worker by his employer, where the purpose of the deduction or payment is the satisfaction (whether wholly or in part) of an order of a court or tribunal requiring the payment of any amount by the worker to the employer.'.—[Mr. Trippier.]

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