§ 5.42 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, I beg to move that this Bill be now read a second time.
The minimum wage is now firmly established as a permanent feature of the labour market and widely recognised as an outstanding success. More than 1 million people have benefited from increased pay since the minimum wage was introduced in 1999, and we have tackled the poverty wages of £2 and £2.50 per hour that were so widespread five years ago. There has been no significant adverse impact on business, and the LOW Pay Commission reported last year that the vast majority of employers were complying with the minimum wage and that the enforcement system was working well. Since April 1999, Inland Revenue enforcement teams have completed more than 21,000 case investigations and identified more than £12 million of wage arrears.
When the Government introduced the National Minimum Wage Act in 1998 we wanted to establish an enforcement regime that was fair and effective, without being an unnecessary burden on business. In particular, we did not want workers—whether they still worked for the employer in question or had left their employment—to have to take action on their own behalf against the employer, although this remains an option for them if they wish. Low-paid workers are a vulnerable group and are often not capable or are unwilling to take action on their own behalf, and of course intimidation and fear can often act as a deterrent to making a complaint.
Since 1999, therefore, minimum wage officers from the Revenue and DEFRA have been issuing enforcement notices—which can require employers either to pay the minimum wage in future or make good arrears of the minimum wage arising in the past—on behalf of both current and former workers. I should add at this point that the minimum wage legislation, and this Bill, covers both the national minimum wage and the agricultural minimum wage as well.
In August 2002, an Employment Appeals Tribunal ruled on Section 19 of the National Minimum Wage Act in the case of Inland Revenue v Bebb Travel plc. The appeals tribunal held that enforcement officers could 152 only issue enforcement notices requiring the employer to pay the minimum wage in respect of current and future pay periods or in respect of current, future and past pay periods. The ruling means that enforcement officers cannot now issue notices for past periods alone. This therefore means that we cannot now issue notices to recover arrears due to former workers. The Revenue believes that about half of all complaints come from former workers. It has currently placed about 250 cases involving former workers on hold, and of course that figure is growing by the day.
The Government are determined to restore the position to what we believed it to be before the Bebb decision, for two reasons. First, former workers are entitled to the minimum wage in just the same way as current ones. If someone was not paid the minimum wage for, say, some work they did in the summer, then we believe that the employer should be required to make good the shortfall, whether the person is still in their employment or not. While it would still be possible for former workers to take action independently against their employer, this is really not as satisfactory as action by the enforcement officers. As I mentioned a moment ago, low-paid people are often unwilling or not capable of taking action against their former employer. They may perhaps need a reference from him or they may feel that their chances of success are small against the employer. That is why we believe that former workers should enjoy the protection of Revenue or DEFRA enforcement officers, in the same way as current workers. If this change were not made, we would also be creating an incentive for employers to dismiss workers as soon as they knew they were being investigated. That is clearly not desirable.
The second reason why it is important to restore the position is that former workers tend to be much more ready to make complaints to the minimum wage helplines, which then prompts action by enforcement officers. Current workers tend not to complain, for obvious reasons. When officers follow up complaints made by former workers, they often then find that the minimum wage is not being paid to current workers as well as the former ones. We do not want to accept a position in which former workers may think there is nothing we can do on their behalf, and therefore stop making complaints that benefit everyone.
I hope that I have explained clearly why the Government believe that the Bill is needed. I should perhaps add that both the CBI and the TUC support the Bill.
The Bill inserts a new subsection (2A) after Section 19(2) of the National Minimum Wage Act 1998. According to the decision in the appeals tribunal which I referred, the existing sections 19(1) and (2) of the Act allow an enforcement officer to issue a notice only in respect of current and future pay periods or in respect of current, future and past pay periods. The new subsection (2A) therefore allows an enforcement officer to issue a single notice on an employer requiring him to pay minimum wage arrears to a worker or workers who have at any time qualified for the minimum wage. It will not matter whether the notice 153 also covers future pay periods; so, if he wishes, the officer will now be able to issue notices that cover minimum wage arrears for former workers alone. This provision restores the position that the Government believe existed before the recent tribunal ruling.
