National Minimum Wage Act 1998

However, s.3 empowers the Secretary of State to make Regulations excluding from the NMW any age group below the age of 26 (such as 16- and 17-year-olds); and s.4 enables him, by Regulations, to add descriptions of those aged 26 or over (for example, apprentices) to the candidates for exclusion in s.3 (and to take them out again). But he may not exclude any age group above the age of 25³. Nor may he differentiate between those who may be excluded on the basis of the region, sector, size of business or occupation in which they work.

Exclusions

The Government has accepted the LPC's recommendations that all 16- and 17-year-olds, and (subject to consultation on Regulations and their approval by Parliament) all those on formal apprenticeships (both traditional and modern), should be excluded from the NMW². The Act itself implicitly or explicitly excludes the following:

Section 44 defines "voluntary workers" as "workers" who: (a) are employed by charities, voluntary organisations, bodies separate from those organisations but whose profits go to them (such as a body running a charity shop) or statutory bodies (such as schools or hospitals); (b) are either unpaid or only receive actual or reasonably estimated travel or out-of-pocket expenses; (c) receive no benefits in kind or none except "reasonable" subsistence or accommodation (such as is provided to those working in youth hostels) and/or training which is geared to improving their ability to do their work (such as first-aid training for those who care for old people or work with children); and, but only if they have been placed with their employer by a charity such as Community Service Volunteers, (d) receive a subsistence allowance¹⁵.

A small minority of those who gave evidence to the LPC suggested excluding from the NMW (or having a lower rate for) disabled workers. But the vast majority, including the Government and organisations representing disabled people, saw no justification for this. However, if after consulting on the Regulations implementing the NMW there were to emerge a radically different response from those organisations, the Government would reconsider how to proceed. The power to exclude (or provide a modified rate for) disabled workers is available in ss.3 and 4, and the position of disabled workers will be included in the continued monitoring by the LPC of the impact of the NMW following its introduction¹⁹.

Meaning of "worker"

Section 54(3) defines a "worker" broadly, and in the same terms as s.230(3) of the Employment Rights Act 1996 (the ERA), as an individual who works under either a contract of employment or "any other contract ... whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or customer of any profession or business undertaking carried on by the individual". Thus, "workers" include not only employees and apprentices but also casual workers, those who work for subcontractors²⁰ and the majority of agency temps and homeworkers.

Special classes

The Act also applies to agency temps and homeworkers who are not otherwise "workers" and to civil servants, relevant members of the House of Commons and House of Lords staff and - with certain exceptions - merchant seamen and women.

Deemed workers

Some agency temps are in a tricky position, because sometimes it is unclear who their employer is. They may not have a contract with anyone in particular; but they will still be in some form of relationship involving working for remuneration²¹. Section 34 applies the Act to an agency temp who is neither a "worker" as defined by s.54(3) nor genuinely self-employed as if he or she has a contract with the person responsible for paying him or her or, if neither the agent nor the person or business that hires him or her is so responsible, with whichever of them actually pays him or her. Section 34 therefore also meets the problem of arrangements involving more than three parties (that is, where more than one agent is involved)²².

Section 35 applies the Act to homeworkers who delegate or are assisted by family members or others. For these purposes, "homeworkers" are individuals who are contracted to work somewhere that is not under their employer's management or control but which need not necessarily be their home²³. Together, ss.34 and 35 are intended to ensure both maximum coverage for the NMW²⁴ and that employers do not try to get round the definition of "worker" in s.54(3)⁷.

Section 18 treats those who would qualify for the NMW if they had contracts which made them "workers" as if they had such contracts. It thus entitles them, if they are paid less than the NMW, to recover the underpayment by complaining to an employment tribunal of an unauthorised deduction from their wages or by bringing an action in a civil court (or, if their employment has ended, in an employment tribunal) for breach of contract. Section 18 is intended to provide those in unusual working relationships, or whose employers contrive to make them self-employed, with the means to enforce their right to the NMW²⁵.

Crown employees

Section 36 applies the Act to those in Crown employment, including civilians such as administrators or clerical staff who work in association with reservists and other civilians employed by the Ministry of Defence¹⁴. The definition of "Crown employment" is the same as that in s.191(3) of the ERA.

Parliamentary staff

Similarly, ss.38 and 39 apply the Act to anyone who was appointed by the House of Commons Commission, is a member of the Speaker's personal staff or is employed by the corporate officer of the House of Lords. Sections 38 and 39 also preserve the right of such a person to bring a claim under the Act before a civil court.

Mariners

Section 40 applies the Act, with certain exceptions, to those employed to work on board a UK-registered ship. They are deemed ordinarily to work in the UK unless their employment is wholly abroad or they are not ordinarily resident in the UK.

Agricultural workers

The Act applies to the agricultural sector as elsewhere, but it does not make wholesale changes to the existing agricultural wages regimes in England and Wales, Scotland and Northern Ireland²⁶. Agricultural wages boards will continue with their work²⁷. The NMW will be the floor below which the pay of agricultural workers must not fall, but the powers of the boards to set other minimum conditions for agricultural workers are unaffected.

