NON-COMPLIANCE: WORKER ENTITLED TO ADDITIONAL REMUNERATION

HC Deb 09 March 1998 vol 308 cc220-5

Mr. Bercow

I beg to move amendment No. 41, in page 11, line 18, at end insert— 'plus two per cent above the prevailing Bank of England base rate.'.

Mr. Deputy Speaker

With this, it will be convenient to discuss amendment No. 68, in page 11, line 21, at end add— '(4) The entitlement to additional remuneration referred to in subsection (1) above shall be limited to an amount as described in subsection (2) above which relates to a period of 12 months immediately preceding the service of a notice under section 17 of this Act or the initiation of civil proceedings for breach of contract in respect of the alleged underpayment.'.

Mr. Bercow

The purpose of clause 15, which the amendment tabled in my name and that of my hon. Friend the Member for Daventry (Mr. Boswell) is designed to amend, is to secure additional remuneration for employees who are deprived of the payment to which they are entitled.

As far as I am aware, none of my hon. Friends has any objection to clause 15. I certainly have no objection to it in so far as it is designed to improve the remuneration of workers. My problem with clause 15, as the Minister of State will recall from our discussions in Committee six weeks ago, is that I do not feel that it adequately secures that objective.

There is no inconsistency in opposing the principle of the minimum wage and believing that, when that national minimum wage is on the statute book, people should receive it, and that, if they do not receive it, they should secure recompense as a result. I do not want there to be a law on the statute book that is, wilfully or otherwise, disregarded by a minority of employers, for which disregard employees are unable to secure redress.

The Government have said until now, in clause 15, that employees should be entitled to the difference between the payment that they did receive and the payment that they should have received in any given pay reference period. It is not accurate in any real sense to describe that differential payment as additional remuneration for the employee. I am not quibbling with the Minister about his good intent, but I genuinely believe that it does not constitute additional remuneration.

The difference between what the employee did receive and what he should have received cannot in any reasonable sense be considered to be additional remuneration. It is simply the remuneration under the terms of the Bill, soon to be the Act, to which the employee is entitled. That is not additional remuneration. Additional remuneration would be something over and above that difference, and something that reflected the period of non-payment that the employee had suffered.

I raised that point in Committee, as the Minister of State will recall, on 27 January 1998 at columns 493 to 496. Fittingly, it is exactly six weeks since that debate took place. On that occasion, I think supported by a number of my hon. Friends, I argued for the payment of compensation for, or interest on, unpaid wages to employees. In response to the points that I made, the Minister of State graciously observed—I am sure that he will not object to me quoting: The hon. Member for Buckingham raised an interesting point that is worthy of consideration". He then said: I shall consider the matter, and I shall ensure that a copy of Hansard containing this morning's debate goes to the Low Pay Commission. Okay?"—[Official Report, Standing Committee D, 27 January 1998; c. 496.] I readily accepted that response as being sincere and as offering some hope that, in one form or another, the spirit of my observations might be taken on board by the Government.

I have not given up hope that the spirit of my observations will be taken on board by the Government. I am not here to cavil but to inquire, to make the arguments and to listen with interest and respect to the Minister's response. The spirit, and possibly the detail, of amendment No. 41 should be able to unite hon. Members on both sides of the Chamber. I invite hon. Members who will disagree violently with me and with my right hon. and hon. Friends on other aspects of the Bill, to consider the issue on its merits, and to ask themselves whether the argument for the payment of interest on an unpaid wage is valid in principle, and therefore whether they might consider giving effect to it in practice.

The arguments are compelling. The first argument is that the employee is entitled to a wage. If an employer does not pay that wage, either accidentally or deliberately, that employer is depriving an employee of an entitlement—an entitlement which the Labour party is determined to embody in law. So wilfully to ignore the fact of non-payment and not to do anything about it would be out of kilter with the Government's thinking and principles on the subject. That is the first argument—a moral one.

The second argument is lesser, but nevertheless, I hope, a valid consideration. It is a practical point and it is that an employee who is not paid the national minimum wage to which he or she is entitled might as a consequence of that period of non-payment suffer real financial hardship or disadvantage. For the period for which he or she is not paid the national minimum wage, the employee might suffer serious cash flow problems. It is unlikely that any cash flow problems that the employer is suffering are in any way comparable to that disadvantage. So, a practical disadvantage is being suffered, quite apart from the moral argument in support of the employee being paid fully at the outset rather than later.

