HL Deb 09 January 2003 vol 642 cc1101-6

11.8 a.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 1 [Enforcement notices]:

Baroness Miller of Hendon moved Amendment No. 1: Page 1, line 14, at end insert— (2B) No notice under subsection (2) or (2A) shall be served in respect of any pay reference period more than six years before the date of the service of the notice."

The noble Baroness said: The Bill is intended to correct an unintended anomaly in the substantive Act. It overrules a decision of the Employment Appeal Tribunal whereby a person who has been underpaid his entitlement to the national minimum wage but has left the employment forfeits his right to recover the lost amount.

Parliament unarguably intended that every employee— present and past—should be able retrospectively to recover the arrears. The Bill, supported by these Benches, puts that matter right.

However, the amending Bill, introduced by the Government, throws up yet another drafting omission in the National Minimum Wage Act 1998. The power to make retrospective orders under Section 2 of the Act did not impose any limitation on the extent of arrears that, the Officer acting for the purposes of the Act", could order to be paid. But such underpayments when they occur, whether reprehensibly, deliberately or through inadvertence or ignorance, are nothing more or less than civil debts.

Amendment No. 1, of which I gave the Government advance notice on Second Reading, simply confirms that this civil debt is subject to the same right of recovery under the Limitation Acts as any other civil debt. Even from the errant employer's point of view, the fact is that the majority—if not all —cases of underpayment, whether deliberate or accidental, will be by very small employers and even equity does not demand that he should be faced with a retrospective claim for what could be seven, eight or even more years of arrears. Six years is ample time for an employee to discover that he has been underpaid and to seek to recover those arrears.

It would be another anomaly if an employee who pursued his civil claim via the courts was subject to the limitation Acts whereas one engaging the mechanics of this Act had unlimited time.

The Committee may recall that when I raised this issue at Second Reading the Minister rejected the point on the grounds that, the measure … can only be retrospective for three years as companies are required only to keep records for three years".

He went on to say, in order to emphasis that argument: Although I believe that civil debt can go back six years, the measure we are discussing could be retrospective for only three years".—[Official Report, 10/12/02; col. 156]

I thank the Minister for correcting that misstatement of the law in response to a letter I wrote to him after Second Reading. He is always very courteous; he was very courteous and speedy in this case.

While referring to possible difficulties in establishing a claim going back more than three years, which I acknowledge, he wrote: There is no time limit in the legislation on how far back enforcement notices may be taken". There is no time limit. Exactly. That is precisely the point of the amendment. I should like to think that the Government are not seeking to create a specially privileged class of creditor who would not be subject to the normal statute of limitation and that they will therefore correct the anomaly I have pointed out by accepting the amendment. I beg to move.

Lord Razzall

The noble Baroness raises an extremely interesting point. I do not want to go into the arcane precedent of the law of limitations, as no doubt the Minister will have to do in order to respond to the noble Baroness, but I shall ask the Minister one fundamental question. I can envisage in 10 or 15 years' time, when presumably the minimum wage legislation will still be in force, although the rates may be different, that the kind of cases which the Bill contemplates will arise when someone discovers— albeit in this case after he or she has left the employment in question—that he or she has been underpaid for a considerable period of time. Why in those circumstances should the period of back pay to which that person is entitled be limited only to three years, or six years as in the amendment of the noble Baroness?

If someone has been earning £6,000 a year in their previous employment and they should have been paid £7,000 a year, why should they not be entitled to the extra £1,000 a year going back to the time they started that employment? That is the core of the point which the Minister needs to answer before the Committee can comment or vote on the amendment of the noble Baroness.

Lord Sainsbury of Turville

The Government agree with the general thrust of the amendment, which aims to ensure that enforcement notices cannot go back for more than six years. However, in practice, we believe that the amendment is not needed.

I shall begin by explaining the position under the present legislation. If an employer fails to comply with an enforcement notice, enforcement officers can pursue one of two options. First, officers can take a case to the county courts, in which case the Limitation Act 1980 already applies. They could seek to recover arrears only for a period of up to six years. Almost all the cases brought so far by the Revenue have used that route and are, therefore, already subject to the six-year restriction sought by the amendment. Secondly, officers can take a case to the employment tribunals, using the powers in the Employment Rights Act 1996. In that case, officers must put their case before the tribunals within three months of the last underpayment, but the Limitation Act does not apply. In theory, officers could pursue underpayments over a period exceeding six years. However, the three-month limit for bringing a claim is extremely tight and, in practice, that route has hardly ever been used by the Revenue.

The legislation was deliberately designed to give enforcement officers similar rights in this area to those already held by the individual workers concerned, essentially to create the possibility that officers should be able to stand in for the workers and enforce their rights in much the same way as the workers themselves. In this legislation, we are talking about enforcement rights and enforcement officers, not the underlying rights in the basic legislation.

