Northern Ireland Assembly Flax Flower Logo

EMPLOYMENT BILL

EXPLANATORY AND FINANCIAL MEMORANDUM

INTRODUCTION

  1. This Explanatory and Financial Memorandum has been prepared by the Department for Employment and Learning (the “Department”) in order to assist the reader of the Bill and to help inform debate on it. It does not form part of the Bill and has not been endorsed by the Assembly.
  2. The Memorandum needs to be read in conjunction with the Bill. It is not, and is not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause or schedule does not seem to require an explanation or comment, none is given.

BACKGROUND AND POLICY OBJECTIVES

  1. The Department for Employment and Learning is responsible for regulation of the private recruitment sector in Northern Ireland under the Employment (Miscellaneous Provisions) (NI) Order 1981 and the Conduct of Employment Agencies and Employment Businesses Regulations (NI) 2005. The Department was granted powers to enter and inspect Northern Ireland-based employment agencies and employment businesses in early 2006, and currently employs two employment agency inspectors to routinely inspect employment agencies and investigate complaints. If an employment agency does not comply with the law, the Department can prosecute the agency in a Magistrates’ Court, or apply to an Industrial Tribunal to prohibit an individual from operating or being concerned with the operation of an employment agency for up to ten years. There is a need, however, to enhance the Department’s powers of investigation and prosecution of certain very serious offences under employment agency law.
  2. Existing legislation relating to the Industrial Court's appointments process is enshrined in primary legislation and is too restrictive in that even a minor modification would require an appropriate legislative vehicle to enact and could only be achieved over a lengthy timescale. In addition there is currently no power to remove or suspend members of the Court. It is therefore proposed to introduce more flexible regulation-making powers in relation to Industrial Court appointments via this Employment Bill.
  3. Article 92(4) of the Industrial Relations (NI) Order 1992 contains a restriction which prohibits legal representation within seven of the Industrial Court’s eight jurisdictions. The original intention of the restriction was to limit the formality of the Court and encourage consensus-building in relation to the Courts role in arbitrating in a trade dispute and resolving complaints about the disclosure of information for the purposes of collective bargaining. Subsequently, however, the Department received legal advice that failure to allow legal representation could lead to a challenge under Article 6 of the European Convention on Human Rights (Right to a fair trial). Consequently, the Department proposes to amend Article 92(4) to enable those parties that so choose, to engage legal representation with the exception of one jurisdiction related to the provision of voluntary arbitration in relation to industrial disputes.

CONSULTATION

  1. In June 2008 the Department sought views on policy proposals to enhance its powers regarding employment agency enforcement and to extend legal representation in relation to Industrial Court jurisdictions. Consultation ran for 17 weeks and closed on 30 September 2008. Responses to the public consultation were presented to the DEL Committee on 26 November 2008. The Committee responded on 11 December 2008 that it was content with the proposals as now contained in the Bill.
  2. The Department received 13 responses to the consultation on employment agency enforcement, 8 of which contained substantive comments. All substantive respondents were fully in support of the broad thrust of the proposals contained in the consultation document and outlined at paragraph 9 below.
  3. Industrial Court provisions, relating to new regulation-making powers and the removal of the restriction that requires the Department to provide the Court case manager, were previously consulted upon as part of the Public Authorities Reform Order from 24 January to 20 April 2007. Three responses were received with the Industrial Court welcoming the provision of regulation-making powers. The proposed change to consultation rights in relation to the appointment of the Certification Officer is as a result of discussions between the Department and the Labour Relations Agency (LRA) on the need for clarification on this matter.
  4. The consultation also included a proposal to amend legislation in relation to a trade union’s ability to expel members for reasons relating to political party membership. Following legal advice this proposal has not been included in the Bill.