5.15 am

The third argument in support of the principle of the amendment is that the Government accept—and are right to do so—the principle that an employer who does not adhere to his obligations under the terms of the Bill when it is enacted could be subject to penalty. I shall be subject to your strictures, Mr. Deputy Speaker, if I stray to any degree from the terms of the amendment and I do not do so. I am referring to clause 19, to illustrate the validity of my argument in support of amendment No. 41.

As the Minister of State will know—I imagine that he knows the Bill backwards by now and has eaten it over the breakfast table on several occasions—clause 19 provides for the service of a penalty notice in circumstances in which an enforcement notice has been ignored or in which an employer has failed to comply with such a notice. If I remember rightly, under clause 19(3) provision is made for that penalty to be charged at twice the hourly rate of the national minimum wage for each day that the employer does not comply with the requirements of the legislation.

I think that the Minister will recollect that I did not complain about that provision. If anything, I made favourable reference to it. It did not seem unreasonable. If there is to be an enforcement procedure and a penalty notice, the penalty has to sting and to stick, otherwise it has no purpose or deterrent effect. If the Government accept the principle of service of penalty and of the entitlement to extract the penalty from a non-compliant employer, why do they not accept—I hope that they will—that that principle should apply in this context too?

My anxiety is this. In the context of clause 19, the penalty extracted from the non-compliant, rogue employer is a penalty that will go to the Secretary of State—it will swell the coffers of the Treasury. That may be appropriate, but surely when an employee suffers disadvantage because an employer does not honour his legal right to the national minimum wage, it is appropriate that the employee should have the right to claim compensation or interest on the unpaid sum.

I have made the modest suggestion that the additional payment that the employee should receive in those circumstances should be a rate of interest on the unpaid sum two percentage points above the then prevailing Bank of England base rate. If memory serves me correctly, that would currently be a percentage rate of 9.25 per cent. For the practical elucidation of the argument for right hon. and hon. Members, what that means can be simply stated. If the employee is owed unpaid wages of £100 when that non-payment is discovered and the employer is required by this legislation to honour the debt, given the inconvenience and suffering that the employee has suffered in the interim, instead of being £100 it will be £109.25. That seems perfectly reasonable.

Moreover, I would go so far as to argue that there should, in this context, be no distinction between a deliberate and an accidental non-payment. Not all my hon. Friends will agree, but I argue that because, whether or not the failing is deliberate or accidental does not affect the disadvantage that the employee has suffered, and, regardless of whose fault it is, it is almost certainly not the employee's fault.

If the employee has suffered the detriment of non-payment and has not enjoyed his or her entitlement under the Bill, he or she should receive not only the payment that was due, but compensation. That is fair and financially helpful to the employee. I suggest that it would act as a deterrent to that tiny minority of employers—I stress that it is a tiny minority—who fail, either wilfully or through neglect, to honour their obligations.

My suggestion is reasonable. When an employee is deprived of his wages, that is analogous to a commercial debt. If Labour Members believe, as I know that many do, in a statutory right of interest on commercial debts—I venture no particular view on the merits of that argument—it should follow that they favour the payment of interest or compensation on the debt that I have described. If not, they will be arguing that a debt that is owed by one company to another merits the payment of interest, whereas the debt that is owed by an employer to an employee does not. I am sure that Labour Members will recognise that that issue is worthy of consideration.

I rest the case. I am not fanatical about whether the particular terms of the amendment are followed, but I passionately believe that, if the right exists in law, it should be honoured and be seen to be honoured. I suggest that the Bill would be fairer, more just and better received if the Minister sympathetically considered the amendment that my hon. Friend the Member for Daventry and I tabled.

Mr. Ian McCartney

I welcome the hon. Gentleman to the Dispatch Box. I well remember the first time that I spoke at the Dispatch Box and I know that it can be nerve-racking, although, to be fair, he did not show any nerves in making his proposition. I hope that he will represent his party at the Dispatch Box on many future occasions—it seems to have improved his temper, although my temper seems to have become worse since I started to speak from the Front Bench.

