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Standing Committee G
Thursday 27 February 2003
[Miss Anne Begg in the Chair]
8.55 am
Resolved,
That, during proceedings on the National Minimum Wage (Enforcement Notices) Bill [Lords], the Committee do meet on Tuesdays and Thursdays at five minutes to Nine o'clock and at half-past Two o'clock.—[Alan Johnson.]
The Chairman: I remind the Committee that there is a financial resolution in connection with the Bill, copies of which are available in the Room. As a general rule, adequate notice should be given of amendments. My co-Chairman and I do not intend to call starred amendments, including those that may be reached during our afternoon sitting. I also remind members of the Committee to switch off their mobile telephones. No amendments to clause 1 have been tabled. Clause 1
Enforcement notices
Question proposed, That the clause stand part of the Bill.
The Minister for Employment Relations, Industry and the Regions (Alan Johnson): It is a pleasure to serve under your chairmanship for the first time, Miss Begg.
No amendments have been tabled to the Bill, apart from the amendment involving privilege that I shall deal with when we discuss clause 2. This small Bill was debated extensively on Second Reading, but I shall briefly explain the background.
We created a network throughout the United Kingdom of 12 enforcement teams operated by the Inland Revenue to investigate and identify non-compliance with the national minimum wage. For three years, the teams issued enforcement notices that required employers to pay the minimum wage in future, or make good arrears of the minimum wage, or both. In August 2002, the Employment Appeal Tribunal ruled in the case of Inland Revenue v. Bebb Travel plc that officers could 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.
That ruling means that enforcement officers cannot currently issue notices in respect of arrears for past periods alone, so we cannot cover arrears owed to former workers. The Government are determined to restore the position to what we believed it to be before the Bebb decision, hence the Bill. There was broad consensus throughout the House on Second Reading and I hope that that will continue today.
Clause 1 deals with the power of enforcement officers to serve enforcement notices on employers for the recovery of the national minimum wage. It inserts a new subsection (2A) after section 19(2) of the
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National Minimum Wage Act 1998. That will allow an enforcement officer to serve an enforcement notice on an employer, imposing a requirement on him to pay a worker who has at any time qualified for the minimum wage arrears of pay in respect of one or more past pay reference periods. He will be able to serve such a notice whether or not he imposes, or might impose, a requirement on the employer to pay the worker the minimum wage in future.
It will not matter if the worker no longer qualifies to be paid the minimum wage by that employer—because, for example, he is no longer employed by that employer. The notice can relate to that worker alone, or, by virtue of section 19(3), to a number of workers. The same notice can therefore deal with a combination of past or future periods and past or current employees.
Enforcement officers will be able to issue notices by virtue of new subsection (2A) for pay reference periods that ended before the passage of the provision. However, workers are already entitled under the National Minimum Wage Act 1998 to bring claims in respect of such periods. The Bill will not give workers an entitlement to minimum wage arrears that they did not previously have.
The amendments made by the Bill to the 1998 Act will also have effect in the application of the Act to enforcement of the agricultural national minimum wage.
New subsection (2B) states that enforcement notices will only be able to extend back for a period of not more than six years, starting from the date of the service of the notice. The key issue is the fulfilment of the Government's policy of restoring the position to what we believed it to be before the Bebb decision. All sides desire clarity and consistency and this new subsection makes it clear that the Revenue has the right to go back for more than three years, but does not have the right to go back further than six years. That provision will give the Revenue greater flexibility and conserve and focus resources, but reassure the business sector that action by enforcement officers cannot extend back over an infinite period.
Mr. Henry Bellingham (North-West Norfolk): It is a pleasure to serve under your chairmanship again, Miss Begg.
I am grateful to the Minister for the clear and concise way in which he has explained clause 1. The essence of the Bill is to restore the position to what the Government believed it to be and what Parliament believed it to be when the original legislation—the 1998 Act—was passed, but I should like to pursue one or two points that emerge from clause 1.
First, there is the six-year limitation. As we discussed on Second Reading, in the county courts there is a six-year statutory limitation period. Most of the cases go forward in the county courts, rather than in the employment tribunals, for the simple reason that a case in employment tribunals has to be launched within three months of the last underpayment. Can the Minister tell the Committee what percentage of the cases brought so far has been brought in employment tribunals? Is it a very small percentage? Are we talking
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about 20 per cent., or 10 per cent.? It would be quite useful to know that.
On the six-year limitation, the Minister, Lord Sainsbury of Turville, brought to the attention of the other place the fact that companies only have to keep records going back three years. I made that point on Second Reading, and I hope that the Minister for Employment Relations, Industry and the Regions will elaborate on it today. Although he replied to most of the points made on Second Reading, I still want further clarification. If a company only has to keep records going back three years under company law, what happens if, for example, it has chucked out all its payroll records, but the employee who is claiming underpayment of the minimum wage has kept his pay slips and other relevant payroll information, and the case then goes to court? A company could be at an unfair disadvantage because the person who is taking the action will have information to hand, whereas the company will not. I want the Minister to comment on that.
The discussion in the other place resulted in an amendment being tabled to introduce the six-year limitation. As the Minister pointed out, before that, the period could have been infinite and the enforcement officers could have gone back more than six years, although it is very unlikely that they would have done so. The national minimum wage legislation only came in three years ago, so the discussion is academic. However, it is important for the future. Since Second Reading, I have been lobbied by one or two business organisations, which are concerned about the three-year rule for keeping records.
Will the Minister speak to his colleagues in the Department of Trade and Industry and the Treasury about the three-year rule? It probably makes sense that companies should not have to keep records going back more than three years, given the overall ambit of record keeping in the corporate sector, but perhaps they could keep payroll information for six years. That, at least, would obviate the set of circumstances that I have flagged up, in which a company is taken to court by an employee who has been unfairly treated and that employee had the information to hand. The court may say that the company got rid of its information legitimately under the law and therefore decide that, even though the evidence on the part of the employee was overwhelming, it could not make an award to him.
Will the Minister clarify another point? Am I right in saying that the six-year limitation applies only to Government enforcement officers, either from the Inland Revenue or from the Department for Environment, Food and Rural Affairs? Would it still be possible, in extreme circumstances that are hard to envisage, for an employee to bring a case on his own account? Does the six-year rule refer only to both kinds of Government enforcement officers? The Bill does not make that clear.
The Opposition are satisfied with the Bill and we supported it on Second Reading and in the other place. We feel strongly that when a problem arises like the one involving Bebb Travel, the Government are
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right to act as quickly as possible to ensure that the position is restored to what it was before.
Dr. Vincent Cable (Twickenham): We accepted on Second Reading that there was no fundamental dispute and we agreed with the spirit of the Bill. However, I asked on Second Reading whether the six-year limitation was necessary and I would like to pursue that in relation to new subsection (2B).
We are dealing with a small number of cases. Imagine if, 10 years hence, there were an extreme case of a company that had consistently underpaid for a decade. There might be an even more extreme case in which the employer lost all its records and the employee somehow managed to retain his. Why should there not be an open-ended commitment for an extreme case in which gross exploitation had occurred?
I do not fully understand the reason for the six-year limit. It seems unnecessary and would apply only to a small number of cases. By leaving things open, parties to the dispute would have a more open agenda. I cannot understand why the Government feel that it is necessary to introduce a cap.
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