Section 47 introduces Schedule 2 to the Act, which contains amendments to agricultural wages legislation. Those amendments ensure that no minimum hourly rate or piece rate fixed under agricultural wages legislation will be less than the NMW, and that all agricultural minimum wage rates will be enforceable under the Act's enforcement provisions (see below) as applied to the agricultural sector²⁸. Section 47 also contains a power to make Regulations amending agricultural wages legislation consequential on the Act or on Regulations made under it.

The review of the agricultural wages boards that was due to take place this year has been postponed until late next year, to take account of the introduction of the NMW²⁹. Section 46 of the Act ensures that the co-existence of the Act and agricultural wages legislation does not result in unfairness or an undesirable outcome²⁶. Specifically, it ensures that a person can neither be prosecuted for the same offence nor recover the same amount both under agricultural wages legislation and under the Act. It also ensures that agricultural wages legislation does not affect the operation of the Act in its application outside the agricultural sector.

Extensions

The Government believes that it has drafted the Act sufficiently tightly to cover all those who should be covered³⁰, but it may not have catered for everybody. Section 41 therefore empowers the Secretary of State to make Regulations applying the Act to individuals of a prescribed description who would not otherwise be "workers".

It may rarely or never be necessary to use the power in s.41, and it could not be used to include a class of person that is expressly excluded by the Act (see above ). It is in the Act to deal with unforeseen circumstances in what is a rapidly changing labour market, and because experience shows that some employers will go to great lengths to evade their responsibilities. The Government wants to be able to close any loopholes which unscrupulous employers may find and exploit. It also wants to be able to adjust the coverage of the Act as may be necessary to deal with changing working practices³⁰.

In normal circumstances, the Secretary of State will consult before using the power in s.41. But the Government cannot rule out the possibility that some employers might reclassify their entire workforce or revise all their working arrangements. If that were to happen, the Government would want to act swiftly to ensure that the workers concerned were not deprived of their rights. That might preclude consultation before action was taken³¹.

Offshore workers

Section 42 enables the Act to be applied to those in offshore employment by an Order in Council. The definition of "offshore employment" is the same as that in s.201(1) of the ERA.

CALCULATION

Section 2 empowers the Secretary of State to make Regulations - in the light of the LPC's recommendations on defining the NMW, all of which the Government has accepted in principle (subject to consultation on the Regulations and their approval by Parliament)² - prescribing how to calculate a worker's hourly rate of remuneration for the purpose of determining if that is at least the NMW. The power is sufficiently wide and flexible to enable the Regulations to reflect the many and varied types of pay systems and working situations that exist in the UK³². In particular, the Regulations may prescribe:

However, the Regulations may not treat the same circumstances differently in relation to different areas or sectors, businesses of different sizes or people of different ages or occupations. Nor does s.2 itself cover the amounts workers should be paid or the benefits that they should receive: it does not interfere in pay arrangements³³.

Pay reference period

Section 1(4) provides that a "pay reference period", for which a worker must be paid at least the NMW, is "such period as the Secretary of State may prescribe for the purpose". The notion of such a period makes it possible to average out the earnings of workers who are employed on an irregular basis³⁴ or who are paid by output rather than by time.

Section 1(4) enables the Secretary of State, by Regulations, to set and to adjust the pay reference period. It will be a matter of judgment as to what that should be³⁵, and there could be different pay reference periods for different kinds of worker (s.51(1)(a)). However, the Government has accepted in principle the LPC's recommendation "that the averaging period for the NMW should be the normal pay period, as agreed between worker and employer, up to a maximum of one calendar month".

ENFORCEMENT

Two "key principles" are said to underlie the Act's enforcement provisions, namely effectiveness and flexibility. The Government wanted to ensure "that those who flout the law are punished, and that any wrong that has been done is put right". It also wanted to provide a number of different enforcement mechanisms³⁶.

How effective the Act's enforcement machinery will be largely depends on the resources that the Government is prepared to make available. There is nothing new about many of the Act's enforcement provisions. They are the same as, or similar to, provisions in Part II of the Wages Act 1986, the whole of which was repealed by the previous Government in 1993 after it had allowed that machinery to wither. The former President of the Board of Trade, Margaret Beckett, has, however, assured the House of Commons that the NMW will be "implemented with vigour"³⁷.

The former Solicitor-General, Lord Falconer of Thoroton, told the House of Lords that the overall purpose of the Act's enforcement mechanisms is to encourage self-compliance. He said: "It is far preferable, if at all possible, to encourage employers to comply voluntarily than to have to provide for a huge bureaucracy to do so."³⁸ Lord Falconer had previously reiterated the Government's overall enforcement objective: "We will do our utmost to encourage everyone to comply with the [NMW]. We will ensure that it is effectively enforced, and with the minimum necessary burden on business. Record-keeping is the key to that."³⁹

Record-keeping

The Government believes that keeping records is "vital to effective enforcement". That is why the Act makes an employer's failure to keep records if it is required to do so a criminal offence⁴⁰ (see below ). Without "adequate" records, it will not be possible to enforce the Act. Workers need to be able to see what they are being paid, and employers need to be able to defend themselves in case they are accused of underpaying. It is therefore in everyone's interests that adequate records are available⁴¹.

