National Minimum Wage Bill

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Mr. Lansley: My hon. Friend makes an important point. Several factors determine the wage rate. Many of those are much more likely to be the subject of dispute now than they were when staff operated on a clocking-in basis. With flexitime, hours worked may be one of the principal bones of contention and may be much more difficult to resolve on an evidential basis than the question of remuneration.

Mr. Hammond: My hon. Friend is right. That problem becomes more important and relevant when the normal burden of proof is reversed and the employer is presumed to have committed an offence unless and until he can prove otherwise.

I want to move on to the requirement that the employer will, from the date of issue of the notice, pay at the rate specified in it. How will the officer arrive at a specification of that rate? That is a problem in the context of complex remunerations.

Suppose, for example, the dispute involves an employee, part of whose remuneration is a benefit in kind, such as accommodation. Perhaps there is a dispute as to the availability or the value of that benefit in kind. What is the officer to do? Is the notice simply to say, "From this day forward the employer will pay a rate of 3.50 per hour" assuming that that is the minimum wage? In the case of a genuine dispute, would not it be in order for the employer to say, "That is the rate that I have always paid. Taking into account the benefit in kind, which I maintain has value x, I am complying fully with the notice in continuing to pay exactly the same package as before"?

10.45 am

Mr. Boswell: Would an employer who paid a complex remuneration package which involved several different elements as well as the hourly wage or salary be able to obtain from an officer an informal determination as to whether that package was acceptable, whether a notice might be served or whether the package could be adjusted so that it was acceptable? I ask the question of my hon. Friend the Member for South Cambridgeshire in order to put the matter in the Minister's mind.

Mr. Hammond: That is an interesting point; perhaps the Minister will deal with it when he replies to the debate. It seems unlikely that the notice will say, for instance, that the employer will henceforth pay the worker at 2.50 an hour plus a meal, which must be of a certain quality, once every six hours and a bed that must have its sheets changed twice a week.

If the dispute revolves around the value of a component of remuneration, it is not clear how the notice will be framed and how the employer will know whether he is complying with it. That will become important when we reach clauses 18 and 19 because of the possibility of an employer, having been held not to have complied with the officer's notice finding himself subject to a penalty notice.

Two issues arise from that. First, as my hon. Friend the Member for Daventry said, there needs to be some provision for an informal consideration or an arbitration procedure at the point when an officer is minded to issue a notice, but has not yet done so. I conceded entirely that there will be hard cases of recalcitrant employers who pay wages in cash and simply will not comply with a notice. Such situations are straightforward and we need not be concerned about them.

Mr. Lansley: I am not quite following my hon. Friend's argument. What about the pay reference period to which the notice will apply? The Bill suggests that it can apply to a pay reference period that continues after the date of the notice.

Therefore, if the pay reference period were a year, for instance, an enforcement notice could be served six months through that year. Does it make sense to place an obligation on an employer an enforcement notice, in effect before he has had an opportunity to fulfil his legal obligation at the end of that pay reference period?

Mr. Hammond: That is an interesting point. The Bill indeed appears not to restrict the officer to serving a notice in respect only of a pay reference period that has already expired. However, I take it that that is the Government's intention and that it would not be possible for an officer to serve a notice in respect of a continuing pay reference period.

Mr. Boswell: The first subsection appears to refer to a pay reference period that has expired. If it had not expired, how could an enforcement officer say that the remuneration did not comply with the national minimum wage, as a supplementary payment could be made within that reference period?

Mr. Hammond: That would appear to be the logical conclusion, and I hope that the Minister will deal with that point.

An employer who pays remuneration that is not made up of cash alone, and who is served with an enforcement notice, can be certain of meeting the requirements of the notice and therefore not liable to the penalties imposed by clause 18 or 19 only by paying the minimum wage in cash until an appeal is determined. The Bill appears to contain no provision enabling that employer, as a defensive move, to begin paying a rate in cash which, coupled with benefits in kind and other elements of remuneration, would amount to an overpayment that could be recovered after a successful tribunal appeal.

