National Minimum Wage Bill

HL Deb 15 June 1998 vol 590 cc1394-440

House again in Committee.

Clause 10 [Worker's right of access to records]:

Baroness Miller of Hendon moved Amendment No. 69:

Page 7, line 31, leave out subsection (1) and insert— ("(1) Subject to the provisions of this section, a worker shall be entitled, on written request, to be supplied by his employer with a copy of any relevant records within twenty-eight days of receipt by the employer of that request.").

The noble Baroness said: In moving Amendment No. 69, I should like to speak to all of the amendments to this clause which stand in my name. I refer to Amendments Nos. 69 to 75 and 77 to 79. This clause involves a matter of major constitutional importance, one which seems to have been totally overlooked by the author of the clause. I do not say that in any recriminatory sense because my honourable friends in the other place also seem to have missed this point. The 15 minutes of debate in Committee in the other place were confined to matters of definition and detail about certain aspects of the clause. The purpose of the clause is to give the employee the right of access to records relating to his pay and hours so that he can be satisfied that he has been correctly paid at least the statutory minimum wage. That is wholly unobjectionable and the Opposition unreservedly accept that the employee should have that perfectly proper and reasonable right.

The constitutional objection arises from the method by which the Government are proposing that that right is to be exercised. It is a method that is totally inappropriate for what is, after all, the pursuit of a civil claim for redress for a financial wrong. It begins with the employee issuing his own search warrant. In Clause 10(5) it is euphemistically called a "production notice". Who else can march into someone's premises without the intervention of a judge or a magistrate and conduct what amounts to a search? The answer is only the Customs and Excise in relation to VAT; the Inland Revenue in relation to certain aspects of income tax, corporation tax and PAYE, and the Department of Social Security in relation to national insurance records. All of those are powers conferred specifically by Parliament to protect the public revenue.

Under Section 18 of the Police and Criminal Evidence Act, the home of a person in custody for an arrestable offence can be searched without a magistrate's warrant. In the case of civil disputes and claims, there is a mutual right of inspection of documents, but that is in the process called "discovery", given by order of the court under the court rules. There is only one instance where claimants can obtain a unilateral right to inspect, copy and, indeed, impound documents and records from the other party—and that is pursuant to what is called an Anton Piller order. It is given ex parte by the judge without the respondent being aware of it. It is given only at the discretion of the judge where he is satisfied, from evidence on oath, that there is a risk that evidential documents may be destroyed or tampered with and that the interests of justice leave no alternative.

The order is hedged around with stringent conditions, of which I shall mention just some. The order has to be served on the respondent in the presence of a wholly independent supervising solicitor, experienced in handling Anton Piller orders, who has to see that the matter is dealt with in a proper manner. Where the premises to be searched are likely to be occupied by an unaccompanied woman, unless the supervising solicitor is a woman, one of the persons attending the service of the process must be a woman. The respondent is entitled to ensure that, except for a named person, nobody is present who could gain a commercial advantage from anything that he might see or read; and so on, and so on.

Perhaps I may repeat—it cannot be emphasised too strongly—that what the Government are proposing is that a person merely has to allege that he has a claim for a civil debt and he shall then have the totally unprecedented right to enter the premises of a third party, and then the right to stay there for virtually as long as he chooses while he conducts a search through that party's books and records. What the Government have proposed in this case is that on 14 days' notice the employee may march into the employer's business premises—

Lord Falconer of Thoroton

I apologise for interrupting the constitutional flow, but could the noble Baroness identify where the "right" to enter premises comes from, where the "right" to stay in the premises comes from and why if documents are not produced, the remedy is not marching in; it is a complaint to an employment tribunal?

Baroness Miller of Hendon

If the noble and learned Lord will give me a moment, I shall find the appropriate provision in Clause 10. Subsection (1) states:

"A worker may, in accordance with the following provisions of this section,—

1. (a) require his employer to produce any relevant records; and
2. (b) inspect and examine those records and copy any part of them".

There is no indication of any other way in which the worker may gain access to the records. Indeed, subsection (8) states:

"The place at which the relevant records are produced must be—

1. (a) the worker's place of work; or
2. (b) any other place at which it is reasonable, in all the circumstances, for the worker to attend to inspect the relevant records; or
3. (c) such other place as may be agreed between the worker and the employer".

Subsection (9) then refers to the number of days involved.

As far as I can see, the clause suggests that the worker has the right to enter "the place" and to see the records. I repeat that subsection (8)(b) states: in all the circumstances, for the worker to attend to inspect the relevant records".

Perhaps I may continue with what I was saying. What the Government have proposed in this case is that on 14 days' notice, the employee may march into the employer's business premises—the noble and learned Lord will not like what I am going to say next because my notes continue—and "ransack" his records. At any rate, it appears that the employee will certainly have a right to look through the records, possibly in front of a shop full of customers. The noble and learned Lord shakes his head, but that is what the clause states. It states that the employee can go into the premises and inspect—

Lord Falconer of Thoroton

No.

Baroness Miller of Hendon

The noble and learned Lord will have plenty of opportunity to argue his case when he responds to my amendment.

Admittedly, subsection (8) refers to a "reasonable" place—again, we have the word "reasonable"—but that is not defined. It will be a brave employer who decides that his solicitor's or accountant's office in the next town or across the other side of London is the most "reasonable" place for that.

Admittedly, subsection (7) refers to a "reasonable … time". However, would, say, 9 p.m. or some time on a Sunday afternoon be accepted by a court as "reasonable" even if that is the time that is least disruptive and least embarrassing to the employer, particularly in the case of a shop which may be full of customers at any other time?

Then, there is all the complicated palaver in this clause about the employee being accompanied by a person of his choice. Who, might I ask, is the "worker's friend" to be? It was suggested in the other place that it might be none other than his Member of Parliament—nothing is impossible, I suppose—or someone from the local citizen's advice bureau. Equally, it could be a large chap with a broken nose and a Rottweiler on a chain whose purpose is to intimidate the employer. I do not believe that this is a laughing matter. There might be a series of visits by one employee after another, without any real cause for complaint as it transpires, whose intent is to disrupt the employer. That may be termed a new form of work to rule. It may even be a local trade union official with a separate agenda who conducts a fishing expedition or a recruiting drive. It could even be a competitor, which would be a very serious matter for any business.

The very nature of the employer's records, whether kept on a computer or on paper, means that the person who inspects them is likely to see irrelevant confidential information relating to other employees. The essential point is that, unlike the inspection of documents carried out pursuant to a court order in civil proceedings, there is no sanction against improper disclosure of information. There are already situations in which under the Data Protection Act a person can demand to see records pertaining to himself held by a third party. I am entitled to obtain copies of information held about me in almost any computer in the country. One is talking about copies on paper sent by mail or messenger. I am not entitled to barge into my bank, building society or the offices of a credit agency brandishing a do-it-yourself search warrant and accompanied by a personal minder.

I am entitled to be supplied with a record, in writing, of my treatment in a National Health Service hospital, not by personally inspecting the hospital's and doctor's notes. Under the Companies Acts I am entitled to demand an up-to-date list of shareholders, not merely the possibly obsolete one on file at Companies House in Cardiff. To obtain that information I do not even have to be a shareholder, but I cannot insist on personally accessing the company secretary's computer.

These are the correct precedents to be followed when considering a demand for copy records to be supplied in writing within a reasonable time and at no cost to the employee. This amendment gives the employee access to all the information to which he is justifiably entitled without all the cumbersome, bureaucratic and inappropriate procedures that this Bill proposes.

I started moving this amendment by referring to a constitutional issue. With the exception of the cases authorised by Parliament to which I referred earlier, no one should be entitled to demand access to someone else's premises without a lawful warrant granted by an impartial member of the judiciary. I believe that, if an Englishman's home is his castle, so to no lesser extent is his place of business.

Because of the considerable constitutional importance of this clause I apologise for having taken up so much of the Committee's time in explaining the background to the amendment that I move. As briefly as possible I should now like to explain each amendment in detail. One needs to look line by line at the more objectionable and draconian provisions of this clause. I shall speak to them in the order in which they appear on the list. The proposed new subsection in Amendment No. 69 rectifies a number of deficiencies in the present provision. The present clause does not specify the form that the employee's requirement should take. Can it be simply oral, face-to-face or even by telephone? To require it to be in writing places it beyond argument that the demand has actually been made. I believe that 28 days rather than 14 days is a reasonable time for a notice by an employee, bearing in mind that an employer may have his records maintained by accountants or a PAYE agency or those records may be in the middle of an annual audit. What happens if the employee makes his demand on Christmas Eve, when the entire country appears to have developed the habit of closing down for two weeks?

I would not dream of diminishing the complaint of a worker who believed that he had been underpaid. However, there is not the degree of urgency that the subsection implies. Therefore, I believe that 28 days instead of 14 days would not make any practical difference. Most important of all, the method by which the employer provides the records should be in writing, not by production on the employer's premises or some other place nominated by the employer under subsection (7). I am sure that noble Lords opposite will be pleased to hear that I do not intend to repeat the arguments that I have already advanced in relation to that point. It is sufficient to say that, as a matter of principle, an employee, or one employee after another, or possibly an employee who has been dismissed for good cause, should not have the right to come back on to the employer's premises perhaps in a disruptive or confrontational manner.

As to Amendment No. 70, there can be no possible objection to an employee being required to place on record the date on which he makes his request so as to place beyond argument the time from which the time limits prescribed by the Bill begin to run. Nor can there be any objection to an employee specifying the period in which he is interested. There is nothing to prevent the employee specifying the period to be from the commencement of his employment to the present date. Equally, there is no reason why the employee should be required to guess the period which is the subject of the dispute. After all, even a real search warrant issued by a magistrate must inform the recipient specifically as to what the searchers are looking for. This amendment proposes the removal of the right of the employee to demand to come on to the employer's premises or some other place, possibly accompanied by a total stranger whose part in the matter may well be dubious or at least unclear. Instead, the employer is to be obliged to provide copies of the records in writing which the employee and any number of so-called advisers can examine at their leisure. There is nothing in the present clause to prevent a disruptive or vengeful employee keeping the employer hanging around for hours while he conducts a gigantic filibuster and pretends to examine the records.

Amendment No. 71 seeks to delete subsection (5). That provision gives the employee the unprecedented right to issue what amounts to a home-made search warrant. If the method of providing the records to which the employee is entitled is in writing, by photocopies, and so on, all the paraphernalia of so-called production notices and the procedural regulations in subsections (6) to (8) is entirely superfluous. The amendments that remove those subsections are Amendments Nos. 72, 73 and 74. Subsection (9) is also superfluous because the time limit for providing the written record is covered by the new subsection (1). That is removed by Amendment No. 75.

Amendment No. 77 substitutes a written request—that is, one demanding copies of the relevant records—in place of the objectionable search warrant which is euphemistically called a production notice. Amendment No. 78 introduces the word "directly" before "relevant" in referring to the records that an employee requires to see in order to establish the employee's pay. The word "directly" is simply to ensure that the employee and his advisers cannot go on a general fishing expedition. What is directly relevant are the hours worked by the employer and what he or she has been paid for them. What is not directly relevant, for example, is what the person working alongside the employee was paid for the same work.

This amendment is only a matter of emphasis. The employee must get the information that he needs to establish whether or not he has a claim. But what he should not demand is information that is not relevant to that objective. The amendment places a limit on the word "relevant" so that it is not widened to whatever remote piece of data someone can dream up. We do not want to see the harassment of employers by continual, ever-escalating and time-consuming demands for what in civil litigation are called further and better particulars.

Lord Clinton-Davis

Where does the noble Baroness imagine that the employee would be able to go on a fishing expedition to discover everything and anything that is not relevant? Does not the clause specifically subscribe to the point I have made? The information has to be relevant.

Baroness Miller of Hendon

It has to be directly relevant to what the employee is looking for. If the noble Lord says that "relevant" states that, he will have no objection to the provision including "directly relevant".

Amendment No. 79 is a purely drafting amendment. It removes a possible ambiguity which establishes that the "worker" concerned is the one who has put the machinery into motion by making the request in subsection (1). That is precisely what is meant, so why not say so clearly? I beg to move.

Lord Falconer of Thoroton

I am grateful for the opportunity of perhaps dissipating a number of the misconceptions which underlay the moving of those amendments.