Employers' duty to keep records

Section 9 of the Act empowers the Secretary of State to make Regulations requiring employers to keep such records as may be prescribed, in such form and manner and for such period as may be prescribed. The Government will consult on the Regulations in draft form before laying them before Parliament.

The power involved in s.9 is flexible, since the Regulations may "make different provision for different cases or for different descriptions of person" (s.51(1)(a)). That means, for example, that the Regulations could specify different recordkeeping requirements for different employers⁴⁰. They will provide differently for different circumstances and descriptions of worker³⁶.

Although there will be differences in the types of records required to be kept, not least as regards the number of hours worked and any non-monetary payments which may be allowed to count towards the NMW, records should be kept for all kinds of workers³⁶. They will, of course, include details of wages paid⁴⁰ (most of which will already be required to be kept for tax purposes), and they will almost certainly need to cover hours worked (however that may be defined)⁴¹. But their exact format will be determined by the LPC's recommendations in relation to s.2⁴⁰.

Those recommendations, especially regarding the calculation of a worker's hourly rate for NMW purposes and the length of the pay reference period, will also play an important part in determining the exact nature of the records that employers must keep³⁶. There may be scope for avoiding duplication with other similar records and, in considering for how long records must be kept, the Government will look at existing precedents for record-keeping requirements (including the laws about keeping sick-pay and maternity-pay records). Employers will not be required to keep records for an unreasonably long time, or indeed for an unreasonably short time³⁹. The Government is committed to "reasonable" Regulations on record-keeping⁴².

Worker's right of access

Section 10 gives a worker the right to require his or her employer (a) to produce any records which are relevant to establishing whether or not he or she has been paid at least the NMW ("relevant records"), and (b) to inspect and copy those records.

The Government believes that it is essential to the Act's enforcement provisions for a worker to have the right to look at what the "source material" shows he or she is being paid. Of course, in many cases that right will be met by the employer providing the worker with copies of the records as they relate to him or her. That will, the Government imagines, be the normal way to proceed. But some employers may fail to provide the right records or may wish to conceal relevant ones⁴³. That is why it is always necessary, as in all civil litigation, for the originals to be inspectable⁴⁴.

Furthermore, by allowing workers to inspect their relevant records, it should be possible to prevent cases of simple confusion or misunderstanding. That in itself should help to prevent cases coming before employment tribunals unnecessarily⁴⁴. It will also act as a deterrent for any employer contemplating paying its workers below the NMW⁴⁵. The Government does not believe that the Act allows the right conferred by s.10 to be abused, and doubts that there will be long lines of workers queuing to inspect their relevant records in person. Rather, the Government believes that the right is meaningful and provides adequate protection both for the employer and for the worker⁴⁴.

There are three safeguards for the employer. First, the worker must have reasonable grounds for believing that he or she is being paid less than the NMW. The intention behind that is to cut out frivolous or vexatious requests for the production of records⁴³. Second, the worker must give the employer a written "production notice" requesting the production of any relevant records relating to such period as may be described in the notice. Third, the employer can determine where the inspection takes place⁴⁴. However, the employer must give the worker "reasonable" notice of the place and time at which the relevant records will be produced.

Unless otherwise agreed between the worker and the employer, the latter must produce the relevant records for inspection at either the worker's place of work or "any other place at which it is reasonable, in all the circumstances, for the worker to attend". That is up to the employer to decide⁴³. If the employer is worried about, for example, confidentiality, it would be perfectly reasonable in saying that inspection cannot take place on its premises and that the worker must go somewhere else. That might be the worker's home, the offices of a CAB if that is sensible, or even a solicitor's office⁴⁴.

The employer must also produce the relevant records within 14 days of receiving the production notice, or at such later time as the worker and the employer may agree during that fortnight. The Government hopes that employers and workers will reach sensible agreements as to the time of day when the records should be produced⁴⁶. On some occasions, it may suit both parties to examine the records at a time outside the worker's working hours; and that will be perfectly legitimate⁴³.

Section 10 also gives a worker the right to be accompanied when examining relevant records. But if he or she intends to exercise this right, the production notice must state that intention. The Government believes that this right is essential to prevent some employers from fobbing off their workers or from pulling the wool over their eyes. It does not believe that there will be many such cases, but the option to be accompanied provides a reasonable deterrent⁴³.

There is also a pragmatic reason for that option. Some of the calculations of remuneration for NMW purposes may not be at all straightforward, and some workers may feel more confident if they can call on a colleague with particular accounting or legal expertise. Again, some workers may not have a complete command of the language to enable them to understand financial or legal terms. The outcome should assist understanding of the position and, to the extent that there may have been an innocent misunderstanding, should encourage early resolution of the problem⁴⁴.

Failure to allow access

An employer's failure to produce relevant records, to produce them at one of the specified places or by the prescribed time, or to allow a worker to inspect and copy them (on his or her own or with a companion) does not give the worker the right to enter the employer's premises. It only entitles him or her to complain to an employment tribunal under s.11. Such a complaint must be lodged within three months after the deadline for the production of the records (or, if that was not reasonably practicable, within such further period as the tribunal considers reasonable), and may be heard by a chair sitting alone (s.27).

