Barry
Gardiner: I wish to speak about this because we are all
considering the issues of people who might be facing unemployment and
redundancy, and the measure is extremely relevant in the current
financial situation. It is abhorrent that someone should seek to avoid
paying legitimate redundancy payments to any employee. In such a
situation, the failure to pay appropriate redundancy moneys can be the
sort of financial interruption that leads ultimately to someone
defaulting on their mortgage, thus leading to foreclosure and a
dramatic effect on their whole life. Even if such a person could get
back into employment within three or four months, the non-payment of
redundancy moneys might precipitate the loss of a family home. I am
delighted that the clause puts in place appropriate compensation for
people who have suffered financial loss as a result of such events. It
should be welcomed by both sides of the Committee, and I congratulate
the Government on introducing
it.
Mr.
McFadden: Let me begin by acknowledging the comments of my
hon. Friend the Member for Brent, North. He is absolutely right that
the clause is timely—more so than in recent years, given some of
the problems that our constituents face.
The hon.
Member for Solihull is right that the hon. Member for Brent, East
raised the issue of interest on Second Reading. However, if my memory
serves me correctly, and it may not, she was talking about minimum
wage arrears, which we will deal with shortly, in clause 8. As for the
question of how someone would prove that losses are directly related to
the non-payment, the provision is not new. It already applies to
holiday pay, so tribunals are used to it. We are simply extending it. I
should like to point out the key phrase in the clause. Subsections
(7)(1) and (2), propose a new subsection (2) in section 24, and a new
subsection (5) in section 163, of the Employment Rights Act 1996. The
last line of new subsection (5) will
read “to
compensate the worker for any financial loss sustained by him which is
attributable to the non-payment of the redundancy
payment”.
It must be directly
attributable and, of course, there must be evidence, but that is for
the chairmen of tribunals to judge. We are extending provisions for
holiday pay to other matters, in recognition of the fact someone who is
unlawfully denied money, and who is dependent on every pound of their
wages, could incur other charges through no fault of their own, as well
as lose their
wage. 12.15
pm
Mr.
Swire: Will there be an appeal system and, if so, how will
it work? If someone is made redundant and does not receive the proper
compensation to which the tribunal says they are entitled, they could
default, for instance, on child support payments. People with a tight
budget could have other commitments, such as standing orders, mortgages
or whatever, but they could choose not to pay to maintain the Child
Support Agency payments. The plaintiff could argue that they were
unable to maintain their child support payments because of a reduction
in the amount of money to which they were entitled, but they could at
the same time maintain payments on white goods or mortgages. Who will
adjudicate on whether someone has found a clever way around a
commitment or whether it is a genuine entitlement to the
plaintiff?
Mr.
McFadden: The answer to the hon. Gentleman’s second
question is that the tribunal chairman or members would adjudicate. On
the first question, all tribunals have an appeal mechanism to the
Employment Appeal Tribunal. It tends to judge appeals on points of law
rather than reconsider a whole case, but there is an appeal process in
tribunals.
Barry
Gardiner: Does my hon. Friend agree that in relation to
the financial loss that has been incurred, the tribunal will look not
at what has resulted from the loss—the non-payment of one bill
rather than another or the reallocation of funds—but whether
there has been a directly attributable financial loss? Therefore, the
points made by the hon. Member for East Devon are not relevant to the
clause.
Mr.
McFadden: As I said in response to the hon. Member for
Solihull, it is set out clearly in proposed new subsection (5) to the
1996 Act, which clearly refers to
“financial loss
sustained by him which is attributable to the non-payment of the
redundancy
payment”. I
hope that I have clarified the matter.
Question
put and agreed
to. Clause
7 ordered to stand part of the
Bill.
Clause
8Arrears
payable in cases of
non-compliance Question
proposed, That the clause stand part of the
Bill.
Mr.
McFadden: We now come to the provisions that deal with the
minimum wage, which are important. We touched on the minimum wage when
discussing clause 7, and clause 8 deals with minimum wage
arrears.
It might be
helpful to the Committee if I set out the difference between how
arrears are dealt with now and how we intend to deal with them in
future under the provisions in clause 8. Let us consider the case of a
mythical minimum wage worker who finds that they have been paid less
than the minimum wage over a period of two or three years. As hon.
