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Viscount Thurso: My Lords, I intervened to speak to the amendments moved by the noble Baroness at Committee stage. With the massed ranks of my party behind me I should like briefly to speak again to this matter. Having read carefully in Hansard the words of the noble Lord, Lord Clinton-Davis, I concluded that as to the principle of the clause my fears were largely ungrounded but as to the detail it was unclear that the provision achieved what was sought. At Committee stage the noble Lord said that Clause 34 should represent a belt and braces approach, ensuring that where the position was uncertain--because it was unclear whether there was a contract with either the agency or the principal--such workers should be covered. I applaud that. I agree that either the agent or the principal should be responsible.

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However, I believe that Clause 34 potentially traps both parties. For example, if in my business I employ a contracting company to install central heating, as Clause 34(1)(a) is written, should that plumber fail to obey the legislation it is possible that liability to ensure the payment of the minimum wage falls upon me as the employer of the contractor. The first matter on which I seek reassurance is whether in those specific circumstances any liability falls upon me as employer. As a sub-question, if in my contract with that plumber I require him to contract that he will obey the legislation, does that provide me with a suitable defence?

I believe that the heart of the Clause 34 is in line 11. Paragraph (b) provides that Clause 34 applies in any case where an individual,

    "is not, as respects that work, a worker, because of the absence of a worker's contract between the individual and the agent or the principal".

It is unclear to me whether that deals with the agent or the principal, or both. I believe that if the words "or the principal" are deleted or the word "either" is inserted before reference to the agent or principal the Government will achieve the clarity that they seek.

Secondly, is the position that the Government are seeking to achieve that somebody must be responsible, who will be either the agent or the principal, but that if the principal has taken just cause to ensure that the agent is paying properly, he or she will not be liable simply because the agent has not obeyed the law?

9.45 p.m.

Lord Clinton-Davis: My Lords, first, can I reassure the noble Baroness, who constantly wishes to erect barricades--and I have a sense of understanding as to where she might put herself there--that we certainly have not regarded all employers as unscrupulous. That is nonsensical. After all, employers were involved in the work of the Low Pay Commission--they were involved in the consultation. They do not share the Opposition's sense of foreboding and even malice about the Bill. It is clear that the Government place great importance upon consultation with all sides of industry. That was part and parcel of what we sought to do long before the last election and since. I think that that was unworthy of the noble Baroness. She is often extremely persuasive--albeit wrong--and always entertaining. I hope she will regard that as a compliment.

The noble Baroness said quite rightly that I had referred last time--though I thought I said it was an extreme example--to somebody marrying to avoid the effects of the national minimum wage legislation.

Baroness Miller of Hendon: My Lords, when the noble Lord raised the matter I could not believe my ears, but I was about to say that maybe, if an employer had two female employees, he might suggest that the employer marries both and so commits bigamy in order not to pay the national minimum wage.

Lord Clinton-Davis: My Lords, that is on a par with most of the noble Baroness's arguments during the

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course of this debate. The fact is that I have heard of less good grounds for marriage. Of course, we were dealing somewhat ironically with the situation.

The noble Baroness said that the existence of a contract can never be in doubt. We have employment tribunals which are constantly visited with these problems. They deal with the nature of a contract, the contracting parties, the legality of contracts and so forth. These matters are not always simple; nor can they be reduced to the alleged commonsense simplicity in which the noble Baroness delightfully indulges us from time to time. She even said that I and my noble and learned friend took a rather different view because we are lawyers; that we look at these things in an arcane way almost deliberately. I would remind her, although I do not think she needs reminding, that she is married to a lawyer, and a very nice labour lawyer he is. I take umbrage on his behalf at that particular remark. Of course one would like to be able to deal in these somewhat simplistic ways, but it cannot always work out like that. That is the problem. That is why there is such a burden of case law dealing with employment matters, and this will not be immune to that.

