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Notices of underpayment: arrears
53. New section 19 provides that where an officer is of the opinion that an employer has not paid a worker the national minimum wage, or has not fully repaid any arrears which the worker is entitled to under section 17, the officer may serve a notice of underpayment requiring the employer to pay arrears to the worker or workers named in the notice (subsections (1) and (2)). The notice may require employers to pay arrears relating to periods occurring before the coming into force of new section 19, but arrears relating to periods more than six years before the date of service of the notice may not be included in the notice (subsections (6) and (7)).
Notices of underpayment: financial penalty
54. New section 19A provides that the notice of underpayment must require the employer to pay a financial penalty to the Secretary of State within 28 days of service of the notice (subsection (1)) unless the Secretary of State has, by directions, specified circumstances in which a penalty is not to be imposed (subsection (2)). The penalty is set at 50% of the total underpayment of the national minimum wage (subsection (4)), although underpayments occurring in periods before the commencement of the provision will not be taken into account when calculating the penalty (subsection (5)). The minimum penalty is £100 and the maximum penalty is £5,000 (subsections (6) and (7)). The Secretary of State has the power to change, by regulations, the percentage used to set the penalty, the minimum and the maximum penalty (subsection (8)). If the employer complies with the notice within 14 days of its service, the financial penalty is reduced by 50% (subsection (10)). The financial penalty shall be paid into the Consolidated Fund (subsection (11)).
Suspension of financial penalty
55. New section 19B allows for the notice of underpayment to contain a provision suspending the requirement to pay a penalty where proceedings have been instituted, or may be instituted against an employer in respect of a criminal offence under section 31. Where a notice contains such a provision, an officer may serve a notice on an employer terminating the suspension where criminal proceedings have either concluded or will not be instituted (subsection (4)). Where an employer has been convicted of an offence under section 31, an officer must serve a notice on the employer withdrawing the financial penalty (subsection (6)).
Notices of underpayment: appeals
56. New section 19C provides that an employer may appeal to an employment tribunal (an industrial tribunal in Northern Ireland) against a notice of underpayment. An employer may successfully appeal on one or more of three main grounds (subsection (1)). The first is that, at the date set out in the notice, no arrears were owing to any worker(s) named in the notice - i.e. that the employer was compliant with the Act (subsection (4)). If the employment tribunal allows an appeal under this ground it must rescind the notice (subsection (7)). The second is that any requirement in the notice to pay a sum to a worker was incorrect; either because no sum was due to that particular worker or that the sum specified in the notice was incorrect (subsection (5)). The third is that either a notice included a penalty in circumstances that have been specified in directions under section 19A(2) or that the amount of the penalty specified in the notice is incorrect (subsection (6)). If the employment tribunal allows an appeal under either the second or third ground it must rectify the notice, in which case the notice has effect as rectified by the tribunal (subsection (8)).
Non-compliance with notice of underpayment: recovery of arrears
57. New section 19D reproduces the current provisions in section 20 of NMWA 1998 which give officers the power to take civil action to recover arrears on behalf of a worker or workers.
Non-compliance with notice of underpayment: recovery of penalty
58. New section 19E reproduces the provision currently in section 21(5) of NMWA 1998.
Withdrawal of notice of underpayment
59. New section 19F allows an officer to withdraw a notice of underpayment by serving notice of withdrawal on the employer where it appears to him that the notice wrongly includes or omits any requirement or is incorrect in any particular (subsection (1)). Where a notice is withdrawn and no replacement notice is issued, any penalty which the employer has already paid in accordance with the withdrawn notice must be repaid with interest (subsections (2)(a) and (4)). Any appeal against the withdrawn notice will be dismissed and an officer may not start subsequent proceedings to recover arrears on behalf of the worker(s) on the basis of the
withdrawn notice, although any proceedings started before the notice was withdrawn may be continued (subsections (2)(b), (c) and (d)).
