The National Minimum Wage Bill
The introduction of a National Minimum Wage was a central plank of Labour's electoral programme. The level at which the minimum wage is set will be seen by many as a litmus test of Labour's commitment to social justice. The Low Pay Commission is due to report during 1998 with a recommended figure.
The hourly rate will obviously be the key issue, but the effectiveness of the minimum wage will also depend on its scope and on rigorous enforcement. These issues are addressed in the National Minimum Wage Bill which is proceeding through the House of Commons. The Bill is an encouraging first step, with a number of interesting features.
Who qualifies?
The Bill provides a general right to pay at a rate not less than the national minimum for all those who qualify (clause 1). This is not confined to employees but to "workers" (clause 51). Workers are defined broadly to include employees and also all those who, under a contract, perform personally any work or services for another party who is not a client or customer of any profession or business carried on by the worker. Essentially, anyone providing labour to another is a worker, unless they provide their labour as part of a business which they run.
This broad definition is significant. It severely restricts the scope for avoidance by employers who seek to create relationships of sham self-employment. The definition is broader even than that relating to unlawful deductions from wages in the Employment Rights Act (see section 230(3)).
This is made clear by the provisions of clauses 16 and 21(5) which extend provisions of the Employment Rights Act relating to unlawful deductions and protection against detriment to those who count as "workers" under the minimum wage legislation, even though they would not be regarded as workers covered by the relevant provisions of the Employment Rights Act.
There are special provisions for agricultural workers and for sub-contractors.
Agency and home workers
Special provision is made to protect agency and home workers. Agency workers are treated as entitled to the minimum wage from whichever of the principal or agent is responsible for paying the worker (clause 31). A home worker is defined as someone who contracts to execute work in a place not under the control of the employer. Home workers are entitled to the minimum wage even where they engage others to assist with the work (clause 32).
Excluded workers
Crown employment is covered as is most work on UK registered ships and in the armed forces. Share fishermen and work carried out by prisoners are excluded.
The other exclusion is volunteers for charities or other voluntary organisations who work for no remuneration or only for expenses equivalent to those actually incurred (clause 41). This is a limited exception which would not be available to other employers who seek to argue that low paid staff are volunteers and therefore deprived of employment rights: an argument used by the last government, unsuccessfully, in cases concerning auxiliary coastguards.
Young workers
Only workers who are over compulsory school age are covered by the legislation. In a controversial provision, the Secretary of State has power to set a lower rate for workers under the age of 26 or even exclude those workers altogether from entitlement to the national minimum wage (clause 3).
Burden of proof
The broad scope of the legislation is reinforced by the provision placing the burden of proof on the employer (clause 26). It is presumed that a person qualifies for the minimum wage unless the employer proves to the contrary and the onus is also on the employer to prove that the employee is remunerated at not less than the minimum rate.
What counts towards the rate?
Much of this aspect of the legislation is left to regulations, which will be issued after the Low Pay Commission has made its recommendations. The pay reference period will be provided for by the Secretary of State, as will the rate of the national minimum wage itself, but - significantly- the wage must be at a single hourly rate: the legislation does not allow variable rates to be set (except for those under 26). The Bill specifically rules out variations by region, size of employer, sector, age or occupation (clauses 1(3), 2(7) and 3(7)).
Regulations will determine what counts towards the national minimum wage and how to calculate what a worker is actually being paid. This will include dealing with variable hourly rates, lump sums and payments in kind. Pay must be by the employer: payments by others (presumably including tips) are not covered (clause 52(2)).
Low Pay Commission
The provision most worthy of comment in relation to the Commission is the requirement that, when making its recommendations, it must take account of the effect of the legislation on the economy of the UK as a whole and on its competitiveness.
Making it known
Perhaps the most effective way of enforcing the minimum wage is ensuring that it is widely known. The Secretary of State must arrange for publicity on the rate and enforcement (clause 47). The entitlement to an itemised pay statement will now require a statement of the rate of the national minimum wage and this is extended to workers who would not qualify for an itemised pay statement under the existing legislation (clause 12).
Employers will be required to keep records, which workers will be able to inspect if they believe they are being paid less than the minimum (clause 10). The worker may be accompanied by a representative and may complain to an Industrial Tribunal if the right is denied or the information is not provided. There is a punitive sanction of 80 times the national minimum wage.
The Government may establish an inspectorate to require production and explanation of records and to enter premises.
Enforcement: employment rights
The national minimum wage is treated as a contractual entitlement, so workers can sue in the County Court, bringing with it an entitlement to statutory interest. The worker has the alternative of bringing an Industrial Tribunal claim for an unlawful deduction from wages (clauses 15 and 16). In these proceedings, the burden of proof is on the employer.
Workers are protected against victimisation for enforcing their rights under the legislation. The protection against suffering detriment is broad: it covers not only acts by the employer, but also deliberate failures to act (in contrast to victimisation of trade union members); it covers dismissal of employees and non-employees and failure to renew a fixed term contract (clauses 21, 22).
Dismissal for a reason connected with action taken on the employee's behalf under the legislation is automatically unfair, involving a similar structure to dismissal for asserting a statutory right with no qualifying period and, interestingly and perhaps a portent of the future, no upper age limit (clause 23).
Enforcement by the state
In addition to the power to inspect records and enter premises, the state may also issue enforcement and penalty notices and apply to the Industrial Tribunal or County Court on behalf of workers. The enforcement mechanism involves payment of sums due plus a financial penalty of twice the hourly rate for each day of non-compliance. Unfortunately, the right to bring "class actions" is not given to trade unions or other organisations.
Employers may also be prosecuted for criminal offences of failing to pay the national minimum wage, failing to keep records, keeping false records, supplying false information or obstructing officers (clause 28).
Overview
The effectiveness of the national minimum wage cannot be assessed until the rate is set and we see how rigorously it is enforced in practice: particularly where workforces are unrepresented and vulnerable. Nonetheless, the National Minimum Wage Bill represents a bold first step, creating broad coverage underpinned by a range of enforcement mechanisms.