I should also make it clear that subsection (2A) has also been deliberately drafted to allow enforcement officers to issue notices in respect of pay reference periods ending before or after the Bill comes into force. I should like to explain why the Bill has been drafted in this way.
As matters stand, enforcement officers have not been able to issue any notices on behalf of former workers since August 2002. Some of these workers may of course have taken action against their employers independently but, although we do not have figures, I suspect that many will not. Unless we allow officers to issue notices covering pay periods before the Bill came into force, we will not be able to recover minimum wage arrears that might have arisen in the past on behalf of former workers. The key point to stress here is that this subsection does not change anyone's entitlement to the minimum wage; that is unchanged. All this subsection would do is create a new means of enforcing existing rights, to help these former workers recover their proper entitlement.
We therefore believe that this subsection is not in fact retrospective. We have approached the Attorney-General on this specific point, and he has advised us that he is content for the subsection to apply in this way.
Clause 2 provides that the Bill shall extend to Northern Ireland in addition to the remainder of the United Kingdom; this is the same arrangement as that for the 1998 Act.
In closing, I should like to stress that this Bill will not affect the vast majority of employers who are already paying the minimum wage. The only people who will be adversely affected by the Bill are the minority of employers who are not paying the minimum wage. I believe that it is entirely right that all workers, whether they are current or former workers, should enjoy the protection of our minimum wage enforcement officers. I beg to move.
§ Moved, That the Bill be now read a second time.—(Lord Sainsbury of Turville.)
§ 5.50 p.m.
§ Lord Razzall
My Lords, it will come as no surprise to the Minister that we on these Benches entirely support this short Bill. However, in the course of the Second Reading we should touch on how we have arrived at the position in which we are today.
I was one of the spokesmen from our Front Bench who participated in the passage of the National Minimum Wage Act 1998 and, indeed, congratulated the Government on introducing it. We considered that it was a much needed provision. We also congratulated the Government on the way in which they consulted on the ensuing regulations. Like the Minister, at the time of the Bill's passage never in my wildest nightmares did 154 I believe that the actions of enforcement officers would be constrained in the way that an employment tribunal appears to suggest in the case of Bebb Travel; namely, that if someone leaves a particular employment no order can be made by an enforcement officer to protect the minimum wage backlog that that individual has accrued.
We should bear in mind the amount of legislation that has passed through this House after having been almost unscrutinised by another place, and the extent to which officials have often presented the Minister with amendments to legislation that have to be produced in this House, often at the last minute, and often in a form that has been completely unscrutinised by another place. The Minister is in the unfortunate position of having to bring the Bill before us to rectify a lacuna in the law. Does he believe that this situation has arisen because the tribunal has acted wrongly and therefore the law has been misapplied, or does he believe that he has been the victim of misdrafting of either the original Bill or the regulations under it? If it is the latter, does he draw any conclusions as regards the way in which we, and often he, are forced to bring legislation before your Lordships?
It has undoubtedly been the case—no doubt the noble Baroness, Lady Miller of Hendon, will endorse what I say—that the long and complicated Bills that emanate from the Minister's department often comprise legislation that has not been scrutinised by another place and amendments to that legislation are then proposed by the Minister. That is not his fault as his officials alert him to parts of legislation that are missing, need to be amended or have not been covered properly. Does he believe that this is one of those occasions? I hope that the Minister will respond to that point when he replies to the debate. However, as I say, we totally support the Bill and hope that it will proceed through the House without any difficulty.
§ 5.54 p.m.
§ Baroness Miller of Hendon
My Lords, this is an uncontroversial Bill to correct an anomaly in the interpretation of the National Minimum Wage Act 1998, to restore the position to what Parliament clearly intended and common sense demands, and, indeed, to the position that we all thought prevailed until the decision of the Employment Appeal Tribunal last August in Inland Revenue v Bebb Travel plc, as the Minister pointed out.
