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As the law currently stands, employment tribunal awards may be enforced, after the statutory 42-day period for payment, in the same way as county court judgments, by means of a court order. Interest is payable after the 42-day period in most cases. We are aware of the need to address the enforcement of employment tribunal awards and, as was said in Committee, we are already taking action to make the enforcement of awards easier—my noble friend Lady Turner was kind enough to mention that.
I shall repeat briefly what we are doing. The Tribunal Courts and Enforcement Act 2007 provides for the enforcement of awards in all tribunals as if they were payable under a county court order, so the claimant does not have to go through the county court but can go straight to the bailiffs for enforcement after the 42 days. The same Act provides that a legally binding agreement brokered by ACAS will be enforceable in the same way and it provides for unpaid awards to be included on the Register of Judgments and Orders. That is likely to make it more difficult for respondents who have defaulted on payment of awards to obtain credit. It is currently intended to implement these measures in April 2009 at the same time as the statutory dispute procedures under the current Bill. We think that is the appropriate way to deal with those respondents who fail to pay awards due to claimants. We should allow time for these measures to bed down, but of course we need to assess their impact. It is a long-held principle of civil justice that the conduct of proceedings should rest largely in the hands of the parties concerned, and we do not believe that the establishment of a state mechanism for the enforcement of employment tribunal awards is justified when a simpler solution is to hand.
I should declare an interest as a long time ago I was chairman of a local citizens advice bureau for three years, and it follows that I have the greatest respect for Citizens Advice and the work it does in providing free advice to some of the most vulnerable in society. It argues that registration of the award in the county court is not enough and that state-led enforcement on behalf of the claimant is needed. It suggests that this might be undertaken either by directly employed lawyers or by the commercial firm, Sheriffs Lodgment Centre. We believe that we should first assess the impact of the changes due in April 2009, which I understand that Citizens Advice supports, as far as they go, although it does not think they go far enough.
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Late last Thursday, we received the interim report on the research, mentioned by my noble friend Lady Turner, commissioned by Citizens Advice into the scale of the issue. We have not had time to assess it fully, but Ministers have asked officials to meet Citizens Advice when the final report is available to discuss the findings and the implications for enforcement. The Government are also commissioning their own research on the payment and enforcement of awards.
As was said in Committee, we are, in addition, providing help to vulnerable claimants in the Bill, by extending tribunals’ discretion to make additional awards against respondents to cover the full financial loss arising from money not paid or unlawfully withheld in certain simple monetary claims.
The Government share the concern that Citizens Advice has brought to our attention—through this amendment moved by my noble friend—that enforcement of awards is important. We want to give time to the measures that we have taken to bed down and see that they work in practice. It is on that basis that I invite my noble friend to withdraw her amendment.
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Baroness Turner of Camden:My Lords, I thank the Minister for that very detailed response. I noted, particularly, that he referred to the possibility of an arrangement that involved going straight to the bailiffs, which I think Citizens Advice would have supported, judging by the briefing that it supplied to me. I am interested to learn that the Government are commissioning their own inquiry and that there is an intention to meet citizens advice bureaux to discuss the interim report. While I would like the amendment that has been suggested by the CABs to have been agreed to, it seems that the Government are aware of the problems and that some action will be taken. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9 [Notices of underpayment]:
Lord Jones of Birmingham moved Amendment No. 16:
“(1A) The Secretary of State may by directions specify circumstances in which a notice of underpayment is not to impose a requirement to pay a financial penalty.
The noble Lord said: My Lords, Clause 9 replaces the current enforcement and penalty notices with a single notice of underpayment. The new notice will require a non-compliant employer to repay arrears of the national minimum wage to the employees specified on the notice as having been underpaid, and to pay a financial penalty to the Secretary of State. The Government are committed to effective national minimum wage enforcement which supports employees and businesses by deterring non-compliant employers from underpaying their employees. We envisage that a penalty will be levied in almost all cases of non-compliance. However, we also realise that there may be circumstances where it would be inappropriate to penalise an employer for failing to pay the minimum wage.
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Our response to last year’s consultation on national minimum wage enforcement, which was published on the introduction of the Bill to your Lordships’ House, stated that:
“The legislation will not require enforcement officers to issue penalties in all cases, although as a matter of policy they will be expected to do so in all but the most exceptional cases”.
At the time the Bill was introduced we considered that we had achieved this policy, as new Section 19(2) on page 7, at line 13, gives the enforcement officer a discretion whether to issue a notice of underpayment. However, we have considered this matter further and believe that there may be limited circumstances where we would wish to require an employer to repay arrears to employees, but where we would not wish to impose a penalty on that employer. Clause 9 does not allow for this.