These amendments, and the point made by the noble Viscount, Lord Thurso, to which I will come later, all relate to Clause 34 dealing with agency workers. It is quite clear that there are some misunderstandings about how the Bill works and the way in which agencies work, and they still remain. What the noble Baroness has argued, in effect, is that the principal, is, as a matter of fact, never the employer. The employer is always the employment agency which supplies the worker. I believe that that is fundamentally wrong. It may be the case in some instances but it is not the case in all instances. The DTI has an entire section devoted to enforcing employment agency standards. I regret to say that there is much case history which shows that sometimes it is not at all easy to determine who is the employer.

In some cases it is clear that it is the principal who is the employer, but not in all instances. We are dealing with the law, perhaps regrettably from the noble Baroness's point of view. There are three parties involved in the arrangements. It is not unusual for there to be more than three. The parties can come up with whatever arrangements suit them. More and more agencies use arrangements where the contract is specifically with the employer and not with the agency.

I want to make clear that there is nothing illegal about that. There are examples in almost every sector of industry. Perhaps I can give an illustration. In the world of the theatre it is often the case that an actor is supplied by an agent but employed by the theatre or film company. It is almost long-established practice. One finds such a situation in many other instances. For the noble Baroness, it is easy to identify the employer at all times, because that is the person who has the contract of employment. With respect, that is a misunderstanding of the clause because the clause does not refer to those with ordinary contracts of employment. Those are the straightforward cases. The clause relates to those agency workers who are not otherwise workers and who cannot be readily identified as being employed by the agent.

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That is the point I tried to make in earlier debates and the point raised by the noble Viscount, Lord Thurso. The contract cannot be both with the agent and with the principal. It has to be with one or the other.

The majority of agency workers is likely to be covered automatically by the Bill regardless of Clause 34 because they have the status of worker by virtue of a contractual arrangement with the agency or the agency's client whom the Bill identifies as the principal. Most people will be covered by such arrangements. We are talking about a situation where it is difficult to determine the position. There will be grey areas. It is that situation which brings in Clause 34.

I thought that we had explained that point in previous debates. We set it out in the Notes on Clauses. I hope that the noble Baroness will think again about what I have been saying. She was kind enough to say to my noble and learned friend that she will spend all of her working days and working nights reading his words. Perhaps she will do the same with what I have said, but with less emphasis. I referred rightly to Clause 34 being a belt-and-braces clause. I hope that I have dealt with that point. I think that I have covered most of the ground that I wanted to cover in relation to that amendment.

I turn now to Amendment No. 52. I do not entirely dismiss what the noble Baroness said in relation to it. It is an interesting amendment. It relates to Clause 34(2) which, in the absence of the worker's contract, defines the person with whom the agency worker is to be regarded as having a contract. I went into the matter at some length in Committee. Perhaps I may offer a resume of those arguments.

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 pays the agency worker.

The effect of the amendment 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 to the person with whom it was held. Is that the right conclusion that we wish to draw here? It is simple; there is certainly an advantage in simplicity. But it would mean that even where it was understood by all concerned--the agency, the principal, the worker--that the principal will pay the worker, the agency has legal responsibility for paying the worker the national minimum wage. I cannot believe that that is a satisfactory outcome for such a situation.

It is not an easy point, but it is important. There is a growing tendency for some organisations to use agency workers to provide flexibility. Although the use of agency workers provides significant advantages to a client company, the uncertainty of the employment status of the worker can lead to a lack of legal protection. That is what we are concerned about in protecting this aspect of the matter.

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I said that there was some merit in the noble Baroness's proposal, although I doubt whether all agencies would agree. It would be simpler. It would be easier for agency workers to identify the person from whom they could claim--the agency. It would ensure that agencies could not use the clause as a loophole to put the onus on the client (or principal, in the terms of the Bill) to pay the minimum wage. However, it is difficult to judge the extent of the benefit because it is difficult to determine the likelihood of an agency being able to get away with such a course of action.

I appreciate the importance placed by the noble Baroness on this matter. I do not dismiss it lightly. However, we are of the opinion that the clause as drafted provides a better outcome than the amendment suggested by the noble Baroness. We believe that the amendment would go unnecessarily far by interfering too much in existing arrangements. While, therefore, the amendment would be workable, I do not think that it is as effective as the provision that we have sought to import into the law. If the noble Baroness proposes to read what I have said, I hope that on this occasion she will withdraw the amendment.

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