Replacement of notice of underpayment
60. New section 19G allows an officer to issue a replacement notice at the same time that a notice is withdrawn (subsection (1)). The replacement notice cannot include workers who were not contained in the withdrawn notice (subsection (2)). Contravention of this requirement is a ground for appeal by an employer against the notice (subsection (3)). The replacement notice may include arrears incurred after service of the withdrawn notice but before service of the replacement notice (subsection (4)). When a replacement notice is issued, the six years limitation period for including arrears in new section 19(7) is calculated from the date of service of the first notice rather than the date of service of the replacement notice (subsection (5)). The replacement notice must set out the material differences from the withdrawn notice (subsection (6)). An officer will only be able to issue one replacement notice (subsection (8)).
Effect of replacement notice of underpayment
61. New section 19H sets out the effects of issuing a replacement notice. Where a replacement notice is issued, any appeal against the withdrawn notice continues to have effect as if it were against the replacement notice. If an employer appeals against the replacement notice he must withdraw any appeal against the withdrawn notice (subsection (2)). An officer may not start subsequent proceedings to recover arrears on behalf of the worker(s) on the basis of the withdrawn notice but any proceedings started before the notice was withdrawn may be continued (subsection (3)). Any sums already paid by the employer as a penalty in relation to the withdrawn notice is taken into account when assessing compliance with the penalty contained in the replacement notice (subsection (4)(a)). If the penalty which has already been paid by the employer is greater than the penalty in the replacement notice, the balance must be repaid to the employer with interest (subsections (4)(b) and (5)).
62. Subsection (2) contains a transitional provision in respect of the amendments contained in new section 19E(a) to NMWA 1998. The section in NMWA 1998 which section 19E replaces has been prospectively amended by TCEA 2007, the relevant provisions of which are not yet in force. This transitional provision allows the current wording to operate until the relevant provisions of TCEA 2007 come into force, upon which time the new wording as provided by TCEA 2007 will operate.
63. Subsection (3) amends section 51 of NMWA 1998 to provide that regulations under new section 19A(6) are subject to the affirmative resolution procedure.
64. Subsection (4) consequentially amends section 4(3)(cd) of ETA 1996, so that the provision that a Chairman alone shall hear an appeal against an enforcement or a
penalty notice under section 19 and 22 of NMWA 1998 respectively, is applied instead to an appeal against a notice of underpayment.
65. Section 44 of the Commissioners for Revenue and Customs Act 2005 provides that the Commissioners shall pay money received in the exercise of their functions into the Consolidated Fund, subject to certain exceptions. One exception, in subsection (2)(f), relates to penalties under section 21 NMWA 1998. Subsection (5) repeals subsection (2)(f) to allow the Commissioners for Revenue and Customs to pay financial penalties obtained under new section 19A into the Consolidated Fund.
66. Subsection (6) provides for consequential amendments to the Agricultural Wages Act 1948.
67. Subsection (7) provides that the amendments in clause 9 do not have effect in relation to the enforcement of the AMW in Scotland and Northern Ireland.
Clause 10: Powers of officers to take copies of records
68. Clause 10 provides that officers have the power to remove records required to be kept or preserved under NMWA 1998 in order to take copies of those records.
69. Subsection (2) enables an officer to copy a complete record without having first to determine whether all of the record is material.
70. Subsection (3) provides that, where records are produced, an officer has the power to remove them for the purpose of making copies. Where an officer removes records for this purpose, they must be returned as soon as reasonably practicable.
71. Subsection (4) provides that the amendments in clause 10 do not have effect in relation to the AMW in Scotland and Northern Ireland.
Clause 11: Offences: mode of trial and penalties
72. Subsection (1) of clause 11 provides that offences under section 31 of NMWA 1998 may be triable as indictable offences. At present, these offences are only triable as summary offences; in future they will be triable either way. Subsection (2) contains consequential repeals.
73. Subsection (3) provides that the amendments in clause 11 do not have effect in relation to the AMW in Scotland and Northern Ireland.