If the tribunal finds that the employer did fail to allow the worker access to relevant records, it must make a declaration to that effect and must also award the worker 80 times the hourly rate of the NMW (as in force when the award is made). That sum will be £288 until such time as the starting rate of £3.60 an hour is varied. The tribunal may not award any more or any less than that sum, nor may it grant the worker any other remedy.

Underpayment

Section 17 gives workers paid less than the NMW a contractual right to recover the difference between what (if anything) they have been paid and the NMW. Thus they may complain to an employment tribunal under s.23(1)(a) of the ERA that their employer has made an unauthorised deduction from their wages, or they may bring an action against their employer in a county court (or, if their employment has ended, in an employment tribunal) for breach of contract.

Workers who successfully complain to an employment tribunal are entitled to recover the amount of the underpayment, but no interest, whereas those who bring a civil action are entitled to interest as well. The Minister of State at the DTI, Ian McCartney, has concluded, "with great reluctance", that it is not feasible to give workers who complain to an employment tribunal a right to interest only on underpayments recoverable under the Act⁴⁷. There are no limits on how far back claims of workers who complain to an employment tribunal can go, provided that they are in time (see s.23(2)-(4) of the ERA), whereas county court claims can go back a maximum of six years before the proceedings were brought.

Reversal of burden of proof

Section 28 provides that, where a person claiming to have been paid less than the NMW complains to an employment tribunal or brings a civil action in order to recover the underpayment, the presumption will be that he or she was paid below the NMW and that he or she qualifies for the NMW. The onus will therefore be on the alleged employer, if it disputes the claimant's claim or status, to show that he or she has been paid the NMW or is, for example, genuinely self-employed⁴⁸. But it will still be for the claimant to establish the amount of the underpayment⁴⁹.

This reversal of the normal burden of proof is intended to help "vulnerable" workers, such as homeworkers and agency temps, who might otherwise be deterred from enforcing their right to the NMW because they do not keep a record of what they are paid⁵⁰ or because of their uncertain status⁴⁸. Frequently they may be working on their own or without access to representation⁵⁰.

Victimisation

Section 23 gives workers (not just employees) the right, from day one of their employment⁵¹, not to be "subjected to any detriment" (with the exception, in the case of employees, of dismissal) by their employer because:

Thus, workers who are not presently eligible for the full rate of the NMW or a higher rate, but who are about to become so because of their age or a general uprating, are protected from victimisation by their employer for that reason⁵², even during the period when no rate has yet been set⁵³.

Section 24 enables a worker to complain to an employment tribunal that he or she has suffered a detriment that breaches s.23. The complaint must be lodged within three months from the date of the employer's act or deliberate omission (or, if that was not reasonably practicable, within such further period as the tribunal considers reasonable), and it will then be for the employer to show the reason for its act or omission.

If the tribunal upholds the complaint, it must make a declaration to that effect and may also make an award of compensation. If the worker was not an employee and the detriment he or she suffered was the termination of his or her worker's contract or other arrangement, the amount of the compensation awarded must not exceed the amount that the worker would have received if he or she had been an employee who was unfairly dismissed. In any other case, there is no limit on compensation. It will be such amount as the tribunal considers just and equitable, having regard to the particular infringement and any loss attributable to the employer's act or omission. Since the worker will still be working, he or she is unlikely to have lost much financially⁵¹.

Unfair dismissal

Section 25 inserts a new s.104A and a new s.105(7A) into the ERA. They provide that employees who are dismissed or selected for redundancy will be regarded as unfairly dismissed if the sole or main reason for their dismissal or selection was that:

Section 25 also provides employees with such protection against unfair dismissal from day one of their employment, and disapplies the upper age limit in s.109 of the ERA if it applies. Section 26 provides the same protection against unfair dismissal for employees in Northern Ireland, by inserting new provisions into the Employment Rights (Northern Ireland) Order 1996.

Enforcement officers

Section 13 empowers the Secretary of State to appoint officers to enforce certain provisions of the Act and/or to arrange for inspectors from an existing government department or agency to act as enforcement officers. The Government has accepted the LPC's recommendation "that an existing government agency should be asked to take on the responsibility of verifying employers' compliance with the NMW", and the most likely candidate is the Contributions Agency (which is to be combined with the Inland Revenue in April 1999). The Government also has the option of appointing agricultural wages inspectors to enforce the NMW specifically in the agricultural sector.

Enforcement officers must produce identification if requested when they are on duty, and they must identify themselves as such to anyone with whom they are dealing who is apparently unaware that they are on duty.

Power to issue enforcement notice

Section 19 enables an enforcement officer who believes that an employer has been paying a worker or workers below the NMW to serve an enforcement notice on the employer requiring it to start paying the NMW to the worker or workers concerned, and to pay them wage arrears.

An enforcement notice is just a warning, and an employer can comply with it simply by paying wage arrears to the worker or workers to whom it relates, and by starting to pay them the NMW. Further, before deciding to issue the notice, the enforcement officer will almost invariably have made contact with the employer and discussed the matter with him or her informally⁵⁴.