Amendment No. 16 seeks to clarify the Government’s policy intention as set out in our response to consultation. It provides that the Secretary of State can make directions to set out circumstances in which a notice of underpayment should be issued, but without a financial penalty. This amendment will allow additional flexibility to respond to future circumstances by means of directions issued by the Secretary of State, rather than needing to make further legislative change. If directions are issued, they will be included in a policy statement to be published by the Department for Business, Enterprise and Regulatory Reform. This policy statement will be made available to the general public and will deal with how the national minimum wage enforcement regime will operate.
As I have said, the aim of this amendment is to allow the enforcement regime to respond to future circumstances where it would be unjust to issue a penalty and so ensure that our enforcement is effective but fair. We are not able to say at present exactly what all those future circumstances might be. I do not think it would be particularly helpful this afternoon to explore numerous hypothetical scenarios out of context. I am pleased to note that this amendment has the support of the CBI. As noble Lords will know, I was director-general of that organisation for six and a half years. I was in favour of the national minimum wage being implemented, but it all happened before my watch. I am very pleased it was so done.
However, to give a flavour of why we believe that this amendment is required, it may help to say that one circumstance we are considering is where, previously, another government agency has stated that the employer’s practice was compliant with national minimum wage requirements but that proved not to be the case in practice. I should emphasise at this point that that is a hypothetical example. We are not aware of any of those problems. Nevertheless, we believe that it would be manifestly unjust to issue a penalty for an employer and, in effect, penalise him for a mistake that was not of his making. Amendments Nos. 17 to 28 make necessary consequential changes. Amendment No. 26 provides an additional ground for appeal to cover cases where an enforcement officer has issued a notice of underpayment that includes a penalty in circumstances where the Secretary of State has directed that a penalty should not be issued. Amendments Nos. 27 and 28 provide that an enforcement officer may withdraw and
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It is important that we create an easily understood deterrent which makes clear that underpayment of the national minimum wage is unacceptable, and what the consequences of underpayment will be. That will provide greater support to vulnerable employees and help ensure a level playing field for compliant businesses. That is the aim of Clause 9. This amendment is not a watering-down of the enforcement regime; rather, it will enable us to avoid the situation where a penalty has to be issued in circumstances where it would be unjust so to do. I beg to move.
Baroness Wilcox: My Lords, I am glad that with this amendment the Government have started to appreciate that the world of employment law regulation is an extremely complicated one for employers to navigate and that sometimes mistakes can happen. I have no doubt that it is with the help of the noble Lord, Lord Jones, who, as he said, was the director-general of the CBI for quite a long time. He has brought this new thinking into a Labour Government. However, I am concerned at how far this amendment will be implemented. In his letter of 13 May, for which I thank him, he said that he would consider waiving the penalty for underpayment only if the employer had been misadvised by another government agency. A government agency gives wrong advice to a small employer doing his best to keep up with the realms of regulation issued by DBERR, yet there is a possibility that the employer will be expected to pay for the mistake. Excuse me. Would my noble friend take over?
Lord Henley: My Lords, I shall continue with what my noble friend was saying. The Government said in Committee that their intention behind imposing a penalty on underpayment of wages was to deter wilful underpayers. If this is the case, why are they not immediately providing an exemption for those solutions where the underpayment was clearly a mistake? This refusal on the part of the Government to appreciate the difficulty that even the most careful employers have in becoming fully compliant has led to such burdens being placed on small businesses.
Lord Jones of Birmingham: My Lords, I assure the noble Baroness, Lady Wilcox—whom I hope will quickly recover—that the example I was using of one department in government giving advice to an employer, which turns out to have been wrong advice in the light of the judgment of another part of government, was just one example. Indeed, I have no evidence of the fact that it currently happens. I was merely trying to illuminate the point at issue.
On Question, amendment agreed to.
Lord Bach moved Amendments Nos. 17 to 28:
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Clause 9, page 8, line 20, leave out from beginning to “is ” and insert “In a case where a notice of underpayment imposes a requirement to pay a financial penalty, if the employer on whom the notice”
Clause 9, page 8, line 33, after “underpayment” insert “which imposes a requirement to pay a financial penalty”
Clause 9, page 9, line 42, leave out “the ground” and insert “either or both of the following grounds—
Clause 9, page 10, line 43, leave out “an officer acting for the purposes of this Act” and insert “and it appears to an officer acting for the purposes of this Act that the notice incorrectly includes or omits any requirement or is incorrect in any particular, the officer”
Clause 9, page 11, line 20, leave out from “above” to “at” in line 21 and insert “and is of the opinion referred to in section 19(1) above in relation to any worker specified in the notice which is being withdrawn (“the original notice”), he may”
On Question, amendments agreed to.