Clause 12: Powers to investigate criminal offences
74. Clause 12 applies investigation powers, and their accompanying safeguards, to investigations by HMRC of criminal offences under NMWA 1998.
75. Subsection (1) applies provisions of the Police and Criminal Evidence Act 1984 and the Police and Criminal Evidence (Northern Ireland) Order 1989 to investigations conducted by HMRC in relation to criminal offences under section 31 of NMWA 1998. These provisions will allow HMRC officers, for example, to apply for production orders and search warrants or to arrest a person suspected of committing an offence, in the same circumstances as these powers would be used in investigating other offences for which HMRC is the responsible investigating body.
76. Subsection (2) applies HMRC's normal Scottish criminal investigation powers to investigations of NMW criminal offences in Scotland.
Clause 13: Cadet Force Adult Volunteers
77. Clause 13 explicitly excludes CFAVs from qualifying for the NMW.
78. A CFAV is a member of the Cadet Forces who is assisting in the delivery of the Ministry of Defence sponsored cadet force programme. The clause does not apply to those performing work for the Cadet Forces in the course of Crown employment, including employment by a Reserve Forces and Cadet Association set up under the Reserve Forces Act 1996. It does not affect any entitlement CFAVs may have to the NMW outside of their voluntary activities as a CFAV.
79. The Cadet Forces comprise of the Combined Cadet Force, Sea Cadet Corps, Army Cadet Force and Air Training Corps. Each is a separate national youth organisation supported by its own charity.
80. The Cadet Forces do not form part of the Armed Forces or the Reserve Forces, although some CFAVs may be serving members of the Armed Forces or the Reserve Forces.
Clause 14: Voluntary workers
81. Voluntary workers are a special class of workers who are exempt from the NMW. Clause 14 amends section 44 of NMWA 1998 to broaden the type of expenses which can be paid to voluntary workers to include expenses which are incurred in order to enable the voluntary worker to perform his duties. New subsection (1A)(b) provides that only those expenses which are reasonably incurred can be paid.
82. As with expenses incurred in the performance of duties, both expenses which have actually been incurred or expenses which have been reasonably estimated as likely to be or to have been so incurred can be paid to voluntary workers.
83. New subsection (1A)(c) provides that accommodation expenses cannot be paid to voluntary workers. The effect of this amendment is to maintain the existing treatment of accommodation expenses under NMWA 1998. Whilst accommodation expenses cannot be paid, under 44(1)(b) of NMWA 1998 such accommodation as is reasonable in the circumstances of the employment can be provided directly to voluntary workers.
Employment agencies
Clause 15: Offences: mode of trial and penalties
84. Currently all offences under EAA 1973 are summary only offences and therefore triable only in the magistrates' court. Clause 15 provides that certain offences committed under EAA 1973 shall be triable either on indictment in the Crown Court or summarily by the magistrates' court. The effect of this clause is to increase the penalty available to the court where the offence results in conviction on indictment. Where the offences are tried in the Crown Court there is no limit on the fine that can be imposed.
85. This clause also amends the maximum fine that can be imposed by a magistrates' court on conviction from a fine not exceeding level 5 on the standard scale to a fine not exceeding "the statutory maximum". At present, the statutory maximum fine is £5,000 in England and Wales and from 10 December 2007 it has been increased to £10,000 for offences tried in Scotland.
86. The offences that will become triable either way under this clause are:
- failure to comply with a prohibition order under section 3B of EAA 1973;
- contravention of or failure to comply with any regulations made under EAA 1973. Currently the regulations made under EAA 1973 are contained in the Conduct of Employment Agencies and Employment Businesses Regulations 2003 8; as amended by the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2007 9; and
8 (SI 2003/3319)
9 (SI 2007/3575)
- requesting or receiving (either directly or indirectly) a fee for providing work-finding services under section 6 of EAA 1973 (except where this is permitted under Conduct of Employment Agencies and Employment Businesses Regulations 2003 as amended).
