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Baroness O'Cathain: I support this amendment, and do so from practical experience. I must declare an interest in that I am a principal, and have been for the past eight-and-a-half years, in an agency employing nurses. In relation to the nurses I employ, I hand out the money at the end of every week and they have no idea of the amount of commission that I pay to the agencies--I have had several over this period. That amount ranges from 20 per cent. to 42 per cent., depending on the agency and the efficiency thereof.

When I read through the Bill I was pretty horrified at the idea that I could be responsible and could be regarded as such because I am the principal. We must think long and hard about this. It is not only the crane drivers who are involved; there are thousands of people in the same situation as myself, particularly in homecare for disabled people. It will cause a lot of angst and a lot of anxiety when people realise what is happening through the Bill.

Viscount Thurso: This clause gives me cause for concern if what the noble Baroness says is correct. Perhaps I may therefore put a question to the Minister.

Suppose I employ, say, the Busy-Bee cleaning agency to come in to clean my office and I have a specific contract with the proprietor of the Busy-Bee

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for my office to be cleaned. He then supplies various workers who come to do that job and in those circumstances I do not pay them or give them any money but have a contractual arrangement with the company and pay that company. Under this clause am I in any way liable for being responsible for the minimum wage?

Lord Clinton-Davis: With respect, there is a misunderstanding of the position affecting this clause. It is because the agency sector is highly complicated that we decided that Clause 34 should represent a belt-and-braces approach, ensuring that where there is an uncertain position relating to the contractual status of agency workers--because it is not clear whether there is a worker's contract with either the agency or the principal--such workers will, nevertheless, be covered by the Bill as though such a contract exists. That is the purpose of Clause 34.

Clearly, the likelihood is that the majority of agency workers will be covered automatically by the Bill, regardless of Clause 34. They will have the status of a worker by virtue of the contractual arrangement with the agency or with the agency's client, whom the Bill identifies as the principal. The vast majority of agency workers are likely to have a contract of that kind. Clause 34 is designed to cover those uncertain or grey areas; it is a fall-back position.

Sometimes the existence of a contract is undoubtedly questionable. Where a contract does exist, it may not always be apparent with whom the contract has been entered into and the employment status of the agency worker may itself be unclear. I hope that there will be very few cases where agencies seek to find ways around their responsibilities under employment law, but it is possible. It is for that reason that Clause 34 exists.

I turn immediately to the specific amendment, Amendment No. 112. I do not have very much to add to what I have already said. The effect of the amendment would be to make Clause 34 unworkable. I cannot think that that is the noble Baroness's objective. The effect would be to exclude precisely those individuals whom the clause is designed to bring into the Bill in the first place; that is to say, it would exclude agency workers who fall into grey areas where it is unclear whether or not they have a worker's contract with the agent or with the principal. I hope that the noble Baroness will not pursue Amendment No. 112 as it would negate the whole purpose that I have been alluding to.

Amendment No. 113 is an interesting amendment but it is wholly inconsistent with Amendment No. 112. It relates to Clause 34(2), which, in the absence of a worker's contract, defines the person with whom the agency worker is to be regarded as having such a contract. Clause 34(2)(a) provides that the contract is regarded as being with either the agent or the principal, depending on which of them is responsible for paying the agency worker. Clause 34(2)(b) provides that where neither the agent nor the principal is responsible for payment, the contract is to be regarded as being with whichever of them actually

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pays the agency worker. The effect of Amendment No. 113 would be that the agency worker would be regarded as having a worker's contract in all cases with the agency--in the absence of such a contract or, in case of doubt, as the person with whom it was held.

I give the noble Baroness this--the amendment does have the advantage of simplicity. However, the difficulty is that it would also mean that even where it is understood by all concerned--the agency, the principal and the worker--that the principal will pay the worker, it will be the agency that will be legally responsible for paying the worker the national minimum wage. I am not sure that the noble Baroness would wish to suggest that that is a satisfactory or desirable outcome. It is a highly difficult and technical matter and it is important because there is a growing tendency for some organisations to use agency workers to provide flexibility. Although the use of agency workers provides significant advantages for the client company, the uncertainty of the employment status of the worker can at times lead to a lack of legal protection for the worker.