Members will know, the Low Pay Commission recommends the rate of the
minimum wage and, since its inception, it has increased year on year.
My Sunday Mirror told me a couple of weeks ago that, if there is
a change of Government in future, that could change. It said that
senior Conservatives have said that the minimum wage will whither on
the vine. Ten years on, perhaps that was a revealing insight into
Conservative party thinking. It is certainly not how the Government
think. Under us, the minimum wage has increased both in line with
average earnings and in relation to prices.
Mr.
Binley: The Minister has made a rather serious allegation.
Will he provide us with the details of the people who said that? He
says that they were senior
Conservatives.
Mr.
McFadden: I think we began proceedings by saying that
written evidence would be put in front of the Committee. If the hon.
Gentleman wishes me to furnish him with a copy of the Sunday
Mirror, I will be very obliged to do
so.
Mr.
Binley: I am grateful to the Minister. He has now put my
mind at rest by saying that it was in the Sunday Mirror. That
makes it all
clear.
Mr.
McFadden: I will leave that
point. In
practice, the minimum wage has tended to be uprated year on year on the
basis of recommendations from the independent Low Pay Commission.
Currently, workers who find themselves being underpaid and therefore
have minimum wage arrears discover that, when they report that and it
is found that they have been underpaid and are entitled to arrears,
they receive the minimum wage at the rate that was in operation at the
time of the underpayment. In other words, they get their back pay, but
lose out on the upratings that have taken place in the meantime. Such
underpayments serve as inadvertent and unintentional loans from
employees to employers. The clause will change
that. The
Low Pay Commission has expressed concerns on this matter over the
years. It expressed particular concerns in its 2007 report. We
consulted on whether arrears could be calculated in a fair way, to take
account of the depreciation in value of those arrears as a result of
the uprating of the national minimum wage. The overwhelming majority of
respondents agreed with the aim of making
arrears fairer for workers in that way. The majority of those who
expressed an opinion were in favour of calculating arrears
by reference to the current rate of the minimum
wage. At
this point I tread carefully, Mr. Bercow. I will attempt to
take the Committee through the equation on page 6 of the Bill under
clause 8. As hon. Members will see, the equation is A over R1,
multiplied by R2. A is the amount of money calculated to have been
underpaid to the worker, and R1 is the rate of the minimum wage at the
time of the underpayment. For example, if the underpayment happened
last year and the worker was underpaid for one hour, the £5.52
that was earned would be divided by the rate at which the minimum wage
was paid, which was £5.52 per hour. That calculation reaches a
time of precisely one hour. R2 is the current rate of the minimum wage.
The formula takes an amount that somebody has been paid at the minimum
wage and turns it into an amount of time in hours, based on the rate of
the minimum wage at that time. In order to ensure that the fair arrears
apply, that time is multiplied by the rate of the minimum wage at the
time the incident is reported or found out. In the case of our mythical
worker who was underpaid by £5.52 last year, they would then
receive £5.73 as the fair arrears. That is the rate of the
minimum wage since it was
uprated. The
new method of calculating arrears is much fairer. Despite my poor
teaching skills it is relatively simple, in that the concept changes an
amount of money into an amount of time and multiplies that by the
current rate of the minimum wage. It secures a measure of justice for
workers who, as we agreed in discussion of clause 7, are often living
at the margin and certainly cannot afford to lose out by giving what
are, in effect, interest-free loans to their
employers.
Michael
Jabez Foster: Will it be the point at which the claim was
submitted, at which the judgment was awarded or at which an agreement
was reached that will determine the rate used? That is important,
because there could have been a change in the rate. In the unlikely
event that the commission should decide on a reduction in the minimum
wage—or in the even less likely event that the Tories should get
in and reduce it, or do something of that order—what would be
the safeguard that the formula would never result in a lesser sum?
Theoretically, at least, the formula could result in that
outcome.
Mr.
McFadden: The rate that would apply would be the one in
force at the time the judgment is given. My hon. Friend is right:
sometimes these things can take time to come to fruition. He asked what
would happen if the minimum wage were to fall. There will come a point
in the next couple of years when the voters can take that into account.
