Small Business, Enterprise and Employment Bill

Lord Young of Norwood Green Excerpts

Monday 26th January 2015 Grand Committee

[Lord Stoneham of Droxford (LD)]

My Lords, I apologise for being a little late for the beginning of the remarks of the noble Lord, Lord Wills, but I will say a few words in this debate. Generally on this side we are supportive of moves that provide extra protection for whistleblowers. Clearly, people who feel that they have to whistleblow must be protected and must have the remedy for being protected. Listening to the debate, I think that the idea of having some form of national code that would supersede the many codes that have grown up is on the face of it a good thing. I will say only that speed is always of the essence in these cases. If they are allowed to drag on, they become very bureaucratic —the individuals are put to huge inconvenience and stress while their grievances are dealt with. My only concern about setting up another regulator or ombudsman is about whether that would just create a bureaucracy that would add to the burden on those who try to deal with these issues, and would slow up the process in which grievances can in general be dealt with quickly. Obviously I will be very interested to hear what the Government have to say in response. We are broadly sympathetic to this tightening up of legislation in this area and the encouragement it should give to genuine whistleblowers.

[Lord Young of Norwood Green (Lab)]

My Lords, we support these amendments. I will preface my remarks by reminding us that in many circumstances this is a matter of life and death. Often the whistleblower finds that his or her life is turned upside down for a considerable period of time and they are put under enormous stress. The lives of the general public can also be affected, as we know from some of the first cases, for example that of the paediatric unit in Bristol. We know that when large organisations get it wrong, they put people and the public at risk, sometimes in extreme circumstances. It is right to remind ourselves of that, and of how much courage it takes for an individual in a large organisation to bring themselves to the point when they feel they have to whistleblow. They might have gone through the procedure of trying to alert their first line manager or even somebody further up the management chain, and still have failed to get any recognition that there was a real problem to be addressed.

We therefore think that the amendments proposed by my noble friend Lord Wills are reasonable; they are justifiable in trying to sort out whether a worker is in fact a whistleblower and is ensured protection. That is extremely important. The amendment enables workers who have been wrongly identified as having made a protected disclosure to be protected under PIDA. Trying to ensure that gagging clauses are finally rooted out is surely another important amendment, and I look forward to hearing the Minister’s response to it. The National Audit Office concluded that many individuals believed that they were gagged regardless of whether or not this was actually the case. Anything that makes that situation clearer and provides adequate protection surely is worth while.

I do not think I need to take much time over the question of whether or not we should include student medical professionals. It seems necessary and I hope that the Government will be sympathetic to it.

Amendment 65 deals with blacklisting. Although we believe that there should be a further inquiry into the general nature of blacklisting, my noble friend Lord Wills has suggested a very reasonable approach to what happens to an individual who, having already lost their job through no fault of their own, finds themselves in a situation where they are unable to gain any further employment, which is surely appalling.

Amendment 63 seeks to ensure that there is not a get-out clause where an employer can suggest that instead of something being a disclosure of information where there is a protected circumstance, that can be got round by considering that it in fact was an allegation, which does not give the employee protection.

I do not need to go into an awful lot more detail because my noble friend Lord Wills and the noble Lord, Lord Low, gave a very detailed analysis. But I will deal with the point about the whistleblowing ombudsman, if only to respond to the noble Lord, Lord Low. One can always make the point about another layer of bureaucracy but when somebody finds themselves in the position of being a whistleblower, we would like to think that these situations are dealt with speedily and promptly but all the evidence tells us that unfortunately these cases go on, in many cases for years, and surely at the end of the day what the individual wants is justice. Having somebody who is genuinely independent as the last port of call is a worthwhile suggestion.

For those reasons, we support these amendments and I look forward to hearing the Minister’s response.

[Baroness Mobarik (Con)]

My Lords, as a new Member of the House, it has been fascinating to follow this Bill through Committee. I am sorry I was unable to speak at Second Reading but I just wanted to say that I support the Bill as a whole, and Clause 144 on whistleblowing. However, listening to noble Lords, there seems to be a lot of new material here that could hold up this important Bill. I should like to hear from my noble friend the Minister what else may be planned outside the Bill on this very important issue.

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Moved by

[Lord Young of Norwood Green]

68ZG: Clause 145, page 125, line 43, leave out from beginning to end of line 4 on page 126

[Lord Young of Norwood Green]

My Lords, I shall speak to all the amendments in this group. It is as well to remind ourselves what an employee has to go through even to get to an employment tribunal.

The Enterprise and Regulatory Reform Act created a number of hurdles that people have to pass. First, they must go to early conciliation at ACAS. If that breaks down, they are issued with a certificate to say that conciliation has been unsuccessful and they must go into the employment tribunal system. An entry fee has to be paid to the employment tribunal service. If they want to take it to a full hearing, there is an additional fee. We do not believe that it is just or fair for a pregnant woman who has been discriminated against at work, for example, to have to pay £1,250 to enter the employment tribunal system.

After going through an incredibly stressful time, including an often expensive employment tribunal, someone might be given a compensatory award that says that they have been wronged at work. The employer must remedy that problem but might decide not to pay. There are a number of hurdles that someone has to get past to be paid, which is why we must try to find a way of remedying the problem, particularly in cases where an employment tribunal sitting in front of a judge has declared that the employee deserves to be compensated and the wrong must be righted.

Amendment 68ZH says:

“Any payments made under this section by the employer must be paid to the employee to the extent that the relevant sum has been fully paid before any sums are payable under the penalty notice”.

Ironically, fines might well be paid to the Government as a result of an employer failing to comply but the compensatory reward could remain outstanding. The Exchequer might benefit but the individual has been denied justice in that the compensatory award has been ignored by the employer. That is why we are recommending that in these circumstances that sum should be dealt with first. Again, I look forward to hearing the Minister’s response to this.

