HL Deb 24 June 1986 vol 477 cc183-223

4.50 p.m.

House again in Committee on Clause 1.

Lord Wedderburn of Charlton moved Amendment No. 3:

Page 1, line 10, leave out ("one of)

The noble Lord said: In moving this amendment I wish to speak also to Amendment No. 4. Now that we have settled the broad issue that no test overall of reasonableness is to be imported into the control of deductions, it is perhaps more important than ever to look with great care at just what the Government have put into their Bill and at their main plank of contractual arrangements being clear.

These amendments go to a puzzle as we see it. It can be put shortly in this way: deductions are to be allowed under the Bill if they are authorised either by statutory provision or by provisions in the worker's contract. That one would understand, but then there is a further wheel to the coach, an alternative to the provisions allowed by contract, those matters to which the worker has previously signified in writing his agreement. If he signifies his agreement in writing in any formal way, as one would expect it to be, would that not become a variation of the contract? If it is a variation of the contract it falls within paragraph (a) and paragraph (b) is not needed. Paragraph (b) is clearly needed where the writing is not imported into the contract; a writing standing alone which would not be legally binding unless it were a sealed deed. What kind of documents do the Government have in mind that would not be a part of a contract? Is this a document where there is perhaps a homeworker who does not have a contract? That is a difficult example to take because the whole of Part 1 of the Bill is based on a worker who does have a contract and the home worker without a contract is not brought in. All we are left with is this very uncertain area of signification in writing of consent or agreement that is not contractual because then it would be within paragraph (a).

At this stage so that we can consider the matter—because our efforts have not been availing in trying to find a clear explanation in another place in its debates on this matter—we ask the Government to clarify what is meant so that the matter can be considered further. I beg to move.

The Deputy Chairman of Committees (Lord Nugent of Guildford)

Before I put the Question, I should explain, as the noble Lord was speaking to Amendment No. 4, that if Amendment No. 4 were agreed to it would pre-empt Amendments Nos. 5 and 6 so that I should not be able to call them as well.

Lord Trefgarne

As the noble Lord has explained, the amendments restructure Clause 1(1), which provides that the basic protection for workers that deductions from wages (or payments by a worker to his employer) are unlawful unless provided for in a statutory provision—for example income tax—in the contract or by the written consent of the worker.

Incidentally, I believe that Amendments Nos. 10 and 11 come within this group as well. I notice that the noble Lord, Lord McCarthy, nodding in assent.

The effect of these amendments would be to remove written agreement as a method of authorising a deduction or payment. But it would create great difficulties both for employers and workers if the route of authorising a deduction by the written agreement of the worker was closed. For example, a set of deductions to recover a loan to purchase a season ticket could then only be authorised by varying the contract, which would be a needlessly cumbersome method of achieving a result desired by both parties. But in so far as the method of varying the contract was by the agreement of the worker the steps involved would amount to much the same thing except that agreement would not necessarily be in writing—so the standard of protection of the worker would, I think, be reduced.

I hope that in the light of these two difficulties the noble Lord will not wish to press his amendment.

Lord Wedderburn of Charlton

I am grateful to the Minister for that explanation. It is one that I followed in one respect, namely that if the effect of the amendments was to reduce the protection of the worker we certainly should not wish to move it. But, in a phrase, the objective and effect of the amendments—I apologise to the Committee and to the Minister because Amendments Nos. 10 and 11 on the new numbering are those we agreed should be considered as they involve the same thing—would not be to remove written agreement from the Bill. Written agreement is presumably contractual. It is intending that the parties should be bound. If I have a contract of employment and a document is put before me saying "Here is £100 as a loan to buy your season ticket. Will you agree to that being deducted from your wages?" and I accept, whether by signature or otherwise—that is a point we are coming to—then it is difficult to understand how that does not vary the relationship: my consideration being my going on working on those terms and the employer's being employing me on those varied terms. That is a variation of the contract of employment. I could imagine very bizarre documents that would not be, but the noble Lord the Minister did not put any of those to us. I am still mystified.

This is an important matter and not just a technical one. It is not a technical matter because if the Bill stays in this state it will suggest to employers and their advisers that there is an important category of writing which can be the foundation of lawful deductions which, because it is in paragraph (b) is not necessarily contractual and not a variation of the contract, not within the contractual sphere. The example that the Minister gave, a loan to purchase a season ticket with a written agreement to repay by deduction, is plainly a variation of the contract of employment. So the only possibility it would seem to me, with respect, would be agreements which are collateral to the contract of employment. That is what I expected the Minister to say. If this is aimed at contracts which are collateral to the contract of employment then Clause 1(1)(b) assumes quite a serious area of danger and problem because then it can go outside the employment relationship in new ways. For the moment, hoping that the Government will be able to say something a little clearer on what are the writings which are not contractual and come within paragraph (b) and do not come within paragraph (a) when we come to the point once again on Report, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 4 not moved.]

5 p.m.

Lord Wedderburn of Charlton moved Amendment No. 5:

Page 1, line 14, after ("signified") insert ("to the employer").

The noble Lord said: In moving Amendment No. 5, with the leave of the Committee I shall also speak to Amendment No. 6. There are two very short points here. They both relate to paragraph (b) and they may be put in this way. We are now on the writing that is not contractual, which is within paragraph (b), and not within paragraph (a), by which the worker signifies his assent.

First, in signifying assent, will he not sign the document? If it is not signed, will there not be uncertainty about his assent, his "agreement or consent", as the paragraph has it? So would it not be better to have it signed, to require signature? The Government are concerned about uncertainty. We heard that in relation to Amendment No. 1. Surely signature should be required.

With regard to the first and main amendment that I am moving, since the worker is so signifying his consent, to whom is he signifying it? Everyone will assume that he is signifying his assent to the employer. But that is not what the paragraph says. That is a much more serious problem because one can well imagine a document which is proffered by the worker to someone else or perhaps a document proffered by someone else, perhaps a customer or perhaps someone in a commercial relationship, to the worker and that later being relied upon by the employer and the worker saying, "I didn't signify my assent to you in that document".

Many such situations can be imagined. They would always be unusual ones, but the law is concerned with the unusual situation; the law is concerned with the pathological rather then the normal. Therefore, in order to avoid uncertainty, will the Government consider perhaps asking that in paragraph (b) the writing, the written document, should be something which signifies consent to the employer specifically and clearly. I beg to move.

Lord Trefgarne

Both these amendments seek to change the provision in Clause 1(1) that a deduction is authorised if the worker, has previously signified in writing his agreement or consent to the making of it". Amendment No. 5 requires that the worker has signified his agreement "to the employer". But the employer could not make a deduction authorised by this provision unless he knew that the worker has signified his consent. So the worker must in practice signify consent to the employer or to a third party, but at the same time informing the employer of this consent, which surely amounts to the same thing. If the worker gave consent to a third party but neglected to inform the employer, the employer obviously could not make a deduction authorised by such a consent. I assure the Committee that the additional words in Amendment No. 5 add nothing in that context of practical value.

Amendment No. 6 requires the worker to sign the agreement or consent he has given in writing. But the clause already requires the worker to give his consent in writing, which means that the worker must write a consent or sign a consent written by someone else. I see no reason to say that a consent written out by the worker but not signed is not a valid consent, and the more complicated we make these provisions, the more Likely it is that an employer will trip up on a small technicality and find himself having to repay to the worker a perfectly justifiable deduction from wages. I believe that these amendments add nothing and, arguably, create a rather confused Subsection. I hope that the noble Lord will not press them.

Lord Wedderburn of Charlton

Sometimes I think it difficult to make these subsections rather more confused than they are, but no doubt if we have achieved that, it has not been a very good step to take. The noble Lord the Minister's objection to the amendments seems to be that they change the provisions of the Bill. That, of course, is the objective of amendments to a Bill. Let us take the two examples that he gave, because they are important. He said —and I follow him a long way—that the agreement must be signified in such a way that the employer knows about it. So it can either be signified to the employer or to a third party and, so long as the employer knows about it, then that is good enough. Well, if the employee does not inform the employer, that he says, would create a problem.

But let us suppose that the third party then informed the employer. The Minister's example has to have added to it the rider that if a third party informed the employer then, on his hypothesis, that would satisfy paragraph (b). How uncertain! The noble Lord the Minister ended up by saying that in practice therefore it would be all right. Every time you hear the draftsman of a clause say, "Oh, in practice, it will be all right", you can be sure that there is something wrong with the clause. No one should ever have to defend a clause with the words, "If it is not right on paper, it will be all right in practice". A clause should be clear, a clause should cut out all possible—it cannot ever cut out all—predictable uncertainties. And there are two here.

The first the noble Lord did not meet—except merely to say that it would be all right in practice. As for the second, the noble Lord the Minister says that the worker must sign a document drawn up by someone else—I accept that—or draw up his own document which he need not sign. Why not? Why not say that it should be signed? Then everyone would know where they stand. For example, we have a document drawn up by, say, a noble Lord. I say, "This is your document". He says, "But I haven't signed it. It's not my handwriting". An element of uncertainty immediately appears.

Lord Trefgarne

I understand the point that the noble Lord is trying to make. I think it will generally be a matter of fact whether or not the employee actually wrote out the document concerned, if he did not sign it. It would be presumed generally in such circumstances—and I guess that they will be pretty unusual ones—that he had written it out in the presence of his employer who therefore knew that it was his document and that he was thereby assenting to the actions to which this provision applied. I understand the anxiety in the noble Lord's mind on this matter. If the noble Lord will allow me, perhaps I may look into this a little further, particularly in the context of a document which the employee has written out himself, to see whether there is any way in which I can meet the noble Lord's anxiety.

Lord Wedderburn of Charlton

I am glad to have that qualified assurance, as perhaps I should call it, from the noble Lord the Minister and on that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 6 and 7 not moved.]

Lord Stoddart of Swindon moved Amendment No. 8:

Page 1, line 15, at end insert—

("and unless the deduction is made by reason of dishonesty, default or other conduct on the part of the worker.").

The noble Lord said: I beg to move Amendment No. 8, which stands in my name and in the names of my noble friends Lord Wedderburn of Charlton and Lord McCarthy. I think it would be convenient to take with this amendment Amendments Nos. 29 and 30. As I read the Bill, Clause 1 as it stands gives the employer carte blanche to make deductions from an employee's wages provided that the employee has previously signified his consent or agreement in writing. Those deductions can arise not from any action on the part of the worker or employee himself but from action on the part of others. That is the reason for this amendment.

Once the employee has made his agreement he cannot retract from that; and we must bear in mind that the employee probably made that agreement at the commencement of his employment and, once having made it, it is unlikely that he will be able to alter it unless there is a provision for review within the agreement or if the employer would himself agree or perhaps if the employer gave the employee the right to renegotiate the agreement without fear of victimisation or dismissal.

Clearly, as the noble and learned Lord, Lord Denning, pointed out in our first debate, the employee is put in an impossibly weak position when he is applying for a job or when he is starting his job. The employer consequently is put in an unacceptably strong position. For a youngster or a person who has been unemployed for a long period to be asked to sign such an agreement before he knows the implications and what his job entails is a shameful strengthening of the employer's position and a weakening of that of the employee. But once he has signed the agreement the employee is trapped. He has not realised, and probably will not realise until he begins work, that his employer can fine him not only for his own dishonesty or default or indeed for any conduct on his own part but also for such behaviour of others over whose actions he has no control.