Section 19 also gives an employer served with an enforcement notice a right of appeal to an employment tribunal within four weeks of receiving it. The appeal may be heard by a tribunal chair sitting alone (s.27). If it is wholly successful, the tribunal will rescind the enforcement notice; and any penalty notice (see below) which was served on the employer will be of no effect. If the appeal is partially successful, the tribunal will correct the enforcement notice and any penalty notice as appropriate. The tribunal may also award costs against the enforcement officer if he or she acted unreasonably in defence of the enforcement notice⁵⁵.

To succeed in an appeal against an enforcement notice, the employer must show: (a) that the enforcement officer had no reason to serve any enforcement notice (for example, because the "workers" to whom the notice served relates are genuinely self-employed); or (b) that the enforcement officer had no reason to include some of the workers concerned in the notice served (for example, because they have not been underpaid); or (c) that no wage arrears were owed to the workers in question, or that the amount of wage arrears specified as owing in the notice served is wrong⁵⁶.

The Government does not anticipate that there should be many successful appeals by employers. But if an employer is confident that it will win its appeal, it can choose to pay nothing pending the outcome of the appeal. If it accepts that it was underpaying, but thinks that the calculation of arrears is wrong, it should pay what it believes is due pending the outcome of the appeal. In either case, however, it risks being sued by an enforcement officer on behalf of the worker or workers to whom the enforcement notice served relates and/or being served with a penalty notice⁵⁵.

Non-compliance with notice

Section 20 provides that, if an enforcement notice is not complied with, an enforcement officer may, on behalf of any workers included in the notice (who are incapable of representing themselves or of seeking representation on their own⁵⁷), complain to an employment tribunal that the employer has made an unauthorised deduction from their wages or take other civil proceedings to recover any sums that are owed to them by the employer.

Before an enforcement officer decides to sue, on behalf of any worker, the worker's employer, he or she must be satisfied that the employer has a case to answer on the basis of the evidence and of an interview with the employer, who in turn must have been involved in the consideration of the evidence during the investigation⁵⁷. Where the officer decides to sue, that does not detract from any right which the worker may have to recover the sums owed to him or her by the employer.

Section 21 provides that, if an enforcement officer is satisfied that an employer served with an enforcement notice has failed to comply with the notice, the officer may serve a penalty notice on the employer requiring it to pay a fine no earlier than four weeks from the date it received the notice. The notice must also state the respects in which the officer believes that the enforcement notice has not been complied with, the period to which the fine relates, the amount of the fine and the calculation of that amount.

The longer the employer takes to pay the fine the bigger it will be: its amount is twice the hourly rate of the NMW (as in force when the penalty notice was served) for each worker who is underpaid and each day of non-compliance. The fine is payable to the Secretary of State, who may, by Regulations, adjust its amount by changing the multiplier; and it is recoverable as if it were payable under a court order in England and Wales or Northern Ireland or the equivalent in Scotland. In other words, there is no need for the enforcement officer to prove the debt before a court.

Section 22 provides that, where a penalty notice is served on an employer which has appealed against an enforcement notice, the penalty notice will not be enforceable until the appeal has been withdrawn or finally determined. Moreover, s.22 gives an employer served with a penalty notice a right of appeal to an employment tribunal within four weeks of receiving it; and, again, the penalty notice will not be enforceable where such an appeal is pending.

An appeal against a penalty notice may be heard by a tribunal chair sitting alone (s.27). If the appeal is wholly successful, the tribunal will rescind the notice. If it is partially successful, the tribunal will correct the notice as appropriate. To succeed in the appeal, the employer must show: (a) that the enforcement officer had no reason to serve any penalty notice; or (b) that some of the details affecting the amount of the fine given in the notice that was served are wrong; or (c) that the amount of the fine itself has been miscalculated.

Other powers of officers

Section 14 gives enforcement officers the power:

However, enforcement officers may not require any person to answer questions or furnish information which might incriminate the person or his or her spouse.

Information obtained by officers

Section 15 provides that information which an enforcement officer has obtained when on duty - for example, from an employer about wages paid or hours worked - is treated as held by the Secretary of State. But the ownership of the information does not change hands: it remains the property of the employer⁵⁹. Section 15 also provides that such information may be exchanged, with the authorisation of the Secretary of State, between different agencies responsible for enforcing the NMW. But they may use the information only for purposes relating to the Act; and they may supply it to others only for the purposes of bringing civil or criminal proceedings under the Act, and then only with the authorisation of the Secretary of State.

Section 16 is similar in design and structure to s.15. It is designed to cover two parallel situations. The first is where an agricultural wages inspector visits an employer who employs agricultural and non-agricultural workers, and uncovers evidence of non-payment of the NMW to a worker who is not entitled to an agricultural minimum wage rate. In that situation, the officer may pass on the information to the agency responsible for enforcing the NMW. The second situation covered by s.16 is the reverse of the first. An enforcement officer might uncover evidence of non-payment of an agricultural minimum wage rate during an inspection of a packhouse, for example, where the majority of the workers will be entitled to the NMW. In that situation, the officer may pass on the information to the agricultural wages inspectorate⁶⁰.