Clause 16: Enforcement powers
87. Clause 16 strengthens the powers of inspection for inspectors appointed under section 9 of EAA 1973.
88. Subsection (2) extends the powers of inspection available under section 9(1)(b) to enable an inspector of the Employment Agency Standards Inspectorate specifically to request financial records and documents that are held on the inspected premises which he may reasonably require to inspect to ensure compliance with EAA 1973. This is in addition to the power already contained in EAA 1973 permitting an inspector to inspect any records or documents kept as required by EAA 1973 or the Conduct of Employment Agencies and Employment Businesses Regulations 2003, as amended.
89. Subsection (4) substitutes a new power. Currently under section 9(1A) of EAA 1973 an inspector may require any person on the inspected premises to inform him where a record, document or information is kept and to make arrangements, where reasonably practicable, for that record, document or information to be inspected or furnished to the inspector at the premises. This power is replaced by a new power enabling an inspector by notice in writing to require the person carrying on the employment agency or employment business to furnish him with a record, document or information at such time and place as the inspector may specify.
90. The effect of this amendment is to place the requirement to furnish the required record, document or information on the person carrying on the employment agency or employment business rather than on the person present on the premises at the time of the inspection (who may not have access to the record or document or sufficient knowledge to supply the information). Enabling the inspector to specify the place at which the person carrying on the business must furnish the record, document or information will mean that the inspector will not need to revisit the inspected premises but can inspect the record, document or information at a convenient place of his choice.
91. Subsection (5) inserts two new powers into section 9 of EAA 1973 by inserting new subsections (1AA), (1AB) and (1AC). Where a person carrying on an employment agency or employment business fails to furnish the inspector with a record, document or information specified in a written notice, and where the inspector has reasonable cause to believe that the record, document or information is kept by a person concerned with, or formerly concerned with, the carrying on of the employment agency or employment business an inspector may by notice in writing require that person to furnish the record, document or information at such time and place as he may specify.
92. Additionally, where the record, document or information is kept by a bank (as defined by the Financial Services and Markets Act 2000) an inspector may by notice in writing require the bank to furnish the record, document or information at such time and place as he may specify.
93. Subsection (6) taken together with subsection (3) replaces the power to take copies of records and documents inspected pursuant to EAA 1973 with a power to take copies of records and documents inspected pursuant to EAA 1973 and copies of financial records and financial documents inspected in order to ascertain whether the provisions of EAA 1973 have been complied with. This wider power reflects the wider range of records and documents that an inspector may inspect. Under this wider power an inspector may remove any record or document from the premises where it is inspected in order to take a copy of it but it must be returned as soon as is reasonably practical. This will enable an inspector to take away a record or document for the purpose of taking a copy before returning it rather than, as is currently the case, relying on copying facilities at the business premises.
94. Subsection (8) creates the offence of obstructing an inspector in the exercise of his powers under section 9 or of contravening a requirement under section 9. A person guilty of the offence is liable on summary conviction to a fine not exceeding level 3 on the standard scale. This subsection amends section 9(3) and extends the offence to the new powers granted by clause 16.
Clause 17: Offences by partnerships in Scotland
95. Clause 17 provides that where an offence under EAA 1973 is committed by a partnership in Scotland, and where it is proved that the offence concerned has been committed with the consent or connivance of a partner, or is attributable to the neglect of a partner, then the partner as well as the partnership shall be guilty of the offence and prosecuted.
96. This reflects a difference between English and Scottish law. Under Scottish law a partnership is a separate legal entity, distinct from the partners who make up the partnership. This is not the case under English law.
97. Clause 17 therefore enables any partners who have consented to or connived at the offence, or whose neglect has caused the offence, to be prosecuted as well as the partnership.
98. No provision was made in EAA 1973 for Scottish partnerships as until the late 1980s specific provision tended not to be made in legislation for offences committed by Scottish partnerships as it was considered that none was necessary.