OPTIONS CONSIDERED

  1. In the employment agency enforcement consultation, the Department recommended allowing serious breaches of employment agency law to be triable either in the Magistrates’ Court (as at present) or the Crown Court, thereby allowing for unlimited fines; and providing the Department with a power to compel agencies or third parties such as banks to provide financial information about an agency for investigation purposes. These proposals were welcomed by respondents to the consultation. The only other option was to do nothing. However the Department considers that existing penalties in the Magistrates’ Court are ineffective when compared to the money that can be made by unscrupulous employment agencies. With regard to investigation powers, the Department is receiving an increasing number of complaints which require investigation (including a number with a financial aspect and considers it is sensible to have the necessary provisions in place to help ensure adequate investigation of complaints. A legal power to override customer confidentiality in certain very limited circumstances would enable such investigations to proceed more quickly.
  2. A further issue was not included in the consultation but was raised by consultees. This related to effective information-sharing between enforcement agencies. As a result of the consultation, and also following a recommendation in the report published by the GB Vulnerable Workers forum, it has been decided to include in the Bill a provision to allow for the lawful exchange of inspection information between the Department’s employment agency inspectors and HM Revenue and Customs National Minimum Wage compliance officers. Again, the only alternative at present is to do nothing. However the Department considers that some agency workers on low wages are potentially vulnerable to abuse and a power to exchange information with HM Revenue and Customs would enable investigation of unscrupulous employers to proceed more efficiently and quickly.
  3. Currently the Industrial Relations (NI) Order 1992 does not permit parties appearing before the Industrial Court to be legally represented in seven of the eight Court jurisdictions. The Department received legal advice that this may breach Article 6 of the Human Rights Act i.e. the right to a fair trial. The Department intends extending legal representation to all but one Industrial Court jurisdiction. This reflects the view of the Industrial Court that this jurisdiction, which provides for voluntary arbitration, by its nature, would not benefit from legal representation. The only other option considered was to leave the legislation as is but this approach would be contrary to legal advice received.

OVERVIEW

  1. The Employment Bill will contain provisions in the following areas:
  1. The Bill has 8 clauses and 2 schedules.

COMMENTARY ON CLAUSES

Clause 1: Employment agencies: mode of trial and penalties for certain offences

Clause 1 amends the Employment (Miscellaneous Provisions) (NI) Order 1981 to provide for offences under employment agency legislation to be triable either in a Magistrates’ Court or the Crown Court. At present, the maximum fine that can be awarded by a Magistrates’ Court can be no greater than level five on the standard scale (currently £5,000). Agencies that act unlawfully can make much more than this amount. Allowing more serious cases to be tried in the Crown Court will provide for the potential for unlimited fines to be awarded against such agencies.

Clause 2: Employment agencies: powers of enforcement

Clause 2 amends the Employment (Miscellaneous Provisions) (NI) Order 1981 to provide the Department for Employment and Learning with powers to compel agencies and third parties such as banks to provide the Department with financial information about an agency for investigation purposes. Limits will be placed on the circumstances in which this power can be used and it will only be available where an agency is suspected of serious offences under employment agency legislation and is asked for, but does not provide, the necessary financial information. This power can only be used following authorisation by a senior officer of the Department (at least Director-level).

Clause 3: Membership of the Industrial Court

Clause 3 makes amendments to the Industrial Relations (NI) Order 1992 to replace current arrangements for Industrial Court appointments with equivalent subordinate legislation provisions which will provide greater flexibility in making appointments. Clause 3 also makes a minor change to remove the restriction that the Court’s secretariat functions may only be fulfilled by staff from the Department.

Cause 4: Legal representation before the Industrial Court

Clause 4 amends Article 92(4) of the Industrial Relations (NI) Order 1992 to enable parties before the Industrial Court to engage legal representation with the exception of one jurisdiction related to the provision of voluntary arbitration in relation to industrial disputes. This reflects the view of the Industrial Court that voluntary arbitration, by its nature, would not benefit from legal representation. Legal advice states that failure to allow legal representation could lead to a challenge under Article 6 of the European Convention on Human Rights (Right to a fair trial).