They have seen what was written in the Sunday
Mirror—there is a record to look at—and that may be
part of their decision. The provisions ensure that if the minimum wage
were to fall, employers could not argue that they should pay back
arrears at the lower current rate. Clause 8 provides that the current
rate is used if it is higher than the rate that was in force when the
underpayment was
made.
John
Hemming: The formula is a relatively complicated
sledgehammer to crack an important nut, but the nut needs to be
cracked. On the definition of the pay
reference period, would a claim over two or three years during which
there were several historic minimum wage rates require a number of
claims? If we follow the statute verbatim, whatever that may be,
mutatis mutandis, one may be forced to use only one historic rate, but
several historic rates would need to be taken into account to get the
right answer. Does the statute, when modified, achieve
that?
Mr.
McFadden: No, I do not think that separate claims would be
required if someone were underpaid over three or four years. As I said,
in the equation on page 6, R1 is the rate at the time they were
underpaid. So if someone was underpaid for 10 hours’ work three
years ago and then for another 10 hours’ work two years ago,
each incident would be converted into a proportion of time, and all of
it would be multiplied by the current minimum wage rate. Separate
claims are not needed for each year. Simplicity is important. One of
the advantages of the minimum wage is that it is clear and simple to
understand. That
brings me to the point made by the hon. Member for Solihull about
interest. It was argued when we were consulting on fair arrears that
perhaps interest should be charged on top of the calculation that I
have set out. However, if we were to do that, workers would be required
to complete self-assessment returns for tax due on the additional
element of arrears, or interest. It is not sensible to put minimum wage
workers in the position of having to fill in a tax return for what
would be relatively small sums of interest when we can deal with the
heart of the problem through a simple, fair arrears calculation. This
is a highly legitimate issue to raise, and it has been of concern to
the Low Pay Commission. Through clause 8 we will ensure fair arrears
for people who are underpaid the minimum
wage. There
has been a great deal of discussion this morning about various clauses.
This clause will be an important measure of justice for some of the
lowest paid people in the country, and I commend it to the
Committee. Question
put and agreed to.
Clause 8
ordered to stand part of the
Bill. Clause
9 ordered to stand part of the
Bill.
Clause
10Powers of officers to
take copies of
records 12.30
pm
Mr.
Djanogly: I beg to move amendment No. 15, in
clause 10, page 13, line 30, after
‘them’,
insert ‘if copying
facilities are not available at that
place’. We
are still dealing with the national minimum wage and the parts of it
that deal with compliance. Let me say first that, despite whatever
appeared in the Sunday Mirror, the position of the Conservative
party is that given our support for the national minimum wage, to the
extent that people want to break the law and not pay it, we are
concerned for the rights of the employees and
also for the rights of those employers who are not breaking the law and
who are put at a competitive disadvantage as a result. Our concerns
about clause 5 and also about clause 11 fall into two different
categories. First, we are concerned whether the provisions are
proportionate in cases where civil liberties would be reduced as a
result of them. Secondly, we have a more practical issue: we need to
look slightly further to examine whether they will actually work and
improve the current failings in the system. The second set of concerns
is probably more suited to a stand part debate on clause 11, so we will
come back to it then. The amendment, which is a probing amendment, is
more closely related to the first category of concerns. It aims to
limit the right for compliance officers to remove documents to those
situations where it is the only practical way for them to continue
their investigation.
The rule of
law in this country maintains that we are innocent until proven guilty.
To that end, compliance officers should not be able to infringe the
rights of employers to run their business unmolested by Government
agencies unless it is absolutely necessary. Given the expansion of
technology in offices in the last decade and the availability of
photocopiers, should officers not be encouraged, where practical, to
take copies of relevant documents rather that removing originals in a
way that might disrupt the running of the business? That is the nub of
the
amendment. There
was discussion in the other place of the need for these powers to
ensure full and effective enforcement of the national minimum wage
regulations. However, I must confess to having some scepticism about
that assertion. I would have thought that the copying of documents
should be the starting point and original documents should only be
removed from offices if all other avenues have
failed. Given
the possible significant disruptive effect of these powers, I would be
grateful if the Minister could provide us with some figures for the
number of occasions when the lack of copying facilities has prevented
an enforcement action. It is important that we weigh the right of the
business to operate unmolested by the state against the need for
effective enforcement.
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