I think we would all agree that it is of considerable importance that the employee has some right of access to the records of the employer. It would also be sensibly agreed by all that the right of access of that employee should be only in relation to records relevant to establishing whether or not he is being paid the national minimum wage. I should have thought that everyone would agree that he should have no right of access unless he can establish reasonable grounds for claiming that he may not be being paid the national minimum wage.

I think we would also all agree that the arrangements made for the employee to look at the records should be convenient both to the employer and employee. By that I mean, first, that the employee should in the appropriate case be allowed to look at the records; and, secondly, that where appropriate he should be accompanied by someone who might help explain to him what the records mean. Many of the people wishing to enforce the national minimum wage may not readily understand what the employer's records contain.

I think we would also all agree that it would be quite inappropriate for the employee to have a right to go into the employer's premises and look around in relation to particular records. We would all agree, however, that some sort of remedy should be given. We need to balance the right of the employer against the right of the employee.

As regards enforcement of that right, the balance is tipped, if anything, in favour of the employer. The only remedy that the employee has is to go to an industrial tribunal and seek a declaration that the rights given in Section 10 have not been complied with. The only remedy that the employment tribunal can give is to award the employee 80 times the national minimum wage. So the right given to the employee is less than the right given in ordinary civil litigation in this country where a person fails to produce a written document. If the other party does not produce the written document, the person against whom the order is made can eventually be committed to prison. There is no such provision here.

The fallacy which underlay the whole of the first sequence of the noble Baroness's approach was that the employee could go into the employer's premises and search around for himself. That is wrong. The position is this. A production notice can be given. That requires the employer to do certain things including providing certain documents. If, however, the employer does not comply with that, that does not as a matter of law give the employee the right to go into the premises. It only gives the employee the right to make a complaint to an employment tribunal under Clause 11.

Let us assume that I am right on that aspect. The noble Baroness will need time to consider whether I am right in relation to that because of the vigour with which the point was made against me. With respect, that would get rid of the major constitutional problem to which the noble Baroness referred in the first 10 minutes of her opening remarks. Assuming that I am right in relation to that, we should then consider the detail of the points she makes about the way that this right, which we all agree should exist, has been constructed.

We have sought to achieve a balance between the rights of workers, some of whom, for example, home workers, may be in the more vulnerable position of not having representation or contacts with other firms, and the rights of other employers. We fully accept that the enforcement should not be overburdensome. That is why in subsections (2) and (3) the Bill makes it clear that the right of access is already limited: for example, the worker must have reasonable grounds for believing that he is or has been paid less than the minimum. The intention of this provision is to cut out frivolous or vexatious claims. In addition, the right of access may be exercised only for the purpose of establishing whether the worker is being or has been paid at least the minimum.

Finally, the worker must produce a written notice—defined in the Bill as a "production notice"—requesting the production of the relevant records. Noble Lords may wish to note that, to this extent, the requirement of the amendments for a written notice to be produced adds nothing to the Bill that is not already there.

Clause 10 as it stands also allows a degree of flexibility, for example in agreeing a different period—longer than the specified 14 days—for the production of records, under subsection (9)(b).

Finally, the clause provides for workers actually to inspect records and to be accompanied if they wish. I believe this is an important entitlement which will encourage workers to exercise their rights and discourage some employers who may be tempted to use unfair tactics of dissuasion.

It is worth emphasising that the overall purpose of this and other enforcement mechanisms is to encourage self-compliance. It is far preferable, if at all possible, to encourage employers to comply voluntarily than to have to provide for a huge bureaucracy to do so. Furthermore, by allowing workers to inspect records it should be possible to prevent cases of simple confusion or misunderstanding. This in itself should help keep cases out of the tribunals and the courts.

The amendments would significantly weaken the position of the worker for no particular reason. In addressing them, I shall aim to focus on three main issues: the removal, by Amendment No. 56 and related amendments, of the worker's right to inspect and examine his records; the removal of the right to be accompanied; and the lengthening of the time in which records must be produced to 28 days.

Taking these points in turn, I believe that it is essential to the enforcement provisions for a worker to have the right to inspect records. Of course, in many cases that right will be met by the employer providing the worker with a copy of the records as they relate to him. I imagine that will in fact be the normal way to proceed. However, it is a regrettable fact that some employers may fail to provide the right records or may wish to conceal relevant records. It must be right to enable a worker, in such cases, to go to the source data; and indeed in all other proceedings that right is recognised.

I do not believe that the Bill allows this right to be abused. I doubt that there will be long lines of employees queuing to inspect their relevant records in person. Subsection (2) already makes it clear that the worker must have reasonable grounds to exercise the right.

Therefore, the replacement of the right of access with a right to a copy of records would, in my view, unacceptably weaken the enforcement provisions of the Bill.

This batch of amendments hanging on Amendment No. 69 would also remove the worker's right to be accompanied when examining the records. As already mentioned, this right is essential to prevent some employers from fobbing off their workers or from pulling the wool over their eyes. I do not believe there will be many such cases, but the option to be accompanied provides a reasonable deterrent.

There is also a pragmatic reason for this provision. Some of the calculations of remuneration for minimum wage purposes may not be at all straightforward. Some workers may feel more confident if they can call on a colleague with particular accounting or legal expertise. The outcome should assist understanding of the position and, to the extent that there may have been an innocent misunderstanding, should encourage early resolution of the problem.

Finally, the amendments would double the amount of time allowed to an employer to produce the records from 14 to 28 days.

There seems to be no particular reason for this proposal. It seems to me that any reasonable employer would be able to produce records relating to how much he pays his staff within a fortnight. Subsection (9) of the clause, in any event, allows the worker and employer to agree between them to an extension of the deadline if that is appropriate. So we have already built in more than sufficient flexibility for employers and employees.

That leads me to Amendment No. 75. Not all the amendments act in the interest of the employer. This amendment deletes subsection (9). It would therefore actually remove the right for the worker and employer to reach an agreement on a longer timescale.

Other amendments in this batch seem to work in the interest of neither worker nor employer. They simply remove straightforward provisions relating to the period of notice to be given and the location of the records.

It is clear from the speech of the noble Baroness that all of the amendments are, with the greatest respect, based on a fundamental misunderstanding of the position, which is that it gave the employee the right to walk into the premises. It does not. Once that is accepted the fundamental basis of the amendments goes.

I strongly doubt that the removal of such provisions as the latter parts of the amendments does anything but weaken the effectiveness of the clause. As I have indicated, we have designed the clause to be effective in a balanced way; not in order to overburden or punish employers or to give employees rights way beyond what is reasonable. It is in everyone's interests, workers and employers, for enforcement to be fair and, in particular, for enforcement to be effective.

I hope that I have convinced your Lordships that Clause 10 is perfectly adequate as it stands and that the amendments would not benefit the Bill. I hope that I have set the noble Baroness's mind at rest as to what she perceived, wrongly, as a constitutional outrage. If pressed I would ask the Committee to reject Amendment No. 69, but I would ask the noble Baroness to withdraw the amendment.

9 p.m.

Baroness O'Cathain

I have listened with great interest to my noble friend's speech and the noble and learned Lord's reply. I have read through Clause 10 three or four times and I have come to exactly the same conclusion as my noble friend. I am not saying that I have a bright brain, but if I have come to that conclusion surely there must be an element of doubt about it. It is weighted against the employer.

I am not saying that the legislation should be weighted in favour of the employer and against the employee. I am looking for balance. I understand that the noble and learned Lord has said that balance is being sought, but the wording in this clause causes me to Worry.

One of the noble and learned Lord's points was that in most cases the employer would produce the information in written form to the employee. Nowhere in Clause 10 does it actually say that that would be an option. The noble and learned Lord said that in most cases it would be a fait accompli, whereby the request would be made in writing and the information would be given back in writing. If so, why are there all these subsections of an intimidatory nature necessary?

There are occasions in commercial life where employees who might have been dismissed or made redundant have a deep-seated spite against their former employer. They would latch on to this. The place is littered with consultants and lawyers—with due respect to the lawyers present—who would be only too pleased to grab such a case and go to the employer's premises. I wonder why there is this deep-seated regret at not accepting these amendments. It leaves a problem. I am not convinced about the matter. One can imagine the example given by my noble friend of heavies going in with a disaffected employee and causing chaos within an organisation.

The second point concerns subsection (9)—before the end of a period of 14 days. The Minister drew attention to paragraph (b): at such later time as may be agreed during the period between the worker and the employer". Returning to the point about the Christmas period, we all know that the Christmas period is not 14 days but extends in a lot of cases to three weeks. There would be merit in looking at the 14 days again.

Viscount Bridgeman

I am the third speaker from this side to feel that this clause does not give protection in a difficult case. Why do we not follow the more usual procedure in the Data Protection Act of the data being produced by the employer? The employer will receive notice. What will he do? In many cases he will have to filter information which is confidential to himself and to which the employee is not entitled. He will have to sift that information from the rest. As to the production of copies, why can they not be produced to the employee as in the Data Protection Act?

I share the feelings of my noble friend Lady O'Cathain that the presence of a helper is slightly intimidatory, and that could be the case under this clause. I am worried that the production notice is a do-it-yourself warrant. There is no recourse to industrial tribunals in this clause. It gives the employee the right effectively to write his own warrant and go in. That also ought to be tightened up.

Viscount Thurso

I listened with great interest to the argument, which was not one that I anticipated. Having looked at the group of amendments, I thought that there would be a debate between the two Dispatch Boxes. However, having listened to the comments of noble Lords on the Conservative Benches, I must say that as an employer I do not see the problem that is being put forward. To draw a comparison between a production notice and a search warrant is stretching things a little too far.

Perhaps I may refer the Committee to subsection (7), which states: Where a production notice is given, the employer shall give the worker reasonable notice of the place and time at which the relevant records will he produced". If that provision relates to a search warrant there is something a little odd. The employer is telling the employee after having received a notice where the employee can receive it. I believe that the drafting is not as weak as has been made out and therefore do not wish to support the amendments.

Lord Falconer of Thoroton

If I believed that the clause legitimately gave rise to the concerns expressed by the noble Viscount, Lord Bridgeman, or the noble Baroness, Lady O'Cathain, I would be equally concerned. However, I genuinely believe that the clause does not give rise to such concerns.

Perhaps I may deal with the specific points that have been made. Both speeches referred to the document as being a "search warrant". What I regard as the essence of objectionability about a search warrant, like an Anton Piller order referred to by the noble Baroness, Lady Miller, is that it effectively prevents the owner, renter, or occupier of the property entering and looking at his records. There is no element of that in this case.

Where a production notice is produced by the employee, the employer tells the employee where the employee can look at the records. It is the employer's choice, so long as he is reasonable, to decide. It does not have to be at the premises; he can choose somewhere else for the employee to look at the records. I draw the Committee's attention to subsection (8), which states: The place at which the relevant records are produced must be…the worker's place of work; or … any other place at which it is reasonable, in all the circumstances, for the worker to attend to inspect the relevant records; or … such other place as maybe agreed". Therefore, if the employer has a good case for saying that it should not be the place of work, he can say, "This is a reasonable place for you to come". He has 14 days in which to ensure that the employee sees only his own records and the appropriate records.

If the employer were minded to disobey the law there is nothing the employee can do except make a complaint to the employment tribunal. The noble Viscount, Lord Bridgeman, said that he saw no reference to an employment tribunal in Clause 10. That is because it is in Clause 11. The noble Viscount, Lord Bridgeman, said that it was intimidatory to allow an employee to bring a companion with him. Think how intimidatory it might be for an employee to be told by his personnel officer, "Here are your records. You sort out whether you have been paid the national minimum wage". I can see that there may be cases in which it might be difficult, but surely a balance must be struck to make the provision work properly.

I would fully appreciate the concerns if they were justified, but I respectfully submit to the noble Viscount and the noble Baroness, who made good speeches outlining their concerns, that if they look at the provisions they will see that they are properly balanced. They do not constitute a search warrant. They do not allow someone to go mad with someone else's records. However, they represent a sensible means of trying to make the Bill enforceable in a way that does not involve too many lawyers or the employee being easily fobbed off by the employer. And there will be employers who wish to try to deprive employees of their right to the national minimum wage.

I earnestly ask the noble Baroness to reconsider the points that she has raised. We have thought about them genuinely and sought to reach a balance.

Baroness Miller of Hendon

I readily accept that the Minister does not have the concerns that I believe he ought to have. I also accept that if he did have such concerns he would deal with them as I have suggested. Therefore, I do not suggest that the Minister does not believe that what he is saying is correct.