The purpose of ss.15 and 16 is to remove unnecessary obstacles to the exchange of information between different enforcement agencies that might handicap the effective enforcement of the NMW or of agricultural minimum wage rates. The information that may be exchanged, the circle of those who may exchange it and the purposes to which it may be put, must all be related to the enforcement of the NMW or of agricultural minimum wage rates. Improper disclosures of information by enforcement agencies will be dealt with "in the strongest possible terms" under internal disciplinary procedures, whilst the normal injunction procedure should usually prevent the misuse of information by those agencies. However, neither s.15 nor s.16 prevents any passing on of information which would otherwise be lawful⁶⁰.

Appeals and conciliation

Section 29 provides that appeals on points of law from proceedings before employment tribunals under the free-standing provisions of the Act (for example, ss.11, 18, 20 and 22) will go to the EAT. Section 30 allows conciliation officers to conciliate complaints to employment tribunals under ss.11, 18, 20 or 24.

Criminal offences

Section 31 makes it a criminal offence for an employer:

All six offences are triable without a jury, and both an immediate and a superior employer (see the box on p.13) may be held jointly responsible for either of the first two offences.

Maximum penalty

The penalty for each offence under s.31 is a fine not exceeding level 5 on the standard scale, which currently stands at £5,000. That maximum will not need to be applied in each and every case, and nor does the Government expect there to be a substantial number of prosecutions. The provisions of s.31 will be used only in rare and extreme cases⁶¹, and as a last resort⁶².

It is highly unlikely that a genuinely insolvent or bankrupt employer would be subject to criminal prosecution for failure to pay the NMW if it had first postponed other payment obligations not involving a criminal offence and was still unable to pay the NMW owing to financial collapse. Where it does have sufficient money, however, it should use that to pay the NMW rather than to discharge other civil debts. The surrounding circumstances will be taken into account in deciding whether or not there should be a prosecution in any particular case. If it transpired that the wages owed were actually lower than the NMW, because the employer had been breaking the law, the DTI's redundancy payments service would pay the NMW to which the worker was entitled⁶³.

Employers' defence

A court will not convict an employer of refusing or wilfully neglecting to pay a worker at least the NMW, or of failing to keep records as required by Regulations made under s.9, if the employer proves that it "exercised all due diligence and took all reasonable precautions" to secure that it complied with the Act or the Regulations. The former Solicitor-General described that as the "I did everything I could" defence⁶⁴, and it is available to both an immediate and a superior employer (see the box on p.13).

Offences by companies

Section 32 provides that the main officers of a company or other corporate body - that is, "a director, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity" - will be held jointly responsible with the body for offences under s.31 that are proved to have been committed with their consent or connivance, or to be attributable to any neglect on their part. The same goes for the members of a management company and for the partners in a partnership in Scotland.

Conduct of proceedings

Section 33 enables the Secretary of State to authorise enforcement officers⁶⁵ or other non-lawyers to prosecute offences under s.31 in a magistrates' court in England and Wales or in a court of summary jurisdiction in Northern Ireland. It also stipulates the time limits for bringing prosecutions in those jurisdictions and in Scotland.

Contracting out

Section 49 makes any agreement void to the extent that it seeks to exclude or limit the operation of the Act's provisions, or to preclude a person from complaining to an employment tribunal under the Act, except where a conciliation officer has conciliated the complaint or a compromise agreement has been reached which satisfies the conditions regulating such agreements.

References

¹ 31.7.98, DTI press release.

² 18.6.98, Hansard (HC), cols. 508-509.

³ 9.3.98, Hansard (HC), cols. 111-112 and 116.

⁴ 11.6.98, Hansard (HL), cols. 1265-1266.

⁵ 22.1.98, Hansard (HC), Standing Committee D, col. 184.

⁶ 29.7.98, Hansard (HL), col. 1535.

⁷ 11.6.98, Hansard (HL), cols. 1247-1248.

⁸ 15.1.98, Hansard (HC) Standing Committee D, cols. 50-51.

⁹ 22.1.98, Hansard (HC), Standing Committee D, col. 224.

¹⁰ 22.1.98, Hansard (HC), Standing Committee D, col. 195.

¹¹ 11.6.98, Hansard (HL), col. 1253.

¹² 13.7.98 EAT 952/97.

¹³ 22.6.98, Hansard (HL), cols. 59-60.

¹⁴ 5.2.98, Hansard (HC), Standing Committee D, cols. 778-779.

¹⁵ 9.3.98, Hansard (HC), cols. 24-25.

¹⁶ 11.6.98, Hansard (HL), col. 1219.

¹⁷ 20.7.98, Hansard (HL), col. 697.

¹⁸ 5.2.98, Hansard (HC), Standing Committee D, col. 771.

¹⁹ 27.7.98, Hansard (HL), col. 1215.

²⁰ 9.3.98, Hansard (HC), col. 114.

²¹ 29.1.98, Hansard (HC), Standing Committee D, cols. 687-688.

²² 15.6.98, Hansard (HL), cols. 1436-1438.

²³ 3.2.98, Hansard (HC), Standing Committee D, cols. 707-709.

²⁴ 29.1.98, Hansard (HC), Standing Committee D, col. 603.