We have heard, for example, of the case of the attendant at a petrol station. My noble friend Lord Wedderburn of Charlton and the noble Lord, Lord Coleraine, referred to cases of forecourt attendants. We heard of the case of a petrol station attendant controlling perhaps six pumps. It is no easy task during a busy period to control six pumps. Yet if a dishonest motorist fills his tank and roars off without paying and the attendant fails to note his number—which in any case may be obscured by dirt or, at night, may not be properly illuminated — the poor attendant, under Clause 1 of this Bill, if the employer so decides and the employee has agreed at the beginning of this employment, has to pay up for a dishonest motorist clearing off without paying for his petrol. He is being punished not for his own dishonesty but for the dishonesty of someone else. Such a situation is unfair and unjust. After all, it is not really the responsibility of the employee to insure his employer against the thefts of others but, as the clause stands, that is precisely what employees can be required to do.

That is not all. It will be possible, particularly in respect of stock discrepancies, for an employer to fine his employees for the dishonesty, misdemeanours and inefficiencies of others, perhaps even of himself. Certainly it will be all too easy for an employer to be lax in the matter of proper control mechanisms if any losses are to be made up by his employees. Why in such circumstances should the employer put himself to the trouble and expense of imposing proper control disciplines if in fact he can draw money at will from his employees?

This clause and this Bill are heavily weighted in favour of the employers and against the employees. They penalise financially the poorest section of the workforce and those whose very status and occupation indicate that they need most protection. Our amendment seeks to somewhat redress the balance between employer and employee and to protect the weakest, in bargaining terms, among the country's workforce. I commend the amendment to the Committee and I beg to move.

Lord Trefgarne

The effect of this Amendment, No. 8, will be to add a further restriction on contractual or agreed deductions or payments. It would ban deductions that are not made by reason of dishonesty, default or other misconduct on the part of the worker. This would ban a great many perfectly reasonable deductions: for example, to recover loans or to pay subscriptions to a company's social club.

Under the Bill as it stands, the worker can be made to compensate the employer for a loss or shortage only if the worker has a contractual responsibility for the loss or shortage; that is, if his contract makes clear that he can be asked to compensate the employer for the loss or shortage. This is clear law and it is reasonable that the parties should agree their own rules in the contract, and stick to them. It is quite reasonable that where a worker has accepted a contractual responsibility for losses or for the cash that is the lifeline of the business, he should meet such loses or shortages.

The Government have considered these amendments carefully but we have concluded that they would lead to uncertainty and complexity and would possibly cost jobs. The amendments would require the employer to seek to determine responsibility in fact for losses and shortages, rather than simply agreeing with the worker to make a deduction and drawing a line under the matter. This might make the employer, faced with continuing unexplained shortages that he had to meet as he could not prove dishonesty, more likely simply to dismiss the worker concerned.

The amendments would lead to complex and lengthy tribunal cases, investigating who was in fact responsible for particular losses or shortages. The more we complicate the Bill with statutory constraints on the ability of employers to offer and workers to accept jobs on terms they can agree, the more likely it is that the number of jobs on offer will be reduced. I ask the Committee to accept that, however well-intentioned, the amendments could lead to complex-ity in law and to the loss of jobs.

5.15 p.m.

Lord Rochester

I have some sympathy with this amendment. There is a widely-held view that any deductions for cash or stock deficiencies are outmoded and should be replaced by better management and better methods of control. I think that was one of the points that the noble Lord, Lord Stoddart of Swindon, was making. My fear is that incompetent management may seek to hide that incompetence at the expense of the employees. Under the Bill it is possible for poor management to make deductions from wages rather than carrying out sound practices such as, for example, moving employees thought to be responsible for deficiencies in cash or stock from one shift to another. Our aim in the long term should surely be to get employers to accept that it is their responsibility to establish procedures under which their employees are protected from what may be the misdeeds of others, rather than taking refuge in penalising people who may not themselves be at fault.

I am in a difficulty here because, as I have already indicated in the general discussion on the first two amendments, I am not happy, any more than is the Minister, about doing something (except in the most exceptional circumstances) which violates, as it were, the contract between the employer and the employee. I rather hope that in those circumstances this particular amendment will not be pressed but that the thought which underlies it may perhaps be introduced at some later stage when I may find it easier to support it.

Lord Denning

I am afraid that I do not support the amendment. It is not wise to put rigid rules such as this into the statute itself. As I indicated earlier, it is really much better for there to be a code of practice or code of guidance so that the matter may be considered as to what is fair and reasonable in all the circumstances. I hope the tribunal will be sufficiently interested and have wide enough powers to decide what is fair and reasonable. I would not hamper it by having through-out this Bill rigid rules laid down for it, or for the employer, to operate on.

Lord Murray of Epping Forest

Very briefly, may I say that I would not wish it to be assumed that silence on these Benches implies, in any sense, acceptance of the statements or unsupported assertions made by the Minister; for example, the reiteration of the assertion that this measure is designed to produce jobs. There is not a shred of evidence that measures of this kind defend jobs. If his argument is that this measure is necessary to defend the job of a defaulter who other-wise might be taken to a tribunal, the answer is that if there is dishonesty his job should be at stake. If there is alleged dishonesty, he should have the right to go to a tribunal and defend himself there. I make the point merely because, if the Minister repeats something many times, that does not mean that we are accepting the basis of his argument.

Lord Harmar-Nicholls

What the Minister said is borne out every day with people who have to run businesses, particularly small businesses. When one is thinking of opening a department in another town, particularly when people have to handle money and one has to pay for the stock which is to be put into the shop, one must be satisfied with the people who will be handling money without day-to-day supervision, because one cannot always transfer top, responsible management to a new department in another town. The employer must feel that he has some sanction which will ensure that the business is being properly run, as regards the cash that comes over the counter.

The arrangement that you come to, perfectly properly, is that if the money taken does not conform with the normal percentages of the other branches, and if there are no circumstances which make that new branch different from the others, the employee knows that he will be responsible for any discrepancies that cannot be accounted for. That makes him that much more efficient. If you do not have that sanction, you think twice about risking your capital in the stock, in the rent and in all the other things that go with opening up new premises. That is common form.

I am interested, too, in a group of hotels where people are in charge of various departments and cash is coming in. If the money taken at the door for a dance, where there is no real check other than the tickets that have been handed in, is short somebody is responsible for the discrepancy. The people who take on that responsibility know that and they are that much more keen to see that the takings at the door conform with the tickets. If there are special circumstances, such as rowdyism, an employer takes that into account.

However, I do not think there is any need for the state to come in on this. There is no need for a statute, which means all kinds of pettifogging forms having to be filled in and procedures having to be followed. The Minister is absolutely right. I have great respect for the noble Lord who has just spoken as a trade union leader. He knows his men and it is right that he should want to defend them from any kind of interference by anybody. But I am on the other side of the counter and I know that, before you take a risk and put in investments, you want certain protections. This is a very sensible one which you enter into with the employee concerned. If it is not there, it will interfere with your decision as to whether you open a department, and therefore it will interfere with the employment of certain people.

Lord Stoddart of Swindon

It has been an interesting short debate. I think I can understand the reservations of the noble and learned Lord, Lord Denning, and the noble Lord, Lord Rochester. I understand their preference for the insertion of what is fair and reasonable and a code of practice. We had the opportunity to vote for just those things, but unfortunately the Committee in its wisdom or otherwise decided that it could not agree to that. Had it done so, this amendment would have been completely unnecessary and we should have certainly withdrawn it. But I understand those reservations and, in any event, I shall probably not press the amendment.

The noble Lord, Lord Harmar-Nicholls, seems to think that employers in the retail trade, and in other such trades, should have this sanction of fining their workers, because that is what it amounts to—

Lord Harmar-Nicholls


Lord Stoddart of Swindon

Yes, indeed. Just listen for a minute. He is proposing that there should be a sanction in those trades of a fine to be placed on the workers quite indiscriminately in respect of defalcations, shortages in the till or shortages of stock. That is what he said. I was listening to him very closely.

Lord Harmar-Nicholls

The noble Lord's interpretation of what I said bears no relation at all to the words that I used. What I said—and I repeat it—was that I believe that a contract made between the employer and the employee is all that is necessary. They both agree that, in order to get the efficiency that they both need, they are prepared to pay for discrepancies which common sense shows are there. There is no question of fining anybody. The kind of interpretation which the noble Lord put on it shows the bias with which he approaches this question: that the employee can never be wrong but that there are dirty employers who always want to be wrong. That is the wrong attitude here and the noble Lord reflects it far too often. But he must not reflect it by misinterpreting my words.

Lord Stoddart of Swindon

On the question of bias, I think that it is a case of the pot calling the kettle black. The noble Lord is very well known for his bias in many respects, and for his forthright speaking in the House of Lords, which is particularly what we want. I understood perfectly what he said about the contract of employment, but I thought I explained earlier the difficulties that a worker may very well be in when he signs that contract of employment. He is at that moment perhaps starting a job without knowing what it entails, or he may be applying for a job but before he can get it he will have to sign the contract. Therefore he is in a weak position, at that point in time, in relation to his employer. That is what I was getting at, and in those circumstances it is wrong. It militates against the interests of the employee, and in favour of the employer, if he is under that contract subject to being fined for defalcations and shortages which may not be his own fault.

The noble Lord asks: who is going to start a small business or department in those circumstances? Marks and Spencer did and they employed workers under the protection of the Truck Acts. Today, Marks and Spencer see no reason to fine their employees for shortages and what have you. The reason they do not is that they manage their business properly and ensure that there is proper control, both of cash and of stock. It is made clear to their workers that any of them who are found to be dishonest will no longer be welcome to be employed by Marks and Spencer.

Although the noble Lord the Minister said that condoning dishonesty by punishing collectively is better than the sack, from the point of view of the business and from the point of view of his fellow workers it is much better that a dishonest worker should be sacked. It is a protection for the employer and it is a protection for the other people who are employed. That is the way to run a business. I therefore think that the noble Lord, in suggesting and bringing up this question of dismissal, is guilty of perhaps misleading himself and by misleading himself is misleading the Committee. As I said, I do not intend to press this amendment at this stage, but I hope that the noble Lord, Lord Trefgarne, will ensure that the debate which has been a short but interesting one is well read in the department. It may well be that we shall come back to this matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 9 to 11 not moved.]

5.30 p.m.

Lord McCarthy moved Amendment No. 12:

Page 2, line 3, at end insert—

(2A) Where an employer makes a deduction from any wages of any worker employed by him and one ground for such deduction relates to any loss or any event causing, or likely to cause, loss, to the employer, which has been, or which it is reasonable to believe has been, occasioned by the dishonest conduct of some other person without default on the worker's part, the deduction shall not exceed one-twentieth of the net amount of the wages payable to the worker on that day.

(2B) Where an employer receives a payment from a worker employed by him and one ground for the payment relates to any loss or any event causing or likely to cause loss, to the employer which has been or which it is reasonable to believe has been, occasioned by the dishonest conduct of some other person, without default on the workers part, the payment shall not exceed one-twentieth of the net amount of the wages payable to the worker on that day.").

The noble Lord said: This amendment is one more attempt to civilise the operation of Clause 1. As has been said by my noble friends on this side of the Committee, if our Amendment No. 1, or if Amendment No. 2 which was moved by the noble Lord, Lord Rochester, on the reintroduction of the reasonability test, had been passed by the Committee, all these amendments would not need to be moved. It is precisely because the Government now take power or now wish to give employers power to dismiss unreasonably and unfairly in any circumstances that we find it necessary to move these amendments. In answer to the noble Lord, Lord Harmar-Nicholls, I have to say that we are not asking for any category of new and extended rights.

It is our central submission today that the workers so far as they were covered were better off and would be better off with the 1896 Act than they will be under this Bill. We are not asking for anything that has not existed since 1896. In effect, we are not asking for the same degree of protection. We are trying to mitigate the consequences of what the Government are doing, particularly because they will not accept the retention of the fair and reasonable test. There is nothing new in what we are trying to seek.