Then there is the question of naming and shaming. We already have a number of circumstances in other legislation where employers are named and shamed. With regard to the national minimum wage, the circumstances in which employers are actually prosecuted or even named and shamed are very few and far between. That is why we believe that this clause ought to include,

“a provision for the publication of the name and other particulars of an employer who does not pay the relevant sum as per the conditions of the notice”.

I beg to move and look forward to hearing the Minister’s response.

[Lord Stoneham of Droxford]

My Lords, I support the principle of these amendments. I look forward to hearing the Minister’s detailed response. It is right that the Government have introduced a number of reforms on employment tribunals, but in doing so they have introduced fees. I understand that the Government are in the process of starting an inquiry into the impact of those fees. We know that the number of people going to employment tribunals has fallen dramatically, so we need to know the reasons for that.

The principle of fees seems to be right in terms of deterring people from making frivolous claims, but we need to ensure that the integrity of the employment tribunal service is open to people with genuine claims, even if they have low means. Therefore, if we are tightening up on the fees, we should be looking closely at the payment of compensation so that the individuals who are awarded compensation get the money as quickly as possible, and preferably ahead of the fines that subsequently could be due on the employer for not having paid that money earlier.

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[Baroness Neville-Rolfe]

My Lords, I thank noble Lords for their amendments. I believe we share the same aim—that of ensuring the best outcomes for individuals who have been through an employment tribunal, and ensuring that they receive their awards. Our research indicates that, without enforcement, only 40% of awards are paid within six months. That is clearly scandalous. Our financial penalty clause is intended to incentivise prompt payment of employment tribunal awards and to prevent employers ignoring judgments by employment tribunals. It applies to all tribunals, awards and settlements conciliated by ACAS. Employers who have not paid the award will receive a warning notice from the enforcement officer. By paying the award in full, promptly, they will avoid a penalty. However, if they do not pay in full, they will be hit with a penalty of 50% of the award. If they continue not to pay, or to pay only part of the award, they can receive further penalties, each of 50% of the unpaid amount, as well as incurring interest on the outstanding award. We consider that encouraging prompt payment in this way is an effective way of dealing with a problem that we agree exists.

Before I return to the amendment, I will respond to the point made by the noble Lord, Lord Young, about employment tribunal fees. It is reasonable to move away from funding being provided largely by the taxpayer towards a more balanced process, whereby the £74 million cost of administering claims to the employment tribunal system are met in part by those who use the system and benefit from it. However, it is important to emphasise that the Government have been very careful to ensure that fee waivers are available for those people of limited means in order that they are not excluded from seeking redress through tribunals. As the noble Lord, Lord Stoneham, has already mentioned, helpfully, the Government—

[Lord Young of Norwood Green]

I hear what the Minister says, but surely there ought to be some concern—as I think the noble Lord, Lord Stoneham, mentioned—about a situation where, in some regions of England, the number of employment tribunals has dropped by 80%? Surely that is not an indication that 80% of claims were vexatious. Does she really not have any concern in this situation that fees are deterring people from bringing what could be completely fair and justifiable cases before an employment tribunal? The evidence we hear from trade unions, which are normally the buffer between the employee and employer, is that that is exactly what is happening.

[Baroness Neville-Rolfe]

My Lords, I am glad that the noble Lord intervened to register his concerns, which to some extent I share. That is why the Government have committed to reviewing the introduction of fees. We are considering the scope and timing of the review, and will bring forward our plans in due course. We need to understand what is going on here, of course, but I was trying to make a general point about trying to improve things. The provisions in the Bill are another example of our efforts to do just that—to ensure that there are fair results and that people who are given awards receive them in due time.

I turn to each of the amendments, acknowledging the spirit of them, but obviously, as is usually my wont, looking to make sure that we do not have any perverse effects. I will start with Amendment 68ZG, which is designed to include costs in the calculation of the money that is considered to be owed for the purposes of the penalty. It is worth noting that “costs” or, sometimes, “preparation time” awards—where people are not paying for attorneys—are made in only a tiny proportion of cases. Costs awards are not related to the compensation for the breach of employment rights—for example, in a case of discrimination—but to the way in which one of the parties has behaved during the tribunal process. A good example would be the deliberate, repeated late disclosure of documents. Indeed, last year only 242 costs orders were made to claimants—in the context of more than 42,000 claims. The Government do not believe that adding costs to the calculation will add a significant additional incentive to pay. But I am sympathetic to the noble Lord’s intention and will consider further whether we need to make a change ahead of Report.

Turning to Amendment 68ZH, we are clear that a penalty regime must incentivise prompt payment in full and not inadvertently reduce the likelihood of individuals gaining their full award. Allowing the penalty to be used to offset the award, as proposed in the amendment, would not, we fear, incentivise prompt payment of the award in full, which is our objective. The point of the penalty is to act as a deterrent and a sanction for non-payment. Conflating money owed to the claimant with a civil penalty would cause confusion and might raise questions about which liability had been met when money was paid. We believe it would be better to keep the civil penalty separate from the money owed to the individual. The clause already encourages an employer to make full and prompt payment to avoid a penalty altogether. As I have explained, the only way in which an employer can avoid a penalty is to pay up in full once they receive a warning notice. This seems to be the most effective approach.

Amendment 68ZJ seeks to introduce a naming scheme. As the noble Lord will be aware, there is already a scheme for the national minimum wage. We are considering naming as part of the Government’s overall approach to increasing the full and prompt payment of tribunal awards. We need to carefully consider the options to ensure that we find the most effective response. I would be happy to update noble Lords on our thinking ahead of Report.

Turning to Amendments 68ZK to 68ZM, I reassure the noble Lord that unpaid awards are already recoverable through the county court, or the sheriff court in Scotland, as they are treated as judgment debts. There is also a fast-track scheme in England and Wales where a court enforcement officer can pursue the money on the claimant’s behalf. Furthermore, interest accrues on those unpaid tribunal awards at 8% per annum. So there is an incentive to pay promptly and in full.