I should like to move on and repeat what the noble and learned Lord said to me. He imagines that in most cases, those things will be dealt with by a copy of the records. That may well be so; but it may well not be so. There is no provision in Clause 10 that suggests that that is the way to deal with the matter.

I shall certainly read carefully what the Minister said. But at this stage I should indicate to him that, while I shall withdraw my amendment, I am not particularly satisfied with his answer. He has tried very hard to be helpful but I am not sure I agree with what he said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 70 to 75 not moved.]

9.15 p.m.

Viscount Thurso moved Amendment No. 76:

Page 8, line 19, at end insert ("during the paid contractual working hours of the employee").

The noble Viscount said: In moving this amendment, I shall speak also to Amendment No. 87. Having listened to the previous debate, which ran for some 45 hard minutes, and was quite fascinating, I am now approaching this amendment from a diametrically opposite point of view. It reflects a general concern that, to a certain extent, employers have the upper hand. I seek to make sure that employees are properly protected and have sufficient access.

I deal first with Amendment No. 76. In my mind, for reasons which will become plain in a moment, I have nicknamed this the "night porter" amendment, and I shall explain that to the Committee as I go along.

Clause 10 generally provides a worker with the right to see records and sets out the manner in which and the places at which those records may be produced, specifically through the production notice. Subsections (7), (8) and (9) deal with the how, where and when of that. Subsection (9) in particular deals with when those records should be produced.

This amendment seeks to add to the burden on employers by providing that the information should be delivered during the paid contractual working hours of the employee. I remind the Committee that I am an employer and I feel slightly schizophrenic because I am never sure whether I am looking at this matter from my point of view or that of my workers. However, I am trying to look at situations when what I do as an employer, my actions, may make life difficult for my employees.

I then came up with the example of the night porter at Champneys. Let us take him as an example. He begins work at 11 p.m. and finishes work at 8 a.m. the following morning. Those are his contracted hours. If that employee lives 45 minutes away—that is not unreasonable because it takes one into north London—it is quite reasonable to imagine that he is never at Champneys at a time at which it is convenient for the office staff to give him information.

I believe that it is more important for employees to have the right, particularly if no one else is on duty for those hours, to have available information delivered to them at that point, since I have many other employees who I can engage to make that information available to such employees. That should be done rather than obliging employees, at their own cost, to drive all the way back to come to my premises during my hours of work to suit me.

This is by way of a probing amendment, but it has a great deal of merit. I hope that the Government will look at it quite favourably. It is important to bear in mind that, whereas the vast majority of employees work relatively straightforward shifts, there are a number of employees in a number of industries who work odd shifts. We should not forget them in looking at what it is reasonable to expect them to do.

Amendment No. 87 is along the same lines but a little bit different. Clause 14 describes the power of an officer and subsection (3) sets out the way in which that officer may give notice. On a number of occasions I have listened to debates in committee where there has been a definition of the word "reasonable". The noble and learned Lord the Solicitor-General has said on a number of occasions that he does not, under any circumstances, wish to invite a court to decide. He said that that was the last thing that he would wish. And yet Clause 14(3) states: The powers conferred by subsection (1) above include power, on reasonable written notice, to require a relevant person", but there is no definition of the word "reasonable".

In this case it is obviously the notice given by the officer to the employer but it has an effect on the employee. Therefore, we merely seek to suggest that it would be reasonable to define the length of time. Indeed, the amendment suggests that "reasonable written notice" should be defined as a period of 14 days or, at some later time as may be agreed between the officer and employer". I should be grateful if the Government would look reasonably sympathetically at both my amendments. I beg to move.

Lord Falconer of Thoroton

I am grateful to the noble Viscount for raising these two points. I am sympathetic to both principles which underlie the amendments. However, I do not think that they are either necessary or appropriate for the Bill. The purpose of Amendment No. 76 is plain to see, although, as a matter of drafting, it would not achieve its aim. But that does not really matter. I believe that the noble Viscount is trying to introduce the requirement that one must produce records relating to an individual employee during his working hours. Therefore, if the person concerned was the night porter at Champneys, the records would probably have to be produced between something like seven in the evening and seven in the morning.

I can see the sense of that from the point of view of the employee, although, as an employer, the noble Viscount might be a little irritated if a person in his personnel office had to wait until three o'clock in the morning just to give someone like a night porter his records. We hope that employers and employees will reach sensible agreements as to when this should be done. However, if we insert a provision stating that this must happen during the working hours of the employee, that would be overly prescriptive in a situation where co-operation between worker and employer is so important.

On some occasions it may suit both parties to see the records at a time which is outside the working hours of the individual concerned. We do not believe that that should be prevented by law, which would be the effect of the amendment. Therefore, although we are sympathetic to the idea, we believe it to be over- prescriptive. With that understanding, I ask the noble Viscount to withdraw his amendment.

Amendment No. 87 relates to the power of an enforcement officer in performing his duties to require a person to produce records, an explanation or additional information on "reasonable written notice". So we are now talking about a different clause from that which applies to Amendment No. 76, which relates to the employee's own request where the time is specified. This amendment defines what is to constitute "reasonable written notice" in relation to this power. The amendment says that that would normally be 14 days or, where agreed, up to a month.

There is nothing wrong in principle with defining the amount of notice required. But, again, as with the noble Viscount's other amendment, we think that it is overly prescriptive. Surely the time will vary having regard to the particular request made. This is not as limited as the individual employee's request: this relates to an enforcement officer. "Reasonableness" is a well understood term and we do not need to tie it down to a specific time frame in primary legislation. Indeed, we do not believe that it would be appropriate.

The noble Viscount made a rather effective teasing point about the fact that I had repeatedly said that it would be wrong to refer to "reasonableness" in the context of the legislation. When I say that, I am referring to issues where the Minister is producing regulations. In that case, it is not appropriate for the courts to get into the question of reasonableness. However, where we are dealing with the powers of an enforcement officer to give notice to citizens, then it most surely is appropriate that the word "reasonable" should be inserted, so that the very point can be tested by the courts. I should say that that might have been a teasing point rather than a serious one. Nevertheless, I thought that I would answer it. In the light of what I have said, I very much hope that the noble Viscount will feel able to withdraw his amendment.

Viscount Thurso

Perhaps I may, first, take the noble and learned Lord's last point. It was a little bit of a tease but not wholly so. I am a little worried about the concept that we must not do anything to allow Ministers to be reasonable because they are, so to speak, inherently unreasonable but that somehow or other enforcement officers will always be reasonable. That is quite a dubious and debatable point. However, I do not wish to go into it tonight.

Lord Falconer of Thoroton

It is because Ministers will always be reasonable but enforcement officers may not that one has to add the word "reasonable".

Viscount Thurso

I shall accept the tease and move on.

As regards the response to my Amendment No. 76, there is an important point of principle here. While I am most grateful to the Minister for his response and have no doubt that we are singing off the same hymn sheet, if a slightly different tune—I am singing in descant probably—the point of principle is that it has been my experience that in British industry generally there is a large number of good employers who have superb human resources departments and for whom the vast majority of this Bill is an irrelevance because they pay way above the minimum wage and they play by the book. I remember a few days ago the noble Baroness, Lady O'Cathain, said in this Chamber that British Airways had a 2 per cent. turnover rate. I have been depressed since I heard that because I thought my turnover rate was rather good but it is considerably higher than that.

There is a certain number of employers—British Airways is certainly one of them—who undoubtedly have great human resources departments and who practise good labour relations. However, I use a phrase that the noble Lord, Lord Currie of Marylebone, used in a debate on management education—despite that head there is a long tail of employers who do not follow the rules and who do not play by the book and who are bad employers. I believe that this legislation is not aimed at my business or British Airways but at those bad businesses who genuinely exploit employees, who pay poor wages, and where poor conditions and bad management conspire to make life pretty intolerable for the people employed. While I have a natural interest, as it were, in protecting employers, in this Chamber my concern is with employees. As regards some of the bad employers, I do not accept that they will necessarily be reasonable. I do not accept that they will not make it difficult for a night porter or a night security guard to exercise his or her rights.

I shall certainly withdraw Amendment No. 76. However, I appreciate what the noble and learned Lord has said and I wish to read what he has said and perhaps discuss it with him. I totally accept that the drafting of the amendment is wrong. I decided that the drafting was wrong before I rose to speak. I believe I have put the words in the wrong place. I accept that. However, the Government may be persuaded that what I seek to do is not such a bad idea after all. Perhaps at a later stage the Government may even produce an amendment of their own. For the moment, however, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 77 to 79 not moved.]

Clause 10 agreed to.

Clause 11 [Failure of employer to allow access to records]:

Baroness Miller of Hendon had given notice of her intention to move Amendment No. 80:

Page 8, leave out lines 35 to 38 and insert ("failed to supply a copy of some or all of the relevant records in accordance with subsection (1) of section 10 above").

The noble Baroness said: I shall not move this amendment because I believe it is rather closely connected with Clause 10 and a written notice.

[Amendment No. 80 not moved.]

Baroness Miller of Hendon moved Amendment No. 81:

Page 8, line 40, leave out ("shall").

The noble Baroness said: Amendments Nos. 81 to 85 seek to modify the totally unyielding provisions on penalties for breaches of this part of the Bill. It seems to be the philosophy of the Government that there should be no discretion whatsoever available to those responsible for administering the Bill, whether it be the Secretary of State in deciding whether there should be any exceptions to the right to receive the national minimum wage or as regards those who are exercising a judicial function in fixing penalties. Other than in the case of someone convicted of murder, every judge and every magistrate has a discretion about a penalty to be fixed. Even in the case of drunk driving, which carries a fixed automatic penalty of disqualification, there is a right for the magistrate or judge not to impose it if there are what are called special reasons, rare though they may be.

In this case what the Government are asking for is for the tribunal to act as a rubber stamp, with absolutely no discretion to ameliorate the penalties, no matter what the mitigating circumstances might be. I think it would be advisable for the Secretary of State to book a ticket to Strasbourg, where she will undoubtedly soon find herself in front of the European Court of Human Rights if the Bill is passed in its present form.

Our Amendment No. 82 proposes leaving out the word "shall" in line 40 and moving it to line 41, so that the wording will still be: the tribunal shall make a declaration … But then we propose to insert the word "may"—this is Amendment No. 83—at the beginning of the phrase in paragraph (b); in other words, the tribunal may make an award. It enables the tribunal to make the same declaration as the Bill proposes. It merely alters Clause 11(2)(b) to give the tribunal a discretion as to the amount of any penalty that it fixes.

Amendments Nos. 84 and 85, when taken together with Amendments Nos. 81 to 83, would now make the whole clause read: Where an employment tribunal finds a complaint under this section well founded, the tribunal—

1. (a) shall make a declaration to that effect; and
2. (b) may make an award that the employer pay the worker such sum not exceeding 80 times the hourly amount of the national minimum wage (as in force when the award is made) as it considers just and equitable having regard to the employer's default."

I hope that my putting together into one package all these fragmentary amendments will be of assistance to your Lordships in understanding what I am getting at. It has certainly helped me.

As the Bill stands, an inadvertent failure to produce a single sheet of paper or a few hours' extra delay or a problem caused perhaps by illness will without consideration of any mitigating factors result in an automatic draconian fixed penalty. On the lowest forecast of what the national minimum wage may be, this could result in a fine in the region of some £288: enough to put a small shop out of business.

We sometimes read of a person convicted of manslaughter not being imprisoned. Is the crime of not giving a worker his due in an administrative matter so heinous that absolutely no mercy can be shown, no matter what the circumstances might be? Is the Secretary of State frightened that those she appoints to her tribunals might actually apply some common sense in cases where the circumstances require it?

The final amendment, No. 86, is simply consequential upon some amendments which your Lordships might have considered in Clause 10—but I shall not move that amendment either.

9.30 p.m.

Lord Monson

I very much agree with Amendments Nos. 81 to 85 inclusive and I think that the noble Baroness has made out an excellent case, and so there is no point in my repeating the excellent arguments she has already made. Let us suppose that 80 times the minimum wage equates to £280. May I ask the noble and learned Lord, Lord Falconer: can the sum of £280 be set off against gross profits for corporation tax purposes? Secondly, is the £280 taxable in the hands of the employee? Thirdly, is national insurance payable on the £280 by both the employee and the employer? Finally, in the event that the minimum wage for those under 26 or under 21, or whatever the watershed may turn out to be in the end, equates to 90 per cent., let us say, of the minimum wage for older workers, will the sum payable be reduced accordingly?