So far we have not had any success not simply on the reasonability test but also on the small and minor points which my noble friends have sought to introduce to the Committee. What we are trying to do in this similarly minor amendment is to limit the rate of repayment to one-twentieth of the wages due on that day in circumstances in, which it is reasonable to believe",

that the deduction, has been occasioned by the dishonest conduct of some other person without default on the worker's part".

In other words, this amendment bites only where the deduction arises as a result of somebody else's conduct and not the conduct of the worker concerned, where the employer cannot show that the worker has been dishonest or in some other way in default. In those circumstances, because noble Lords opposite would not accept any of our previous amendments where we wished to restrict the employer's rights to do these things by reference to dishonesty and so on, we are asking them to accept some small reduction on the rate of return.

There are many reasons one could give why this is a modest thing to ask. But I would suggest that the Government themselves accept the principle behind this amendment because the Government propose in Clause 2 in particular that where workers sell directly to the public or to fellow workers or to other individuals in their personal capacities, there shall be a limit of one-tenth—that is what Clause 2(1) says—and that the rate of repayment, shall not exceed one-tenth of the gross amount of the wages payable to the worker on that day",

whether it is his fault or not. We say that if in those circumstances the Government are prepared to accept a limit of one-tenth, surely in the rather more general circumstances of this clause they would be prepared to accept the limit of one-twentieth. I beg to move.

Lord Trefgarne

Under the Bill as it stands a worker can be made to compensate the employer for a loss or shortage only if the worker has a contractual responsibility for the loss or shortage (for example, his contract makes clear that he can be asked to compensate the employer for that loss or shortage). This is clear law and it is reasonable that the parties should agree their own rules in the contract and stick to them. It is quite reasonable that where a worker has accepted a contractual responsibility for losses, or for the cash that is the lifeline of the business, he should meet such losses or shortages.

We have considered this amendment very carefully but have concluded that it would lead to uncertainty and complexity. The amendment would require the employer to seek to determine responsibility in fact for losses and shortages rather than simply agreeing with the worker to make a deduction and drawing a line under the matter. This might make the employer, faced with continuing unexplained shortages that he had to meet as he could not prove dishonesty, more likely simply to dismiss the worker concerned. The amendment would lead to complex and lengthy tribunal cases investigating who was in fact responsible for particular losses or shortages.

The 10 per cent. limit on deductions on account of cash shortages or stock deficiencies is a response to what emerged as a particular problem area in the consultation exercises conducted in 1983 and 1984. We consulted on the 10 per cent. figure, which proved acceptable. There is no evidence of any more general problem and no reason for the 5 per cent. limit proposed in this amendment. Even if the principle that workers could not be asked to accept a contractual responsibility unconstrained by various statutory controls on the behaviour of the employer were accepted, these particular controls seem to have no great merit. Why a 5 per cent. limit on wages when someone else is responsible for the loss? I think it would be wisest just to leave matters to the parties as is proposed in the Bill.

Lord McCarthy

The noble Lord really is amazing. If he wants to say that he should like our amendment to propose one-fifth rather than one-twentieth, of course we will do that; but otherwise what he says is quite irrelevant. We say one-twentieth because we are trying to be reasonable. It is not an argument against our reasonability for the noble Lord to say that we should have been unreasonable or less reasonable.

Then he says that he thinks there are circumstances in which when stoppages occur as a result of cash loss or stock loss one-tenth is a reasonable figure; but where deductions arise not from cash or stock but from some other cause no figure at all is reasonable. What possible argument can there be for that? I expect the noble Lord to make the arguments about uncertainty. I expect him to tell me that otherwise employers will not be able to employ people. I think it is time he set that to music.

Amendment, by leave, withdrawn.

[Amendments Nos. 13 and 14 not moved.]

Lord Wedderburn of Charlton moved Amendment No. 15:

Page 2, line 14, after ("more") insert ("express").

The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendment No. 16 as both amendments refer to the same point.

We are now, as my noble friends and I see it, faced with a Bill where every part of the dice is loaded against the worker, at any rate against the worker who does not have strong union organisation. The point has not yet been made, but what spin-off effects this Bill will have in those areas where the union is organised among workers involved has yet to be investigated. No doubt at some point the Government will tell us what they expect there.

These are the circumstances of the vulnerable and isolated worker. He is now to be bound by contract or by a written document signifying his assent, with a certain number of uncertainties. We hope the Government will say there is at least a document that he has signed. We then come to what is meant by his contract—the "relevant provision" in subsection (3). The terms which are within the relevant provisions are either express or implied. If the Government are concerned about certainty and uncertainty, such a phrase in a statute of this kind is a recipe for disaster. The Government must take the responsibility that it is not just a disaster in the abstract but a disaster for the worker because it will always operate against him on the structure that we now have.

Lawyers know very well, and laymen know even better if they have been involved in litigation (and many laymen know as well as lawyers) that terms implied into contracts by tribunals or the courts, and especially appellate courts, are often very difficult to predict. There are terms implied in fact; there are terms implied in law; there are terms implied because of that well-known test, "An officious bystander would think that the parties intended to include them although they did not include them". There are terms implied to give what the court thinks is, in the old phrase, "business efficacy" to the contract; there are terms implied by some judges because, especially today, they think it is reasonable for them to be implied.

The Government, who eschewed "reasonableness" on our Amendment No. 1, specifically include implied terms and bring in reasonableness in litigation by another door. There are terms implied because of a custom or usage of the trade; and there are terms implied by other judges because they see them as part of the relationship between the parties and not coming under any of the other heads. Those broad categories only begin to elucidate the complexities of the implied terms.

Implied terms are nearly always the cause of controversy. For example, in 1931 the Court of Appeal implied a term allowing an employer in Lancashire to deduct for bad workmanship because, the court said, that was a normal part of Lancashire cotton weaving. One of the Lord Justices came from the area. He believed that, even if the workers had never heard of it, that had to be implied into the contract.

Many Members of the Committee will have seen, a little outside the area, the decision on 30th May this year about what is implied in the contract of a teacher. That was a matter of great dispute between the parties. The learned judge in the High Court held that the contract of employment in a professional capacity would not normally be expected to detail all the obligations but that it must include whatever could be seen as a professional obligation, though not referred to. He thought that meant the standards set both by the profession and by public expectation. I appreciate that is not about deductions but it gives some illustration of the kind of controversy and complexity which always surrounds implied terms if an argument breaks out between the parties. Whether those decisions are right or wrong does not matter, but they illustrate the uncertainty.

Why let lawyers litigate when—and the Government say this is what they want—there should be clarity in the contractual arrangement? Why have the matter brought to implied terms? Indeed, the matter is to be put into writing in one way or another; In subsection (3)(a) and (b) one would expect something in writing if only because (and this was an amendment that we did not move but which referred to the issue that most employees have written particulars of their employment) one would hope to find a reference there. So why the insistence that we must have implied terms to deal only with the situation of an oral agreement? That would seem very undesirable.

Consent under Clause 1(1)(b) must be in writing. Why should we not have similar clarity in the Bill, even on the basis of the Government's logic and not on the basis of any of the arguments we have hitherto advanced? Surely the Government will consider again whether implied terms should be kept out and that clarity between the parties must at least make the deduction clause an express term of the contract—that refers to the first amendment—and leave out reference to implied terms because that will only increase uncertainty and establish an area for new controversy which would not otherwise be there. I beg to move.

5.45 p.m.

Lord Rochester

I should like a little more clarification from the noble Lord, Lord Wedderburn, because I do not altogether understand the significance which is attached in this amendment to the distinction between an express and an implied term of contract; and I must admit to being something of a layman in these matters. If, for example, there is a collective agreement which sets out, say, a disciplinary procedure, that could lead to pay being withheld and that would surely be recognised (would it not?) by any court or tribunal as a valid implied term of the employee's contract.

Moreover, as I understand the Bill, it protects employees against arbitrary wage deductions based on implied terms because the employer has to tell the employee that such a term exists and give him a written explanation of what it means before making any deduction. The employee also has the fallback remedy to which I suppose we shall come later. If he believes there is no implied term in his contract he can complain to an industrial tribunal, which will decide whether there is such a term.

It may be that I have misunderstood what the noble Lord has in mind or that there is much more to it than what I have seen, but I felt that I should give expression to that doubt.

Lord Denning

I am afraid I do not support the amendment. When speaking about terms of a contract we in the law know perfectly well that they can be express or implied, or they can be oral or in writing; and we always manage to deal with them quite well. In the old days we had requirements for the terms to be in writing, but we have lost all that and we can have them quite generally, as the words are in the Bill. Therefore I do not support the amendment.

Lord Trefgarne

Having listened to the noble and learned Lord, I am not sure there is any more I need say; but perhaps I should explain that under the Bill as drafted the employer will have to give the worker a copy or a written explanation of any terms authorising a deduction from wages prior to the making of a deduction authorised by them. The important objective is to ensure that the worker knows of the terms before any deduction is made on account of them.

Taken with Clause 1(4), which deals with retrospective amendments of the contract, these are strong controls. Proposals to strengthen these controls must be balanced against the added complexity for the employer, and the danger of creating a situation where he can easily trip over a technicality. The amendment would rule out implied terms of contracts from being terms which could authorise a deduction.

The amendment seeks to bar the implied terms of contracts from being terms which, as I say, could authorise a deduction. I understand that it is common for terms of contracts to be implied from collective agreements with trade unions, custom and practice in the industry, or company rule books. A relevant example would be a term implied from a company disciplinary procedure which might itself be part of a collective agreement. There seems to be the thought behind the amendment that there is something undesirable about implied terms. That is not the case; but in any event, since the Bill makes it clear that the worker must be given a written explanation of the implied term, he will not remain in ignorance of the term simply because it is implied. I hope that in the light of this explanation the noble Lord will not wish to press the amendment.

Lord Wedderburn of Charlton

If I do not press the amendment, I shall certainly press the argument, and it is a matter to which we may come back on Report because, with great respect, a number of fallacious concepts seem to be floating about in the Committee. It is perhaps the hour of the day. For example, there is a distinction made between terms which are implied in a contract and terms which are incorporated into a contract by reference.

So far as concerns collective agreements, the normal position is that the statement of written particulars of the employee will refer to the collective agreement, and that is not an implied term. I know of no authority to say that that is an implied term. It is a term incorporated by reference. If the two categories alone are permitted, it is more in the camp of "express" than anything like that of "implied". A company disciplinary procedure incorporated by written particulars or other document or express reference by the contract of employment is of course incorporated.

It is true that on occasion when an employer does not get his written particulars right, or when he is slovenly about the document which he is obliged under Section 1 of the Employment Protection (Consolidation) Act to give to each employee, the courts sometimes have to bend their minds to implying other documents—be they collective agreements or works rules—when it comes to the contract of employment, and they have frequently done so to the disadvantage of employees in the last decade.

It is exactly that fact to which my noble friends and I object. We object to the fact that the worker will not have the certainty of finding it in his written particulars or other document, be it under this Bill or under the Employment Protection (Consolidation) Act, and there will plainly be a great deal of overlapping of pieces of paper in that respect to which no attention appears to have been given. He is entitled to the certainty of something written down which will attract his attention. But if one is saying that we can use the implied term where the employer has been slovenly in his practice, and where he cannot even be bothered to give to the employee the proper written particulars to refer him to the documents where the deduction clause may be found and that that is where the implied term will be used, of course it will. That is precisely the matter to which we object in this amendment.

