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Lord Clinton-Davis moved Amendments Nos. 35 and 36:
The noble Lord said: My Lords, in moving Amendments Nos. 35 and 36, I wish to speak also to Amendments Nos. 38, 40 and 41. These linked amendments are essentially technical. They are designed to maintain the status quo of the enforcement arrangements envisaged in the Bill. I have written to the noble Baroness, Lady Miller, and to the noble Lord, Lord Razzall, with a detailed explanation of the amendments. There may be some points I have not covered in writing, in which case an explanation or a letter will be placed in the Library. I beg to move Amendments Nos. 35 and 36 en bloc.
On Question, amendments agreed to.
Clause 15 [Information obtained by officers]:
Lord Clinton-Davis moved Amendment No. 37:
The noble Lord said: My Lords, in moving Amendment No. 37, I wish to speak also to Amendments Nos. 39, 42, 64, 65 and 67. The purpose of these amendments is essentially to clarify the situation. They are being proposed to avoid any doubt and inconsistency as to who holds information for the purposes of the information exchange provisions of the Bill. What I had to say before applies equally in relation to the letter and/or the explanation. I beg to move.
On Question, amendment agreed to.
Lord Clinton-Davis moved Amendment No. 38:
On Question, amendment agreed to.
Clause 16 [Information obtained by agricultural wages officers]:
Lord Clinton-Davis moved Amendment No. 39:
On Question, amendment agreed to.
Lord Clinton-Davis moved Amendments Nos. 40 to 42:
On Question, amendments agreed to.
Clause 19 [Power of officer to issue enforcement notice]:
Lord Clinton-Davis moved Amendment No. 43:
The noble Lord said: My Lords, the purpose of this amendment is to cut unnecessary red tape and prevent enforcement from being potentially weakened in a specific area. I beg to move.
On Question, amendment agreed to.
Baroness Miller of Hendon moved Amendment No. 44:
Page 10, line 2, after first ("any") insert ("Minister of the Crown or").
Page 10, line 3, at end insert ("Minister,").
Page 11, line 36, at end insert--
("(6A) Subsection (2) above does not affect the title or rights of--
(a) any person whose property the information was immediately before it was obtained as mentioned in subsection (1) above; or
(b) any person claiming title or rights through or under such a person otherwise than by virtue of any power conferred by or under this Act.").
Page 11, line 37, after ("any") insert ("Minister of the Crown who, or").
Page 11, leave out line 42.
Page 12, line 2, after ("any") insert ("Minister of the Crown,").
Page 12, line 3, after ("that") insert ("Minister,").
Page 12, line 27, at end insert--
("(bb) in relation to information obtained by an officer acting in an area which is partly in England and partly in Wales, the Ministers mentioned in paragraphs (a) and (b) above acting jointly;").
Page 14, line 21, at end insert--
("(9) The powers of an employment tribunal in allowing an appeal in a case where subsection (8) above applies shall include power to rectify, as the tribunal may consider appropriate in consequence of its decision on the appeal, any penalty notice which has been served under section 21 below in respect of the enforcement notice.
(10) Where a penalty notice is rectified under subsection (9) above, it shall have effect as if it had originally been served as so rectified.").
After Clause 22, insert the following new clause--
(" . The failure of an employer to pay any wages at all as required under a contract of employment or a contract for services shall not be treated for the purposes of this Act as a failure to pay the national minimum wage when such failure is due to the operation against the employer of any of the provisions of the Insolvency Act 1986 or the Bankruptcy (Scotland) Act 1985 or the corresponding bankruptcy and insolvency legislation in force in Northern Ireland and no enforcement procedures under sections 17 to 22 of this Act shall be undertaken in such cases.").
The noble Baroness said: My Lords, I return to this amendment which I moved in Committee because the Government have not met the case that I advanced on 15th June. I must say at the outset that I accept the blame for this because on re-reading the wording of my original amendment I feel that it did not make my point sufficiently clearly, although I thought it did when I spoke. I therefore propose a revised amendment which I believe fully meets the Government's objection. I regret that I have been unable to specify precisely the primary legislation affecting Northern Ireland but I do not have the research facilities available to the Government. That can no doubt be rectified on Third Reading.