Finally, in response to Amendment 68ZMA, I hope I can provide further reassurance. As I have outlined, there are already a range of mechanisms by which an individual is able to enforce their tribunal award. In addition, under Clause 145, a government-appointed agent will impose penalties for non-payment. The penalty scheme we are introducing through this clause offers an alternative, cost-free way to ensure that the claimant gets the money they are owed. Therefore, the Government do not consider that there is a need to set up a further mechanism at this stage, but we shall continue to monitor the situation following implementation of the new penalty provision.

I hope that my explanations, including about our wider plans, have provided reassurance to the noble Lord and that he will be content to withdraw the amendment.

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[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord, Lord Low, for his comments. I would of course be delighted to host a meeting and go through these important issues—what we are doing, what we are not doing and how to find the best way forward in this important area so that the penalties work and the awards are paid.

[Lord Young of Norwood Green]

My Lords, I thank the Minister for her comprehensive reply. Are we satisfied? No, I do not think we are entirely, although I welcome the suggestion from the noble Lord, Lord Low, of a meeting; that is a useful and practical possible way forward. The research carried out in 2009 by the Ministry of Justice, which administers the system, showed that 49% of those employment tribunal awards—almost half—went unpaid in the first instance before any enforcement action was taken through the county court system. If it were 4% or 9%, we might say, “Okay, it’s not doing too badly”. Each case represents an individual who has fought their way through all those hurdles, got through to the employment tribunal and won an award but, no matter what the penalties are, they do not yet seem to be convincing the majority of employers. It is even worse in Scotland.

We still have real cause for concern. I have raised the fact that we have seen a dramatic decrease in people being prepared to go to a tribunal, and this seems to be adding insult to injury when they actually do go there. Nearly half the employers are able to say, “We can ignore it. We’re not bothered. We’ll see if we can weary the individual to the point where they won’t continue”. I am sure that some will not go through the county court because by that time they will have had enough. That is our concern.

[Baroness Neville-Rolfe]

My Lords, I reiterate that I also feel that the current situation is scandalous—I think that is the word I used—and the question is how we can best find measures that will solve the problem and bring the rate of payment in such areas much closer to what one might expect in other areas of the law. I hope that our meeting might assist with that.

[Lord Young of Norwood Green]

I think that I have made the necessary points, and I beg leave to withdraw the amendment.

Amendment 68ZG withdrawn.

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Moved by

[Lord Young of Norwood Green]

68ZN: Clause 147, page 136, line 39, leave out “£20,000” and insert “£50,000”

[Lord Young of Norwood Green]

In this situation we have another worrying set of circumstances with regard to underpayment of the national minimum wage, a situation that we have protested about on numerous occasions. There have been only a pitiful number of prosecutions of people who have failed to pay the minimum wage, and even the naming and shaming has not exactly resulted in a large number of employers being brought to the attention of the public and their credibility, image and brand being exposed for failing to meet their obligations under the national minimum wage. That is why we have suggested that the penalty should be increased from £20,000 to £50,000.

As we say in Amendment 68ZQ, we believe that the Secretary of State should provide,

“an annual report to Parliament on the effectiveness of … enforcement of the national minimum wage”.

Does the current enforcement regime have the necessary resource to police the situation and go on to enforce it? As we then say:

“the level of the financial penalty for underpayment, including but not limited to its impact on compliance”;

should also be reported on, as should,

“changes in provisions relating to the national minimum wage improving other measures of pay in the labour market”,

as proposed subsection (c) says. In addition, having looked at how enforcement currently takes place, which is via HMRC, we believe that it would be more effective if it was enforced by local authorities. There are a number of examples where local authorities currently enforce at the local level, whether on environmental issues or food safety. It seems to us that they would be much more effective than HMRC is. I look forward to hearing the ministerial response to these amendments.

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[Lord Popat (Con)]

My Lords, I thank the noble Lord, Lord Young, for his amendments to Clause 147, and for giving us the opportunity to debate the important subject of the national minimum wage. I have heard a number of concerns raised by the Opposition about the underpayment of the national minimum wage. I hope that my notes will cover what the Government are doing about that.

Clause 147 is an important step towards ensuring that employers comply with the national minimum wage legislation. It will amend the National Minimum Wage Act 1998 so that the maximum penalty that can be imposed through a notice of underpayment will be calculated on a per-worker basis rather than per employer. This will substantially increase the penalty for employers who owe large arrears to a number of workers. My noble friend Lord Storey asked this question, so I am pleased to confirm that the penalty of £20,000 is per worker.

By applying the penalty to each worker, employers owing high arrears to a number of workers may be issued with a greater penalty overall, as well as a higher maximum penalty. The higher penalty will deter employers from breaking national minimum wage law in the first place, ensuring that workers receive what they are entitled to and to come down harder on those employers who continue to break the law.

I will now respond to each amendment. Amendments 68ZN and 68ZP are designed to increase the maximum civil penalty available for non-payment of the national minimum wage from £20,000 to £50,000 per worker. I heard what the noble Lords, Lord Whitty and Lord Watson, had to say on this subject, and we welcome the recognition from the Opposition that there is a need to increase these penalties but we do not see the evidence to set the upper limit at £50,000. As the impact assessment for the measure sets out, 6% of cases in 2013-14 involved total arrears in excess of £20,000. None of these cases was anywhere near the upper limit suggested in the amendment.

Under the Bill, the penalty will be applied on a per worker basis, as I said. When you look at the cases where HMRC issued a notice of underpayment in 2013-14, the change means that in almost every case, the employer would have been issued with a penalty equivalent to the total amount of arrears they owed, rather than having the overall penalty capped at £20,000. As a result, the amendment would have had very little impact on the level of penalties in those cases.

However, I reassure noble Lords that if, in future, there is evidence to suggest that a higher maximum is needed, we can make that change through secondary legislation. I hope that I am giving reassurance to the party opposite that if we think in future that £20,000 is not enough and we need to raise it, we can bring in secondary legislation to increase the penalty.