I say with great respect to the noble and learned Lord that the idea that just because most statutes and most judgments use the phrase, terms of a contract express or implied, oral or in writing", then we have to use it here seems to me not to follow at all. Indeed, the implied term has expanded its scope in the contract of employment in the last 10 years—it is common knowledge—to the disadvantage of workers. In cases such as the notorious Hollister decision the courts have expanded the implied term "to co-operate" on the workers' side in such a way that, despite one or two judgments putting obligations on employers, managerial prerogative has been expanded in business reorganisation in the common law to a very large extent.

If the noble Lord, Lord Trefgarne, says that it will be all right because the worker will have something written down and he must know of it under this Bill, what is the point of the implied term?—because then presumably this will be covered by the Bill without the implied term and a written explanation will be enough.

I confidently expect that when we look at Hansard it will be found that there is something in the point that implied terms will operate exactly as I have outlined, when this Bill even on its own premises, should not encourage the practice of bad management. That is a situation where management has not given to workers in advance the documentary evidence of their obligations to which they are entitled. It is precisely there that the implied term will be used and, on the structure of the Bill, must be used. We ought to look again at the matter when we see the nature of our debate today. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 16 not moved.]

Lord Wedderburn of Charlton moved Amendment No. 18:

Page 2, line 19, after ("contract") insert ("or any such provisions").

The noble Lord said: I wonder whether I may put this amendment very briefly to the noble Lord the Minister because I think that perhaps there is no difference of principle, especially in the light of a phrase that he used when speaking on the last amendment. I am moving Amendment No. 18 and for convenience I shall speak also to Amendments Nos. 19 and 20.

The point can be put simply. The noble Lord the Minister, as I understood him, remarked that the Bill prevented certain types of retrospective deduction. It is fairly obvious that on anybody's premises retrospective deduction is not really a very good idea. However, as I understand it, subsection (4) allows for the prohibition of variations of the contract under Clause l(l)(a) and all types of written consent under Clause 1(1)(b), but that does not cover the case of a contract which itself permitted retrospection.

I should like to give an example. Let us suppose that a young man helps out on Saturdays in a computer shop; and any Members of the Committee who have had any contacts with computer shops will know that the best time to go to these places is on a Saturday when the teenagers are there, because they know all about computers. So the young man helps out from time to time and then he is taken on as a part-time employee. Let us suppose that there is a contract in that clause which allows for deductions for any losses which occur in any period during which he has worked there. That would not be a variation. It is an original contract, and as I understand it it will not be covered by Clause 1(4). It is a contract which provides for the possibility of retrospective deduction without variation and of course does not come under the heading of the written consent.

I have other examples, but I shall leave it at that. In the hope that the Minister will say that he will take this amendment away and look again at Clause 1 (4) I beg to move.

Lord Trefgarne

Clause 1(4) prevents employers from varying the contract or obtaining the consent of the worker to the making of a deduction in respect of a particular event and then deducting in respect of an earlier event. For example, it would be unlawful for an employer to vary the contract or obtain consent to his making deductions for lateness, and then to institute deductions for incidents of lateness that had occurred some months previously.

I must assure the Committee that Amendments Nos. 18 and 20 are of no effect, but that Amendment No. 18 amends the reference to relevant provisions in Clause 1(4) to cover all provisions of a contract, and since deductions can be authorised only by relevant provisions as defined in Clause 1(3), this is of no effect. Amendment No. 20 simply says that deductions or receipts covered by the subsection are unlawful, which is already the case. Amendment No. 19 would have the effect that an employer could not enter into a contract with the worker and then make a deduction from his wages on account of a matter that occurred before the contract was entered into.

I wonder how real is the problem that the amendment seeks to deal with. If an employer agrees to take on a worker for the first time, what event might there be that happened before the contract was forged in respect of which the employer might want to make deductions? It cannot be anything to do with the employment relationship, as there was no employment relationship.

The amendment might have some unfortunate side-effects. It would debar an employer from reaching an agreement to take on a worker, subject to the worker agreeing to have deductions from his wages in respect of something that had already happened before the employment commenced; for example, the individual had borrowed money from the employer before he worked for him or had run up a debt with him as a customer of his business.

The problem that the clause deals with is where the employer agrees terms, seeks to vary them and then makes a retrospective deduction in respect of an event related to the employment relationship that occurred before the variation. This is rather different from employer and worker agreeing terms at the outset of employment that incude provisions for deductions in respect of past events when the worker was not employed but was perhaps a customer. I think that the amendment adds little by way of extra protection, at a possible cost of some unintended side-effects, and I hope that the noble Lord will not wish to press it.

6 p.m.

Lord Wedderburn of Charlton

One of the problems with these amendments and with the noble Lord's response is that many of them relate to apparently small points, but they are real ones. Each one, it is argued, will either be all right in practice or will have no effect.

If I may illustrate, the Minister by advancing up the flanks, as it were, has forsaken his mid-field. He says that there must be the possibility in a contract to allow for the recovery of money borrowed from the employer or debts incurred previously by way of business; so the principle of retrospection is not to be absolute. I can see some force in that. One might wish to take account of that, but the Minister will not allow variations for that. Why not? The provision does not allow variations for money borrowed, debts run up in business, and so on, previously. On the Minister's logic he ought to allow variations for that.

I merely take two points. Secondly, the Minister asks how real all this is. It is very real. The example that I gave was a simple one of a youngster working in a shop, just helping out and then being taken on. But we are dealing especially with the part-time employee, the short-term contract, the casual contract and all the other forms of a typical and marginal employment which are now being analysed by the academics but which are not doing a great deal of good for some of the workers, compared to their need for full-time and secure employment. We rarely get the numbers broken down into the jobs that are part time and insecure.

The point about short-term or casual contracts is that there may well be a short-term contract for a few days and then for a week or two. Those would be broken up and they would be separate contracts. They would not fall under the ban of variation. They are not variations one of another; they are short-term and separate contracts, except that in some such cases the courts—and this is an area of complete confusion in case law—imply what they call a global contract to cover the relationship. But in the majority of such cases there are fragmented, short-term relationships for such workers; fishermen, for example. There have been cases recently where people have been held to have only short-term contracts, interspersed with periods away.

I take the Minister's point that different types of debt may well be considered separately. But no kind of retrospection is to be forbidden there. It is not within the Government's logic to permit restrospection there, for all types of debt anyway, and to ban it for variation. I ask the Minister whether he will say that he will look at that again. In practical terms that could be an important point. We all know that deductions are often made in respect of stock losses—perhaps a little less so for cash shortages—which take some time to come to light. Periods of time matter in the relationship between the parties. In asking leave to withdraw the amendment, I hope that the noble Lord will consider carefully what result subsection (4) as it stands will have.

Lord Trefgarne

Before the noble Lord seeks permission to withdraw the amendment, he has asked me specifically whether we will look at the matter again. I am bound to say that I cannot see much scope for that. However, I wish to be as constructive as 1 can be. I think that he is asking us to look at the possibility of distinguishing among different kinds of debt, where some would be deducted retrospectively and others would not. I believe that that presents considerable difficulties of definition. Nonetheless I shall ask for the matter to be looked at, but, to be frank, not with much expectation of success.

Amendment, by leave, withdrawn.

[Amendments Nos. 19 to 21 not moved.]

Lord Wedderburn of Charlton moved Amendment No. 22:

Page 3, line 12, after ("person") insert ("(not being a person employed by, or directly or indirectly under the control of. the employer)").

The noble Lord said: This amendment is concerned with Clause 1(5)(d), which is already known by those who know the Bill—and they are few so far but there will be more—as the check-off clause. It takes out of all the controls of this part of the Bill certain deductions made in accordance with its terms, with the agreement of the worker, which are to be deducted and paid over to a third person.

Many people concerned with employment matters will immediately think of the check-off; that is to say, the arrangement whereby the employer deducts a portion of wages due to the worker who is a union member and pays it over to the trade union. It is an arrangement which in terms of stability and good industrial relations has an important place in a number of industries and indeed now in a number of services and in the public sector.

Clause 1(5), however, goes rather further. It relieves the employer of the prohibition on deductions in subsection (1) so that he is relatively free, although it then reimposes the requirement for consent. As it stands, this provision in the clause relieves the employer of the requirement to gain consent, whatever the relationship of the third party to him. It does not seem to us that that can be right.

Some aspects of the Truck Acts originated in the "tommy shop" system. I am not suggesting that that would necessarily be re-created; that is, shops under the control of the employer. But would it not be desirable, as a condition of exempting the employer from the normal controls of subsection (1) and imposing merely the requirements of consent in subsection (5)(d), to insist that the third person should be independent of the employer; or should there not be some other formulation which prevented any kind of abuse in that respect? I put the point shortly, and I beg to move.

Lord Trefgarne

I understand that it is common for workers to agree that the employer can deduct sums and pay them to third parties—for example, to a trade union, a charity or a social club—with the third party telling the employer how much to deduct; for example, what subscription is due. The most common example is the check-off of trade union subscriptions, the worker signing an agreement that the employer pays directly to the union subscriptions of an amount notified by the union. Such arrangements are perfectly proper, but it would be wrong, I think, if the employer was guilty of an unlawful deduction if the union got its calculations wrong.

The amendment is clearly designed to protect the worker where the third party is employed by or controlled by the employer. The thought is, I think, that the employer could possibly instruct the third party to advise him to deduct a larger sum than was properly due, part of which was then paid back to the employer.

I believe that the worker is already well protected. Deductions on account of those arrangements are still covered by Clause 1, if the worker has not signed his agreement to the arrangement. The protection of the worker against the abuse of that provision is that he can always withdraw his agreement. I recognise the concern that lies behind this amendment, but I think that it is unnecessary because the worker is well protected even without it.

Lord Wedderburn of Charlton

I hear what the noble Lord the Minister says. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Baroness Cox)

I must point out that if Amendment No. 23 is agreed to I shall be unable to call Amendments Nos. 24 and 25.

Lord Wedderburn of Charlton moved Amendment No. 23:

Page 3, line 16, leave out from beginning to ("or") in line 22.

The noble Lord said: I think that it will be convenient if I refer also to Amendments Nos. 24 and 25. They are all related to clause l(5)(e)—deductions made from workers' wages where the employee has taken part in a strike or other industrial action.

There are three major points which support the amendments to which I am speaking and moving. First, the paragraph relieves the employer of the prohibition upon deduction in Clause 1. The first thought that comes to mind is, why? Should there be no control just because there is a strike or industrial action? One might suggest that the employer should say in advance what he will do if he intends to deduct sums for industrial action, at any rate in general terms. That might lead to a document as to his policy on the matter. However, that is not required. He is left at large.

Secondly, as has been said in another place, it appears to be one of the Government's reasons for having the clause, that in effect it gives the employer the right in law without constraint to fine anyone who dares to take industrial action. What he can do will depend upon the state of industrial relations, trade union strength and the labour market. The Government may then say that one of the reasons for the provision is to keep strikes and industrial action away from industrial tribunals. If the deductions and fines for industrial action were covered by this Part of the Bill, complaints could be made to industrial tribunals. It has long been a policy of employment protection legislation that the controversial issue of what is a just or defensible industrial action, lock-out or strike should be kept out of industrial tribunals.

Of course, this is the Government which invented the procedure of joinder—that the trade union can be joined in an unfair dismissal action in an industrial tribunal if it threatened to take industrial action which induced the dismissal. With those provisions, the Government pushed the justice and equity of strike action into the tribunals.

It has been said in another place that the Government are relying upon the traditional argument—keep strikes out of the industrial tribunals. If that is so, the jurisdiction under the present law of unfair dismissal with regard to industrial action and strikes (the jurisdiction of the industrial tribunal) is destroyed under Section 62 of the 1978 Act in effect only where the employer treats all employees alike—that is to say, where he does not victimise one or some by dismissing them or refusing to re-engage them as against the others who were involved in the same industrial action or, under the amendments, the same industrial action at that establishment.