I therefore think it would be wrong to create a position in which officers using the tribunals route could not go back as far as the workers themselves could, even though, as I said, few cases use that route. The great majority of cases brought by the Revenue can go back for only six years. Although, in theory, some cases could be taken back further, that seems extremely unlikely in practice. I should add that the average minimum wage case extends back for less than a year and—a point that I have made before—the minimum wage came into force only in April 1999. At the moment, therefore, cases could be taken back only for three and a half years in any event.

The minimum wage regulations require employers to hold pay records only for three years, so that, in practice, the Revenue would find it difficult to pursue cases that went back further than three years, unless there was clear evidence, such as payslips, held by the worker and no dispute about the hours worked.

For all those reasons, it seems likely that few cases will go back further than three years and very few will go back as far as or further than six years. I hope that that gives the noble Baroness the reassurance that she seeks and that she can agree to withdraw the amendment.

11.15 a.m.

Baroness Miller of Hendon

I shall withdraw the amendment, but I shall read carefully what the Minister said. The Minister intends to be helpful, not convoluted, but what he said struck me as being convoluted.

The noble Lord, Lord Razzall, does not want to limit the period even to six years, and I understand that. I would not like the noble Lord to think that I do not want the employee to get whatever he deserves. I believe that he will—

Lord Razzall

Or she.

Baroness Miller of Hendon

Or she. I thank the noble Lord. However, he should not be able to bring the case 20 years later. That would be intolerable for a small employer. If the Minister is saying that it does not matter because there will be so few cases—one would be too many, if the person did not get paid—I cannot understand why the amendment cannot be accepted. It would not interfere with the Bill in any way.

The Minister's letter says: there is no time limit in the legislation". There ought to be. The Minister says that, in practice, there is a limit, but it seems that it is hard for him to accept amendments that I put down. He may smile at me, but I know that it is hard for him.

All that the Minister need do is stand up and graciously accept the amendment. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Short title, commencement and extent]:

Baroness Miller of Hendon moved Amendment No. 2: Page 1, line 18, leave out subsection (2).

The noble Baroness said: At this stage, this is a probing amendment. When the Bill, which is intended to correct an anomaly that operates to the possible detriment of what may, admittedly, be a small number of employees, becomes an Act, it will not come into effect for two months. What is the reason for the delay?

Neither employers, employees nor the Inland Revenue need to gear themselves up extensively to give effect to the Act. It is a simple matter. All that it involves is that, possibly, some extra cases—not many, I suspect—will be brought into the system now, rather than later. Whatever the number, there is no reason why they should be deferred at all. I remind the Minister of the adage: Justice delayed is justice denied". If an employee discovers that he has not been paid what he is entitled to, he ought to be able to bring a case. As I said, it may be only a few people, but we are concerned that they should all get what they are entitled to as quickly as possible. I beg to move.

Lord Sainsbury of Turville

I believe that this amendment is intended to be helpful, as it would bring the Bill into force as soon as Royal Assent is obtained. I take this as an indication of general support for the Bill from the noble Baroness and am grateful to her for that.

Personally I rather sympathise, being of a rather impatient temperament myself, with the proposal to bring the Bill into force straightaway, but I think that there is a good reason for not doing so.

We have checked the position with the Cabinet Office and the established procedure is that Bills commence two months after Royal Assent, unless there are pressing reasons for bringing the Bill into force more rapidly. The idea is that both business and employees should have a reasonable opportunity to see and understand the implications of a new Act before it comes into force. Although I agree with the noble Baroness that the argument is not particularly strong in this case—where we are not changing the existing entitlement to the minimum wage—I think we can all agree that in general it is highly desirable that there is this period before a Bill comes into effect.

Even where there are pressing legal reasons the two month commencement period is generally retained, except in the case of emergencies. This is clearly not an emergency. The Bill will allow enforcement officers to issue notices in respect of pay periods ending before the Bill comes into force, so we shall be able to recover past moneys owed to workers whether the Bill comes into force in, say, March or May of this year.

So, although I sympathise with the aims of this amendment, I invite the noble Baroness to withdraw it.

Baroness Miller of Hendon

I made it clear that it was a probing amendment. I thank the Minister, first, for having sympathy with the amendment and, secondly, for taking it to the Cabinet Office. I am grateful to him for that. However, while I shall certainly withdraw the amendment, I do not really accept what he is saying because in this case the reason for bringing forward the Bill is that the first Bill was drafted incorrectly. Had it been drafted correctly the employee would receive his money immediately. In view of that, I believe that employees are entitled still to do so because the mistake is the fault—I do not say of the Government or the Minister—of the actual Act and the way in which it was drafted. Therefore, I ask the Government and the Minister to be sympathetic again and push the point. If the Government had not made the error in the first place, employees would have been able to receive their money on the same day as the Act came into force, which was over a year ago. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

House resumed: Bill reported without amendment.