Lord Falconer of Thoroton

These amendments, as the noble Baroness has made clear, relate to Clause 11, which concerns the failure of an employer to allow access to records and the awards that can be made by employment tribunals in that event, as well as the period for bringing a complaint. The critical amendment is Amendment No. 83, which removes the obligation for the employment tribunal to make an award to the employer if a complaint is well founded. Instead, it says that a tribunal may make such an award. Amendment No. 84 takes the proposed discretionary power a step further, in that it gives the tribunal the option of awarding less than the full amount, which is currently set at 80 times the hourly national minimum wage rate, to be paid by the employer to the worker. Amendment No. 85 is linked with the discretionary notion, as it gives the tribunal the right to consider what is just and equitable.

As I explained during the course of debate on Clause 10, the only means of enforcing the right given in Clause 10 is by a complaint to an employment tribunal. The employment tribunal can, if the complaint is well-founded, make a declaration that an employer has not complied with his obligation under Clause 10 and then, in an attempt to obtain enforcement, make an award of 80 times the minimum wage. If the minimum wage is set at £3.60—I do not say that it will be, but if it were to be that—that figure will be less than £300.

It is slightly unfair and "over the top" to suggest that that is an unreasonable burden on an employer who, by this step, could effectively prevent an employee finding out—

Baroness Miller of Hendon

That is the minimum. It could be much more.

Lord Falconer of Thoroton

Not for an individual employee. It would be 80 times the national minimum wage. If the national minimum wage goes up, which I am sure is the noble Baroness's point, it will rise by that amount. It ought to be understood what the scale of the penalty will be. It is likely to remain in the same area.

Baroness Miller of Hendon

I thank the Minister for giving way again. I do not suppose that he has been in business. His expertise is in the law, and I have great respect for his knowledge. But if you are running a tiny shop and you have difficulty meeting all the salaries on a Friday, this provision could make quite a big difference. All my very modest amendment attempts to do is allow some discretion.

Lord Falconer of Thoroton

I have been in business; barristers also have to run their business. The noble Baroness may laugh, but barristers start out with no money, and they start out employing people. Barristers, like shopkeepers and everybody in small business, have the option of avoiding the penalty of £300-odd by complying with the reasonable provisions of the law.

Having the award fixed, which is what the provision amounts to, would enable cases to be handled much more swiftly and effectively in a tribunal. There will be no need for the tribunal to spend time considering specific amounts. At the same time, employers are protected, because a tribunal must first have found the complaint of a worker to be well-founded.

I believe the balance in this provision is right. It is a reasonable penalty and is the only means of enforcing the order. It is fixed, easy and simple. I respectfully ask the noble Baroness to consider withdrawing her amendment.

Baroness Miller of Hendon

I am certainly considering the lateness of the hour. Perhaps I may point out that when we originally discussed all these matters we were told that we could have two days to debate them in Committee. I understand that the House is very busy. However, as the noble and learned Lord knows, on Thursday evening we did not begin debating the Bill until late. We certainly did not spend more than five hours on it. The position is the same today. This is our second day for debate, but in effect our second half-day. The Government have offered us another evening next Monday, about which we are delighted. I shall certainly withdraw this amendment, and, undoubtedly, during the course of the evening I shall not move all of the amendments. However, I think it right to say that we on these Benches do not agree with the national minimum wage. We believe in a national minimum income. I have spent many hours on these amendments because I want to do justice to your Lordships and make sure that I put my points forward. One thing I can tell the Committee with certainty is this. For the hours I have put in, no matter what we hear from the Low Pay Commission regarding the level of the national minimum wage, I am not earning the national minimum wage and I suspect that many of your Lordships will not be earning it either. We shall withdraw—

Lord Carter

Would the noble Baroness speed up if we paid her the national minimum wage?

Baroness Miller of Hendon

I do not know. I thank the noble Lord the Chief Whip for his kindly intervention. All I would say is that, on Thursday, I withdrew several amendments. There are one or two that I did not move then which I shall wish to bring back on Report. I am sure that the Chief Whip does not intend to give us days and days on Report. I shall withdraw the amendment but—

Lord Monson

Before the noble Baroness withdraws her amendment, could the noble and learned Lord kindly answer my taxation questions?

Lord Falconer of Thoroton

I am sorry, in the cut and thrust of debate with the noble Baroness, I completely forgot the questions on tax and I apologise. I cannot give the noble Lord a definitive answer because neither those in the Box nor myself regard ourselves as expert tax advisers. We think that it could be set off against tax, but the noble Lord should not rely on that. It depends on the tax position of the employer, especially whether he is making profits in relation to the matter.

Baroness Miller of Hendon

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 82 to 86 not moved.]

Clause 11 agreed to.

Clauses 12 and 13 agreed to.

Clause 14 [Powers of officers]:

[Amendment No. 87 not moved.]

Clause 14 agreed to.

Clauses 15 and 16 agreed to.

Clause 17 [Non-compliance: worker entitled to additional remuneration]:

[Amendments Nos. 88 and 89 not moved.]

Clause 17 agreed to.

Clause 18 agreed to.

Clause 19 [Power of officer to issue enforcement notice]:

Baroness Miller of Hendon moved Amendment No. 90:

Page 13, line 36, at end insert—

("( ) Any requirement under subsection (2) above shall be stayed pending the determination of any appeal pursuant to subsection (4) of this section.").

The noble Baroness said: I wish to move Amendment No. 90 and speak also to Amendment No. 91. They are simple amendments which remedy two omissions that simple justice requires your Lordships' House, as the Supreme Court of the United Kingdom, to remedy.

The amendment to Clause 19(2) provides for a stay of enforcement notice requiring payments of sums which the enforcement officer rules is due from an employer, pending any appeal by the employer. This follows normal precedent in case of civil debt, with the following distinction. If an employer is forced to pay a sum to an employee which is later ruled not to be due, then the normal facts of life make it difficult, if not impossible, to recover it from the employee, who may by then not be able to be found.

The second amendment is to subsection (7). If the tribunal decides that the enforcement officer would have had no reason to serve an enforcement notice, instead of allowing the appeal it has to rescind the enforcement notice. But by then the employer may have incurred legal and accountancy costs and all kinds of other expenses. The normal rule is that costs should follow the event. If the enforcement officer is as radically wrong as is envisaged by Section 17(6)(a), then the employer should not be left out of pocket.

The amendment gives the tribunal the widest possible discretion about the amount of compensation to be awarded, including, one assumes, taking into account the fact that the employer may have brought his problems on himself. I beg to move.

Lord Falconer of Thoroton

Perhaps I may deal first with Amendment No. 90. Subsection (2) of Clause 19 as drafted says that an officer can serve an enforcement notice requiring the employer to pay sums due to the worker because of a past failure to pay the minimum wage. I think we all agree that this is an extremely important provision.

Equally important, subsection (4) gives the employer the right to appeal against the notice within four weeks of receiving it. The amendment which we are debating would postpone an employer's duty to pay those arrears until the appeal had been heard. Thus, if the employer has been paying below the minimum wage, the worker might have to wait a further period of time before the enforcement officer could serve a penalty notice on the employer. This would plainly invite abuse from employers simply wishing to delay payment of the full amount.

We have heard that the employer must be treated fairly. And of course the Government agree with that. We have also heard that the legislation is weighted to favour the worker—and we agree with that too. I make no apologies; it is quite right that it should be so. But we must not forget that it is the employer who has the duty to pay the minimum wage. He is responsible for ensuring that he is complying with this law, as with any other law.

If an employer is confident that he will win his appeal, because he is sure that he has always paid the national minimum wage, he can choose to pay nothing pending the outcome of the appeal. If he accepts that he was underpaying, but thinks the calculation of arrears is wrong, he should pay what he believes is due pending the outcome of the appeal. In either case he risks being served with a penalty notice imposing a financial penalty for continued non-compliance with the enforcement notice. The only purpose of a penalty notice is to penalise employers who fail to comply with enforcement notices.

However—and this is the crucial point—while it is true that such a notice can be served where the employer is appealing against the enforcement notice, in such circumstances it is not enforceable until that appeal is finally determined or withdrawn. The employer has the right, under Clause 20, to appeal against the penalty notice as well. And again, if he does so, the penalty notice is not enforceable until the appeal is finally determined or withdrawn. Only if those appeals fail or are withdrawn, will the defaulting employer have to pay the financial penalty. Indeed, if he continues to underpay the national minimum wage he may face criminal prosecution.

Members of the Committee will note that, in those circumstances, the related Amendment No. 91 would require the DTI in addition to compensate the employer. I will turn to that amendment next. The amendment would require the DTI to pay compensation to an employer in the event of the employer's appeal against an enforcement notice being upheld. The amount would be determined by the tribunal and would include, but would not be limited to, compensation in respect of any legal and accountancy costs incurred by the employer.

We have heard it argued in defence of this amendment that there needs to be some symmetry of protection for employers and employees; we have been told that, just as the vulnerable worker is entitled to claim underpayments from an employer, so the vulnerable employer should be able to claim compensation if, on appeal, an officer was found to have wrongly served an enforcement notice. But the argument on the basis of "symmetry" is misleading. It is built on false premises, and therefore draws a false conclusion—for it implies that, like a pay dispute, this is a matter of bargaining between employer and worker. But of course this Bill is not concerned with negotiations and disputes, where both sides quite rightly expect equal treatment. The relationship we are constructing is, if you like, deliberately asymmetrical. The purpose of this Bill is to protect the worker from unscrupulous employers; not the other way around.

The obligation is on the employer to pay at least the statutory minimum. He must be able to prove that he is paying it. The employer must obey the law or face the consequences, and the enforcement officer will, if he has reason to believe that the minimum wage has not been paid, serve a notice.

We expect enforcement officers will carry out their duties diligently. We will take steps to ensure that they do. So we do not anticipate that there should be many successful appeals by employers. But, if the employer appeals against the enforcement notice, as he is entitled to do under Clause 19, and that appeal is completely successful, the enforcement notice will be rescinded. There is no need for any additional compensation payment to the employer.

In most proceedings before a tribunal, costs are not awarded. However, were an enforcement officer to act unreasonably in conducting his defence of the enforcement notice in an appeal before a tribunal by an employer, the tribunal rules would already permit the tribunal to make an award of costs against him. To go further is unnecessary. Moreover the proposal begs an interesting question: what should be the consequences for an employer if he is unsuccessful in his appeal? Should he be penalised further? I would not argue so, but that is where the logic of this amendment would take us.

I believe that the clause works best as it is currently drafted. It reflects the approach taken to all claims to employment tribunals; namely, that costs should not normally be awarded, again to keep the lawyers out. I therefore urge the noble Baroness to withdraw the amendment.

Baroness Miller of Hendon

I thank the noble and learned Lord for his words. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 91 not moved.]

Clause 19 agreed to.

Clauses 21 and 22 agreed to.

Baroness Miller of Hendon moved Amendment No. 92:

After Clause 22, insert the following new clause—

EMPLOYER'S FAILURE TO PAY CONTRACTED WAGES

(" . The failure of an employer to pay any wages at all as required under a contract of employment or a contract for services shall not be treated for the purposes of this Act as a failure to pay the national minimum wage and no enforcement procedures under sections 17 to 22 of this Act shall be undertaken in such cases.").

The noble Baroness said: This proposed new clause seeks to remove an anomaly, or rather a potential cause of injustice, which seems to have been overlooked by the draftsman in framing the Bill. It is not a device to enable an employer to escape from paying the national minimum wage by the simple expedient of not paying any wages at all. He would soon get short shrift from his employees, who would justifiably march out at the end of the first pay day. Such a cumbersome dodge would be totally ineffective because the employer would also find himself in the district court in no time at all.

No, this is to cover the situation where an employer becomes bankrupt or goes into liquidation or receivership and is unable to pay the wages due to staff who then become preferential creditors. It may take some time for them to receive their wages, even supposing that there are enough realisable assets to do so, especially bearing in mind that the Crown, in the guise of the Inland Revenue and Customs and Excise, is even more preferential and may snatch all the available assets. It would be iniquitous if, having seized the funds available to pay the wages, the Crown were then to prosecute the employer for having failed to do SO.

It is equally unfair if, following a bankruptcy, the employer's misfortunes were added to by a prosecution. It is true that there are bankruptcies and liquidations which have either a touch of fraud or of mismanagement about them. However, it is not, except in the most blatant of cases, a criminal offence to fail to pay one's debts. When that is the case, other creditors, apart from employees, will be involved. There are also severe penalties available, including imprisonment. In a normal case there is no criminal sanction because the employer has not paid his trade creditors.

