Employment Bill [Lords]

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Barry Gardiner: I see the point of the hon. Gentleman’s remarks. Clearly, however, one could then get into a situation in which the officers go in to copy documents, if that is possible, but when they ask for use of the photocopier, there is obstruction on the part of the employer, who says, “No, I’m sorry, you’re not going to use my photocopier,” or, “I’m going to charge you £1.20 a copy,” or whatever.
All that such an amendment would do is put in place another obstacle that would become a point of dispute between the officers and the employers. I thought that the whole thrust of what the Committee wanted to do was to simplify things and get certainty. In that sense, it is much better that the powers should be as they currently appear in the Bill.
Barry Gardiner: Does the hon. Gentleman accept that what he has just said is not what his amendment says? His amendment would simply insert
“if copying facilities are not available at that place”.
They might be available at the place, but they might be charged for at an exorbitant rate. Officers might be refused access to those copying facilities. What his amendment proposes is not the reasonable point of discussion that he has made.
Mr. Djanogly: I accept the hon. Gentleman’s assertion that the drafting is not all that it could be, which is probably why I announced it to be a probing amendment. I am making a point of principle, because I think that this could be like using a sledge-hammer to crack a nut.
Dr. Palmer: Does the hon. Gentleman accept that the clause does not stipulate that officers are compelled to remove documents? If copies are instantly made available at no cost, it is quite possible that they could accept those.
Mr. Djanogly: I accept that, but the reality is that if the enforcing officers are given the powers, they will often use them. It is incumbent on us, as legislators, to ensure that we minimise the disruption.
John Hemming: Although we share the concerns of the hon. Member for Brent, North about the drafting of the amendment, we want the Bill to reflect the principle that people operating on behalf of the state have the powers to do only what is necessary, rather than allowing them to take any documents from anywhere. The principle is a good one, but the drafting needs a bit of work.
Mr. Binley: May I refer to the reality of the situation when the inspector calls? Hon. Members do not need me to remind them just how many inspectors can call on small businesses—VAT inspectors, those looking at health and safety at work and a number of others spring to mind. In many instances, they create in small businesses a feeling of fear, and certainly great apprehension. We need to be very careful about the power with which we endow inspectors, specifically with regard to businesses run by members of our ethnic communities. Often they are not fully versed in the English language and have a sizable fear, brought with them from the culture of their countries, of inspectors who call. That needs to be taken into account much more in this respect.
The wording of the clause is imperfect. There is a vagary about the term “copy records”, about which the Minister might like to reassure us. I know that the term
“records must be returned as soon as reasonably practicable”
is a legal phrase, but it is as lose a legal phrase as one can get. The Minister and I both know that sometimes the arm of bureaucracy is used to instil fear and apprehension. That concerns me enormously.
The Chairman: Order. What concerns the hon. Gentleman is naturally a concern to many people, but I gently say to him that the sentiments he is expressing relate to the clause and therefore potentially, if there is to be one, to the clause stand part debate. Sadly, his comments do not relate to the amendment. On that basis, I feel confident that he is about to draw his remarks to a close.
Mr. Binley: You are absolutely right, Mr. Bercow, to bring me to the matter that I really want to talk about, which is the amendment itself, but you will appreciate that I had to create the colour first.
The truth of the matter is that we should do everything possible to ensure that inspectors do not remove documents that small business men might need to work on once the apprehension is planted in their minds that they could well face a bureaucratic—indeed, legal—problem. The return of those documents as soon as is reasonably practicable leaves open a problematic issue that we need to attend to with more certainty.
I support the amendment because if it is practically possible to copy documents, it should be right and proper to do so. However, equally, I want the Minister to take account—I will refer to this matter in the stand part debate—of the looseness of the wording in that respect. For those reasons, I support the amendment.
