Employment Bill [HL]

moved Amendment No. 16: 16: Clause 9, page 7, line 44, at end insert— ““(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. (1B) Directions under subsection (1A) may be amended or revoked by further such directions.”” 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. 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 reissue a notice of underpayment if that notice was incorrect—for example, if it wrongly included or omitted a penalty. 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.