As far as concerns Clause 34, it is of value to bear in mind that the standard agency worker arrangements will not be affected either by the clause as it stands or by the clause as it would be amended by Amendment No. 113 because those agency workers will in any event be workers under the general definition in Clause 54 and it will be clear from the contract who is responsible for paying the minimum wage.

I do not deny that there is some merit in the argument adduced by the noble Baroness. As I said before, it has the virtue of simplicity and it would make it easier for agency workers to identify the person from whom to claim; namely, the agency. That would ensure that agencies could not use the clause as a loophole to put the onus on the client, or "principal" in the Bill's terms, to pay the minimum wage. There could be some advantage in that. But it is difficult to judge the extent of the benefit because it is difficult to judge the likelihood of an agency being able to get away with such a course of action. I believe that this is an issue which is finely balanced. I am grateful to the noble Baroness, Lady Miller of Hendon, the noble Baroness, Lady O'Cathain, and the noble Viscount, Lord Thurso, for advancing the matter for debate. On balance I believe that the clause provides a better outcome as drafted. The amendment would go too far unnecessarily by interfering too much in existing arrangements.

When we drafted the clause we sought to reflect the reality of what happens now. Sometimes the principal may clearly have the responsibility for paying the wages and in such cases the obligation to pay the minimum wage would and should rest with the principal. In other words, an agency worker may be paid either by the agency or the client, as the noble Baroness said. It makes sense in assuming the existence of a contractual relationship to follow that flexible practice and to assume that the obligation to

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pay the minimum wage lies with whoever is responsible for payment or, where that is unclear, with whoever makes payment.

The clause as drafted also meets the problem of arrangements involving more than three parties--that is to say, where more than one agent is involved. The criterion for deciding who is legally responsible for paying the minimum wage is whoever is responsible for paying or whoever actually pays the wages at present, as I have indicated.

Finally, I believe that it is right and sensible, when drafting legislation, to err on the side of caution. While there are arguments in favour of Amendment No. 112, I do not believe that it is possible to predict all the effects of making the changes proposed. While Amendment No. 113 would offer a workable arrangement, on balance the way in which the clause is drafted is preferable. Therefore, I ask the noble Baroness to consider what I have said and, in the circumstances, to withdraw the amendment.

Baroness Miller of Hendon: I shall consider very carefully and read very carefully everything that the noble Lord has said. At first, I thought Clause 34 stood the law of agency on its head and I could not see any merit in the clause. I have listened carefully to what the noble Lord has said and I shall read carefully what he has said. I suspect that we shall want to return to this matter because I believe that there is much more merit in our very simple amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 113 not moved.]

Clause 34 agreed to.

Clauses 35 and 36 agreed to.

Clause 37 [Armed forces]:

[Amendment No. 114 not moved.]

Clause 37 agreed to.

Clause 38 [House of Lords staff]:

Lord Clinton-Davis moved Amendment No. 115:

Page 25, line 17, leave out ("contract of employment") and insert ("worker's contract").

The noble Lord said: Amendment No. 115 relates to Clause 38, which applies the Bill to staff of this House. I am glad that we have reached it tonight. As the Bill stands, Clause 38 applies only to such staff who are "employees"--that is to say, staff who have a contract of employment with the Corporate Officer of this House.

The clause was originally drafted in this way to reflect the present reality, confirmed by the House authorities, that all staff of this House in fact have employment contracts. However, partly in the light of views expressed in another place, the Government have in the meantime reflected further on this clause. In particular, they have considered it preferable to treat staff of the other place and this House on an equal footing. Clause 39 differs from Clause 38 in applying to workers who are not employees, as well as to employees. It is also considered more prudent

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to ensure that the law reflects not only the present reality but is also capable of applying to any reasonably likely future arrangements. It is not, of course, any part of my responsibilities in government, but I believe it is not completely out of the question that some individuals might be engaged to do work in this place under arrangements other than a contract of employment.

It is for those reasons that the Government have tabled Amendment No. 115, which I ask the Committee to support. I beg to move.

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On Question, amendment agreed to.

Clause 38, as amended, agreed to.

Clauses 39 and 40 agreed to.

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