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House of Lords

Thursday, 9th January 2003.

The House met at eleven of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.

Prayers—Read by the Lord Bishop of St Albans.

Business of the House: Standing Order 41

The Minister for Trade (Baroness Symons of Vernham Dean): My Lords, on behalf of my noble and learned friend the Leader of the House I beg to move the Motion standing in his name on the Order Paper.

Moved, That Standing Order 41 (Arrangement of the Order Paper) be dispensed with on Tuesday next to allow the Motion standing in the name of the Baroness Blackstone to be taken after that in the name of the Lord Grenfell; and on Wednesday next to allow the Motion standing in the name of the Lord Henley to be taken before that in the name of the Baroness Cumberlege.—(Baroness Symons of Verham Dean.)

On Question, Motion agreed to.

National Minimum Wage (Enforcement Notices) Bill [HL]

11.8 a.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Sainsbury of Turville.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 1 [Enforcement notices]:

Baroness Miller of Hendon moved Amendment No. 1:

    Page 1, line 14, at end insert—

"(2B) No notice under subsection (2) or (2A) shall be served in respect of any pay reference period more than six years before the date of the service of the notice.""

The noble Baroness said: The Bill is intended to correct an unintended anomaly in the substantive Act. It overrules a decision of the Employment Appeal Tribunal whereby a person who has been underpaid his entitlement to the national minimum wage but has left the employment forfeits his right to recover the lost amount.

Parliament unarguably intended that every employee—present and past—should be able retrospectively to recover the arrears. The Bill, supported by these Benches, puts that matter right.

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However, the amending Bill, introduced by the Government, throws up yet another drafting omission in the National Minimum Wage Act 1998. The power to make retrospective orders under Section 2 of the Act did not impose any limitation on the extent of arrears that,

    "the Officer acting for the purposes of the Act",

could order to be paid. But such underpayments when they occur, whether reprehensibly, deliberately or through inadvertence or ignorance, are nothing more or less than civil debts.

Amendment No. 1, of which I gave the Government advance notice on Second Reading, simply confirms that this civil debt is subject to the same right of recovery under the Limitation Acts as any other civil debt. Even from the errant employer's point of view, the fact is that the majority—if not all—cases of underpayment, whether deliberate or accidental, will be by very small employers and even equity does not demand that he should be faced with a retrospective claim for what could be seven, eight or even more years of arrears. Six years is ample time for an employee to discover that he has been underpaid and to seek to recover those arrears.

It would be another anomaly if an employee who pursued his civil claim via the courts was subject to the limitation Acts whereas one engaging the mechanics of this Act had unlimited time.

The Committee may recall that when I raised this issue at Second Reading the Minister rejected the point on the grounds that,

    "the measure . . . can only be retrospective for three years as companies are required only to keep records for three years".

He went on to say, in order to emphasis that argument:

    "Although I believe that civil debt can go back six years, the measure we are discussing could be retrospective for only three years".—[Official Report, 10/12/02; col. 156.]

I thank the Minister for correcting that misstatement of the law in response to a letter I wrote to him after Second Reading. He is always very courteous; he was very courteous and speedy in this case.

While referring to possible difficulties in establishing a claim going back more than three years, which I acknowledge, he wrote:

    "There is no time limit in the legislation on how far back enforcement notices may be taken".

There is no time limit. Exactly. That is precisely the point of the amendment. I should like to think that the Government are not seeking to create a specially privileged class of creditor who would not be subject to the normal statute of limitation and that they will therefore correct the anomaly I have pointed out by accepting the amendment. I beg to move.

Lord Razzall: The noble Baroness raises an extremely interesting point. I do not want to go into the arcane precedent of the law of limitations, as no doubt the Minister will have to do in order to respond to the noble Baroness, but I shall ask the Minister one fundamental question. I can envisage in 10 or 15 years' time, when presumably the minimum wage legislation will still be in force, although the rates may be different, that the kind of cases which the Bill

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contemplates will arise when someone discovers—albeit in this case after he or she has left the employment in question—that he or she has been underpaid for a considerable period of time. Why in those circumstances should the period of back pay to which that person is entitled be limited only to three years, or six years as in the amendment of the noble Baroness?

If someone has been earning 6,000 a year in their previous employment and they should have been paid 7,000 a year, why should they not be entitled to the extra 1,000 a year going back to the time they started that employment? That is the core of the point which the Minister needs to answer before the Committee can comment or vote on the amendment of the noble Baroness.

Lord Sainsbury of Turville: The Government agree with the general thrust of the amendment, which aims to ensure that enforcement notices cannot go back for more than six years. However, in practice, we believe that the amendment is not needed.

I shall begin by explaining the position under the present legislation. If an employer fails to comply with an enforcement notice, enforcement officers can pursue one of two options. First, officers can take a case to the county courts, in which case the Limitation Act 1980 already applies. They could seek to recover arrears only for a period of up to six years. Almost all the cases brought so far by the Revenue have used that route and are, therefore, already subject to the six-year restriction sought by the amendment. Secondly, officers can take a case to the employment tribunals, using the powers in the Employment Rights Act 1996. In that case, officers must put their case before the tribunals within three months of the last underpayment, but the Limitation Act does not apply. In theory, officers could pursue underpayments over a period exceeding six years. However, the three-month limit for bringing a claim is extremely tight and, in practice, that route has hardly ever been used by the Revenue.

The legislation was deliberately designed to give enforcement officers similar rights in this area to those already held by the individual workers concerned, essentially to create the possibility that officers should be able to stand in for the workers and enforce their rights in much the same way as the workers themselves. In this legislation, we are talking about enforcement rights and enforcement officers, not the underlying rights in the basic legislation.

I therefore think it would be wrong to create a position in which officers using the tribunals route could not go back as far as the workers themselves could, even though, as I said, few cases use that route. The great majority of cases brought by the Revenue can go back for only six years. Although, in theory, some cases could be taken back further, that seems extremely unlikely in practice. I should add that the average minimum wage case extends back for less than a year and—a point that I have made before—the

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minimum wage came into force only in April 1999. At the moment, therefore, cases could be taken back only for three and a half years in any event.

The minimum wage regulations require employers to hold pay records only for three years, so that, in practice, the Revenue would find it difficult to pursue cases that went back further than three years, unless there was clear evidence, such as payslips, held by the worker and no dispute about the hours worked.

For all those reasons, it seems likely that few cases will go back further than three years and very few will go back as far as or further than six years. I hope that that gives the noble Baroness the reassurance that she seeks and that she can agree to withdraw the amendment.

11.15 a.m.

Baroness Miller of Hendon: I shall withdraw the amendment, but I shall read carefully what the Minister said. The Minister intends to be helpful, not convoluted, but what he said struck me as being convoluted.

The noble Lord, Lord Razzall, does not want to limit the period even to six years, and I understand that. I would not like the noble Lord to think that I do not want the employee to get whatever he deserves. I believe that he will—

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