As it stands, the Bill allows for discriminatory fines and deductions and so it is not in line with traditional policy. Amendment No. 25 is a probing amendment to ask why that should not be included. If one is to impose the traditional policy of keeping industrial tribunals out of strike issues, why do the Government not do it in the way that is traditional—by saying that can be the case where the employer treats all his workers alike?

In other words, the clause takes a bit of the old policy and adds a bit of its own. To keep out the industrial tribunals, it excludes fines for strike action from the controls and any obligation to say in advance what the employer's policy will be with regard to that matter. I should have thought that was an arguable point on any basis. Having done that, and used the traditional policy for that, the provision does not go on to tell the employer that he will be at risk if he victimises some people as against others.

Our amendments ask the question: why not? If the logic of the parallel with Section 62 of the 1978 Act is to be followed, surely some equity must be imposed as a price for the lifting of all the controls. There is nothing here about workers' consent. I know what the Government will say about that. They will plainly say that where a strike and industrial action are concerned the workers' consent is irrelevant.

I should have thought that two other points would have caused the Government to look with care at the clause—first, the requirement that the employer should in some circumstances say something about his policy in writing and, secondly, the determination that if the matter is to be taken from industrial tribunals by removing it from the clause, the price should surely be that there is no unfair discrimination and victimisation merely because people have taken industrial action, which, in some countries and sometimes in this country, people like to refer to as the right to withdraw their labour.

At present far more than anything we have so far met in the Bill, the clause not only permits but positively encourages management victimisation by way of fines and deductions of those who take part in industrial action. I know that it will be said that such people may be lucky to have their jobs back. That is the stage we have reached. We cannot accept that that is a proper piece of legislation to pass now. I do not think that it is a piece of legislation that will be found in that form in any other Western European country. In the light of these amendments, we ask the Government to look at the matter again. I beg to move.

6.15 p.m.

Lord Trefgarne

Perhaps I may just swiftly explain the objective of Clause 1(5)(e). If a worker is involved in industrial action—for example, in a go-slow or other similar action in which the worker stays at work but deliberately hampers production—the employer is often entitled to deduct something from his wages. There may be an express term in the contract that allows for that, but more often there will be an implied term in the contract that the worker does not behave in that way and that, if he does, the employer is not obliged to pay him his wages in full.

The worker can of course go to the civil court and argue that the employer is in breach of the contract in making such a deduction. There are a number of cases where a worker has taken an employer to court and, in some instances, the courts have disagreed with the employer's interpretation of the implied term of the contract and have made an award to the worker.

Clause 1(5)(e) leaves the existing legal situation in respect of deductions on account of the worker having taken part in industrial action broadly unchanged, Clause 1 will not apply to such deductions, so the worker's redress if he believes that the deduction is not contractually authorised is to the civil court for breach of contract rather than to an industrial tribunal. In the Government's view, it is best that contentious and difficult problems concerning deductions in disputes, where emotions may run high, remain matters for courts and not for industrial tribunals. The courts—not tribunals—are best placed to deal with such matters. Each of these amendments changes that situation. Amendment No. 23 reverses it entirely. Amendment No. 24 effectively does the same thing as a tribunal could be asked to decide if a deduction was authorised by the worker's contract. Amendment No. 25 has the effect that a tribunal could be asked to consider whether the employer had treated all workers on strike equally. It is arguable, I believe, either way, whether the employer should be prevented from being selective and from deciding to forgo his right to make deductions from some workers, although our fundamental objection to the amendment remains that these issues are best not put to tribunals at all. I believe that Clause l(5)(e) is essential and that each of these amendments destroys it or erodes it significantly.

The noble Lord, Lord Wedderburn, was concerned to know why we should exclude deductions for strikes and industrial action. The answer is that it is partly because, as the noble Lord himself said, the scope of implied terms is often uncertain, and particularly so, I fear, in this field. The employer would have real difficulty knowing what the implied term was and would therefore be debarred from making any deduction by the technical requirement of Clause 1 (3)(b) to explain the effect of the term in writing to the worker. I hope that these difficulties will have persuaded the noble Lord that he should not press the amendment.

Lord Wedderburn of Charlton

I am nearly encouraged to press it, especially when the Minister, to whom I am grateful, says that deductions can be made in the case of a go-slow because it will be a term, and often an implied term, of the contract that employers are allowed to do so. As seen in the recent teachers' case, this may be difficult to interpret. But the noble Lord goes on to say that implied terms arc very difficult and that this explains why the Government have excluded the area of strikes and industrial action from the scope of Clause 1. To exclude the problems of implied terms from Clause 1 and to leave the matter to common law where one finds implied terms that are very difficult to interpret seems a curious policy to follow. The Government wish of course the employer to be in the clear, so far as this is possible, in respect of fines for industrial action. That is what they wanted; that is what they have done. It is that approach that these amendments were meant to challenge. 1 beg leave to withdraw the amendment.

Amendment, by leave withdrawn.

[Amendments Nos. 24 to 26 not moved.]

On Question, Whether Clause 1 shall stand part of the Bill?

Lord McCarthy

The Committee will not be surprised to find that we wish to oppose the Motion that the clause stand part of the Bill. I wish to say a few words about what the clause does, what the Government have said and done this afternoon and what the consequences, we believe, will be. This clause is to replace the provisions of the 20 or so Acts dealing with deductions and payments by workers with two broad tests: what is allowed and provided by the statute, and what is contained or implied in the contract. We have sought in various ways to argue that this is insufficient. We have sought to argue that it is an imperfect form of protection, in particular in relation to Section 1 of the Truck Act 1896 and most especially in relation to that part of the 1896 Act that has been represented this afternoon as the reasonability test.

As a result, we have tried to put down 10 effective—nine of them very minor—gateways, into reasonability. We tried to get the Committee to reintroduce the reasonability test. The noble Lord, Lord Rochester, tried to get the Committee, if not to introduce it by statute, to put it in the code of practice. We tried to get the Committee to limit the authorisation of deductions to those that were contractual only. We tried in Amendment No. 5 to say that consent must be by the employer. We tried in Amendment No.8 to confine a deduction to dishonesty and default of conduct on the part of the worker. We tried in Amendment No. 10 to limit the rates of reduction. We tried in Amendment No. 15 to insist on express intent. We tried in Amendment No. 18 to limit retrospection and, in Amendment No. 22, to have a limit on what can count as a lawful third party. Finally, my noble friend Lord Wedderburn tried to limit deductions in cases of strikes in Amendment No. 23.

What have been the Government's answers? I must be fair. Apart from the one, or perhaps one and a bit, that the noble Lord undertook to take away, to our 10 reasonable but minor ways into reasonability we have had five defences. The noble Lord has said that the amendments, or parts of the amendments, were declaratory of the Bill and therefore not necessary anyway. The noble Lord has said that even if they were not declaratory of the Bill, they would have no effect and were not required. Thirdly, he has said that they might have some effect but that they would also, unfortunately have side effects and that such side-effects could not possibly be tolerated.

The noble Lord has said repeatedly that the amendment would foster uncertainty. Here, we have had some advance on previous statements by the Government. I congratulate the Minister. Previously, and particularly in respect of the reasons for the Government taking out the reasonability test, we had no explanation at all. The Secretary of State on Second Reading—I had intended to read out his remarks but I shall not now do so—did not really refer to the reasonability test specifically at all. He talked about the chaos and the archaic nature of the present Truck Acts, as indeed did the Minister in another place. What they are really talking about is the difficulty of doing something about restrictions on deductions by check. That may be chaotic. We are talking about stoppages. We are talking about deductions.

For the first time, we have had some kind of defence in terms of uncertainty. We have been told about the position of the employer who would be uncertain if any of our amendments were accepted. And finally of course we have had our old friend, the employment effect. Employers would not like it. If these things were done, employers might not employ people, might employ fewer people or might dismiss people. Here, the Government ease into an area where there are a few facts. That is something that the Government do not like to do. Several surveys have been done including those by the Institute of Policy Studies and the Government's own study, Burdens on Business. These suggest overwhelmingly that when businessmen, even small businessmen are asked what it is that limits employment, their reasons—in so far as they give reasons—have nothing whatever to do with the Truck Acts. They are to do with VAT, with taxation and with all kinds of complex forms that come from the Department of Trade. Very few, if any, talk about Section 1 of the Truck Act 1896.

Nevertheless, the Minister says that there will be an employment effect. It is not only we, on this side, who say that there is no justification for this clause or indeed for Part 1 of the Bill. Evidence has been submitted, following upon the consultative document, by the National Association of Citizens Advice Bureaux, by the law centres, by the CBI and by the Institute of Personnel Management. The general thrust of this evidence is that there is no justification for this part of the Bill. There may be some justification for the chaos of check restrictions. But there has been no substantial evidence against Section 1 of the Truck Act 1896. We have therefore to ask the Committee to oppose this clause. We do not say that, in destroying the unfair and unreasonable provisions of the 1896 Act, that the Government want to be unfair and unreasonable. We do not say that the Government believe that the result will be that employers will be unfair and unreasonable. We say that, in the interests of their ideology and their friends, they do not care whether or not they are unfair or unreasonable.

6.30 p.m.

Baroness Turner of Camden

I rise to support my noble friend who is moving that this clause shall not stand part of the Bill.

As with the Shops Bill, we are discussing a situation which applies to employees who are in a particularly vulnerable situation. The Victorians believed that such people had to be protected. I remind Members of the Committee opposite that Disraeli played some part in that, because a long time ago, when I was at school, I remember reading his book, Sybil—the Story of Two Nations. I can still remember the description of the "tommy shops" and the operation of the "tommy shops" which eventually led to the Truck Acts legislation.

There was an acceptance then, and there should be now, that there was a parliamentary obligation to protect those who are most vulnerable. I believe that it is partly because the Government have not recently been seen to discharge that duty that the Shops Bill ultimately failed to pass, and that the Government were defeated in Committee in your Lordships' House last night on some key sections of the Social Security Bill.

I believe it was claimed by the Minister in another place that the new provisions on deductions represent a step forward for vulnerable employees. It does not appear to us on these Benches to be so. It is true that it abolishes the distinctions between workers. The Truck Acts were limited in their cover to manual workers and I know from my own experience as an official for a white-collar union that they did not apply to white-collar employees. Nevertheless, the mere fact that the Truck Acts were there inhibited employers when it came to making deductions, even as far as white-collar employees were concerned. There is no requirement now because we failed to get the amendment that any deductions had to be fair and reasonable past your Lordships' Committee. That of course was a key element in the older legislation.

There have been a number of cases recently which have been referred to in the Committee, and I do not want to go over that. However, I want to remind noble Lords that many of the people who operate as cashiers at petrol stations—and their cases have been referred to—are often from ethnic minorities with, in many cases, a very inadequate grasp of English. To suggest that these employees, who no doubt are often happy to have any sort of job at all, are capable of negotiating a contract about deductions and understanding what it means, is quite frankly absurd. Moreover, because of the transitory nature of much of this work, which has already been referred to in the debate, and the relative isolation of the people who do it, they are not particularly easy to organise into unions.

In such circumstances, if they cannot protect themselves, it is up to Parliament to do so. Just how necessary this protection is can be gleaned from some of the reports produced by some law centres. Fortunately, some employees who felt themselves to be victimised have been able to have recourse to such centres and law centres have been able to assist them in a number of cases. I should like to quote from a recent report by the Hounslow Law Centre, which has been doing a great deal of work in this area. It says: Till shortages can occur in many ways: customers can be dishonest; cheques bounce; meters are faulty or are misread; tired cashiers made to work without the breaks to which they are entitled may give too much change. In our experience management is rarely concerned to trace the error or give advice about preventing recurrences. It is much easier to make a cashier pay. The result is that cashiers' already low wages are regularly reduced below the poverty line as a result of events which are not their fault". The Hounslow Law Centre says that in the past year it has dealt with 35 inquiries about deductions, 26 of which were from petrol station cashiers. It says that it has been successful in a number of cases.