Mr. McFadden: Given what you have just said, Mr. Bercow, I am wary of setting out any context for my response. However, the context is important because we are not dealing with a new law; we are dealing with something that has been in place for 10 years and has become a familiar part of the labour market. Clauses 9 to 12 all relate to stronger enforcement of the minimum wage and context is important because we have 10 years of experience of how it operates. Most employers are perfectly willing to pay the minimum wage and treat their workers completely fairly, and when we discuss the policing and rules around those who do not, it is important to acknowledge that.
The hon. Member for Northampton, South referred to when the inspector calls. Sometimes minimum wage enforcement is criticised from the different direction of the inspector not calling enough—people do say that. It is important to make it clear to the Committee that the inspectors work in two ways. One way is in direct response to reports of non-payment of the minimum wage. That would be investigated and inspectors may visit a premises and so on. The other way they work is proactively on what we call risk-based inspection. We know that that is more likely to take place in certain sectors than others and that certain employers might have a track record in other areas. In a world of finite resources, we target the resources we have as well as we can.
Mary Creagh (Wakefield) (Lab): Does my hon. Friend agree that in most companies that operate any sort of payroll facility, however basic, it will most likely be done, and should be done, through a computerised system in the interests of good record keeping? In the event of copies being removed from premises, the employer is very likely to have some form of copy or record available on a computer.
Mr. McFadden: My hon. Friend is right. Let us remember that the penalty regime, which was dealt with in clause 9, has increased for employers. A non-compliant employer who is underpaying will know that they are liable for an earlier and bigger penalty than under the current rules. The co-operation of the employer is key, not the existence of photocopying facilities, because it is quite possible for those to exist, but for the employer to say, “Well, we have it, but you can’t use it.” In those circumstances, we would have delays and so on.
The hon. Gentleman, who is a very decent and honourable man, quite rightly raised the point about proportionality. The powers in clause 10 would be used only in that small minority of cases where enforcement officers cannot complete the review on the employer’s premises and where the employer refuses to allow them to remove the records.
Mr. Binley: I thank the Minister for his remarks, and of course I understand much of what he is saying. However, will he comment on the line in the clause about how records should be returned
“as soon as reasonably practicable”?
I know that that is rightly part of the stand part debate, but will he comment on that, if the Chairman allows him to? Timing is important.
The Chairman: Order. The Minister will have every opportunity to comment in the clause stand part debate, which might follow.
12.45 pm
Mr. McFadden: I shall obey the Chairman’s wise guidance and perhaps return to that point during the debate on the clause.
I do not feel that amendment No. 15 would deal with the issue of the co-operation of the employer. One of the things raised with us time and time again is that we are dealing here with vulnerable workers who very often are fearful of reporting. We are also dealing with a system where—we will discuss this in later clauses—currently, without the clauses that we are about to discuss, prosecution is often dependent on the willingness of a vulnerable and often fearful worker to testify in person. The provisions are all about enabling enforcement without always being dependent on such a worker coming forward. The examination of the records, particularly in the context of whether an employer is being obstructive, is a necessary part of that process, which is why I do not agree with the amendment—I am afraid—and hope that the hon. Gentleman will withdraw it.
Mr. Djanogly: The Minister just said that we are dealing with vulnerable workers. In some clauses, that is the case, but not in clause 10, which deals with authorities raiding what might be vulnerable companies. That is the issue with which we are dealing. We have raised our concerns about the fact that in some situations the authorities might not give adequate thought to the needs of the ongoing business of the company from which they are taking documents, probably in some kind of raid. I have heard the Minister try to explain why that is necessary, and I accept that the wording of the amendment is not perfect, which is why I shall not press it to a vote now. However, we will reconsider that point, and in the stand part debate I shall address related circumstances.
Mary Creagh: The hon. Gentleman said that he advised companies on dealing with the consequences of DTI raids. Presumably he would have talked to them about their risk management. Did he ever come across any companies that only had a single copy of their records? If so, would he have advised them of the risk they were taking in the event of a fire, flood or some such accident where those records got lost?
Mr. Djanogly: First, the answer to your question is probably yes.
The Chairman: Order. I did not ask any question.