[Lord Young of Norwood Green]

How many cases were in court for underpayment of the national minimum wage last year?

[Lord Popat]

I will certainly come back to the noble Lord on that in a minute.

I turn to Amendment 68ZQ. It is designed to impose reporting requirements on the Government’s approach to national minimum wage compliance and enforcement, as well as the impact of the minimum wage on wages more broadly.

I welcome the Opposition’s continued interest in this area and their desire to ensure that the system is working as well as it can. However, we believe that we are already transparent in our approach to reporting on the effectiveness of the national minimum wage and its impact on workers’ wages. Every autumn, the Government submit evidence to the independent Low Pay Commission, including an assessment of the national minimum wage’s impact on the labour market. That evidence is considered by the Low Pay Commission before it makes its recommendations to the Government. If new minimum wage rates are to be set, Parliament has an opportunity to debate them before they are introduced in October. Therefore, I hope that noble Lords will agree that the amendment is not necessary, as it simply imposes obligations that will duplicate reporting that is already taking place.

Finally, I turn to Amendment 68ZR, which would give local authorities power to enforce the national minimum wage. The Government already have an enforcement body dedicated to the national minimum wage, with a strong track record in this area.

I will respond to the question of the noble Lord, Lord Young. Since it started that work in 1999, HMRC has identified more than £54 million in arrears for more than 229,000 workers during more than 65,000 employer interventions. We are doing a lot more. The Bill, as my noble friend Lord Stoneham said, is to give small businesses help and support. We have gone as far as we can to make sure that employers do not break national minimum wage legislation. The noble Lord, Lord Young, asked how many cases of arrears there were last year. In 2013-14, there were 680 cases, with total arrears of £4.6 million.

[Lord Young of Norwood Green]

My Lords, I heard what the Minister said in response. I do not think that we are not totally satisfied with it. I may have missed in the exchange over the figures the Minister’s response to our view about enforcement by local authorities. Can he confirm what attitude is taken towards that?

[Lord Popat]

Towards what?

[Lord Young of Norwood Green]

Towards regulations devolving the enforcement of the national minimum wage to local authorities, as proposed in Amendment 68ZR.

[Lord Popat]

My Lords, we have a very strong HMRC enforcement regime. We do not see any point in giving the power to local authorities. However, HMRC has regional offices to enforce the legislation. Of course, many other government departments play an important role in enforcing it.

[Lord Popat]

The noble Lord, Lord Morris, raises the important issue of how we help to ensure that people are paid the minimum wage and what guidance we give them on working out by how much they are being short-changed. Since 2013, we have published detailed new guidance on calculating the national minimum wage, which is available on the GOV.UK website. We have also updated several GOV.UK pages which hold information about the national minimum wage. This includes new information about current and future national minimum wage rates, a worker’s checklist, guidance on work experience and internships, information on the increased penalty for breaching the national minimum wage and the revised criteria for naming and shaming employers who breach national minimum wage legislation. Therefore, quite detailed information is available for workers to help them work out by how much they might have been short-changed in cases of people being paid less than the national minimum wage.

[Lord Young of Norwood Green]

A propos the Minister’s final point, is there not also the employment rights helpline, which we introduced? Does the Minister have information on the level of complaints or reporting of failure to pay the minimum wage on the employment rights helpline?

[Lord Popat]

I am afraid that I will have to write to the noble Lord with that information. I do not know whether it is available on our websites.

I have just been given some information on how many calls have been received on that subject. From the beginning of 2014 to October 2014, the number of inquiries that we received was 10,086. The number of complaints that we received relating to the national minimum wage was 1,550. I will certainly write to the noble Lord with more information on this subject, which we appreciate is quite important.

[Lord Young of Norwood Green]

I thank the Minister for his response. We will take into account the points that he has made and reflect on whether we need to come back to any or all of these issues on Report. I beg leave to withdraw the amendment.

Amendment 68ZN withdrawn.

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Moved by

[Lord Young of Norwood Green]

68ZS: After Clause 147, insert the following new Clause—
“National minimum wage
(1) Section 17 of the National Minimum Wage Act 1998 (non-compliance: worker entitled to additional remuneration) is amended as follows.
(2) In subsection (2), at the end of paragraph (b) insert “including any relevant remuneration the worker would have received in respect of holiday pay or other leave pay”.”

[Lord Young of Norwood Green]

My Lords, we suggest that this new clause be inserted into the Bill. In the case of non-compliance, we believe it is justified that,

“any relevant remuneration the worker would have received in respect of holiday pay or other leave pay”,

ought to be included as part of the national minimum wage assessment. I beg to move.

[Baroness Neville-Rolfe]

I thank the noble Lord for his amendment and, indeed, for his succinct introduction, which I do not think I can quite match in responding to the amendment, which introduces a new clause to include holiday and other leave pay within the calculation of the minimum wage.

The Government do not consider that the amendment is necessary. That is because under the Working Time Regulations, a worker is entitled to a week’s pay for each week of leave, and there are already routes of redress if these payments are not made. A worker who believes that they have been underpaid can make a claim to an employment tribunal. This claim has to be submitted via ACAS, which will first offer early conciliation. Where holiday pay has not been paid, workers have a choice as to how they may claim the money they are owed. They can bring an action against their employer under Regulation 30 of the Working Time Regulations or they can bring an action for unlawful deduction of wages under Section 23 of the Employment Rights Act.

Both claims are brought in the employment tribunal. Where the worker is entitled to other leave pay which forms part of his or her wages, he or she will be able to claim any underpayments through an action for unlawful deduction under the Employment Rights Act. In addition, the early conciliation system allows for disputes over pay to be resolved before recourse is made to the tribunal, so without litigation. If a worker believes that he or she has not received the correct holiday pay, he or she can contact ACAS, which I am sure will be very helpful and will offer early conciliation. If that is not successful, a worker can take a claim to an employment tribunal. ACAS offers helpful guidance on holiday pay on its website.