It would be wrong to blame the parliamentary draftsmen for what appears to be a drafting error. But like the noble Lord, Lord Razzall, I believe that we should discuss how this situation came about. It is possible that had the matter been pursued further through the courts a differing interpretation might have prevailed. That is because of an extension to Duggan's Law; namely, that to every lawyer there is an equal and opposite opinion.
However, the Government are to be congratulated on not wasting legal costs and time by pursuing the appeal procedure, especially as they have seemingly been advised that the chance of success in the courts i 155 problematical. Instead they have taken the sensible course of having Parliament correct its own error, or rather, not Parliament's error but the Government's error.
I do not pretend for one moment that the Opposition in the form of either the Conservatives or the Liberal Democrats spotted the error. I do not think that anyone did. Certainly my advisers did not and nor did our colleagues in the other place. But I am sure that the Minister would agree with me that, even if I had spotted the error, he would have tried to oppose me. That is what my experience tells me.
I fear that there may be other time bombs ticking away waiting for some astute lawyer to upset the Government, and scarce parliamentary time may be needed to make further corrections. We certainly hope that that will not be the case. However, I shall at a later stage introduce a very minor and, I believe, totally constructive amendment to head off future problems. Although any underpayment of the national minimum wage is to be deplored, whether it is deliberate or inadvertent or, as often may be the case when a small employer is involved, due to ignorance, I shall simply propose that the degree of retrospection that may be imposed should be restricted to the limitation period for any other civil debt. I trust that with that advance notice the Minister will have time to reflect on what I shall propose.
If I have any general criticism of the present Bill, it is that, bearing in mind that the National Minimum Wage Act 1998 was intended to give employees—or rather "workers" as the Act calls them—a clear indication of their rights, and employers a clear indication of their obligations without the need to have recourse to professional advice, the wording of the new subsection (2A) (which the Minister explained to us) seems very convoluted. I am not a lawyer but I should have thought that it might be enough simply to have said:An officer may make an order under subsection (2) retrospectively notwithstanding that the employment of the worker with the employer has already ended".Those words are taken from the excellent explanatory note provided by the Government to accompany the Bill. When I was involved in business and spent a great deal of time approving advertising campaigns, I was taught what was definitely lesson number one; that is, keep it simple.
With that very small criticism, and subject to my intended amendment, I assure the Government that, like the noble Lord, Lord Razzall, we on these Benches support the Bill. Although I am not part of the usual channels, I am sure that we shall do whatever we can to facilitate its progress so that employees may not be deprived of their rights.
§ 5.58 p.m.
§ Lord Sainsbury of Turville
My Lords, I thank the noble Lord, Lord Razzall, and the noble Baroness, Lady Miller, for their helpful comments. We launched an appeal as we considered that the appeal tribunal's decision was wrong. Bearing in mind the terms of the 156 original Act, it is difficult to see how that rather strange interpretation was arrived at. It is not for me to criticise the draftsmen at this point. As I say, we have appealed against the decision.
I am sure that, had the noble Baroness spotted an error when we discussed the original Bill, we would have opposed her remarks as we still consider that the Bill covers the position. But perhaps the milk of human kindness and charity would have prevailed and we would have recognised the rightness of her argument and taken it on board. That would have saved a great deal of subsequent trouble.
As regards the retrospective nature of the measure we are discussing, it can only be retrospective for three years as companies are required only to keep records for three years. Although I believe that civil debt can go back six years, the measure we are discussing could be retrospective for only three years.
I appreciate that the noble Lord, Lord Razzall, and the noble Baroness, Lady Miller, referred to the main point. In drafting the Bill, our intention has been to restore what we thought to be the position, which is the ability of enforcement officers to take action on behalf of former workers following the tribunal ruling last August. It must be right that we do all we can to help to recover the arrears due to those low-paid workers. We have gone back to all the people involved in the drafting of the Bill. It is clear that that was their intention, so we intend to restore what we all felt was the purpose of the Bill.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.