Power conferred on: Secretary of State
Power exercised by: Directions
Parliamentary procedure: None
3. Clause 9 of the Bill enables officers appointed to enforce the National Minimum Wage to issue a notice of underpayment on an employer who has failed to comply with minimum wage legislation. The notice of underpayment requires the employer to repay arrears to underpaid workers and, additionally, to pay a penalty for non-compliance. The provisions of clause 9 replace the current requirements of the 1998 Act which provide for separate notices requiring the repayment of arrears and the payment of penalties.
4. Clause 9, as introduced into Parliament on 6 December 2007, provides that where a notice of underpayment is issued it must include a financial penalty in all circumstances. A Government amendment tabled for Lords Report stage would enable the Secretary of State to issue directions setting out circumstances where enforcement officers must issue a notice of underpayment without a penalty.
5. The aim of the amendment is to clarify the Government's policy intention published at the Bill's introduction 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". Until (and unless) a direction is given, the default position is that a penalty must be applied in all circumstances. If directions are given, it will be to specify very limited and exceptional circumstances in which it is appropriate to withhold a penalty. By way of illustration, we are currently considering circumstances in which an employer had relied upon advice from a Government department that he is acting in compliance with minimum wage legislation.
6. The ability of the Secretary of State to limit the imposition of penalties is desirable as operational experience will inform the policy on an ongoing basis. If, as the new enforcement mechanisms in the Bill are rolled out it, becomes clear that there are circumstances in which it is desirable to withhold the penalty, directions can specify those circumstances. Additionally, those circumstances may change over time and so it is desirable that the directions can be amended.
7. The directions will not be in the form of secondary legislation. Rather, they will be part of BERR's published policy on how the minimum wage legislation is enforced. Although the power to make directions is not a power to make legislation, it is reported to the Committee to err on the side of caution.
Department for Business, Enterprise and Regulatory Reform
May 2008