Trade union membership
Clause 18: Exclusion or expulsion from trade union for membership of political party
99. Section 174 of TULRCA 1992 provides a right for individuals not to be excluded or expelled from membership of a trade union, unless the exclusion or expulsion is for a reason specified by the section. Section 174(2)(d) makes it unlawful for a trade union to expel or exclude a person on the sole or main ground of "protected conduct" of that person. Sections 174(4A) and 174(4B) define "protected conduct" as membership or former membership of a political party. Section 176 of TULRCA 1992 provides remedies where the employment tribunal finds that a trade union has breached this right. Clause 18 retains the concept of "protected conduct" set out in sections 174 and 176 of TULRCA 1992, but amends these sections in response to the judgment made on 27th February 2007 by the European Court of Human Rights in the case of Aslef v UK (Application no.11002/05). In the Aslef v UK case, the trade union had a policy to prohibit members of the British National Party from belonging to its union. An Employment Tribunal upheld a complaint under section 174 by a union member who was expelled for being a member of the British National Party. The union then complained to the European Court of Human Rights, which found that, in being prevented from expelling a member on grounds of political party membership, the union's Convention right of association had been infringed.
100. Clause 18 therefore amends section 174 of TULRCA 1992 to allow a trade union to expel or exclude an individual on the basis of their membership or former membership of a political party. Subsection (2) inserts new subsections (4C) - (4H) which set out the circumstances in which a trade union may expel or exclude on this basis.
101. New subsection (4C) further qualifies the definition of "protected conduct" under subsection (4A). This enables trade unions to expel or exclude individuals who belong or who have belonged to a particular political party, if membership of that political party is contrary to the rules or objectives of the trade union.
102. New subsections (4D) and (4E) provide that the relevant union "objectives" (but not rules) have to be reasonably ascertainable. If an individual is excluded from a union because he is or was a member of a political party, it must be reasonably practicable for the relevant objective to be ascertained by a person working in the same trade, industry or profession as the excluded individual at the time of their conduct. If an individual is expelled from a union on such grounds, it must be reasonably practicable for the relevant objective to be ascertained by a member of the union at the time of their conduct.
103. New subsection (4F) provides that expulsion or exclusion from a trade union remains unlawful if any of the three conditions in subsection (4G) are met. These conditions are:
- The decision to exclude or expel does not comply with the union's rules;
- The decision is taken unfairly; and
- Loss of union membership would cause the individual to lose his livelihood or suffer other exceptional hardship.
104. Subsection (4H) sets out the circumstances in which a decision is taken unfairly for the purposes of subsection (4G)(b). This has the effect that an individual must be given notice of the proposal to expel or exclude him (including reasons) and a fair opportunity to make representations, which the union must consider fairly.
105. Subsection (3) of clause 18 amends section 176 of TULRCA 1992 to achieve consistency between the sections 174 and 176 of the 1992 Act, in line with the changes made to section 174 by new subsections (4D) and (4E). This is achieved by changing the corresponding test of what is ascertainable which is used in section 176.
General
Clause 19: Repeals
106. The repeals Schedule lists those repeals which are explicitly mentioned in the clauses. It also contains some consequential repeals, in particular, of legislation which inserts provisions which are themselves being repealed. The extent of the repeals is described at relevant points of the main commentary. The repeals contained in the Schedule will be commenced at the same time as the clauses to which they relate.
Clause 21: Commencement
107. Clause 21 provides for the commencement of different provisions at different times. Clauses 1 to 7 relating to dispute resolution, clauses 8, 9, 11 and 12 relating to the NMW (arrears payable in cases of non-compliance, notices of underpayment, penalties for offences and powers to investigate criminal offences) and clause 18 relating to trade union membership will come into force on such a date as the Secretary of State may by order appoint. Clauses 10, 13 and 14 relating to the NMW (powers of officers to take copies of records, CFAVs and Voluntary workers) will come into force two months after Royal Assent. Clauses 15 to 17 relating to employment agencies will come into force on 1 October 2008 unless the Bill is not passed until after that date, in which case they will come into force on 6 April 2009. The remaining provisions come into force on the day of Royal Assent.
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