²⁵ 27.1.98, Hansard (HC), Standing Committee D, cols. 501-505.

²⁶ 5.2.98, Hansard (HC), Standing Committee D, cols. 831-832.

²⁷ 22.6.98, Hansard (HL), col. 67.

²⁸ 17.2.98, Hansard (HC), Standing Committee D, col. 1010.

²⁹ 9.3.98, Hansard (HC), col. 165.

³⁰ 3.2.98, Hansard (HC), Standing Committee D, cols. 748-752.

³¹ 22.6.98, Hansard (HL), cols. 51-52.

³² 27.1.98, Hansard (HC) Standing Committee D, cols. 327-329.

³³ 27.1.98, Hansard (HC) Standing Committee D, col. 275.

³⁴ 17.2.98, Hansard (HC) Standing Committee D, col. 1011.

³⁵ 11.6.98, Hansard (HL), col. 1251.

³⁶ 9.3.98, Hansard (HC), col. 216-218.

³⁷ 18.6.98, Hansard (HC), col. 514.

³⁸ 15.6.98, Hansard (HL), col. 1401.

³⁹ 15.6.98, Hansard (HL), cols. 1384-1385.

⁴⁰ 27.1.98, Hansard (HC) Standing Committee D, cols. 453-454.

⁴¹ 20.7.98, Hansard (HL), cols. 639-641.

⁴² 15.6.98, Hansard (HL), col. 1387.

⁴³ 20.7.98, Hansard (HL), cols. 649-652.

⁴⁴ 15.6.98, Hansard (HL), cols. 1400-1403, 1405 and 1407-1408.

⁴⁵ 27.1.98, Hansard (HC), Standing Committee D, col. 458.

⁴⁶ 27.7.98, Hansard (HL), col. 1204.

⁴⁷ 9.3.98, Hansard (HC), col. 224.

⁴⁸ 29.1.98, Hansard (HC), Standing Committee D, cols. 649-650.

⁴⁹ 9.3.98, Hansard (HC), col. 234.

⁵⁰ 20.7.98, Hansard (HL), cols. 683-684.

⁵¹ 29.1.98, Hansard (HC), Standing Committee D, col. 605.

⁵² 9.3.98, Hansard (HC), cols. 226-227.

⁵³ 28.7.98, Hansard (HC), cols. 272-274.

⁵⁴ 27.1.98, Hansard (HC), Standing Committee D, cols. 528-529.

⁵⁵ 15.6.98, Hansard (HL), cols. 1415-1416.

⁵⁶ 15.6.98, Hansard (HL), col. 1422.

⁵⁷ 27.1.98, Hansard (HC), Standing Committee D, cols. 548-553.

⁵⁸ 27.1.98, Hansard (HC), Standing Committee D, col. 483.

⁵⁹ 28.7.98, Hansard (HC), col. 269.

⁶⁰ 9.3.98, Hansard (HC), cols. 56-59 and 80-82.

⁶¹ 29.1.98, Hansard (HC), Standing Committee D, cols. 672-674.

⁶² 9.3.98, Hansard (HC), col. 219.

⁶³ 20.7.98, Hansard (HL), cols. 678-679.

⁶⁴ 22.6.98, Hansard (HL), col. 71.

⁶⁵ 29.1.98, Hansard (HC), Standing Committee D, col. 682.

National Minimum Wage Act 1998: main points to note

Low Pay Commission

Sections 5 to 8 and Schedule 1 to the Act provide a statutory framework for the existing, non-statutory Low Pay Commission ("the LPC") to work in, but do not specify what its future role will be. The Government envisages the LPC's role as being "task-orientated, not unlimited"; and, in order to maintain the task-orientated focus, essentially the LPC must be "reactive, not proactive"⁶⁶. The Government also intends to disband the LPC once it has completed the tasks that the Government has set it if there is nothing further for it to do⁶⁷.

The Government set up the LPC in July last year to recommend the initial level and coverage of the NMW. The LPC presented its recommendations on 27 May, and the Government responded to them on 18 June. In its response, the Government said it was asking the LPC to review the position of 21-year-olds again in 1999, following the introduction of the NMW in April, and then to report on whether or not, in the light of experience, it reconfirms its advice that 21-year-olds can safely be covered by the full rate rather than the development rate⁶⁸.

The Government also wishes the LPC to continue to monitor and report on the impact of the NMW following its introduction, and no doubt that monitoring process will feed into the consideration of any future variation or uprating of the level of the NMW⁶⁶. Section 8(9) empowers the Secretary of State to reconvene the LPC as required to consider the impact of the NMW, to advise on possible future adjustments and/or to carry out such tasks as research or monitoring⁶⁹.

Section 6(1) gives the Secretary of State a discretion to refer to the LPC at any time such matters relating to the Act as he thinks fit. This caters for the possibility that the Regulations setting the NMW and establishing its operation may require amendment at some future time because they do not cover particular detailed circumstances that have been overlooked or missed for some reason. A component of pay, for example, may not have been considered fully. Problems of a technical nature to do with the pay reference period may be discovered. At the same time it remains perfectly open to the Secretary of State to refer matters of a more substantial nature, including any review of the need to vary or increase the level of the NMW⁷⁰. If economic circumstances were to change, the LPC could be called on to review the rate at any time⁷¹.