In presenting my amendment on a previous occasion, I said that this was not a device to enable an employer to escape paying the national minimum wage by the simple expedient of not paying any wages at all. This was to cover the situation where an employer becomes bankrupt or goes into liquidation or receivership and is unable to pay the wages due to the staff. The noble and learned Lord the Solicitor-General proceeded to demolish the case for an employer saying, as it were, "Look, we are a bit short of money at the moment. Do you mind not being paid anything at all for the next few weeks?" That was the case that I had expressly said I was definitely not putting forward. The Minister began the passage I just quoted by saying:
"Putting aside a case of bankruptcy or liquidation".
20 Jul 1998 : Column 678
But that was exactly the case I asked to be covered. The fact that the noble and learned Lord the Solicitor-General acknowledged that bankruptcy and liquidation were a separate case makes the case for this amendment.
Clause 31(8) of the Bill provides a partial but slightly ambiguous defence by an insolvent employer from the criminal sanctions constituted by Clause 31(1). This amendment makes the position absolutely clear: an employer who is already suffering the misfortune of insolvency is not only absolved from criminal prosecution but from the other sanctions and penalties provided for in Clauses 17 to 22. The Solicitor-General has already recognised that that situation is a special case. All I ask is for the Government to put a statutory seal on it. I beg to move.
Lord Falconer of Thoroton: My Lords, I am grateful to the noble Baroness for explaining the purpose of the amendment. It is worth making a general point first about the operation of bankruptcy and insolvency law. Its purpose is not to penalise the employer or anyone else, as the amendment would seem to suggest. Instead, I regard that legislation as providing a systematic means of sorting out a financial mess that has inevitably arisen. That must be in the interests of everyone concerned.
If the amendment is intended to highlight the position of the Crown as a preferential creditor of an insolvent business, capable of emptying the pot before employees can get their hands on any remaining assets, I have to say that that is not my understanding of how the process works.
I am advised that preferential creditors do not rank ahead of each other in that way. In other words, if there are £500 of assets to distribute and £5,000 worth of preferential claims, each preferential creditor gets 10p in the pound--whether that creditor is the Crown or an employee in respect of pay. So the somewhat alarmist scenario envisaged by the noble Baroness in Committee, along the lines that the Government could take all the money and prosecute the employer for failure to pay the national minimum wage, seems to be based on a misapprehension of the way in which bankruptcy and insolvency law operates. The scenario to which I have referred was suggested by the noble Baroness in Committee. The way in which she presented this amendment indicates that it is designed to cover the situation to which I referred then.
In any event, it is highly unlikely that a genuinely insolvent company or bankrupt employer would be subject to criminal prosecution for failure to pay the minimum wage if he had first postponed other payment obligations not involving a criminal offence and was still unable to pay the minimum wage due to financial collapse. Where he does have sufficient money, however, it seems only right that he should use that to pay the minimum wage rather than to discharge other civil debts. Clearly, a position in which employers were entitled to postpone payment of the minimum wage to their lowest paid workers before postponing payment of purely civil obligations would be unacceptable.
The criminal offence which the Bill creates in that respect is the refusal or wilful neglect to pay the minimum wage. Clearly, the surrounding circumstances would be taken into account in deciding whether there should be a prosecution in any particular case. Again, referring to what was said in Committee, I do not believe that over-zealous officials would or could take advantage of the situation. Such officers will in any event be working to the remit provided by the Secretary of State.
The wider question is how a worker can secure any outstanding payments owed to him by the business which is unable to pay him irrespective of the minimum wage legislation. In that event our concern is to ensure that the worker receives his money, not to punish the insolvent employer.
There are already mechanisms in place for such payments to be made to workers where a company is unable to meet its obligations. The Department of Trade and Industry's redundancy payments service can make certain payments to the former employees of insolvent employers under the Employment Rights Act 1996.
The question of whether a worker has received the national minimum wage therefore becomes subsumed in the larger question: has he received his wages at all? If it transpired that the wages owed were actually lower than the minimum required because the employer had been breaking the law, the redundancy payments service would pay the minimum wage to which the worker was entitled.
I appreciate that the explanation I have given is rather dense in the sense that it relates to provisions under insolvency and bankruptcy law. I do not think that anybody, whatever the time of day, could have taken it in at one shot. However, I believe that I have dealt with the points that the noble Baroness legitimately raised. I could not reasonably expect the noble Baroness, or anybody, to take all of my reply in at the speed at which I delivered it. I suggest that the noble Baroness reads my reply in Hansard. She will then realise that there is no need to pursue the amendment.
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