Clause 5: Employment agencies and national minimum wage: information

Clause 5 amends the National Minimum Wage Act 1998 and the Employment (Miscellaneous Provisions) (NI) Order 1981 to clarify the law relating to information-sharing and allow HM Revenue and Customs National Minimum Wage compliance officers and Department for Employment and Learning employment agency inspectors to legally share and exchange information discovered by them in the course of exercising their powers. At present the exchange of such information is restricted. The removal of this restriction will, for example, enable employment agency inspectors to report breaches of the National Minimum Wage Act by employment businesses to HM Revenue and Customs.

Clause 6: Minor and consequential amendments and repeals

Clause 6 provides that the minor and consequential amendments and repeals set out in the Schedules to the Bill will have effect.

Clause 7: Commencement

Clause 7 gives the Department power to bring the membership of the Industrial Court provision of the Bill into operation by commencement order. It also provides that the remaining provisions of the Bill will come into operation on the day after the Act receives Royal Assent.

Clause 8: Short Title

Clause 8 cites the title of the Act. This is the title by which the Act will be known.

FINANCIAL EFFECTS OF THE BILL

  1. With regard to the employment agency proposals, the Department may face higher costs (estimated at £20,000 per annum) as a result of some prosecutions taking place in the Crown Court.
  2. In relation to the Industrial Court provisions and the extension of legal representation to Industrial Court jurisdictions, the Bill does not place any duty on the Department over and above its standing obligations that will require any expenditure additional to its current budgetary allocations.

HUMAN RIGHTS ISSUES

  1. A human rights impact assessment has indicated that the proposals in respect of powers to prosecute serious offences by rogue employment agencies will engage, but not infringe or limit, Article 6 (Right to a fair trial) and Article 8 (Right to respect for private and family life) of the European Convention on Human Rights (ECHR).
  2. Legal advice has indicated that failure to allow legal representation in relation to Industrial Court jurisdictions may be contrary to Article 6 of the ECHR. Consequently, the Department proposes to extend the right to legal representation to all but one Industrial Court jurisdiction. The proposal to not extend the right to legal representation to the remaining Industrial Court jurisdiction related to voluntary arbitration in trade disputes, which by its nature would not benefit from legal representation, will engage, but not infringe or limit Article 6.

EQUALITY IMPACT ASSESSMENT

  1. In accordance with its duty under section 75 of the Northern Ireland Act 1998, the Department conducted preliminary equality impact assessments on the proposals in respect of powers to prosecute serious offences by rogue employment agencies, Industrial Court appointments and extending the right to legal representation to other Industrial Court jurisdictions, concluding that the proposals would have a neutral effect on equality of opportunity and that full equality impact assessments were therefore unnecessary.

SUMMARY OF THE REGULATORY IMPACT ASSESSMENT

  1. Partialregulatory impact assessments were included in the consultation documents. The overall cost to business, and the voluntary and community sectors, is minimal with any costs relating mainly to the taking forward of employment agency prosecutions by the Department.
  2. The employment agency enforcement proposals are targeted at agencies which do not comply with employment agency law. We do not anticipate that taking these additional powers would have any impact upon law-abiding agencies or indeed upon those agencies who swiftly put right any small and/or inadvertent breaches of the law when these are brought to their attention. Non-compliant firms facing prosecution may face higher costs, owing to the greater costs involved in Crown Court cases than Magistrates’ Court cases. However, these costs are avoidable if firms comply with their legal obligations and are therefore not regulatory costs.

LEGISLATIVE COMPETENCE

  1. The Minister for Employment and Learning had made the following statement under section 9 of the Northern Ireland Act 1998:

“In my view the Employment Bill would be within the legislative competence of the Northern Ireland Assembly.”

SECRETARY OF STATE CONSENT

  1. A statement is required under section 10(3)(b) of the Northern Ireland Act 1998, on Secretary of State consent:

"The Secretary of State has consented under section 10(3)(b) of the Northern Ireland Act 1998 to the Assembly considering this Bill."