Mr. Djanogly: The answer to the hon. Lady’s question is probably yes. The largest companies often do not keep multiple copies of their records. More importantly, it is the smaller companies who probably would not be able to afford legal advice or would not even think of going for legal advice in relation to what they should have in the event of authorities raiding them. Those smaller companies are the companies that are most likely to be negatively affected by these provisions. Small companies often do not have the resources to take multiple copies of documents. They are surviving hand to mouth and perhaps may do their paperwork every quarter when they have to do their VAT return or whatever. That is the reality of small businesses. We still maintain that, as drafted, the clause could be a sledgehammer to crack a nut.
Mr. McFadden: I do not want to prolong this any more than is necessary, but I want to take issue with the hon. Gentleman’s comment at the opening of his remarks that the clause was not dealing with a situation involving vulnerable workers. It most certainly is. We may have a situation, as sometimes we do, where vulnerable workers are fearful of reporting the non-payment of the minimum wage and prosecutions that would otherwise take place cannot take place because we have not given the inspectors the necessary powers to enforce the law. That most certainly involves vulnerable workers. In all the clauses relating to the minimum wage we are most certainly dealing with some of the most vulnerable workers in the country.
Mr. Djanogly: I do not accept that. I am not arguing against enforcement. In fact, I am going to argue later that enforcement should be improved. I am not arguing even that raids should not happen where they are appropriate. I am simply saying that the clause as drafted does not give enough leeway for the reality of the circumstances that may exist for companies that are wholly innocent at the time they are raided. The downside of that could be very significant. We have covered the point. We will look at this again. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 ordered to stand part of the Bill.

Clause 11

Offences: mode of trial and penalties
Question proposed, That the clause stand part of the Bill.
Mr. McFadden: I just want to draw the Committee’s attention to one or two points in this clause. It relates to the mechanism by which criminal offences under the National Minimum wage Act 1998 can be tried. Criminal offences already exist under that Act so this does not create new criminal offences, but it relates to the overall strengthening of the penalty regime which we have just heard that the Conservative party supports. The overwhelming majority of cases of non-compliance with the minimum wage have been dealt with under the civil law. That will continue to be the case under the new regime proposed in the Bill.
The national minimum wage is enforced under current arrangements by Her Majesty’s Revenue and Customs. As I said, that is initiated either by a complaint from workers or through risk assessment, including targeted enforcement at low paying sectors. An HMRC enforcement officer will visit the employer, interview the employer and the workers, check the employer’s national minimum wage records and so on. The vast majority of cases are resolved with the employer repaying arrears to workers who have been underpaid, which we have discussed. It is only in cases in which Her Majesty’s Revenue and Customs cannot achieve payment of arrears to workers that the issue and enforcement notice requiring the employer to repay the arrears takes effect. Let me give the Committee some figures. In 2007-08, HMRC investigated 4,500 cases. It found non-compliance in 1,649 cases. Of those, 96 per cent. were settled without the need to issue an enforcement notice and HMRC had to resort to the formal mechanism of issuing notices in only a small number of cases.
Clause 9 changes the enforcement notice process. Following recommendations from the Low Pay Commission, we also want to make changes in other areas, too. I want to talk about the criminal sanctions that are affected by the changes that we propose in clause 11. The National Minimum Wage Act provides for a number of criminal offences—deliberately paying below the minimum wage, failing to keep minimum wage records or keeping false records and obstructing enforcement officers. Currently, such offences can be tried only in a magistrates court in which the maximum fine is £5,000. Criminal conduct by employers is the exception rather than the rule.
As well as considering how we need to strengthen the enforcement regime with the penalties under the civil law, we also considered whether the sanctions for the criminal offences were sufficient. We concluded that in order to ensure a balanced spectrum of enforcement, the potential fine available to a criminal court when sentencing for an offence should be greater than the maximum penalty that can be imposed by notice of underpayment. Secondly, HMRC’s investigative powers, which we believe are necessary and are proposed in clause 12, could not be used if the offences remained triable only as summary offences in the magistrates courts. The clause is important on its own and in relation to clause 12.
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