The Government firmly believe that the holiday pay arrangements currently in place are sufficient and there is no evidence to suggest that enforcement in relation to holiday pay should be extended to the National Minimum Wage Act. I did, however, pick up the point from the earlier discussion that perhaps people do not always know what the routes for information and redress are. In writing to noble Lords, as I promised to do on the earlier amendment, I would be happy also to set out the arrangements on holiday pay so that people have a full understanding.

I hope that the noble Lord has found my explanation of the avenues that exist reassuring and will therefore agree to withdraw his amendment.

[Lord Young of Norwood Green]

I have listened carefully to the Minister’s response. We think there is a connection in that employers who fail to pay the minimum wage are often also in this situation, where they do not respect full holiday pay and leave entitlements. We will take into account the response and consider whether to come back to this on Report. In those circumstances, I beg leave to withdraw the amendment.

Amendment 68ZS withdrawn.

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Moved by

[Lord Young of Norwood Green]

68ZU: Clause 148, page 137, line 27, at end insert—
“( ) The Secretary of State shall make regulations containing provisions and measures enabling and facilitating the enforcement by workers of the rights conferred under this section.
( ) Those regulations shall be laid before each House of Parliament in draft before being made, subject to the affirmative resolution procedure.”

[Lord Young of Norwood Green]

My Lords, I shall speak to a number of the amendments in this group as well as say a few words by way of a general introduction. The rise in the use of zero-hours contracts is a trend that should concern Members across the Committee. While a small number of people find this type of contract suitable, too many people from across the UK are at the mercy of unscrupulous employers who are exploiting this type of employment. The increasing reliance on this form of employment does nothing to promote the jobs that the country needs. For many employees, zero-hours contracts present huge drawbacks in comparison to permanent regular work. There is no guaranteed level of regular earnings to provide any certainty over meeting bills or planning for the future. By our very nature, we human beings need stability and certainty in our lives; these types of contracts do not offer that. The need to respond to calls to attend work, frequently at short notice, disrupts life outside of work and places a particular strain on families and on arranging care for dependants. One of the most concerning aspects about the explosion of such contracts is that women are likely to be disproportionately affected by them.

Zero-hours contracts by share of the workforce are most common in: the arts, entertainment, and recreation services—2.5% of the workforce; in accommodation and food services—2.2% of the workforce; and in healthcare services—1.2% of the workforce. Not surprisingly, they are most common among people in caring and leisure occupations, where it is 1.7%, and among the less skilled—1.4%. These industries have high percentages of female employees.

We welcome Clause 148, which introduces an exclusivity ban in zero-hours contracts. This is a welcome step forward from a Government who had to be dragged kicking and screaming on this issue, but they have fallen far short in bringing forward measures which tackle the exploitative use of such contracts. This does nothing to change the practices of companies that base their entire workforce management strategy on them. Our Amendment 68ZU would reinforce the powers of the Secretary of State. Amendment 68ZW, perhaps in time-honoured fashion, would delete “may” and insert “must”—I cannot think where I have encountered that before—while Amendment 68ZAB would extend the powers of employment tribunals.

This is a huge problem area, and we need to remind ourselves that workers in these circumstances find themselves in situations where they do not attract sick pay, holiday pay or national insurance contributions. While we would not deny that there are some circumstances where zero-hours contracts might be relevant and applicable, the numbers that we are currently encountering place a huge burden on the workforce. This disproportionately affects them in terms of the employment rights and benefits that the vast majority of the workforce would expect to be theirs as of right. In those circumstances, I beg to move.

[Lord Stoneham of Droxford]

This amendment is all very well but I am not quite sure where it is leading us. It is not very specific. The Government have included clauses to stop people being excluded from doing other work while on a zero-hours contract, which seems to go to the heart of one of the principal problems. Here we are talking in general terms about an obligation on an employer to offer a fixed-hours contract to a worker who has worked regular hours for a continuous period. I am not sure where that is leading to. It is very general, apart from saying, “What we really want is to get rid of all zero-hours contracts and put everyone on a permanent contract on a 40-hour week or 35 hours a week, or whatever it is”. That is not actually what zero- hours contracts are being used for.

I accept that there is some bad practice, which we want to see eliminated. Where there is discrimination or unfair practices, we should work at that. The principal source of exploitation is where people are excluded from doing other work by these contracts. Some of these contracts have worthwhile benefits, as we have seen during the recession. One thing that the recession has done is to enable people to share work around when it is limited. I suspect that as the work comes back, as it is clearly doing as we move out of recession, some of these problems will begin to fade in their severity.

[Lord Young of Norwood Green]

I want to make it clear that this is an attempt not to rule out zero-hours contracts but to introduce some reasonable ground rules. I shall give the Committee some statistics that it might find interesting. The Chartered Institute of Personnel and Development research last November noted that 83% of staff on zero-hours contracts had been engaged for longer than six months, and 65% had been engaged for two years or more. We have a situation in which 65% of staff on zero-hours contracts have been on them for two years or more; that is not a short-term need. If someone has been employed for that length of time, does the noble Lord really not think that they should be entitled to basic rights such as holidays, sick pay and pension contributions?

We are not embarked on a Don Quixote-like mission, tilting at windmills and hoping to abolish all zero-hours contracts, but we are on a mission to ensure that there is some fairness and reasonable ground rules. We are suggesting that if someone has been employed on a zero-hours contract for a reasonable period of time, it indicates that there is a permanent need for this type of employment. In such a case, they ought to have the employee rights that workers on full-time contracts would enjoy.

[Lord Stoneham of Droxford]

I thank the noble Lord for his speech and his intervention. I accept that there are issues here which we need to deal with but we are putting very general terms in here. One thing we do not want to do is to lose some of the flexibility which people have benefited from over the last couple of years, when work has been in short supply. One major problem is in the local authority area, where people are doing social care work. The Government should obviously look at and deal with this area, because they have the means to do so through their contracts, but I am not sure whether these general terms that are being looked for will actually do the job.