The amendments concern workers' rights to recover an underpayment, but they have little else in common. Amendment No. 41 is well intentioned, and I welcome it in that spirit. It would give the worker the right not only to any additional remuneration over the relevant period—which is defined as the difference between what was paid and the national minimum wage—but to the interest on that amount. That seems to be a reasonable proposition—as the hon. Member for Buckingham (Mr. Bercow) pointed out, when the general concept was put to me in Committee, I agreed that it was worthy of further consideration.

The idea has a number of problems, however. The worker's entitlement to recover an underpayment is not a new feature of employment law. The Bill uses existing remedies. First, the worker can make a claim in an industrial tribunal under the existing provisions on unauthorised deductions from wages in the Employment Rights Act 1996.

Secondly, when an employee's employment ends, he can claim for past underpayments of the national minimum wage in an industrial tribunal under the provisions of the Industrial Tribunals Act 1996, which enable tribunals to hear ordinary breach of contract claims. Thirdly, he can bring a claim for breach of contract in the ordinary civil courts.

The recovery of underpayments of the national minimum wage simply follows those accepted precedents. If a worker makes a claim to an industrial tribunal, he is entitled to the outstanding sum owed, but not to any interest, but if he makes a claim in the ordinary civil courts, he will be entitled to interest.

That is undeniably an inconsistency, but it is not easy to resolve. In general, no interest going back to the date of the wrong done is claimable in an industrial tribunal, even when the award represents a debt owed to the worker; but to entitle workers to interest only in respect of national minimum wage claims would produce a different set of inconsistencies. Workers recovering other underpayments in breach of contract in industrial tribunals would not be entitled to interest, and those recovering an underpayment, partly in breach of the national minimum wage provisions and partly not, would be able to obtain interest only on the proportion that was in breach of the provisions.

I am sympathetic to the amendment, but it raises complicated problems. With great reluctance, I have concluded that it is not feasible at this stage to entitle workers who claim in industrial tribunals to interest on national minimum wage claims alone. I therefore ask the House to reject the amendment if it is not withdrawn.

For most workers on very low wages, the vital thing is to get the cash that they are owed as soon as possible. Interest is likely to be very much a secondary consideration. Industrial tribunals may not offer interest, but they offer an approachable and speedy procedure. The idea behind the amendment is reasonable, but I am convinced that getting the money to the worker as soon as possible is the most important consideration.

Amendment No. 68 is a different kettle of fish. It would restrict the period over which a worker is entitled to claim back any underpayment. Under the Bill, if a worker suspects that he is being paid less than his minimum wage entitlement, he can start civil proceedings to reclaim his money through an industrial tribunal or a civil court, or an officer may serve a notice on his behalf.

In an industrial tribunal's proceedings on unauthorised deductions from wages, there are no limits on how far back claims may reach, provided that the claim itself is timely—that is, it is made within three months of the last of a series of underpayments. In county court proceedings for breach of contract, the claim can go back a maximum of six years before the proceedings were brought.

Amendment No. 68 would change all that. A worker who had been paid below the minimum wage would be able to claim money back only for the year before the proceedings were started. Any underpayment from before that would not be recoverable. That would apply regardless of whether the proceedings were brought in a tribunal or in the ordinary courts.

Amendment No. 41 is fair-minded, but there can be little to recommend amendment No. 68, which is simply unjust. Why should an employer who gets away with underpayment for years and years have to pay back only what he owes the worker for the last year? Is that a reward for the employer who can keep things quiet for as long as possible before finally being brought to justice?

For different reasons, I urge the House to reject both the amendments.

Mr. Bercow

I am extremely grateful to the Minister for his kind remarks, which are warmly appreciated. I am also grateful for the spirit in which he responded to my specific remarks in support of amendment No. 41.I acknowledge the practical difficulties, but I still believe that there is a powerful argument in principle for the incorporation of the amendment or something similar. If that is not possible on this occasion, I hope that we may revisit the subject in the future.

I am conscious of the hour and of the other important business that remains to be transacted, so I shall not detain the House. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.