Section 7 provides that, where matters are referred to the LPC under s.6(1), it must consult organisations representative of employers and of workers - and, if it think fits, any other body or person - before arriving at the recommendations to be included in its report to the Prime Minister and the Secretary of State. The latter must lay the report before Parliament and arrange for it to be published.

⁶⁶ 27.7.98, Hansard (HL), col. 1221.

⁶⁷ 22.6.98, Hansard (HL), cols. 77-78 and 85.

⁶⁸ 18.6.98, Hansard (HC), col. 508.

⁶⁹ 27.1.98, Hansard (HC), Standing Committee D, col. 451.

⁷⁰ 11.6.98, Hansard (HL), col. 1275.

⁷¹ 11.6.98, Hansard (HL), col. 1270.

Responsibility for paying NMW

Section 1(1) of the Act makes a worker's employer responsible for paying him or her no less than the NMW. Section 54(4) defines the "employer", in relation to a "worker" (see pp.9-10 of the text), as "the person by whom the ... worker is ... employed". The definition is the same as that in s.230(4) of the Employment Rights Act 1996. By virtue of the Interpretation Act 1978, "person" includes a corporation, such as a company, and an unincorporated body, such as a partnership in England and Wales or Northern Ireland (but not in Scotland)⁷².

Multiple employers

A worker who has more than one job is entitled to be paid at least the NMW by each of his or her employers for the time during which he or she is working for them. So too is a worker who works for more than one employer simultaneously, such as a childminder who in a given period looks after children belonging to two different families. In that period, he or she looks after all the children simultaneously but is employed by both sets of parents⁷³.

Superior employers

Particularly in farming and in the construction and textile industries, a worker's immediate employer may himself or herself be employed by some other person (a "superior employer") on whose land or premises the worker is employed. In that particular and not very common situation, s.48 of the Act deems the superior employer to be the worker's employer jointly with the immediate employer⁷⁴. The responsibility for paying the worker at least the NMW falls on each of them, and they both have all the other duties of employers under the Act placed on them. Precisely how they comply with those obligations will depend on the facts in every case⁷⁵.

⁷² 22.6.98, Hansard (HL), col. 80.

⁷³ 27.1.98, Hansard (HC) Standing Committee D, cols. 278-279 and 489 and 11.6.98, Hansard (HL), cols. 1207 and 1210.

⁷⁴ 10.2.98, Hansard (HC) Standing Committee D, cols. 862 and 867.

⁷⁵ 22.6.98, Hansard (HL), col. 73.

National minimum wage statements

Section 12 of the Act empowers the Secretary of State to make Regulations requiring employers to provide workers, when or before they are paid, with a written "national minimum wage statement" containing information (a) relating to the Act or any Regulations made under it or (b) to help them establish whether or not they have been paid at least the NMW for the period to which the payment relates. Section 12 also empowers the Secretary of State to make Regulations applying ss.11 and 12 of the Employment Rights Act 1996 (the ERA), which deal with the enforcement of an employee's right to receive an itemised pay statement under s.8 of the ERA, to workers and to national minimum wage statements as they apply to employees and to itemised pay statements.

Section 10 of the ERA already enables the Secretary of State to require national minimum wage statements to be given to employees: he can, by Order, add to the information that must be shown on itemised pay statements. But only the Regulation-making powers under the Act allow Regulations to apply differently to different cases or for different descriptions of person (see s.51(1)(a)). Therefore, the Act extends those powers to cover employees as well as workers who are not employees. Employers will be required to include a national minimum wage statement in their employees' itemised pay statements by Regulations made under s.12 of the Act, rather than add to the particulars that must be included in those statements by an Order made under s.10 of the ERA.

That flexibility is important. Although the Government has not yet taken detailed decisions over national minimum wage statements on pay slips, it wants to leave its options open. It may, for example, want to apply the Regulations differently to different sorts of firms⁷⁶. The Government has, however, accepted in principle (subject to consultation on the Regulations and their approval by Parliament) the Low Pay Commission's recommendation "that employers should be obliged to display on pay slips both the NMW and details to enable workers to confirm readily whether they have received the statutory minimum".

⁷⁶ 27.1.98, Hansard (HC) Standing Committee D, cols. 460-462.

Publicity

Section 50 of the Act places a duty on the Secretary of State to arrange for information about the Act and Regulations made under it to be brought to the attention of "persons affected by them" (that is, both employers and workers). The information will be consistent with their languages and traditions, take account of people with disabilities and be provided by the Government in all the different forms of media (including the free media) with the cooperation of a wide range of organisations.

After the introduction of the NMW, "services will provide clear information, advice and help about how to deal with the rate and related issues, and about how to implement the wage properly"⁷⁷. As part of its overall publicity and enforcement strategy for implementing the NMW, the Government will need to consider the Low Pay Commission's recommendation "that employers should be encouraged to display details of the NMW prominently in the workplace".

⁷⁷ 10.2.98, Hansard (HC) Standing Committee D, cols. 907-911.