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Lord Falconer of Thoroton: Perhaps I may deal first with the point made so effectively by the noble Baroness, Lady Miller of Hendon, in relation to the wording of Clause 48. The point she made with great vigour was that the Government had said through the Notes on Clauses that this is the same as Section 22 of the Wages Act 1986. She said that it is the same as Section 22(1) but that it is not the same as the remainder of that section because the remainder of that section has provision whereby, if the commission of an offence is due to the act or default of some other person, that other person is not guilty of an offence. It also says that in any proceedings for an offence under subsection (1) or (2) above it shall be a defence for the person to prove that he exercised all due diligence and took all reasonable precautions to secure that the provisions of this Act, and of any relevant regulations made under it, were complied with by himself and by any person under his control.

The structure of the Bill is that where there is a superior employer--someone above the immediate employer--he is made jointly liable as the employer with the immediate employer where certain specified circumstances are satisfied. If one then goes back to Clause 31 of the Bill, certain defences are included, including the defences which were formerly in Section 22 of the Wages Act 1986. I have not had a chance to compare precisely the defences under Section 22 of the Wages Act 1986 with the defences in Clause 31 because I did not know that this point would be raised. However, by the way the noble Baroness read them, they seem to be precisely the same defences as are included in Clause 31 of the National Minimum Wage Bill. The one that can be seen most obviously as being the same is in subsection (8) of Clause 31, which is the "I did everything I could" defence--the due diligence defence.

The noble Baroness's point would be a good one if it was good on the facts. However, fortunately from the point of view of the structure of the Bill, I think it is wrong because these defences apply to anyone, whether he be a superior employer or not. Of course I shall check that that is the position, but I think it is. So, with respect to the noble Baroness, I think that her speech was based on a fundamental misconception. In those circumstances, I think it would be inappropriate for her to persist in the allegation that there was any deception on the part of the Government in saying that Section 22 has been followed, because I think it has been. Obviously, she will need to check what I have said but I think it was a misconception.

She said in her speech that I should not bother too much with her actual amendment because this, as she saw it, better point became the fundament of her speech. If I may, I shall accept her invitation. It was accepted in another place that we had introduced this because there would have been considerable scope for abuse if we had not done so. Her amendment proposes that we should

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introduce a caveat to the application of the superior employer rule where the tribunal thought it was not fair and just to apply it. That is simply impracticable as a means of providing protection for people who are employed in this way in, for example, the agricultural industry, the construction industry or the textile industry.

Perhaps I may deal with the point made by the noble Lord, Lord Skelmersdale. We are doing precisely what he suggested we are doing. If one does not have this amendment, the target--and the only target--would be, in his parlance, the foreman. One would not have the man who is actually paying the wages. Without Clause 48, the employer would be the foreman. What one needs to do is to bring in the real employer, who is the one above him, in order to make sure that the person who is in reality the employer--the person who is providing the wages--is caught by the Bill. Therefore, with the greatest respect to the noble Lord, I think we are doing precisely the reverse of what he suggests we are doing. We are bringing in the person who pays so that there is the real employer before the tribunal or the court.

Lord Dixon-Smith: Before the noble and learned Lord sits down, perhaps he will consider subsections (6) and (7) of Clause 31. I am not convinced that his explanation in response to my noble friend's amendment stands up. Subsection (6) states:

"Where the commission by any person of an offence under subsection (1) or (2) above is due to the act or default of some other person, that other person is also guilty of the offence".

That may be fine, but subsection (7) states:

"A person may be charged with and convicted of an offence by virtue of subsection (6) above whether or not proceedings are taken against any other person".

It looks as though it does not necessarily provide a defence because one could gun for both parties whereas there might be only one guilty party.

Lord Falconer of Thoroton: I think the noble Lord is right to say that subsections (6) and (7) are not defences. I was particularly referring to subsection (8), which states:

"In any proceedings for an offence under subsection (1) or (2) above it shall be a defence for the person charged to prove that he exercised all due diligence and took all reasonable precautions to secure that the provisions of this Act, and of any relevant regulations made under it, were complied with by himself and by any person under his control".

Lord Dixon-Smith: I am grateful to the noble and learned Lord.

Lord Fraser of Carmyllie: The noble and learned Lord has given an interesting reply. We shall certainly want to look carefully at subsection (8) of Clause 31. However, as with all splendid answers, it tends to raise more questions than it resolves. If the head employer is to be deemed for the purposes of this Act to be the employer of the person jointly with the immediate employer, there is in subsection (2) of Clause 31 a requirement about the keeping or preservation of records in accordance with regulations to be made under

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Clause 9. I am not clear that I have understood the structure of this provision correctly. Does that head employer just have to make sure that the other employer with whom he is deemed to be an equal keeps records, or does he have to keep a separate set of records himself in order to comply with the provisions into which, through from that clause and into Clause 31 and Clause 9, he is drawn?

Lord Falconer of Thoroton: The effect of Clause 48 is that the head employer--the superior employer--and the immediate employer are to be treated jointly. They are both regarded as employers of the worker jointly. The effect of that is that they are both employers and both have all the obligations of the Bill placed on them. Precisely how they comply with those obligations will depend on the facts in every case. It would be wrong for me to indicate that in a particular case it would or would not be sufficient if the records were kept by one of the two but both had access to them. It would be a question of fact in every case.

Lord Fraser of Carmyllie: I think the noble and learned Lord will want to return to this point because he will appreciate that, if the outcome of the interplay of these provisions is that a head employer cannot compel the employer who is closer to the employee to keep the records and if he has to keep his own separate set of records, some quite interesting issues begin to be raised about the burdens that might be imposed on relatively small businesses. I am sure it is not the purpose of this Government, any more than it was the purpose of the previous government, to impose unnecessary burdens and red tape on small businesses.

6.30 p.m.

Lord Falconer of Thoroton: I fully accept that it is not the Government's intention to impose extra burdens on anyone. We have to remember that the immediate employer will be the employee of the superior employer. Between them one would have thought that they could make sensible arrangements for the keeping of records.

Lord Skelmersdale: I am grateful to the noble and learned Lord for his instant reaction to my perhaps inopportune question. How does the clause relate to Clause 31(1) to which the noble and learned Lord also referred in the course of his remarks? That clause speaks specifically about the employer. Therefore, does Clause 48 mean, in the noble and learned Lord's terminology, both employers; namely, the head employer and the intermediate employer?

Viscount Thurso: Before the Minister answers, perhaps I may say that I have become slightly confused between what is an employer and what is not. Is it not all defined in Clause 54 which sets out that there has to be a contract of employment and therefore a simple supervisor cannot be a subordinate? Is that not the answer?

Lord Falconer of Thoroton: Perhaps I may first deal with the question of the noble Lord, Lord Skelmersdale.

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It is quite a simple and clear structure. Clause 48 makes both immediate and superior employers joint employers for the purposes of Clause 31. Both can be guilty of an offence in Clause 31 subject to the defences in the clause. That legislative technique is adopted to avoid abuse where the real employer is the superior but he is using the immediate employer as a means of trying to get round this or any other provision.

As regards the question put by the noble Viscount, Lord Thurso, broadly it is as simple as he said, subject to Clause 48, except that in Clause 54 there are circumstances in which there could be a relationship which gives rise to the payment of the national minimum wage whereas in strict legal terms there was not a contract of employment. I do not believe that the attractively simple solution he suggests can quite be applied.

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