There is no need to make what I may describe as unfortunate employers liable to criminal sanctions because among those ordinary creditors are included employees who, regrettably, missed their last pay day. I am certain that the Government did not intend to create a specially privileged class of creditors where, unlike electricity companies or the local council, a failure to pay results in automatic prosecution. I beg to move.

Lord Falconer of Thoroton

Amendment No. 92, which on one view is rather breathtaking in its boldness, would have the effect that complete non-payment of wages would not count as failure to pay the minimum wage. Therefore, an employer who paid his workers nothing at all would not be vulnerable to a claim by an individual under Clauses 17 or 18, or to action by the enforcement officer under Clause 19, issuing an enforcement notice, Clause 20, on behalf of a worker, or Clause 21, issuing a penalty notice. Therefore, putting aside a case of bankruptcy or liquidation, the very unscrupulous employer could simply say to his employees, "Look, we are a bit short of money at the moment. Do you mind not being paid anything at all for the next few weeks?", in which case there would be no rights even under the National Minimum Wage Bill.

This amendment appears to betray to some extent a misunderstanding of how the enforcement provisions of the Bill work. Clearly, the Government's intention is neither to leave a large loophole, so that employers can get away with paying literally nothing, nor to create duplication of claims. I can assure the Committee that the Bill avoids each of those undesirable outcomes.

Failure to pay the minimum wage is treated as an unauthorised deduction of wages. Action to pursue such a claim may be made under Section 23 of the Employment Rights Act 1996. Instead or in addition, a civil action may be brought for breach of contract. The Employment Rights Act 1996, in providing protection against unauthorised deductions of wages, also protects workers against complete non-payment of wages.

The amendment is undesirable because it would prevent claims being enforced in the event of failure to pay wages at all. This is a matter of principle. If no wages are paid at all, a worker should be able to pursue a claim under the Employment Rights Act. Where wages are paid below the level of the minimum wage, the worker should again be able to pursue the claim as an unauthorised deduction of wages under the Employment Rights Act. In other words, a worker should be able to recover the minimum wage especially when he is paid nothing and for whatever reason. There should not be any exceptions to this principle and the enforcement rule should apply. I ask the noble Baroness to withdraw her amendment.

Baroness Miller of Hendon

I shall read very carefully what the Minister has said. I do not recall the number of the amendment that we dealt with on Thursday which touched on a very similar point. Undoubtedly the noble Lord, Lord Clinton-Davis, will write to me on that amendment. At this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 23 [The right not to suffer detriment]:

[Amendment No. 93 not moved.]

Lord Clinton-Davis moved Amendment No. 94:

Page 17, line 2, after ("by") insert (", or by virtue of, any provision of").

The noble Lord said: I suggest that we discuss Amendments Nos. 94, 95, 98, 126, 127 and 132 at the same time. The two government amendments, Nos. 94 and 95, are linked tidying-up amendments whose purpose is to ensure consistency and correctness of drafting.

Each amendment affects Clause 23, which protects workers against detrimental action for asserting rights under the Bill. The effect of Amendment No. 94, which adds the formulation "by virtue of" in Clause 23(3)(a), is to ensure that the rights to which the protection of Clause 23 applies are rights conferred by other legislation which apply for minimum wage purposes by virtue of this Bill; for example, the legislation covering the agricultural wages regimes or regulations made under the Bill, as well as rights conferred directly by the Bill.

This brings the drafting into line with the new Section 104A(3)(a) of the Employment Rights Act 1996 inserted by Clause 25(1) of the Bill; and the equivalent Northern Ireland provision inserted by Clause 26.

I turn to Amendment No. 95, which is a drafting amendment in the light of Amendment No. 94. Clause 23(3)(b) currently specifies that the clause applies also to rights under Clause 12. This provision becomes unnecessary because Amendment No. 94 provides for coverage of rights conferred by regulations under the Bill, including regulations made under Clause 12. I hope the Committee will agree to support these minor technical amendments.

Amendment No. 132 is a tidying-up amendment consequential on the deletion of subsection (5) in what is now Clause 25, which was done by government amendment at Report stage in another place. That subsection (5) would have modified the Employment Rights Act 1996.

But the prospective modification became unnecessary as a result of Section 12 of the Employment Rights (Dispute Resolution) Act. Subsection 25(5) was therefore deleted by an earlier government amendment, but the corresponding deletion of the repeal entry in Schedule 3 was overlooked at the time. I apologise for that fact, but Amendment No. 132 puts it right. I hope that the Committee can agree to this minor technical correction.

I turn to government Amendments Nos. 98, 126 and 127. These highly technical amendments reflect changes in the treatment of dismissal procedure agreements made by the Employment Rights (Dispute Resolution) Act 1998, as they affect the protection of employees in Northern Ireland against unfair dismissal for asserting their rights under the Bill.

Particularly in view of the complicated nature of the amendments, I have written to the noble Baroness and the noble Lord opposite with an explanatory note. I hope that they have received it. I am happy to share this explanation with the Committee and to place it on the record.

Amendment No. 98 provides a power, in a new subsection (6) in Clause 26, for the Department of Economic Development (Northern Ireland) to make an order to repeal subsection (5), as well as the new subsection (6), of Clause 26.

Clause 26 deals with protection of employees in Northern Ireland from unfair dismissal for asserting their rights under the Bill.

Clause 26(5) inserts a new paragraph (2)(d) into Article 142 of the Employment Rights (Northern Ireland) Order 1996 (which provides for "statutory exclusions" in that the statutory right not to be unfairly dismissed does not apply to employees covered by a designated dismissal procedures agreement; but which also provides that the statutory right nevertheless applies in the case of dismissals specified in certain statutory provisions). The effect of Clause 26(5) is to ensure that the right of an employee in Northern Ireland not to be dismissed for enforcing a right under the Bill will be one of the rights that applies regardless of whether the employee is covered by a designated dismissal procedures agreement.

Section 12 of the Employment Rights (dispute Resolution) Act 1998 provides that there will no longer be statutory exclusions (of unfair dismissal rights) in dismissal procedures agreements. Instead, this will be left to the agreement to determine. Therefore, there will be no need to specify (as, in effect, Clause 26(5) does) that national minimum wage rights are outside those exclusions. Clause 26(5) thus becomes redundant.

The Employment Rights (Dispute Resolution) Act 1998 applies to England, Wales and Scotland, with corresponding provision for Northern Ireland to be made by Order in Council under the Northern Ireland Act 1974. Once that Order in Council is passed, it will become necessary to repeal Clause 26(5).

This amendment therefore provides a power, in a new subsection (6), for the Department of Economic Development (Northern Ireland) to make an order to repeal subsections (5) and (6) of Clause 26. The equivalent deletion was made to what is now Clause 25, "Right of employee not to be unfairly dismissed: Great Britain", at Commons Report stage—in their Amendment No. 25 (Hansard of 9th March 1998; col. 229).

Amendments Nos. 126 and 127 are consequential drafting changes arising from Amendment No. 98. They amend Clause 51(8) dealing with regulation and order-making powers for Northern Ireland.

I appreciate that these are complicated technical matters but I hope that this explanation, which will, of course, appear in Hansard, which itself is useful from the point of view of interpretation, has clarified the position and the need for these amendments which I ask the Committee to accept. I beg to move.

On Question, amendment agreed to.

10 p.m.

Lord Clinton-Davis moved Amendment No. 95:

Page 17, line 4, leave out from beginning to ("and").

On Question, amendment agreed to.

Clause 23, as amended, agreed to.

Clause 24 agreed to.

Clause 25 [Right of employee not to be unfairly dismissed: Great Britain]:

[Amendment No. 96 not moved.]

Clause 25 agreed to.

Clause 26 [Right of employee not to be unfairly dismissed: Northern Ireland]:

[Amendment No. 97 not moved.]

Lord Clinton-Davis moved Amendment No. 98:

Page 20, line 30, at end insert—

("(6) The Department of Economic Development may by order repeal subsection (5) above and this subsection.").

On Question, amendment agreed to.

Clause 26, as amended, agreed to.

Clause 27 [Tribunal hearings etc by chairman alone]:

Baroness Miller of Hendon moved Amendment No. 99:

Page 20, line 37, at end insert (", unless either party requests that the tribunal be composed of three persons").

The noble Baroness said: I beg to move Amendment No. 99 and speak also to Amendments Nos. 100 to 102. These are identical amendments to paragraphs in Clauses 27(1) and (2). Clause 27(1) relates to the constitution of an employment tribunal for certain purposes of this Bill under the Employment Tribunals Act 1996, and Clause 27(2) relates to employment tribunals in Northern Ireland.

The Bill provides for the tribunal for those purposes to consist of a chairman sitting alone. Each of the four amendments provides for either party to be able to request that the tribunal should consist of three persons. Clause 27 deals with complaints against an employer for failing to allow access to records under Clause 11 and appeals against enforcement and penalty notices under Clauses 19 and 22. The Government may claim that they are following the precedent set by the Trade Union Reform and Employment Rights Act 1993 for cases where the input of lay members was considered less essential because the pressure of work and the volume of cases resulted in inordinate delays and the available number of tribunal members had to be spread more thinly.

The very success and popularity of the tribunal system created a problem that had to be solved in what I believe was a very unsatisfactory way. However, I agree that it was the only practical solution. It may well be that with experience of the operation of the new Act it will be found that extra tribunal members have to be appointed and trained because of the volume of work that it generates. We shall have to wait and see.

In the Notes on Clauses it is stated that cases dealt with under the sit-alone provision usually turn on legal issues rather than disputes about the facts. We disagree with the Government on whether cases arising under Clauses 11, 19 and 22 are more likely to involve legal issues than factual ones. We believe that they are more likely to be factual than legal, or at least to have a greater factual than legal element. Did the employer fail to produce some or all of the records that he was required to? Did he fail to give the employee some or all of his right to inspect? Did he refuse access to such person as the worker may think fit? Did he fail to comply with an enforcement notice? Has the time for an appeal against it expired?

I agree that in appeals under Clause 22 the permitted grounds are much more legal than factual. Nevertheless, they contain a substantial factual element as well. The important point is not whether we or the Government are right but the perception of the parties. An employer may well feel aggrieved by being bombarded with threatening notices that he believes are unjustified, or he may be threatened with drastic penalties when he believes in all good faith, and reasonably, that he has complied with them. Similarly, an employee may feel aggrieved that he has not received his full entitlement and that his employer has used all kinds of obstructive tactics against him. In either case one party or the other will want his day in court. Where the issue is one of fact he will want the satisfaction of having been heard by a form of jury.

One cannot rely on a single chairman exercising a discretion as to whether to enlarge the tribunal. Human nature being what it is, most chairmen with the qualifications that they need simply to be appointed to the post will feel themselves perfectly capable of handling cases on their own. Pressures on chairmen to clear their list will discourage them from adjourning to call in lay assessors cases that have started and have already taken time to reach the top of the list.

Courts, whether they be the mighty High Court of Justice or simple employment tribunals, exist for the benefit of litigants, not for the convenience of the judiciary—even less for the financial problems of the Treasury which has to pay judges. It is not for the Government to decide how judicial matters in these cases should be handled. If a litigant believes that his case deserves a full tribunal and makes a claim for one early enough in the proceedings then justice demands that he should have one and not be left with a grievance that he has not had a fair hearing.

It is perhaps relevant to note that under Section 4(3)(e) of the Industrial Tribunals Act 1996 parties who face a three-person tribunal can opt for a chairman sitting alone. In those cases, the parties in effect are given a choice. There is absolutely no reason why parties in cases under this Bill should not have a similar right; or why they should suffer a lesser right.

These simple amendments serve only to improve the working of the Act. They do not detract from the principles of the Bill. I urge the Government to accept them.

Lord Haskel

I listened carefully to what the noble Baroness said. However, the parties to a dispute already have the right to ask for three persons to hear the case, but it is the chairman who decides. The Employment Rights (Dispute Resolution) Act deals with this matter in some detail. It was a Private Member's Bill introduced by my noble and learned friend Lord Archer. He made it clear that the Government are committed to the tripartite nature of the tribunal system. Despite the noble Baroness's comments, perhaps I may take this opportunity to repeat that commitment. The two lay members can and do make a valuable contribution through their experience of employee relations in the workplace. This is much appreciated and in my opinion underpins the value of industrial tribunals.