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[Baroness Neville-Rolfe]

I thank the noble Lord, Lord Young, for these amendments and for the debate we have had on this part of the Bill, which went slightly wider than the amendments. I ought to say that Labour did nothing about zero-hours contracts for 13 years. The number of them went up by 75% between 2004 and 2009. What we have done is to carry out a review into these contracts, so that we can deal with any abuse. As a result, we are banning the type of contracts which mean that employees are not allowed to work for any other employer, while still allowing people such as students to benefit from the flexibility that they offer.

We introduced Clause 148 to deal with this mischief and I am glad to hear the noble Lord’s support for it and my noble friend Lord Stoneham’s perceptive analysis. The noble Baroness, Lady Donaghy, rightly tried to improve our English and not talk about zero-hours contracts. It may be that like one of the terms we were struggling with earlier, the term is an Americanism. Wikipedia does not give its origin but I will hunt it down.

At present, an individual subject to exclusivity terms in their zero-hours contract cannot seek work elsewhere, regardless of whether the employer offers only occasional, minimal, or even no hours of work. Exclusivity terms are unfair for the individual who, as a result, is prevented from boosting their income or building on their work experience. Frankly, it is also damaging to the economy because it prevents people from reaching their full employment potential.

As my noble friend Lady Harding made clear at Second Reading, from her own experience of running a supermarket in Yeovil, zero-hours contracts are an important element of a flexible, vibrant labour market, and they work for employers and individuals alike. I even heard the shadow Business Secretary agreeing that sometimes people quite like to use them. However, I think that we also agree that people working under such a contract must get a fair deal.

The ban on exclusivity terms in zero-hours contracts, as set out in the clause, is straightforward. From the moment the clause commences, individuals can simply ignore an exclusivity clause and work for another employer as well if they wish. There is no process, no admin and no need to discuss this with the employer—I am not sure that people understand this—and any attempt by the employer to stop a second or third arrangement would be unenforceable. This is a major change and a reduction in employer flexibility, but one that we believe is right.

Amendment 68ZU seeks to provide a route of redress for zero-hours workers who need to enforce their rights, allowing for regulations to set out the details. The clause already provides for an order-making power that will allow for this.

Amendment 68ZW seeks to make the use of that order-making power mandatory. However, given the fact that routes of redress will be delivered through the order-making power, I am sure that the Committee will agree that in this case the amendment is unnecessary. The Government will have to bring forward regulations; otherwise, the ban on exclusivity terms in zero-hours contracts will have no meaning. For this reason, I do not believe that we need to make this amendment. The regulations that will be possible under the order-making power will also be able to address the issue of redress that is covered in detail in Amendment 68ZAB; that is, that an employment tribunal will have the power to consider claims related to the exclusivity ban, including providing remedies to the individual and issuing penalties to the employer. The Government recently consulted on using the order-making power. We are currently finalising the details with a view to publishing the government response shortly on how we plan to tackle avoidance.

Amendment 68ZZ suggests that the definition of an exclusivity term is too narrow. However, the Government have looked at this and consider the description in new Section 27A(3) of the Employment Rights Act 1996, which will be inserted by Clause 148, to be sufficiently broad. It covers any provision in a zero-hours contract that prohibits working for others, as well as terms that require an individual to seek permission from their employer to do so.

I believe that our approach will deal sensibly and effectively with both avoidance of the ban and routes of redress for individuals on a zero-hours contract who suffer a detriment. I hope that on this basis the noble Lord will agree to withdraw the amendment.

[Lord Young of Norwood Green]

The Minister indicates that the Government have had some consultation and regulations will be published. I wonder if she will give some timescale for those.

[Baroness Neville-Rolfe]

My Lords, we shall be publishing them shortly.

[Lord Young of Norwood Green]

Prior to Report?

[Baroness Neville-Rolfe]

I will take that point away and do my best.

[Lord Young of Norwood Green]

Right. Obviously, as we said earlier, we welcome this measure. We are probing a bit to see whether or not the controls that the Minister referred to and the powers of the Secretary of State are sufficient. We will take into account the points that she made in her response, and we will consider whether we need to return to these issues on Report. In the mean time, I beg leave to withdraw the amendment.

Amendment 68ZU withdrawn.

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Moved by

[Lord Young of Norwood Green]

68ZX: Clause 148, page 137, line 36, at end insert—
“( ) Regulations made under subsection (1) shall include provisions—
(a) giving zero hours workers the right to be awarded financial compensation of amounts, and in circumstances, to be determined by the Secretary of State;(b) giving employment tribunals powers to enforce their judgments, including the award of any applicable compensation as referred to in paragraph (a), or imposition of any applicable penalty, in cases involving zero hours workers; and (c) imposing an obligation on an employer to offer a fixed hours contract when a worker has worked regular hours for a continuous period, or series of continuous periods, of employment, to be determined by the Secretary of State.”

[Lord Young of Norwood Green]

My Lords, again, this amendment seeks to extend the Secretary of State’s powers and to make it more explicit in the legislation. That is justifiable in the circumstances and we have identified the relevant provisions. There is some flexibility in it, so zero-hours workers have a right to be awarded financial compensation, of amounts to be determined by the Secretary of State. Employment tribunals are given powers to enforce their judgments, which is relevant and reasonable in the circumstances. Returning to an issue to which I referred in an earlier contribution, it imposes an obligation on an employer to offer a fixed-hours contract when a worker has worked regular hours for a continuous period or a series of continuous periods of employment, to be determined by the Secretary of State. We are not seeking to do away with flexibility; we recognise that that is appropriate in some circumstances. However, we believe that at the moment zero-hours contracts are, in many circumstances, a bridge too far and that they deny workers basic employment rights.

