Employment Bill [HL]

Welcome back. I hope that the changes that we are introducing in the Bill show how seriously we consider non-compliance with the national minimum wage. As well as considering how we needed to strengthen the enforcement regime with penalties under the civil law, we also considered whether the sanctions for criminal offences under the National Minimum Wage Act 1998 were sufficient, or whether they needed to be enhanced in line with the penalties imposed for non-compliance. Clause 9 provides that the maximum financial penalty that can be imposed for non-compliance with the national minimum wage by way of a statutory notice of underpayment is £5,000. Currently, criminal offences under the National Minimum Wage Act 1998 can be tried only in the magistrates’ court, where the maximum fine that can be imposed is £5,000. However, there is no such limit on the fine which can be imposed by the Crown Court. In those rare cases where the criminality involved makes it appropriate, it is important that the potential fine available to a criminal court when sentencing for an offence under the Act is greater than the maximum penalty which can be imposed by a notice of underpayment. I say to the noble Baroness, Lady Wilcox, that there is a distinction between the two—non-compliance and greater criminality—for underpayment. Without the possibility of the Crown Court imposing an unlimited fine, there may be a perverse incentive for a criminally minded employer to prefer prosecution because the outcome is likely to be less serious from a purely financial point of view. We cannot have the criminality side being out of kilter with the penalty for a civil breach. We do not believe that the sentencing powers available to magistrates would be suitable in the most serious and exceptional cases where employers refuse or contrive not to pay the national minimum wage and do not co-operate with a compliance officer’s investigations. That is where the distinction to which the noble Baroness referred is highlighted. For example, where an employer owes Her Majesty’s Revenue and Customs £50,000, say, in deliberately evaded tax, the maximum penalty available is seven years in prison or an unlimited fine. However, where an employer owes his workers £50,000 by deliberately underpaying the national minimum wage, the maximum penalty currently available is £5,000. The courts should be able to deal with the deliberate exploitation of the low-paid more strongly than at present. In addition, the strengthening of the investigative powers of Her Majesty’s Revenue and Customs proposed in Clause 12—which we shall discuss shortly—could not be used if the national minimum wage offences remained triable only as summary offences. The power to impose an unlimited fine for criminal offences under the National Minimum Wage Act means that rogue employers could be fined to the total extent of any profits gained from underpaying of the national minimum wage, and ensures that the balance of the enforcement spectrum is preserved. At the moment, notices are issued only when an employer does not comply with a civil enforcement notice, not a criminal one. Clause 9 replaces that with a notice of underpayment that applies the penalty for non-compliance with the national minimum wage. The criminal prosecution regime is totally separate from the civil one and, as required in Clause 9, will apply only in the small minority of cases where there is criminal conduct. The specific answer to the noble Baroness’s question is two.