The kind of cases where such workplace experience is particularly valuable are those involving, for example, unfair dismissal or victimisation. Other clauses in the Bill protect workers against such victimisation for asserting their rights under the Bill. Complaints to tribunals on such grounds must be heard by a tribunal of three. There is no discretion for the chairman to sit alone in these cases. This rightly reflects the existing practice in relation to matters of this sort, where the two lay members can bring their own experience to bear.

However, as the noble Baroness said, there is a different level of cases where, in my view, the role of the lay members is less relevant. These are typically technical cases and cases which hinge upon a point of law. The chairmen of those tribunals are always legally trained. There are three types of cases which Clause 27 adds to the "sit-alone" tribunals. The first such case relates to a complaint by a worker that his employer has failed to produce relevant records to enable the worker to check, for example, that he has received at least the rate of the minimum wage. It seems to me that this question is essentially a straightforward matter of fact. Either the employer has produced the records in question; or he has not. It seems unlikely that there would be dispute on that score.

The second such case relates to an appeal by an employer against the imposition of an enforcement notice by an enforcement officer. To succeed in such an appeal, the employer needs to show that the officer had no reason to serve the enforcement notice—for example, because the worker in question was self-employed; that there had not been any underpayment of the minimum wage; or that the specified underpayment was incorrect.

The question here is essentially, in my view, a matter of technical legal judgment. The decision which the tribunal will be called to make will rest on whether those criteria are met in the case in question.

The third type of case which Clause 27 adds to the "sit-alone" list is an appeal by an employer against the imposition of a penalty notice for failure to comply with an enforcement notice. The grounds for successful appeal in this case are similar to those for appeal against an enforcement notice—and in my view turn essentially on technical, legal issues.

In theory, the amendments which the noble Baroness has tabled would not prevent these three types of cases from being heard by the chairman sitting alone. This is because the effect of the amendments would be to make it compulsory to convene a tribunal of three, if either of the parties requests it. The consequence would therefore be to remove the chairman's discretion to decide whether to convene a tribunal of three. There is flexibility in the system which Clause 27 establishes, and in the whole system of "sit-alone" provisions which Clause 27 supplements. In every case where the chairman is required to sit alone, he retains discretion to decide to convene a tribunal of three. We feel that it is satisfactory to leave that to the discretion of the chairman. The existing legislation—the Industrial Tribunals Act, Section 5(4)(c)—makes clear that the chairman must have regard to any views of the parties before exercising his discretion to convene a tribunal of three—but the decision remains the chairman's. These amendments would remove the chairman's discretion. We have absolutely every confidence in the expertise of the chairmen of these tribunals.

In practice, the amendment would probably compel the three members of the tribunal to sit in nearly every case of the type covered. That is not necessary or desirable. That is the purpose of providing the chairman with the discretion which these amendments seek to take away. With that in mind, I hope that the noble Baroness will withdraw her amendment.

Baroness Miller of Hendon

I listened carefully to what the Minister said. I do not agree with him but, due to the lateness of the hour, I will most certainly withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 100 to 102 not moved.]

10.15 p.m.

On Question, Whether Clause 27 shall stand part of the Bill?

Baroness Miller of Hendon

Although I gave notice that we were going to oppose Clause 27 standing part of the Bill, due to the lateness of the hour I shall not speak to that Motion this evening. However, I would not like the Minister to infer that I am happy with the clause. I most definitely am not.

Lord Clinton-Davis

The noble Baroness is not happy with the Bill.

Baroness Miller of Hendon

The Minister is absolutely right. I am not at all happy with the Bill. I am doing my best to improve it, not only for the benefit of employers but for employees and employment generally.

Clause 27 agreed to.

Clause 28 [Reversal of burden of proof]:

Baroness Miller of Hendon moved Amendment No. 103:

Page 21, line 6, leave out ("qualifies or, as the case may be, qualified") and insert ("does not qualify or did not qualify").

The noble Baroness said: I shall speak to Amendments Nos. 103 to 105. When I spoke on Clause 10 I referred to a major constitutional issue. Another such issue arises from this clause which the marginal note unashamedly describes as the reversal of the burden of proof. In other words, in civil proceedings the plaintiff is not required to prove his case: not to the criminal standard of beyond reasonable doubt, not even just to the civil standard of the reasonable balance of probability. All the complainant has to do is to make an allegation, however fanciful, however far-fetched, misconceived or even malicious. The employer has to prove his innocence.

It is worth noting that nothing in Clause 28 refers to the words "reasonable belief" or "in good faith". The noble and learned Lord, Lord Falconer, has taken issue with me on several occasions over those words but on this particular occasion they do not appear.

No more, innocent until proved guilty. What is the reason for the reversal of the judicial tradition that we are proud to have given to the rest of the world? Interestingly enough, the DTI gave the game away in an outburst of candour in its notes to the Bill. It said: It should ensure that those remunerated at a rate below the national minimum wage can more easily succeed in claims to recover any underpayment". In other words, away with the concept of equality for all before the law. No level playing field. Perhaps it is more than symbolical that the scales on the figure of Justice outside the doors of this Chamber have not been replaced despite having been removed years ago. One of our attendants told me they were stolen.

What is the explanation for this totally unjustified and biased departure from the normal standards that we expect in our courts? It is because old Labour still lurks behind certain ministerial desks in the DTI, harbouring caricatures of an employer being a cigar-smoking plutocrat with his foot firmly planted on the neck of a grovelling Bob Cratchit. I readily and immediately acquit the noble Lord, Lord Clinton-Davis, of that characterisation. If I am wrong I am sure that the Minister will tell me that his experience as a solicitor, a Member of Parliament and a Minister in a former administration as well as in the present one, and as a distinguished public servant in Brussels, means that he undoubtedly knows the realities of the business world.

Neither do I include the noble Lord, Lord Simon of Highbury, in my stricture about lack of perception of the nature of the present relationship of employers/employees, even though he is apparently not participating in our deliberations about minimum wages. As a distinguished industrialist, he, too, undoubtedly is well aware of the balance that exists between both sides of the negotiating table. Nor do I include any of the Ministers sitting opposite me on the Front Bench.

If your Lordships think that I am exaggerating the attitude of unreformed old Labour to employers, let me quote what the Minister of State at the DTI told the Committee in the other place. He stated: For far too long, low paid workers, who have little or no representation, had found it impossible to do anything about their employment status or to gain access to basic minimum rights in the labour market". Later in the same debate, he went on to say: I am putting the case not only for the Government but for millions of workers who, over the years, have not had the opportunity to make their voices heard". Millions of workers? Surely, that is a slight exaggeration.

First, the type of employer who is most likely to become embroiled in disputes over the minimum wage is not some giant corporation or even the Government's bêtes noires, a well known fast food retailer or various so-called security firms providing the services of glorified nightwatchmen in some kind of uniform. No, it would be the owner of the village store; the high street mini-market struggling against discounted petrol and other what they call "loss leaders" but what is probably predatory pricing.

What does the small businessman have ranged against him under this present Bill? Under Clause 14, the employer can call on the assistance of a state funded enforcement officer. He has the power to require the production of records, furnished in the presence of the officer's own witness, including the complainant, with an explanation of the records and other information. And most sinister of all, this officer has the power to enter an employer's premises without a warrant. I beg the indulgence of the noble and learned Lord, Lord Falconer, for repeating what I said earlier, because I still believe it.

If that is not enough, this enforcement officer has the power not only to require the production of records at such time and place as the officer chooses, but also to summon the employer into his presence to be further interrogated. It should be noted that the Bill does not give the employer the right to be supported by his own adviser.

Furthermore, there are the powers of the employee under Clause 10 to require the production of records under a home-made search warrant, euphemistically called a production notice, and for the employee to be entitled to be accompanied by such other person as the employee may think fit; perhaps a solicitor or someone from the local citizen's advice bureau or, I was even going to add, someone from Rent-a-Thug with a degree in GBH!

In Committee in the other place, the Minister, in a flood of eloquence which says something for his stamina at 2.30 in morning, posed a series of rhetorical questions. He asked: Where does the information come from? Who maintains the records? Who has information about remuneration and emoluments? Who maintains records about National Insurance and PAYE? Who maintains records about employees?". In answering himself, he said, "The employer does". Maybe so, but, as I have pointed out, the employee, together with his ally the enforcement officer, has draconian powers to secure access to those records. That is apart from the fact that the information should be in the possession of the employee without all these searches and interrogations and the need for the employee and the enforcement officer to be accompanied by a minder. The basic information which surely every employee will know is how much he is being paid and how many hours he has worked.

Perhaps it is relevant to ask the Minister who the officers will be. Clause 13 gives the Secretary of State the power to appoint them and to second them from other government departments. Will they be trained accountants? Will they be tax inspectors made redundant as a result of all this self-assessment? The point is that they will be paid for at the public's expense. We have not been told how much it will cost, or perhaps we have and I have just missed it in all the reading that I have done. Their function will be to support the employee to construct a case against the employer unless the employer can convince them that there is no case to answer. In other words, their function is to presume that the employer is guilty unless he can positively prove the contrary.

Let us look at a possible scenario for the sake of argument. Let us assume that the minimum wage is fixed at the entirely improbable figure of £1.20 per hour. I did not wish to suggest a figure which would give an idea to the Low Pay Commission as to what is should be. Let us suppose that the employer pays £1.50 per hour but the employee, who is paid in cash, as is sometimes customary in this country, alleges that he has received £1.05 per hour and that the employer's PAYE records are fictitious because the employer has pocketed the difference. Perhaps the Minister will tell me how the employer is to discharge the onus of proof. Is it suggested that in future, every small employer, in addition to all the records he already has to keep—tax, PAYE, National Insurance, VAT, self-assessment, and records under the Companies Act—must also demand a receipt every pay day?

One of the ills which the Government are undoubtedly trying to remedy is that of contrived arrangements which, by some device or other, turn someone who is clearly an employee into a so-called self-employed individual. That can certainly operate to his detriment as regards legal rights, employment protection rights, health and safety and so on. On this side of the Committee, we entirely support anything which will remove such abuses. But that does not require the sledgehammer which the Government are now proposing.

The Inland Revenue has a simple test to decide whether or not someone is bona fide self-employed. All the enforcement officer needs to do is to obtain evidence from the person's records at the tax office. The Government's excuse for that reversal of a fundamental constitutional concept and right is that the employer is in a dominant position vis-à-vis the employee. But as I have shown, it is the opposite in this case. With all the power of the state and its enforcement officers, the employee is in the dominant position as regards procuring evidence and information.

My honourable friend, the Member for Ashford, said at the opening of the Committee debate on this clause in the other place that he had thought originally that the Government's reasons for reversing the burden of proof were obscure, but having read the DTI notes, he knew that they were daft. We are not allowed in this Chamber to indulge in such flamboyant language. However, I should like to think that I have discharged the onus of proof in demonstrating that the clause is both unnecessary and unreasonable. I hope that the Committee will support the long-established rule of law by accepting the amendments which restore the burden of proof to where it belongs; that is on the complainant. I beg to move.

Lord Newby

The noble Baroness referred very elegantly to the judicial tradition which she used in support of her argument. It is fair to say that the Industrial Relations Act 1971—the first time that the employee had a cause of action against an employer for unfair dismissal—provided that the burden of proof rests with the employer, not with the employee, to show that the reason for the dismissal was fair.

In that case there was a much more draconian range of powers than appears in this Bill. It seems to me that the Bill is merely continuing the tradition established by the Conservative Government in 1971. They saw, rightly, that in the kind of dispute that we are talking about, unless the burden of proof were reversed, there simply would not be a level playing field and the balance of forces would be cast unfairly against the employee.

It seems to me that exactly the same applies here. I too am an employer. I keep records of what I pay the people who work for me. By and large, I do not pay them in cash. If I were to do so, I suspect that I should require from them a receipt to show how much cash I had given them. Even if I were handing over cash as opposed to paying by cheque or direct debit, the thought that I would somehow do that without any records or in a way that would leave me open to dispute is ludicrous. I cannot believe that as a matter of general principle and practice that employers are doing that.

I apologise for detaining the Committee on this matter but I have not spoken before this evening. I feel very strongly that this is an issue where a principle has been established in an Act introduced by the administration of the noble Baroness's party. Therefore, it is appropriate for the tradition which that Act established to be continued in this legislation.

10.30 p.m.