Amendment 68ZAC is intended to ensure that workers are fully enabled and empowered by understanding the nature of the zero-hours contract, so the employer has to provide basic information about terms and conditions for all zero-hours workers within two months of their start date. Again, we think that is a reasonable requirement. We regard a contract of employment as an inalienable right of workers and we seek to extend that right to those on zero-hours contracts. I beg to move.

[Baroness Hollis of Heigham (Lab)]

My Lords, I support the amendments in this group. The daughter of a friend works for a burger company and is on a ZHC. She does not know until the previous Friday what hours she will get for Monday. She cannot plan her life; she cannot budget; she cannot buy any large goods; she cannot study. She cannot do another job alongside it—I am delighted that the Government are moving to stop that ban continuing—and, if she were not living it home, she could not rent, as landlords want evidence of steady income. The Unite union, which has done splendid work on this, was told by a call-centre worker, who had worked for a multinational firm for five years: “I am only informed if I have shifts one week in advance and the hours I am given can range from nought to 48. I feel regularly anxious about whether I will be able to pay the rent and put food on the table.” She too is on a ZHC. A third person on a ZHC, a lone parent, expects, and is expected, to work on Fridays and had arranged and paid for childcare, as she must. Her shift was cancelled an hour before and she was told to work on Saturday instead. She had to pay for the childcare she did not need on Friday but could not find childcare for the Saturday when she needed it, so she refused. Her hours were cut the following week as punishment.

As my noble friend Lord Young said, we estimate that nearly 2 million people are on ZHCs in cleaning and domiciliary care, retail, hospitality, catering, call centres, construction and customer services, with wages at or around the minimum wage. Some 75% of those on ZHCs find that their hours vary every week and 40% are not allowed to work for anyone else, although we welcome the fact that this Bill begins to address that problem. They are on call—unpaid—and required at an hour’s notice. They are hoarded but not used, a sort of just-in-time stock control applied not only to tinned tomatoes but to staff. Of course, after six months they should be given a proper fixed-hour contract. We may be in a 24/7 economy, which needs a flexible labour market, but, as Pickavance argued in his report, fluctuating demand—the excuse for flexible labour and ZHCs—is largely predictable.

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[Baroness Neville-Rolfe]

The noble Baroness makes a good point. In a sense, that is a problem for employers, who could previously have a zero-hours arrangement that was exclusive. As I explained in opening, we have decided that that should not be the case in future. I am sure that the new arrangements will take some thinking about and settling in but, as far as I am concerned, if you are on a zero-hours contract, you can offer your services to—I do not know—two fashion magazines rather than just one. That is an excellent move forward. In any event, many people on zero-hours contracts who benefit so much from them, especially those in the categories that we were talking about, are not looking for universal credit, as the noble Baroness acknowledged.

I have probably taken this as far as I can this evening. I have tried to set out why we are proposing this, and I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Young of Norwood Green]

I was interested when the Minister said that one of our amendments, seeking compensation if shifts were cancelled at short notice, was catered for in the Bill. I had another careful look and I presume that she is referring to new subsection (5)(c) on page 138, which states rather broadly:

“requiring employers to pay compensation to zero hours workers”.

It does not state in what circumstances. I would welcome some clarification. If that is not possible today, it is still an important issue that requires an answer in writing.

[Baroness Neville-Rolfe]

I thank the noble Lord for raising the issue. I was going to deal with it in my response, but decided not to because of the complexities. I can give him some comfort but the best thing is to consider the questions that he has asked and write to him and copy that to other noble Lords, because this is obviously an important issue.

[Lord Young of Norwood Green]

I think the noble Baroness for her response. It has been an interesting debate. I thank my noble friend Lady Hollis for her usual forensic analysis. We will need to consider our response in the light of the Minister’s answers. Although we do not necessarily have an agreement on this, we are seeking to improve the Bill. We are not seeking to abolish flexibility or all zero-hours contracts but we seek to create a fairer scenario for workers employed in those circumstances. With those caveats, I beg leave to withdraw the amendment.

Amendment 68ZX withdrawn.

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[Baroness Drake (Lab)]

My Lords, I support Amendment 68ZY. My noble friend Lady Hollis has been tenacious in seeking to achieve fairness for a section of the workforce that is excluded from the national insurance system.

As my noble friend explained, this group of workers is caught by the rules whereby someone has to earn, in a single job, an amount above the lower earnings limit—£5,700 a year—to come into the national insurance system, although they do not have to pay national insurance contributions until they earn more than £7,500 in a single job. If, however, they have two or more short-hours jobs—mini-jobs—all of which pay below £5,700 but which may involve them working, say, 30 hours a week, they cannot add the wages of those jobs together to get above the lower earnings threshold and into the national insurance system. The amendment is simple. It proposes lowering the earnings threshold for entering the national insurance system to allow many more of the growing number of workers on mini-jobs and non-guaranteed hours to get into the national insurance system.

In the past, it was thought that perhaps 50,000 people, mostly women, were affected, as they sought to get an income by putting together a series of mini-jobs. But the scale of the problem is now far greater because of the increase in the use of zero-hours and minimum guaranteed hours contracts in the economy, which can deliver little or no wages in some weeks if little or no work is offered. Workers may need several casualised jobs to get an income but then find that not one of them pays above the £5,700 entry level for the NI system.

According to the ONS’s Annual Business Survey in January 2014, there were some 2.7 million zero-hours contracts, of which 1.4 million provided work to people and 1.3 million did not. The 2011 Workplace Employment Relations Study revealed that 23% of workplaces with 100 or more employees used zero-hours contracts. My noble friend has provided far more detail on the growing evidence available but it is clear that the number who find themselves excluded from the national insurance system will increase.