Of course, with the absence of Truck Acts protection and with the absence of the fair and reasonable amendment which we tried to insert in the Bill before the Committee, these people will not have that protection in the future. If it is claimed that the law is difficult to enforce, all I can say is that we ought to do something about the inspectorate. We ought to have more inspectors in order to ensure that that law can be enforced for the benefit of a very vulnerable workforce. I support my noble friend's Motion that the clause shall not stand part of the Bill.

Lord Trefgarne

I am not sure whether the noble Lord, Lord Rochester, wishes to speak?

Lord Rochester

I thank the noble Lord for giving way. I feel obliged to say that, in the light of the discussion which took place over the first amendment relating to the need, as I saw it, for deductions from wages to be fair and reasonable, and in order to be consistent I must oppose the question that this clause shall stand part of the Bill even though, as the Committee will have seen, I have reservations about a number of amendments tabled thereafter.

Lord Trefgarne

Members of the Committee will not be surprised to hear that I very much hope this clause will remain part of the Bill. The clause of course provides a new and uniform protection for all workers, manual and non-manual, against arbitrary deductions from their wages. Deductions from wages will be lawful where they are provided for in the contract of employment, where the worker agrees to them in writing or where they are authorised by statute. This leaves it to the parties themselves to decide the circumstances in which deductions should be allowed, enabling the parties themselves to sort out provisions that are clear, easy to understand and mutually acceptable.

I believe that this is a fair and workable system. For manual workers the new protection replaces out-dated protections which were uncertain in their application, confusing to understand and which applied to circumstances which might have prevailed in Victorian times but which are no longer relevant to modern conditions. For non-manual workers they introduce for the first time statutory safeguards against unfair deductions where previously workers have had to rely on common law remedies.

The provisions are designed to be straightforward and clear so that employees and employers know exactly where they stand. I hope that Members of the Committee will agree that this clause should remain part of the Bill.

6.37 p.m.

On Question, Whether Clause 1 shall stand part of the Bill?

Their Lordships divided: Contents, 105; Not-Contents, 83.

Airey of Abingdon, B. Inglewood, L.
Allerton, L. Kaberry of Adel, L.
Ashbourne, L. Kimball, L.
Belhaven and Stenton, L. Kinloss, Ly.
Belstead, L. Knollys, V.
Birdwood, L. Lane-Fox, B.
Boyd-Carpenter, L. Lauderdale, E.
Brabazon of Tara, L. Layton, L.
Bridgeman, V. Long. V.
Brookes, L. Lucas of Chilworth, L.
Brougham and Vaux, L. Lurgan, L.
Broxbourne, L. Macleod of Borve, B.
Caithness, E. Mancroft, L.
Cameron of Lochbroom, L. Marley, L.
Campbell of Alloway, L. Marshall of Leeds, L.
Carnegy of Lour, B. Massereene and Ferrard, V.
Cathcart, E. Maude of Stratford-upon-
Coleraine, L. Avon, L.
Colwyn, L. Merrivale, L.
Constantine of Stanmore, L. Molson, L.
Cox, B. Monk Bretton, L.
Davidson, V. Monson, L.
De La Warr, E. Montgomery of Alamein, V.
Denham, L. [Teller.] Mottistone, L.
Denning, L. Mowbray and Stourton, L.
Eccles, V. Munster, E.
Elliot of Harwood, B. Murton of Lindisfarne, L.
Elton, L. Nelson of Stafford, L.
Faithfull, B. Onslow, E.
Ferrers, E. Orkney, E.
Ferrier, L. Orr-Ewing, L.
Fortescue, E. Pender, L.
Fraser of Kilmorack, L. Perth, E.
Gardner of Parkes, B. Plummer of St Marylebone,
Glanusk, L. L.
Glenarthur, L. Polwarth, L.
Gridley, L. Portland, D.
Hailsham of Saint Reay, L.
Marylebone, L. Renwick, L.
Halsbury, E. Rochdale, V.
Harmar-Nicholls, L. Rodney, L.
Hives, L. Russell of Liverpool, L.
Holderness, L. St. Davids, V.
Hood, V. Sandys, L.
Hooper, B. Savile, L.
Hunter of Newington, L. Sharples, B.
Hylton-Foster, B. Skelmersdale, L.
Strathcona and Mount Royal, Vaux of Harrowden, L.
L. Vickers, B.
Swinfen, L. Vinson, L.
Swinton, E. [Teller.] Vivian, L.
Teviot, L. Wise, L.
Thomas of Swynnerton, L. Young, B.
Tranmire, L. Zouche of Haryngworth, L.
Trefgarne, L.
Airedale, L. Lockwood, B.
Amherst, E. Longford, E.
Aylestone, L. Lovell-Davis, L.
Bacon, B. McCarthy, L.
Birk, B. McIntosh of Haringey, L.
Blease, L. Mackie of Benshie, L.
Blyton, L. McNair, L.
Brockway, L. Mar, C.
Brooks of Tremorfa, L. Mayhew, L.
Bruce of Donington, L. Meston, L.
Burton of Coventry, B. Milner of Leeds, L.
Carmichael of Kelvingrove, L. Morton of Shuna, L.
Chitnis, L. Murray of Epping Forest, L.
Cledwyn of Penrhos, L. Nicol, B.
Crawshaw of Aintree, L. Northfield, L.
David, B. [Teller.] Oram, L.
Davies of Penrhys, L. Parry, L.
Dean of Beswick, L. Ponsonby of Shulbrede, L.
Denington, B. [Teller.]
Diamond, L. Prys-Davies, L.
Ennals, L. Rea, L.
Ewart-Biggs, B. Rhodes, L.
Fisher of Rednal, B. Ritchie of Dundee, L.
Foot, L. Rochester, L.
Gallacher, L. Ross of Marnock, L.
Glenamara, L. Sainsbury, L.
Graham of Edmonton, L. Seear, B.
Grey, E. Shepherd, L.
Hampton, L. Simon, V.
Harris of Greenwich, L. Stoddart of Swindon, L.
Hatch of Lusby, L. Taylor of Blackburn, L.
Heycock, L. Taylor of Gryfe, L.
Houghton of Sowerby, L. Taylor of Mansfield, L.
Jeger, B. Tordoff, L.
Jenkins of Putney, L. Turner of Camden, B.
John-Mackie, L. Underbill, L.
Kagan, L. Wedderburn of Charlton, L.
Kaldor, L. White, B.
Kilmarnock, L. Wilson of Langside, L.
Kirkhill, L. Wilson of Rievaulx, L.
Lawrence, L. Winstanley, L.
Lloyd of Hampstead, L. Young of Dartington, L.

Resolved in the affirmative, and Clause 1 agreed to accordingly.

6.46 p.m.

Clause 2 [Deductions from wages of workers in retail employment on account of cash shortages etc.]:

Lord Graham of Edmonton moved Amendment No. 27:

Page 3, line 35, at beginning insert—

("( ) It shall not be lawful for the employer to make any deduction from any wages of any worker employed by him to whom this section applies on account of one or more cash shortages or stock deficiencies unless the shortage or deficiency was caused by the dishonesty, negligence default of that worker or of a worker for whom he is responsible by virtue of the express terms of his employment.").

The noble Lord said: I rise to move Amendment No. 27, and I understand that it is for the convenience of those involved if I speak also to Amendment 37. In moving to Clause 2 it might be helpful if I read from the face of the Bill. Clause 2 provides that where a worker's employment involves selling directly to the public, to fellow workers, or to other individuals in their personal capacities, any deduction from his wages on account of a cash shortage or stock deficiency, shall not exceed one-tenth of the gross amount of the wages payable",

to him.

As background before I indicate the main thrust of my argument I wish to draw the Committee's attention to the fact that when one looks at the amendment it is clearly seen what we are not quibbling about; namely deductions in respect of dishonesty, negligence, or default of the worker, for which he is responsible by virtue of the express terms of his employment. That is in Amendment 27. What we say is why should an employee who is responsible, who is honest, who is not negligent and who is not at fault be penalised?

In another place we had some interesting observations. The Minister who introduced the Bill on 11th February said at col. 800: The Bill introduces an important new and modern set of rights for workers … a comprehensive, easily understood, easily enforeceable and fairer set of statutory rights concerning deductions".

Anyone who knows particularly the retail trade would object strenuously to that description.

As a matter of fact a Conservative Member, Mr. Richard Holt, had this to say at the Report stage at col. 739 of the Official Report on 14th May about the Bill and this clause: suggesting that [the Truck Acts] are being replaced by something superior, fairer and nicer simply does not hold water. It does not bear examination. The Government's case is wafer-thin, and water is seeping through … The Government have produced bad law on this aspect, and it will not be long before it will bring the whole Bill into disrepute".

Those are words with which I sympathise and which I accept. He happens to be a member of another party, a member of the Minister's party. The difference is that that person speaks with some experience of the retail trade. I profess at this stage to indicate a modest credential in that respect too. I am a director of a co-operative society. I have close connections with the co-operative movement, and declare an interest in the Union of Shop, Distributive and Allied Workers.

The main burden that the Minister has to satisfy is that it is right and proper that individuals not well paid, perhaps adequately paid, should bear the consequences of someone else's actions, because in the real world that is what will happen. Someone else can be careless; someone else can be dishonest; someone else can take a chance and someone else can be the victim of someone else's fraud, but the individual who is nominally in charge of the till or the cashpoint will have to carry the can. We cannot accept that that is right.

I do not believe the Minister will accept that is right either, because we are talking about business systems and the manner in which a business sets out to control its stock efficiently. Some stock control systems are good and some are bad. Some are able to control the amount of stock, to control the value of the stock, and are able to apportion and identify the responsibility so precisely that there is very little of what is known in the trade as leakage. Leakage is that amount of the stock, or that amount when the cash and the stock are taken together, which is unaccountable for. In a normal well-run business an allowance is made.

Sometimes, dependent upon the nature of the business, there will be a variation. There certainly is a variation between departments, between the food department and the non-food department, even between the butchery, the milk department and the grocery department. There are understood norms. The attempt in the retailing business in 1986 is always to keep the expenses down as much as possible. That is fair. One of the expenses of a business is wastage, leakage, and one of the responsibilities of management is to make sure that that is kept down as low as possible.

In retailing in 1986 there are far more part-time employees than full-time employees. People will come on duty for two hours, or four hours or part of the day, and then go. We are talking about, as the Minister in another place said, what a nonsense it would be if every employee had his own cashpoint or till. Somebody has to be responsible but he is not responsible for the management, control and security of the cashpoint every minute of the day. The till may be left out of the control of the responsible person during lunch time, during tea break, coffee break or while that person goes to the toilet. There are a great many ways in which temporarily the person who will have to pay the shortage is not in charge of that point.

To leave this matter as it is is a charter for bad management because the bad manager says, "Although I know I should be responsible for providing training, education and making my employee far more efficient, I do not need to bother." If the employee is not diligent, honest and reliable but is careless, and there is a shortage, the Bill provides the bad manager a legal opportunity of taking 10 per cent., not once and for all but time and time again until the total amount is received. I cannot believe that that is the intention of a fair-minded government or of a fair Bill.

I believe that the stock deficiency aspect in this clause and in my amendment is part and parcel of the business risk. By and large that risk ought to be carried by the employer and not by the employee. I am talking about the honest and diligent person doing his job within the confines of the tools of the trade; that is, computerisation. In computerisation mistakes can be made. There are two kinds of losses: a real loss and a notional loss. There is a loss whereby goods are not there and a loss whereby on a piece of paper we are told that the goods are not there. When there is a reconciliation later, that is found not to be correct.

