National Minimum Wage: Sports Direct

Chuka Umunna Excerpts

Monday 14th December 2015 Commons Chamber

[Mr Chuka Umunna (Streatham) (Lab)]

(Urgent Question): To ask the relevant Minister if he will make a statement on Sports Direct plc and its compliance with the national minimum wage legislation.

[Mr Speaker]

I call the relevant Minister, Mr Nicholas Edward Coleridge Boles.

[The Minister for Skills (Nick Boles)]

Thank you, Mr Speaker.

I share the hon. Gentleman’s concern that working people are paid the full amount that the law requires for every hour that they work, and I welcome his urgent question. We take the enforcement of minimum wage laws very seriously. That is why we have increased the enforcement budget from £8.1 million in 2010 to £13.2 million in 2015-16. While I am not able to comment on enforcement action in relation to individual employers, I can assure the House that Her Majesty’s Revenue and Customs follows up every complaint it receives in relation to breaches of the national minimum wage. I encourage any employer or worker who is concerned that these laws are not being complied with in their workplace to contact HMRC or ACAS, through its confidential hotline. HMRC undertakes targeted enforcement activity in the most high-risk sectors of the economy.

As the Prime Minister announced in September, the Government are taking a number of further steps to crack down on employers who are not paying workers the minimum wage. We have already increased the penalty for breaches of minimum wage legislation to 100% of arrears, up to £20,000 per worker, and from April 2016 the Government will double the maximum penalty from 100% to 200% of arrears so that employers comply with the law and working people receive the money they are due. Furthermore, a new team of compliance officers will be established within HMRC to investigate the most serious cases of employers not paying the relevant minimum wage. The team will have the power to use all available sanctions, including penalties and criminal investigation. We will also continue to name and shame employers who do not pay their workers what they are entitled to.

As a Government, our message to employers is straightforward. We will work to reduce burdens on business by cutting regulation and corporation tax. In return, we expect employers to pay working people at least a decent legal minimum—the national minimum wage and, from next April, the national living wage for workers aged 25 and over. I can assure the House that we will not hesitate to crack down hard on employers, large and small, who break this social contract by failing to pay the wage that the law requires.

[Mr Umunna]

I thank the Minister for his reply. I am proud that the last Labour Government, in the face of the then Conservative Opposition, introduced the national minimum wage in the first place, when people in our country were earning as little as £1 an hour. I am also proud —the Minister mentioned this—that the overwhelming majority of British businesses, notwithstanding any legal requirements, seek to treat their workers with dignity and respect.

We know enough about the practices at Sports Direct plc, which has a branch in my constituency, to conclude that this company is a bad advert for British business and one with a culture of fear in the workplace, which we would not wish to see repeated elsewhere. As the Institute of Directors has said, it is

“a scar on British business.”

I appreciate what the Minister said about not necessarily being able to respond in specific instances, but may I ask him this question? HMRC enforces the national minimum wage. A complaint has been made by Unite the union, of which I am a member, against Sports Direct, accusing it of being in breach of the legislation. HMRC says it cannot act without evidence being provided by workers in that workplace, but, of course, all of them are refusing to come forward in the warehouses concerned, for fear of the repercussions that will follow. Why cannot HMRC go ahead and carry out an investigation in this case, which surely will render other evidence without workers being required to put their necks on the line?

Secondly, may I ask the Minister a generic question? An issue has come up whereby employees are required to go through body searches to check for potential theft. The time they spend going through body searches is not time for which they are paid. The law is unclear in this area. Can the Minister give industry an indication of whether, in the Government’s view, time spent going through body searches would count as working time for the purposes of the legislation?

Thirdly, employees face having 15 minutes of working time deducted if they clock-in just one minute late. The law is not entirely clear about that situation, either. Do the Government believe that if an employer is engaged in those kinds of practices, they are not in keeping with the spirit of the legislation?

Fourthly, the enforcement of national minimum wage legislation is carried out not by the Minister’s Department, but by HMRC. How can we expect HMRC to do the work that we require of it if the Government are pushing through an 18% real-terms cut in HMRC’s funding over the course of the spending review period?

Finally, I have no doubt that the reaction of the employer concerned will be to say, “We comply with the law,” but surely what it needs to understand is that the British public expect a lot more from it. We often do not do things that the law allows us to do, because we do not think that that is the right way to treat our fellow citizens. Surely that should apply to the company in this case.

[Nick Boles]

The hon. Gentleman asked a series of very important and good questions. The first point I would like to make is that, if any employee of any company has any fear of repercussions, I can reassure them that the ACAS hotline is genuinely confidential. I am sure the hon. Gentleman would be willing to endorse the fact that ACAS is an absolutely, resolutely independent organisation, so people should have no fear of calling that hotline out of hours and reporting a practice.

I did say in my brief response that HMRC enforcement is entitled to conduct targeted enforcement activity in sectors of concern, so it is entirely open to HMRC to investigate proactively in sectors where it feels that breaches may be in evidence. In that sense, it does not necessarily need to wait for a specific complaint to be able to investigate breaches.

I have read the article that revealed some of the allegations being made about Sports Direct. The hon. Gentleman asked about the search and whether the time it takes is working time or not. This is an intensely vexed legal question and he will know, as a former employment law practitioner, how much of his former colleagues’ time it is taking up. I cannot give an absolute pronouncement, but what I can say is that anything that counts as work as part of somebody’s employment contract must be compensated at least at the level of minimum wage. The question is whether such a search counts as work under their employment contract, and that question can be explored legally.

The hon. Gentleman mentioned the second claim that was made—about employees being docked 15 minutes for being one minute late. Although it is legally permissible for time to be docked for late arrival, it is important for every hon. Member to understand that the minimum wage legislation will apply to the 14 minutes as well as to the rest of the time that people work, so employees cannot not be compensated for those 14 minutes if that would bring their overall wage rate down below the national minimum wage. I hope that that goes some way to reassure him.

The hon. Gentleman made a general point about the cut in funding for HMRC of 18% over the spending review period. I will have to take his word for it because I do not have the global figures to hand. I pointed out to him the very significant and dedicated increase in funding for the minimum wage enforcement team. It has gone up by more than 50% since 2010 and will go up £3 million this year alone. I can therefore reassure him that, whatever else is going on in HMRC, this is a priority in which we are investing and on which we will beef up activity.

The hon. Gentleman is absolutely right to make the general point that obeying the law is the minimum we expect of employers. We expect employers to behave responsibly and to be good citizens. We hope they would not be satisfied with just obeying the law, but would want to go a great deal further, and in a sense, our expectations about the behaviour of large and profitable employers are even greater than those for others.