Lord Falconer of Thoroton

Despite the enthusiasm with which the noble Baroness produced her extremely eloquent and effective speech, if one thought a little about why it was that the burden of proof had been reversed one would realise that there were quite good reasons behind it. The noble Lord, Lord Newby, referred to the Industrial Relations Act 1971 which was introduced by a Conservative Government. It placed the burden upon the employer to establish that a dismissal was fair. The reason it placed that burden on the employer was plainly that it would be the employer who would have the detail relating to that person's employment and the circumstances in which he was dismissed.

The approach taken by the 1971 Act is one used repeatedly in civil law. The latter has always been able to construct arrangements whereby, in circumstances where the answer to a particular problem is more likely to be in the hands of one party than another, it will place the burden of proof on that other person rather than the plaintiff. With respect to the noble Baroness, Lady Miller, the burden of proof in criminal cases should not be confused with that in civil cases.

What does this legislation do about the reversal of the burden of proof? First, it places the burden on the employer to establish whether an individual qualifies for the national minimum wage; and, secondly, it places the burden of proof on the employer to establish that the employee has been paid the national minimum wage. That is whether the claim is brought for an unauthorised deduction before an employment tribunal or whether the claim has been brought to enforce a contract claim where it is said that the worker is not paid the minimum wage. With great respect to the noble Baroness, that would seem to be quite sensible.

As far as concerns people who might be making claims for the national minimum wage, very many of them will be in a moderately vulnerable position. Many of them may be isolated from other workers; for example, they may be out-workers or home workers, completely without assistance, and indeed sometimes not very well able to express themselves in English. As a matter of principle, what is wrong with them being allowed to go to an industrial tribunal and say, "I don't believe that I have been paid the minimum wage; I appear to be getting a very small amount of money"? If the noble Baroness had her way, the employer would simply say: "Prove that you are an employee first of all, and prove what you have been paid". The employee would then say, "I can't remember the terms upon which I was actually employed and I can't tell you what I have been paid over the years because I'm paid on a piece rate".

Surely in such a case the sensible course is that the employer comes before the tribunal and provides the material showing the basis of employment or the relationship between the worker and the employer, together with the figures as to what that person has been paid. A balance must be struck somewhere. The burden has to be placed on one or the other. Which is the more sensible place to put the burden? Is it on the employee in trying to enforce the national minimum wage or is it on the employer? The obvious answer seems to me to be on the employer. If he has a complete answer to the case, he will be able to say, for example, "This person is not an employee", or "I paid the national minimum wage". He will be able to do so much more easily than would be the case with the employee.

I find the suggestion of the noble Baroness—namely, that this is some sort of constitutional affront—impractical, misguided and alarmist. I suggest that she should think again about the basis of the amendments that she has tabled. She should consider, as a matter of practicality, where the balance should properly lie. In my respectful submission it is clear that the reversal of the burden of proof in relation to these two matters is sensible and practical. I respectfully ask the noble Baroness to withdraw her amendment.

Baroness Miller of Hendon

Despite the beguiling way in which the Minister responded to that point, he did not respond to the following point. Nowhere does Clause 28 state—I searched hard—that the employee either has reasonable grounds or is acting in good faith. We have often used those terms during the course of this Bill. The Minister appears to be saying it is quite obvious that the burden of proof should be on the employer. I believe it is much more obvious that the employee should at least have reasonable suspicion to believe he has not been paid the minimum wage. After all, he will be given his money with a pay slip. However, due to the lateness of the hour, I shall withdraw the amendment. However, I give the Minister notice that I shall return to the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 104 and 105 not moved.]

On Question, Whether Clause 28 shall stand part of the Bill?

Baroness Miller of Hendon

For the same reason as I have just mentioned I shall not oppose the Question that Clause 28 shall stand part of the Bill at this time of night.

Clause 28 agreed to.

Clauses 29 and 30 agreed to.

Clause 31 [Offences]:

Baroness Seccombe moved Amendment No. 106:

Page 22, line 18, leave out ("delays or").

The noble Baroness said: In moving Amendment No. 106 I wish to speak also to Amendments Nos. 107 and 108. I wish to follow the line of my noble friend. As drawn, this part of the Bill worries me greatly. The Bill will give to what is described as an "officer"—and an officer is probably an official appointed by the Secretary of State, or seconded from a local authority—powers to demand information and compliance with his orders. In reality, Clause 31 as drawn deprives the employer of the elementary rights enjoyed under our law in respect of other matters—criminal matters. We should remember that the remedies given to an aggrieved employee are essentially to secure a civil right to recover a civil debt; a debt incurred as a result of a right to a statutory rate of pay. But this part of the Bill provides for criminal sanctions and criminal penalties not available to the ordinary civil courts except after a court order and after proceedings for contempt of court.

The Bill creates a new criminal offence of "contempt of officer"; an offence which deprives the employer of defences that are available to the most violent criminal prisoner. Clause 31(5)(a ) makes it an offence to delay or obstruct an officer. We do not object to the word "obstruct". We have tabled Amendment No. 106 because we object strongly to the word "delays". "Delays" is not defined. What happens if an officer demands information or whatever and the employer says, "You will have to make an appointment or wait while I consult my solicitor"? Is that a delay? If so, that is to be an offence. Our Amendment No. 107 seeks to require the officer to exercise his powers reasonably. The word "reasonable" keeps appearing throughout the Bill. We have already had a number of debates on the word "reasonable". The Committee will be pleased to hear that I do not intend to go over that ground again.

However, I remind the Committee that as regards the criminal offence of obstructing a police officer in the course of his duty, the police officer must prove not only that he was exercising a legal duty, but that he was doing so reasonably. A police officer cannot complain if, contrary to any requirement of his, a suspect insists on exercising a legal right of his own.

Finally, Amendment No. 108 seeks to insert the word "wilfully" to qualify "neglect". Again, the Government are seeking to create an absolute criminal offence with no defence. "Neglect", according to the Oxford English Dictionary, means "to fail to do". An employer may neglect—that is fail—to answer questions, furnish information or produce any documents simply because he has forgotten or does not know the answer or because he does not have the documents. This iniquitous provision even deprives an employer of the right to silence that is still among our constitutional safeguards in criminal cases, notwithstanding recent changes in the law.

What the provisions in this section that we wish to modify seek to do is to create powers that are not available to the police and to subject a person guilty of the offence of being an employer to penalties, sanctions and procedures not available to the police when investigating a suspected serial killer. It is constitutionally essential that your Lordships introduce a sense of rational perspective and proportionality into this part of the Bill. I beg to move.

Lord Falconer of Thoroton

I agree that these provisions in the Bill should be balanced. We think that they are and are at the right level to achieve enforcement.

Let me deal with Amendment No. 106 first: to take out the word "delays" in relation to Clause 31(5)(a). We are not talking here about an employer's inability to pay, which will be covered by a different part of the clause. The fact is that an employer will be obliged to pay at least a minimum wage, and refusal or wilful neglect to do so will be an offence under subsection (1) of Clause 31. Rather, the provisions which are the subject of this amendment are designed for where an enforcement officer asks an employer for something to ensure compliance with the Act.

The focus of the provision is on the word "intentionally". We are not suggesting that an employer who accidentally happens to be out, for example, when the enforcement officer calls should be guilty of an offence; but employers who systematically or deliberately seek to frustrate the enforcement officer in pursuing his duties should not be allowed to get away with it. I do not think that the noble Baroness who so eloquently moved this amendment would disagree with that proposition.

That is the purpose of this provision and that is why we think that the amendment would be inappropriate. It would have the effect of removing one complete section of protection against the employer who seeks systematically and deliberately to obstruct the enforcement of the Act.—

Baroness O'Cathain

I thank the noble Lord for giving way. Surely delay is obstruction.

Lord Falconer of Thoroton

If the noble Baroness is right, what is the objection to having the word "delay" in? There would certainly be scope, I am afraid, for lawyers to regard "obstruction" as being something different from "delay", and if the person deliberately delays the officer from enforcing, there should surely be some sanction. At the moment I cannot really see the argument for not including it.

Baroness O'Cathain

I am concerned about, intentionally … obstructs an officer acting". If somebody was delaying something for six or eight weeks, that would be covered. There could be another form of obstruction by making sure they were not allowed into the premises—that is, physically allowed in. I just feel it is tautological.

Lord Falconer of Thoroton

I entirely respect the noble Baroness's intervention but, with great respect, I do not feel that she is right because obstruction is one thing and delay is another. I shall certainly think about the drafting aspect, but I do not believe, if the point made by the noble Baroness, Lady O'Cathain, is right, that there is a point of principle between us. Indeed we are all singing from the same hymn sheet in relation to this.

Baroness O'Cathain

I was trying to be helpful.

Lord Falconer of Thoroton

I regard it as a most helpful intervention. I am sorry to have looked a gift horse so horribly in the mouth, but I do not think we are in considerable disagreement in relation to it.

The noble Baroness moved her amendment on a slightly different basis. She had understandably been affected by the rhetoric of the noble Baroness, Lady Miller of Hendon, and saw constitutional outrages all over the shop. I do not think that is the right approach.

I now turn to Amendment No. 107. Again, it is intended to deal with enforcement officer offences, if I may so call them. Amendment No. 107 would require enforcement officers to exercise their powers in a reasonable way. The Opposition have sought to introduce the "reasonable" test at a number of points at different times during the Bill's consideration. As with the other attempts, we believe that this one, too, is inappropriate and should be resisted.

Our basic premise is that we would expect enforcement officers to act reasonably within the framework of the powers conferred upon them. That must be the basis of all enforcement. If, however, an officer fails to act in a proper manner, it is likely that he will be acting outside the terms of his power in Clause 14. I fear that a specific "reasonable" test would add nothing. It would add a further explicit hurdle, no doubt of great interest to the legal fraternity, which could make it more difficult for an enforcement officer to act speedily. At worst, it might only be of benefit to non-compliant employers trying to find ways to avoid their obligations.

I hope in the light of the assurance that I have given regarding Clause 114, the noble Baroness will feel reassured in relation to the absence of the word "reasonable" on that occasion.

The last amendment in this group is Amendment No. 108. On the face of it, that would appear to have some merit. The current drafting of the Bill would make it an offence to refuse or neglect, to answer any question, furnish any information or produce any document when required to do so", by an enforcement officer. The amendment would apply the higher standard of "wilful" neglect in a failure to comply with such requests.

I say that the amendment would at first sight appear to have some merit, because it would apparently mirror the offence of a refusal or wilful neglect to pay at least the minimum wage. However, such a comparison would be ill-founded. The reason is that we are dealing with two very different circumstances.

Throughout the Bill we have wanted to create a fair balance between the rights of employers and workers. In particular, we have set the high standard of wilful neglect for the criminal offence of failing to pay at least a minimum wage. That is because we would not want to see employers being punished through accidental failure. We recognise that in this connection accidents may happen. We recognise in particular the reality that in relation to the sometimes complicated matters of determining pay and pay reference periods, there is a possibility that accidental errors will be made, particularly during the running-in period of the minimum wage.

However, the circumstances envisaged by this provision are quite different. It seems to me that there can be little, if any, room for misunderstanding or accidental error where an enforcement officer has asked an employer a question or had requested him to do something, such as produce records, and the employer has not answered the question or has not produced the records. I therefore believe that wilful neglect in this context would be an unreasonably high standard to prove. On a practical level, I understand that it might be extremely difficult to prove a wilful neglect to provide information.

Clearly, we do not want to penalise accidental failure or oversight. But it is important to catch the non-accidental or "accidental on purpose" cases. If this amendment is pressed, I therefore advise the Committee to reject it. In those circumstances, I very much hope that the noble Baroness will not feel bound to press her amendment or move Amendment No. 108.

Lord Burnham

Before the noble and learned Lord sits down, is it not the fact that the inclusion of the word "wilful" in Amendment No. 108 entirely justifies the arguments made by my noble friends with regard to Amendments Nos. 106 and 107? We are talking about somebody who deliberately fails to observe the conditions laid down in the Bill. By the use of the word "wilful" the noble and learned Lord might consider accepting all three of these amendments, bearing in mind that they are a trio and are totally interrelated.

Lord Falconer of Thoroton

I have dealt with each amendment individually. So far as the word "wilful" is concerned in Amendment No. 108, the Government's view is rightly that if a person refuses or neglects to answer any question, it is hard to see that that will not be wilful. In relation, for example, to refusing to answer a question, the concept of "wilful" is very difficult to apply. That is not the case in relation to not paying a wage. There, it could be believed, bona fide, that the right wage was X, but they have got it wrong. There, it would be right to make it a criminal offence only where a person wilfully neglects to pay the minimum wage; that is, that a person knows that he should be paying X, but pays Y. We think that the payment situation is different from such a thing as refusing to answer a question. That is why there is a difference and why we think not inserting the word "wilfully" is appropriate.