There is the transfer and the movement of the stock about a building, because each member of the staff has his own duties and the stock passes through many hands. Goods are received; they are stored on the premises; they are transferred to selling areas and placed on display. They are selected with and without the assistance of the sales staff. They are sold and they are packed. At each stage not only can those goods go missing but they can also be damaged; they can also deteriorate. Writing off losses, whether goods are sold cheaper or whether they are simply written off, are all aspects of the control of stock. In retailing in 1986 the name of the game is to get the biggest volume of trade with the minimum number of employees. That means that the business wants the maximum amount of trade to be done by each employee. As I have already said, there is a great deal of coming and going.

Then there is the management. There will be shops open from 9 o'clock in the morning and increasingly to 8 o'clock or 9 o'clock at night—forgetting the Sunday nexus. Shops are open six days a week. I am tempted to deal with the Sunday trading issue, but time does not permit it. What about the manager who cannot work all those hours that the shop is open; that is, 56 or 60 hours a week? He needs his time off and somebody else is in charge of the shop. Businesses have their own ways of chastising a manager who is notdoing his job. If there is a leakage and it is shown that the manager is not as efficient as he ought to be, there are ways in which his promotion does not come along. There are ways in which, without fining him or making him responsible for the loss of stock, that manager is made to pay.

I hope that what we shall hear from the Minister is something that is helpful and fair. So far as we are concerned, a stock loss is a commercial risk which should not be passed to the employee. The employee has no means of exercising real control over stock. A true stock depends on the adequacy of management recording and monitoring systems. Stock checking systems have been proved in the past on many occasions to be inaccurate. I move the amendment and look forward to the faint possibility that the Minister may be able to say something kind about it. I beg to move.

Lord Rochester

I have some sympathy with this amendment. It seems on the face of it to offend against natural justice if the course advocated by the noble Lord, Lord Graham of Edmonton, is not followed. At an earlier stage I indicated that I think we want to reach a situation as soon as possible where there is no need for deductions from wages but we rely instead on better management practices and methods of control, as the noble Lord, Lord Graham, said.

I have a question to ask and a doubt to express, if the noble Lord, Lord Graham, would be kind enough to help me. Is there a danger that if some unscrupulous employer were denied the opportunity to effect a deduction by virtue of this suggested new subsection, he might approach the matter in an altogether different way by making use of disciplinary procedures which, more particularly in the case of employees having less than two years' service, might result in a pretty speedy dismissal? In that case, what sets out to protect the employee might, I suppose, in practice have the reverse effect.

At Second Reading, I made it plain that for my part there were a number of points in Part I of the Bill where I would wish to judge the matter on the merits of the particular case. This is one such case. I have an open mind about it. I look to the Minister for guidance and I seek reassurance from the noble Lord. Lord Graham, as to the doubt to which I have given expression.

Lord Trefgarne

These amendments would ban deductions relating to shortages except where these were due to dishonesty, negligence or default of the worker himself or another worker for whom he was responsible. Under the Bill as it stands, a worker can be made to compensate the employer for a loss or shortage only if the worker has a contractual responsibility for that loss or shortage; that is, his contract makes clear that he can be asked to compensate the employer for that loss or shortage. It is reasonable that the parties should agree their own rules in the contract and stick to them.

It is also reasonable that, where a worker has accepted a contractual responsibility for losses, he should meet such losses or shortages. The amendments would require the employer to seek to determine responsibility in fact for losses and shortages rather than simply agreeing with the worker to make a deduction and drawing a line under the matter. The amendments would lead to complex and lengthy tribunal cases investigating who was, in fact, responsible for particular losses or shortages.

It should also be noted that a failure to pay a bonus due to a cash shortage or stock deficiency is treated as a deduction under Clause 2 by virtue of subsections (4) and (5). The effect of Amendment No. 27 would be to render unlawful bonus systems run by many reputable employers whereby managers get a bonus if stock shortages are kept below a certain level because such bonuses have nothing to do with dishonesty, negligence or default. Many large and reputable employers would be alarmed by that. Even if the principle that workers could not be asked to accept a contractural responsibility unconstrained by various statutory controls on the behaviour of the employee were accepted, these particular controls seem to me to have no great merit.

Why have a provision that allows deductions if the worker in question is contracturally responsible for another worker, even if the other worker has not been dishonest, but prevents them even if the worker in question has not been dishonest himself? It would be wisest simply to leave these matters to the parties. I hope that in the light of these difficulties, and, particularly, the penultimate difficulty to which I referred the noble Lord will not wish to pursue this proposition.

Lord Graham of Edmonton

It is the understatement of the night if I say that I am disappointed with the response of the Minister. He fails completely to see, in the context, very often, of very lowly paid employees, the situation of their having to be responsible for the acts of others when they are not dishonest, when they are not negligent or when they have not been at fault. I tried to explain to the Minister that in the nature of retailing there are many episodes and practices which will cause a stock loss for which a person who has been honest, careful and without fault can be held to be responsible. I simply ask this. Why should we not write on the face of the Bill a protection of that kind?

In the retail food and allied trades there are more than half a million workers. Their wage is £80 per week. Yet the Minister is saying to them that if there is stock deficiency, they should have some of their £62 or £64 a week deducted even though they have been honest and have not been negligent. There are, in unlicensed places of refreshment, 116,000 workers. Their wage in 1986 is £73.26.

The Minister really reveals that he is not part of the real world. He reads his brief, he understands the Bill, he is able to argue it. But in the real world outside there are real people who will be faced—and never mind the question of equity and never mind the question of unfairness—sometimes by virtue of bad management decisions with having to pick up the tab and with being fined a few pounds through no fault of their own. I think this is a very unfair clause. I think this amendment is very reasonable and I intend to press it.

7.5 p.m.

On Question, Whether the said amendment (No. 27) shall be agreed to?

Their Lordships divided: Contents, 52; Not-Contents, 92.

Bacon, B. Lovell-Davis, L.
Birk, B. McCarthy, L.
Blease, L. McIntosh of Haringey, L.
Broadbridge, L. Mar, C.
Brockway, L. Milner of Leeds, L.
Brooks of Tremorfa, L. Murray of Epping Forest, L.
Carmichael of Kelvingrove, L. Nicol, B.
Cledwyn of Penrhos, L. Northfield, L.
David, B. [Teller.] O'Neill of the Maine, L.
Dean of Beswick, L. Oram, L.
Denington, B. Parry, L.
Ennals, L. Ponsonby of Shulbrede, L.
Ewart-Biggs, B. [Teller.]
Fisher of Rednal, B. Prys-Davies, L.
Gallacher, L. Rea, L.
Glenamara, L. Ross of Marnock, L.
Graham of Edmonton, L. Shepherd, L.
Heycock, L. Stoddart of Swindon, L.
Houghton of Sowerby, L. Taylor of Blackburn, L.
Jeger, B. Taylor of Mansfield, L.
John-Mackie, L. Turner of Camden, B.
Kagan, L. Underhill, L.
Kaldor, L. Wedderburn of Charlton, L.
Kinloss, Ly. White. B.
Kirkhill, L. Wilson of Rievaulx, L.
Lawrence, L. Ypres, E.
Lockwood, B.
Airey of Abingdon, B. Eccles, V.
Alexander of Tunis, E. Elliot of Harwood, B.
Ashbourne, L. Faithfull, B.
Belstead, L. Ferrers, E.
Birdwood, L. Ferrier, L.
Boyd-Carpenter, L. Fortescue, E.
Brabazon of Tara, L. Gardner of Parkes, B.
Bridgeman, V. Glanusk, L.
Brookes, L. Glenarthur, L.
Brougham and Vaux, L. Gridley, L.
Broxbourne, L. Hailsham of Saint
Bruce-Gardyne, L. Marylebone, L.
Caithness, E. Halsbury, E.
Cameron of Lochbroom, L. Hives, L.
Campbell of Alloway, L. Holderness, L.
Carnegy of Lour, B. Hooper, B.
Colwyn, L. Hylton-Foster, B.
Constantine of Stanmore, L. Inglewood, L.
Cox, B. Kaberry of Adel, L.
Craigavon, V. Kimball, L.
Davidson, V. Knollys, V.
De La Warr, E. Lane-Fox, B.
Denham, L. [Teller.] Lauderdale, E.
Denning, L. Layton, L.
Lindsey and Abingdon, E. Rochdale, V.
Long. V. Rodney, L.
Lucas of Chilworth, L. Sanderson of Bowden, L.
Macleod of Borve, B. Sandys, L.
Mancroft, L. Savile, L.
Marley, L. Shannon, E.
Marshall of Leeds, L. Sharples, B.
Massereene and Ferrard, V. Skelmersdale, L.
Merrivale, L. Strathcona and Mount Royal,
Molson, L. L.
Monk Bretton, L. Swinfen, L.
Montgomery of Alamein, V. Swinton, E. [Teller.]
Mottistone, L. Teviot, L.
Mowbray and Stourton, L. Thomas of Swynnerton, L.
Munster, E. Tranmire, L.
Murton of Lindisfarne, L. Trefgarne, L.
Nelson of Stafford, L. Vaux of Harrowden, L.
Onslow, E. Vickers, B.
Orkney, E. Vinson, L.
Pender, L. Vivian, L.
Plummer of St. Marylebone, Wise, L.
L. Young, B.
Polwarth, L. Zouche of Haryngworth, L.
Portland, D.

Resolved in the negative, and amendment disagreed to accordingly.

7.14 p.m.

Lord Wedderburn of Charlton moved Amendment No. 28:

Page 3, line 36, leave out ("in retail employment").

The noble Lord said: In moving Amendment No. 28, it may be convenient if I speak to Amendments No. 31 and 38. The point can be made briefly that now we have reached this stage the Government's new dichotomy in the workforce is beginning to take shape in the Bill. That dichotomy is between those in retail employment and those who are not. There are two questions to be answered. Is it fair to have such a dichotomy? Does it work?

In one sense, the first depends on the second because obviously it is unfair to have some workers limited to a 10 per cent. deduction (to put it as a label) when others are at risk of having whatever is in the documents which count as consent under this Bill. Quite plainly, anomalies can arise between those in retail employment and those not. That is to say, the shop assistant may be in the retail sector but a stockroom assistant in the same shop might not be. One wonders whether even on the best of definitions that would be a fair situation. Why should the one not be limited to 10 per cent. deductions and the other be so limited?

The history of the definition of who is in retail employment of course began with the Bill in a very different state from what it is now. Leaving aside the minor points, in broad terms it began by a definition that said that those who carry out retail transactions directly with members of the public are to be retail employment sector employees. Of course the definition of "the public" is a well-known problem in many areas of our law. The company law prospectus issued to the public has caused a great many problems and there have to be special provisions as to what it meant by "the public".

However, the difficulties for the Government increased when they realised that here that was, in any case, an inadequate definition, however difficult, because transactions might not be with members of the public but with fellow workers by those in retail employment or by other individuals—as they now put it, other individuals in their personal capacities".

But of course the retail transaction is not necessarily a sale: it is a supply of goods or services, including financial services.

What does this mean? Does the clerk in accounts who provides a supply of financial services to other workers in the firm, some of which are for their personal purposes, become someone in the retail sector? Is the stockroom or warehouse worker who supplies goods to other persons, who may be fellow workers within the area or without, a worker in the retail sector? Does it depend on whether the goods supplied are for their personal use? Does he have to ask? Does he have to say, "I am now supplying you with goods: are you going to use them in your personal and individual capacity or are you taking them as an agent or employee of your employer?"