Baroness Turner of Camden moved Amendment No. 29:
(1) The National Minimum Wage Act 1998 (c. 39), section 1 (workers to be paid at least the minimum wage) is amended as specified in subsection (2) and section 40 (application of the wage to mariners) is amended as specified in subsection (3).
(2) In section 1(2)(b) the words “or, in the case of mariners, is a person satisfying either of the provisions of section 40” are inserted after the words “under his contract”.
The noble Baroness said: My Lords, in Committee I sought to get the Government to agree to an amendment designed to deal with the anomalies that exist in the
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The Government opposed my amendment on a number of grounds. There were the expected arguments about the possibility that foreign ships would flag out; those arguments are usually made by shipping employers whenever any improvement in terms and conditions of employment are suggested. It was also argued that to try to enforce the national minimum wage on all ships in UK territorial waters would not be compatible with the UN Convention on the Law of the Sea and customary international law, primarily because it would infringe the right of international passage. Moreover, it was argued that the amendment would mean that the UK Government would have to pursue ships that might only occasionally call at UK ports.
However, the Minister agreed that there were anomalies that should be considered, notably that, because of the distinction made between UK internal waters and UK territorial waters, the national minimum wage became payable in respect of the sea between Scotland and the Inner and Outer Hebrides but not in respect of the sea between Scotland and Shetland. The Minister agreed that other, similar anomalies existed.
Following the debate in Committee, my noble friend Lord Wedderburn and I had a meeting with union representatives. The union concerned has had further discussions with its lawyers and the wording now before the House is the result of those discussions. The union believes that the ships that are of primary importance for national minimum wage coverage are ferries and cargo vessels trading regularly from UK ports. We believe that the revised wording deals with the main arguments against our original amendment, while attempting to deal with the anomalies that the Minister agreed existed as far as present practice is concerned.
It may be argued that the wording could still risk encouraging what is known as flagging out by foreign ship owners unwilling to accept the obligation to pay the minimum wage. We believe this to be a form of blackmail, which the Government should not accept. Shipping is an important industry; indeed, I understand that the Government have made certain tax advantages in acknowledgement of its importance. However, there are obligations as well, one of which should be to ensure that basic employment standards are met for seafarers working on these ships. The Government admit that anomalies exist and the Bill presents an opportunity to put at least some of them right. I urge the Government to accept our revised amendment and I beg to move.
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Lord Hoyle: My Lords, I support my noble friend on this amendment. We took away the earlier, all-embracing amendment and narrowed it down to ships such as ferries that operate regularly between the United Kingdom and EU ports or to the Isle of Man and Jersey. We think that the measure is capable of being enforced and that it is essential that it should be enforced; it is a matter of justice for the people who work on those ships. Once again, I hope that the Minister will look at the amendment and agree with us on the matter. As the Government admitted in Committee, there are anomalies, such as in relation to Shetland. However, let us go a little further and apply this on a broader scale to the ferries and other ships that operate regularly.
6.15 pm
Lord Bach: My Lords, I am grateful to my noble friend Lady Turner for moving the amendment, which, as she said, has been drawn more narrowly and specifically than the previous one. We are grateful to her for the work that she has done on it.
I am afraid that we still feel that the amendment, even as newly drafted, is unworkable. My noble friend Lord Jones wrote to Members of the Committee on the matter, but it is still useful to remind ourselves to which seafarers the minimum wage applies at present. Under present legislation, all resident and non-resident seafarers are entitled to the minimum wage while they are in the UK’s internal waters. A seafarer on a UK-registered ship anywhere in the world is entitled to the national minimum wage unless his employment is wholly outside the UK or he is not ordinarily resident in the UK. The position is that, at the moment, a wide range of people who work in the seafaring industry are due to receive the national minimum wage.
Our problems with the amendment are as follows. First, it would extend the minimum wage to all seafarers on UK-registered ships, including seafarers who do not ordinarily live in the UK or who work wholly outside it. It was never the intention of the minimum wage legislation to extend rights to workers who have no link with the UK. There is also the real possibility that the amendment might have damaging consequences for our own merchant fleet. Extending the minimum wage to all seafarers on all UK ships wherever in the world they trade carries with it the risk that, as my noble friend herself pointed out, companies could change the flag of their ships to that of another country to avoid paying the minimum wage. The seafarers would be no better off and the UK would suffer a considerable disadvantage in terms of the number of ships carrying the UK flag, which I understand to be a matter of great significance in the maritime world.
The amendment would also extend the right to the minimum wage not only to mariners on UK-registered ships but to those on foreign-flagged ships. Attempting to apply the right on foreign-flagged vessels would raise difficulties, of which we also spoke, about the right of foreign vessels to enjoy innocent passage in our territorial waters. Because of the existence of this right, which is indeed enshrined in the United Nations Convention on the Law of the Sea, UK-flagged ships
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