A modem welfare system has to be inclusive and responsive to the realities of the contemporary labour market. Over the years, Parliament has recognised the unfairness of locking certain groups of people out of the national insurance system and has amended the rules accordingly. As my noble friend listed, mothers of children aged under 12, disabled people, carers, a grandparent caring for a child whose mother works, and the unemployed on JSA are credited into the national insurance system. It seems all the more unfair that there is a group of workers whose pattern of employment and earnings does not deliver wages in any one job sufficient to meet the entry point of £5,700 for the NI system and they cannot add their wages from their other jobs to get through the turnstile. A hundred pounds per week, which is below the lower earnings limit, equates to almost 16 hours on the national minimum wage, so a person with more than one such mini-job could be working a significant number of hours but still be excluded.

Universal credit is income-based so it will not provide a comprehensive solution to this problem. For example, if a single person is earning more than £4,000 a year in any job, they are above the level for universal credit so they do not get credited in. However, £4,000 is significantly below the lower earnings limit of £5,700 and if not one of their mini-jobs pays above this level, they still cannot get credited in. My noble friend gave us another example. If a partnered woman is working but has no single job paying wages that reach £5,700, and if her husband is in work and they have two children aged over 12 when his earnings float him off universal credit, the woman cannot get credited through to the national insurance system. The need to address the position of such women is made even more urgent because from April 2016 these women will no longer be able to gain state pension though their husbands, as the married women’s dependency pension will cease. They will be locked out either way you cut it. Yet the ONS report revealed that women make up a greater proportion of those on zero-hours contracts, and that people who report being on such contracts are more likely to be younger and, I presume, to be single.

The Secretary of State, Vincent Cable, and other employer bodies such as the EEF, the CBI and the IoD argue that zero or no guaranteed-hours contracts have a place in today’s labour market and that employers need flexibility in today’s global economy to manage the consequences of economic downturns. If that is the case, the issue of workers who accrue income across one or more contracts but cannot enter the NI system is here to stay. It means also that it is here to be addressed. The right of businesses to employee flexibility should not deprive workers of access to the national insurance benefits system—but that is exactly what it is doing and will do, unless the problem that my noble friend has so tenaciously and consistently articulated is addressed.

It is argued that such zero-hours contracts are required to meet a short-term need of employers but the persistency of zero-hours contracts is evidenced by the Chartered Institute of Personnel and Development, whose findings indicate that of the workers affected, 65% have been on such contracts for two or more years, 40% for five or more years and 20% for 10 or more. The employer’s need may be short term but the employee’s contractual position can be long-term and bring a long-term lock-out from the national insurance system. The Government’s ban on exclusivity clauses in zero-hours contracts allows people to work for more than one employer but will not provide a definitive solution to the problem. The freedom to have several contracts does not provide entry into the national insurance system if none of them produces a wage above £5,700.

My noble friend Lady Hollis has faced varied rebuttals from the Government on her proposed solutions: that it is not reasonable to try to share employer’s NI across mini-jobs; that the women will still not want to pay class 1 contributions; that there are only a few of them; that their situation is temporary; that they have time to make up missing years; that universal credit will solve it and that, if all else fails, there is pension credit. That persistent rebuttal is becoming increasingly hollow, though, since both the Secretary of State and business itself confirm that there is an integral need for these minimum and no-guaranteed-hours contracts as a functioning part of a modern labour market, so we need to find a solution.

I repeat: over the years, Parliament has recognised the unfairness of locking certain groups out of the NI system, including the state pension, and has amended the rules accordingly. As my noble friend has advised, it has rightly accepted that those who are unemployed and in receipt of benefits such as JSA, have no employer and do not pay national insurance are in the national insurance system. Those who are lucky enough to get a single job earning £6,000 or £7,000 do not pay national insurance contributions but are also in the system. Lowering the lower earnings entry point to allow many more of the growing number of those on mini-jobs and no-guaranteed-hours contracts to enter the national insurance system has the merit of simplicity and is the fair thing to do.

[Lord Young of Norwood Green]

My Lords, after that forensic double examination, I cannot help reflecting that I am glad I am not responding. I support the amendment because it raises a significant issue. I also want to add the point that here are a Government who say that the best thing we can do is to encourage people to get into work, and I think that that is right; people who are locked out of the employment market, for whatever reason, face a real challenge. So these are people who are determined to work, which is what the Government want them to do, and determined to make a contribution not only for themselves but for their families, yet they are being penalised. The case being made is a valid one. We recognise by the nature of the contributions that this is quite a complex issue, so I look forward to the Minister’s response.

[Lord Newby (LD)]

Such expectation, my Lords. I know that the question of NI eligibility raised by the amendment is one about which the noble Baroness is deeply concerned and has been for some time; this is not the first time the issue has been raised in your Lordships’ House by her and others. I hope that I can reassure them that the Government are already actively considering this matter, and I look forward to working further with her on this outside the debates on the Bill, to see how best it can be addressed. We are in no sense claiming that this is not a valid issue.

I know that officials from a range of government departments have already been in discussion with interested parties, including the noble Baroness, over recent months, and this work has been considering the evidence base around the matter of national insurance eligibility. As the noble Baroness is aware, it remains a work in progress and we believe that we do not yet know enough to make a sensible legislative change at this point. There are many complex issues regarding the scale of the problem and how to address it.

The noble Baroness raised the figure of 200,000 people who might be affected by the problems that she has so graphically described, but these figures do not align with DWP analysis, which suggests that 50,000 individuals are affected and that the group is disproportionately made up of under-25 year-olds. The noble Baroness laughs but the DWP is not coming up with a low figure for the sake of frustrating her; that is its best view. That is why we need to do more work on the issue.

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[Lord Newby]

My Lords, Clauses 149 to 151 give Her Majesty’s Treasury powers to make UK-wide regulations with regard to public sector exit payments. Amendments 68A to 68N and 101A will provide Scottish Ministers with equivalent powers to make regulations to recover exit payments made by relevant bodies in Scotland. They do not enable Scottish Ministers to make regulations affecting payments made elsewhere in the UK. I can confirm that that the Scottish Government have seen these amendments in draft and are content with them. I beg to move.

[Lord Young of Norwood Green]

I see no reason to oppose the amendments.

Amendment 68A agreed.