I refer to garden centres as an example. I am sure many of your Lordships will have visited those. Take the garden centre which normally supplies goods or services wholesale. As I read the definition, if workers are taking goods on behalf of their employers, that would not be a retail transaction. However, suppose some members of the public come in and take goods. These definitions seem to lead to the type of uncertainty which we have seen earlier today and which the Government are beyond compare in their anxiety to avoid. Perhaps they could do better in their definition of what is retail employment and what is not if they want to avoid the core case of these amendments.

That core case—if I may repeat it briefly—is this. If some workers are to be guarded by the 10 per cent. protection and others are not, there must be a definition of the line between the two which works and is fair. Despite the changes in another place, that line neither works nor is fair, I beg to move.

Lord Sainsbury

We on these Benches support this amendment. I do not see why protection against excessive, unfair or unjustified deductions should be confined to the retail trade. I shall be very brief, because the noble Lord, Lord Wedderburn, has explained the situation so clearly. There are other examples, such as a wholesale cash and carry warehouse or a trade counter, which can also be subject to cash shortages and stock deficiencies. Therefore, as I said, we on these Benches will support the amendment if it is put to a vote.

Lord Trefgarne

As the noble Lord has explained, these amendments would have the effect of extending the protection provided by Clauses 2 and 3 to all workers and not only to those involved in retail employment. Let me clarify what we are trying to do with Clauses 2 and 3. Clause 1 provides certain basic protections against arbitrary deductions. All deductions must be authorised by statute, agreed in the contract of employment, or be with the prior written consent of the worker concerned, and the worker must have knowledge of any contractual term authorising a deduction before a deduction based on such a term is made.

What we are trying to achieve with the additional protection of Clauses 2 and 3 is a situation where workers do not suffer such large deductions or require-ments to make payments, on account of cash shortages or stock deficiencies, that they are left with very little or nothing in their wage packets; and it is because it is in the area of retail employment, and really only in that area, where there is evidence of abuse and public concern that we have restricted the special protection to that area. We are therefore covering sales staff, petrol station cashiers, milk roundsmen etc., but not people who are not actually engaged in sales, such as warehouse staff.

I think we would all be in agreement that practices which leave workers with almost nothing in their wage packets because they are asked to cover till shortages are undesirable. I hope we are all agreed that something needs to be done about such practices. We believe that we have struck the right balance in the protection provided here. We have included in the group to which additional protection is provided all those workers engaged in the sale or supply of both goods and services. Following amendments passed in another place, we have ensured that Clause 2 makes clear that the protections apply to all workers engaged in the sale or supply of goods to members of the public, fellow workers or other individuals in their personal activities; for example, members of a club.

We have also ensured that the person who sells not only to the public but also to companies is fully covered in respect of all his sales. The protection is also provided to those who are not involved in selling or supplying goods or services on a regular basis. This means that a worker who does not normally sell goods to the public but who, for example, covers for a colleague during a lunch break, will have the same protection as those workers who normally sell to the public. But we see no reason why protection should be extended to those engaged in activities other than selling to the public, where stock shortages might occur but where these are likely to be as a result of negligence or theft. I believe that the protection provided covers the areas of need and I hope that the Committee will resist these amendments.

Lord Wedderburn of Charlton

I thank the noble Lord the Minister for his reply. In case he said something that we would want to take into account, or there is a new point that we have missed, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 29 to 33 not moved.]

Lord Stoddart of Swindon moved Amendment No. 34:

Page 4, line 27, leave out from ("of) to end of line 30 and insert ("three months commencing with the date on which it was reasonably practicable for the employer to establish the existence of the shortage or deficiency".).

The noble Lord said: I beg to move Amendment No. 34 and, if it is for the convenience of the Committee, I think we should take with it Amendments Nos. 35 and 44. The amendment seeks to limit the period of time during which the employer may seek to make deductions from an employee's wage packet in respect of a stock or cash deficiency. As the clause stands, an employer is given 12 months from the time when he established the shortage or deficiency to take action to deduct from an employee's wages, and that seems to be a quite inordinate length of time. Again, the Government seem hell-bent on favouring the employer at the expense of the employee.

A year is a long time to allow an employer to act and I am puzzled as to why this lengthy period of time was decided upon. Perhaps the noble Lord will explain the reasons. Perhaps it has something to do with annual accounting. I certainly do not know, but if it does it is quite nonsensical. Any businessman who has the slightest modicum of business and accountancy sense will check his cash and stock at frequent intervals, and in a well-run business any cash discrepancies or stock deficiencies would be spotted fairly quickly. Investigations into such discrepancies and deficiencies ought to be carried out immediately and completed in days or weeks rather than months, and our amendment limiting the period to three months is eminently reasonable in all the circumstances. It would be far more considerate of the employee's interest, too.

Why should an employee, 12 months after the event, be faced with deductions in respect of a deficiency of which he may have no knowledge? We must remember that we are dealing here not with people who are earning £20,000 or £30,000 a year, or even with people earning the national average wage of around £185 per week. We are talking about people earning around £55 to £70 per week, to whom a delayed deduction will come as a bombshell and will disrupt their already strained finances.

I do not know how many noble Lords present have experienced living a hand-to-mouth existence; some, perhaps, have. Certainly, having spent part of my childhood in the Rhondda Valley during the years of depression, I am aware of the strains and the stresses such an existence imposes on men and women and their families. It is no good the noble Lord sneering. This is exactly what happens in families on low incomes. They suffer from actions such as these, and I detest seeing the noble Lord sneering when we are talking about low-paid people such as those I have mentioned. Therefore I sincerely hope that noble Lords will have some understanding and compassion for these low-paid people and will help them in a small way by supporting this amendment. I beg to move.

The Deputy Chairman of Committees

Perhaps I should point out that if Amendment No. 34 is agreed to, it will not be possible to call No. 35.

Lord Rochester

I should like very briefly to support this amendment. An employer should surely not need a period as long as 12 months from the time when he should have established a deficiency until he makes a deduction from wages. Three months is quite long enough and I look forward to hearing from the Minister that he agrees, or, if he does not, why.

Lord Trefgarne

Before the noble Lord, Lord Stoddart, was so objectionable, if he will forgive me for saying so, I was thinking of offering some comfort to the noble Lord on this amendment. The fact of the matter is that my family comes from South Wales as well and I am quite aware of the matters to which he refers. I do not think it lies very well in the mouth of the noble Lord to accuse me of sneering as he said I was. The fact of the matter is that the sort of sentiments we hear from noble Lords opposite from time to time seem to me to represent attitudes about a century out of date, but be that as it may.

The Government introduced amendments during Committee stage in another place to ensure that deductions relating to cash shortages or stock deficiencies would be entirely prohibited if there was an 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. It was said during that debate that there is nothing magical about the period of time one chooses, but 12 months was mentioned as a reasonable period. The amendments seek to reduce this period to three months. I really believe that in certain cases that is too short a period to enable an employer to discover the shortage and consider whether, taking everything into account, he really wants to make a deduction on account of a shortage.

I am supported in this view by the existence in the Bill of the requirement that if an employer could reasonably be expected to have found out about a shortage earlier than the date on which he did the deduction will be lawful only if it is made within 12 months of the date on which he ought to have found out about its existence. This I am certain provides the necessary safeguards and will prevent employers, who I am sure would be few in number, who decide to victimise a worker for whatever reason from dredging up a lot of old events on which they took no action at the time and starting to make deductions. I hope that those considerations will persuade the noble Lord not to press his amendment.

Lord Stoddart of Swindon

Let me first of all apologise to the noble Lord. If he was not sneering, I must confess it appeared that he was. But of course I welcome him as a compatriot. I accept that he was not in fact sneering at the difficulties that poor people have.

I listened to the noble Lord very closely. I understand from the Bill that an employer may not deduct from his employee amounts that the employer ought to have located within 12 months. I do not quite know how that is to be discovered. Therefore, I think that the assurance the noble Lord has given is not satisfactory. I still believe that the three-month period is the more satisfactory one. I believe it is adequate for the protection of the employer and I believe it is much more satisfactory from the point of view of the employee. Therefore I fear I must press this amendment to a division.

7.33 p.m.

On Question, Whether the said amendment (No. 34) shall be agreed to?

Their Lordships divided: Contents, 57; Not-Contents, 72.

Airedale, L. McCarthy, L.
Amherst, E. McIntosh of Haringey, L.
Bacon, B. Mackie of Benshie, L.
Barnett, L. Mar, C.
Blease, L. Morton of Shuna, L.
Brockway, L. Murray of Epping Forest, L.
Carmichael of Kelvingrove, L. Nicol, B.
Cledwyn of Penrhos, L. Parry, L.
Crawshaw of Aintree, L. Perry of Walton, L.
David, B. [Teller.] Ponsonby of Shulbrede. L.
Diamond, L. [Teller.]
Ennals, L. Prys-Davies, L.
Ewart-Biggs, B. Ritchie of Dundee, L.
Fisher of Rednal, B. Rochester, L.
Gallacher, L. Ross of Marnock, L.
Glenamara, L. Sainsbury, L.
Graham of Edmonton, L. Shepherd, L.
Grey, E. Stoddart of Swindon, L.
Hampton, L. Strabolgi, L.
Hatch of Lusby, L. Taylor of Blackburn, L.
Houghton of Sowerby, L. Taylor of Gryfe, L.
Jeger, B. Turner of Camden, B.
John-Mackie, L. Underhill, L.
Kagan, L. Wedderburn of Charlton, L.
Kaldor, L. White, B.
Kennet, L. Wilson of Langside, L.
Kilmarnock, L. Wilson of Rievaulx, L.
Lockwood, B. Winstanley, L.
Lovell-Davis, L. Ypres, E.
Alexander of Tunis, E. Marshall of Leeds, L.
Belstead, L. Massereene and Ferrard. V.
Birdwood, L. Maude of Stratford-upon-
Boyd-Carpenter, L. Avon, L.
Brabazon of Tara, L. Merrivale, L.
Brookes, L. Molson, L.
Brougham and Vaux, L. Monk Bretton, L.
Cameron of Lochbroom, L. Monson, L.
Campbell of Alloway, L. Montgomery of Alamein, V.
Carnegy of Lour, B. Mottistone, L.
Constantine of Stanmore, L. Mowbray and Stourton, L.
Cox, B. Munster, E.
Craigavon, V. Murton of Lindisfarne, L.
Davidson, V. Onslow, E.
De La Warr, E. Orkney, E.
Denham, L. [Teller.] Pender, L.
Faithfull, B. Plummer of St Marylebone.
Ferrers, E. L.
Ferrier, L. Polwarth, L.
Gardner of Parkes, B. Renton, L.
Glenarthur, L. Rochdale, V.
Gridley, L. Rodney, L.
Halsbury, E. Sanderson of Bowden, L.
Hives, L. Savile, L.
Holderness, L. Shannon, E.
Hooper, B. Skelmersdale, L.
Hylton-Foster, B. Strathcona and Mount Royal,
Inglewood, L. L.
Kaberry of Adel, L. Swinton, E. [Teller.]
Kimball, L. Teviot, L.
Lane-Fox, B. Tranmire, L.
Layton, L. Trefgarne, L.
Lindsey and Abingdon, E. Trumpington, B.
Long, V. Vaux of Harrowden, L.
Lucas of Chilworth, L. Vickers, B.
Lurgan, L. Vinson, L.
Macleod of Borve, B. Wise, L.
Marley, L.

Resolved in the negative, and amendment disagreed to accordingly.

7.41 p.m.

Lord Brabazon of Tara

In moving that the House do now resume I suggest that we do not return to consideration in Committee on this Bill until twenty minutes to nine o'clock. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.