Baroness Seccombe

I reject the words that I was infected by my noble friend. I was convinced by her excellent arguments. It is always a pleasure to listen to the warm and reasonable words of the Minister, but I need to read them in detail. Therefore, at this stage I beg leave to withdraw Amendment No. 106.

Amendment, by leave, withdrawn,

[Amendments Nos. 107 and 108 not moved.]

Clause 31 agreed to.

Clause 32 agreed to.

Clause 33 [Proceedings for offences]:

[Amendments Nos. 109 to 111 not moved.]

Clause 33 agreed to.

Clause 34 [Agency workers who are not otherwise "workers"]:

Baroness Miller of Hendon moved Amendment No. 112:

Page 24, line 9, leave out from ("principal") to ("and") in line 12.

The noble Baroness said: I wish to move Amendment No. 112 and speak to Amendment No. 113. These amendments leave out paragraphs in Clause 34 which would have the effect of making an employer who engages an agency to perform functions for his business responsible for the payment of the national minimum wage to those agency workers. This is not only iniquitous but it turns the whole law of agency on its head. An employer might engage a firm of industrial cleaners to clean his premises for him. He might engage a firm of caterers to operate his works canteen. He might engage a specialist firm to operate a particular piece of equipment, for example, one of those tower cranes that we see on building sites. He may use temporary staff from one of the secretarial or employment agencies such as Manpower.

The employer, the principal if you will, is definitely not the employer of the agency worker. It is the agency who is the employer. There might be cases in the law of tort where the principal could be held liable for the wrongful acts of the agency worker, but that is not because he is the employer but because he is directing his work and actions.

The principal has no part in the contract between the agency worker and the employer. The principal does not pay him his wages, indeed, often he will not know what they are because the agency will not want the principal to know what its profit margin is. The principal is not responsible for deducting the employee's PAYE or national insurance or for holiday or sick pay. If there is a breach of health and safety regulations, it will be the agency, as his employer, who will be responsible for any damages or criminal penalties, although the principal might in some circumstances be jointly liable. For all those reasons it is wrong to involve the principal in the financial and contractual arrangements between the agency worker and his real employer.

The Notes to Clauses suggests that the reason for the provision is that, It may not be apparent whether the agency worker is working for the agent or the third party". That is nonsense. The employer is the person with whom the contract of employment is made and from whom the worker should have received his statutory written memorandum of employment terms, actually called his contract of employment. The employer is the one who actually pays the worker's wages and deals with PAYE. This may not be the person who physically hands over the weekly pay packet because it is conceivable that the agency may well ask the principal to do that for it. The simple act of handing over a pay packet on behalf of the agency, as the agent of the agent, in fact, cannot make the principal the employer. If the provision of Clause 34(2)(b) really means what it says, then I fear that some agency workers may not get their pay packets early on a Friday while the employer, possibly in an armoured car, makes the rounds of the various sites.

But there cannot be the slightest doubt in the worker's mind who his actual employer is, especially if he is also wearing some kind of uniform. What if the agency worker performs duties for several principals during the week or during the day—quite a common situation, especially in the industrial cleaning business? What if he does not even perform the duties for the principal on the principal's premises—in a letter shot, mailing or dispatching the principal's goods, for example?

A simple look by the employee at his PAYE records and pay slips will soon clear up any doubt in his or her mind as to who is his employer. There is no justification for involving the principal who has genuinely contracted out some activity in the pay and conditions of the agency's actual employees. There is no justification for treating genuine agency arrangements, which have long been a regular, entirely proper and indeed sometimes entirely necessary commercial arrangement, as though they were some sort of evasion device.

Agency contracts were in use long before this Bill was ever dreamed up. Whatever problems the clause seeks to resolve with regard to defining self-employed persons, disturbing normal agency arrangements will not resolve them. Nobody but nobody should be made responsible for the performance of the legal obligation of someone else under this Bill by this shotgun approach. The solution is to remove the paragraph, for which these amendments call. I beg to move.

Baroness O'Cathain

I support this amendment, and do so from practical experience. I must declare an interest in that I am a principal, and have been for the past eight-and-a-half years, in an agency employing nurses. In relation to the nurses I employ, I hand out the money at the end of every week and they have no idea of the amount of commission that I pay to the agencies—I have had several over this period. That amount ranges from 20 per cent. to 42 per cent., depending on the agency and the efficiency thereof.

When I read through the Bill I was pretty horrified at the idea that I could be responsible and could be regarded as such because I am the principal. We must think long and hard about this. It is not only the crane drivers who are involved; there are thousands of people in the same situation as myself, particularly in homecare for disabled people. It will cause a lot of angst and a lot of anxiety when people realise what is happening through the Bill.

Viscount Thurso

This clause gives me cause for concern if what the noble Baroness says is correct. Perhaps I may therefore put a question to the Minister.

Suppose I employ, say, the Busy-Bee cleaning agency to come in to clean my office and I have a specific contract with the proprietor of the Busy-Bee for my office to be cleaned. He then supplies various workers who come to do that job and in those circumstances I do not pay them or give them any money but have a contractual arrangement with the company and pay that company. Under this clause am I in any way liable for being responsible for the minimum wage?

Lord Clinton-Davis

With respect, there is a misunderstanding of the position affecting this clause. It is because the agency sector is highly complicated that we decided that Clause 34 should represent a belt-and-braces approach, ensuring that where there is an uncertain position relating to the contractual status of agency workers—because it is not clear whether there is a worker's contract with either the agency or the principal—such workers will, nevertheless, be covered by the Bill as though such a contract exists. That is the purpose of Clause 34.

Clearly, the likelihood is that the majority of agency workers will be covered automatically by the Bill, regardless of Clause 34. They will have the status of a worker by virtue of the contractual arrangement with the agency or with the agency's client, whom the Bill identifies as the principal. The vast majority of agency workers are likely to have a contract of that kind. Clause 34 is designed to cover those uncertain or grey areas; it is a fall-back position.

Sometimes the existence of a contract is undoubtedly questionable. Where a contract does exist, it may not always be apparent with whom the contract has been entered into and the employment status of the agency worker may itself be unclear. I hope that there will be very few cases where agencies seek to find ways around their responsibilities under employment law, but it is possible. It is for that reason that Clause 34 exists.

I turn immediately to the specific amendment, Amendment No. 112. I do not have very much to add to what I have already said. The effect of the amendment would be to make Clause 34 unworkable. I cannot think that that is the noble Baroness's objective. The effect would be to exclude precisely those individuals whom the clause is designed to bring into the Bill in the first place; that is to say, it would exclude agency workers who fall into grey areas where it is unclear whether or not they have a worker's contract with the agent or with the principal. I hope that the noble Baroness will not pursue Amendment No. 112 as it would negate the whole purpose that I have been alluding to.

Amendment No. 113 is an interesting amendment but it is wholly inconsistent with Amendment No. 112. It relates to Clause 34(2), which, in the absence of a worker's contract, defines the person with whom the agency worker is to be regarded as having such a contract. Clause 34(2)(a) provides that the contract is regarded as being with either the agent or the principal, depending on which of them is responsible for paying the agency worker. Clause 34(2)(b) provides that where neither the agent nor the principal is responsible for payment, the contract is to be regarded as being with whichever of them actually pays the agency worker. The effect of Amendment No. 113 would be that the agency worker would be regarded as having a worker's contract in all cases with the agency—in the absence of such a contract or, in case of doubt, as the person with whom it was held.

I give the noble Baroness this—the amendment does have the advantage of simplicity. However, the difficulty is that it would also mean that even where it is understood by all concerned—the agency, the principal and the worker—that the principal will pay the worker, it will be the agency that will be legally responsible for paying the worker the national minimum wage. I am not sure that the noble Baroness would wish to suggest that that is a satisfactory or desirable outcome. It is a highly difficult and technical matter and it is important because there is a growing tendency for some organisations to use agency workers to provide flexibility. Although the use of agency workers provides significant advantages for the client company, the uncertainty of the employment status of the worker can at times lead to a lack of legal protection for the worker.

As far as concerns Clause 34, it is of value to bear in mind that the standard agency worker arrangements will not be affected either by the clause as it stands or by the clause as it would be amended by Amendment No. 113 because those agency workers will in any event be workers under the general definition in Clause 54 and it will be clear from the contract who is responsible for paying the minimum wage.

I do not deny that there is some merit in the argument adduced by the noble Baroness. As I said before, it has the virtue of simplicity and it would make it easier for agency workers to identify the person from whom to claim; namely, the agency. That would ensure that agencies could not use the clause as a loophole to put the onus on the client, or "principal" in the Bill's terms, to pay the minimum wage. There could be some advantage in that. But it is difficult to judge the extent of the benefit because it is difficult to judge the likelihood of an agency being able to get away with such a course of action. I believe that this is an issue which is finely balanced. I am grateful to the noble Baroness, Lady Miller of Hendon, the noble Baroness, Lady O'Cathain, and the noble Viscount, Lord Thurso, for advancing the matter for debate. On balance I believe that the clause provides a better outcome as drafted. The amendment would go too far unnecessarily by interfering too much in existing arrangements.

When we drafted the clause we sought to reflect the reality of what happens now. Sometimes the principal may clearly have the responsibility for paying the wages and in such cases the obligation to pay the minimum wage would and should rest with the principal. In other words, an agency worker may be paid either by the agency or the client, as the noble Baroness said. It makes sense in assuming the existence of a contractual relationship to follow that flexible practice and to assume that the obligation to pay the minimum wage lies with whoever is responsible for payment or, where that is unclear, with whoever makes payment.

The clause as drafted also meets the problem of arrangements involving more than three parties—that is to say, where more than one agent is involved. The criterion for deciding who is legally responsible for paying the minimum wage is whoever is responsible for paying or whoever actually pays the wages at present, as I have indicated.

Finally, I believe that it is right and sensible, when drafting legislation, to err on the side of caution. While there are arguments in favour of Amendment No. 112, I do not believe that it is possible to predict all the effects of making the changes proposed. While Amendment No. 113 would offer a workable arrangement, on balance the way in which the clause is drafted is preferable. Therefore, I ask the noble Baroness to consider what I have said and, in the circumstances, to withdraw the amendment.

Baroness Miller of Hendon

I shall consider very carefully and read very carefully everything that the noble Lord has said. At first, I thought Clause 34 stood the law of agency on its head and I could not see any merit in the clause. I have listened carefully to what the noble Lord has said and I shall read carefully what he has said. I suspect that we shall want to return to this matter because I believe that there is much more merit in our very simple amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 113 not moved.]

Clause 34 agreed to.

Clauses 35 and 36 agreed to.

Clause 37 [Armed forces]:

[Amendment No. 114 not moved.]

Clause 37 agreed to.

Clause 38 [House of Lords staff]:

Lord Clinton-Davis moved Amendment No. 115:

Page 25, line 17, leave out ("contract of employment") and insert ("worker's contract").

The noble Lord said: Amendment No. 115 relates to Clause 38, which applies the Bill to staff of this House. I am glad that we have reached it tonight. As the Bill stands, Clause 38 applies only to such staff who are "employees"—that is to say, staff who have a contract of employment with the Corporate Officer of this House.

The clause was originally drafted in this way to reflect the present reality, confirmed by the House authorities, that all staff of this House in fact have employment contracts. However, partly in the light of views expressed in another place, the Government have in the meantime reflected further on this clause. In particular, they have considered it preferable to treat staff of the other place and this House on an equal footing. Clause 39 differs from Clause 38 in applying to workers who are not employees, as well as to employees. It is also considered more prudent to ensure that the law reflects not only the present reality but is also capable of applying to any reasonably likely future arrangements. It is not, of course, any part of my responsibilities in government, but I believe it is not completely out of the question that some individuals might be engaged to do work in this place under arrangements other than a contract of employment.

It is for those reasons that the Government have tabled Amendment No. 115, which I ask the Committee to support. I beg to move.

On Question, amendment agreed to.

Clause 38, as amended, agreed to.

Clauses 39 and 40 agreed to.

Lord Haskel

I beg to move that the House do now resume.

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

House resumed.

House adjourned at eleven minutes past eleven o'clock.