Mr. Boswell: My hon. Friend makes a series of valuable points. Might not the employer in the quandary that he has described about whose compliance with the national minimum wage there might be a genuine difference of opinion suffer, as well as an enforcement notice, a penalty notice under clause 19? That would put him in an awful dilemma.

Mr. Hammond: That is exactly my point. An employer faced with an enforcement notice under clause 17 would want to do whatever was necessary to avoid a penalty notice for non-compliance. The employer must not be denied a just outcome by being forced, to protect himself, to pay at a rate above the legal requirement. If overpayment is determined to have been made, the employer must be able to recover it.

Mr. Boswell: My hon. Friend is right there should be some guaranteed means of recovery. If the employee involved was temporary, and had done a runner, how could that excess and inappropriate payment be recovered?

Mr. Hammond: Recovery of excess payment in that case would be difficult, but the Bill makes no provision at all for such recovery. Normal employment law does not give the employer the right to recover excess payment.

The officer issuing the notice on the basis of an opinion will exercise an almost quasi-judicial function in assessing the prima facie evidence of a breach of law. An enforcement notice has consequences for the employer, as it involves the presumption of guilt until that employer is able to prove his or her innocence.

The enforcement officer is not a neutral party. The clause reads as if the officer were a neutral intermediary between the employer and the worker. Later in its consideration of the Bill, the Committee will see that such officers have powers to take up cases and to commence civil proceedings on behalf of workers. The officers have the right of entry into employers' premises, the right to inspect their records and the power to issue them with notices. In such circumstances, it would be unreasonable to expect employers to regard such an officer as a neutral and quasi-judicial official who acts from a neutral position.

Mr. John Bercow (Buckingham): I am grateful to my hon. Friend I confess that I have not reflected on that point. Is my hon. Friend suggesting that the relationship between the officer and the suspected employer should be likened to the relationship between the European Court of Justice and the House of Commons?

The Chairman: Order. I advise the hon. Member for Runnymede and Weybridge to avoid pursuing that point.

Mr. Hammond: I am glad that you said that, Mr. Atkinson. If I were going to engage in such a debate, I would not do so with my hon. Friend the Member for Buckingham (Mr. Bercow), who is far more knowledgeable about the subject than I am.

Mr. Boswell: There is a very close analogy in this matter with other aspects of employment law. Does my hon. Friend agree that a much closer analogy would be the case of an officer who took up an unfair dismissal case in which a Minister had dismissed his diary secretary?

Mr. Hammond: My hon. Friend is exactly right. That observation is very pertinent.

In the interest of making progress, I shall simply flag up my anxiety about the neutrality of the officers, and about the way in which they will be perceived. The Committee will want to return to the matter during its consideration of clauses 18, 19 and probably 22, so I shall not pursue it now. A disturbing trend is visible beneath the surface.

The second possible effect of the notice relates to its specification that arrears of underpaid wages should become payable by employers to employees. Once again, if a breach has clearly occurred, and wages have been paid entirely in cash and not at the correct rate, some I suspect not many problems will arise. One problem, on which the Committee has touched, would be the treatment of those payments for taxation purposes, and for calculating whether the national minimum wage has been paid. I understand that under the clause, any payments of arrears that result from past underpayment will be discounted from computation of whether the minimum wage has been paid, in the pay reference period in which they are made. I also understand that such payments will be treated for taxation and for national insurance purposes as if they had been paid in the period in which they originally fell due. That could cause administrative difficulties for both the employer and the Inland Revenue. The matter should be dealt with, otherwise there could be unintended, unforeseen and unfair consequences for employees and employers.

The issue of notice, and of the specification of an amount of arrears that results from underpayment, will give employees the workers two possible routes of remedy. They will be able to seek to recover the underpaid amount by civil proceedings, while the statutory procedure will work through the employment tribunals with the employer appealing if he considered the decision to be unreasonable.

I have said more than once that I am not a lawyer. It may be simple for someone better qualified to clarify this point: which procedure has precedence? Could an employee pursue the supposed debt through the civil courts? If the courts found that the debt was not properly due and owing, would the procedure instigated by the officer and pursued through the employment tribunals be automatically terminated, or am I correct in saying that civil proceedings could not commence until the employment tribunal procedure was exhausted?

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Prepared 29 January 1998