Minimum wage law change needed for ex-employees

A recent Court of Appeal ruling has confirmed that the Inland Revenue does not have the power to compel employers to pay back any minimum wage entitlement to former employees.

The Court said that the enforcement procedures under the National Minimum Wage Act 1998 cannot be used against employers to make them pay the proper rate to ex-employees. This means that a worker must still be in work in order to claim back any underpayments.

The ruling arose from an application by the Inland Revenue Wales and Midlands against travel company Bebb Travel. The company was investigated by the Inland Revenue which confirmed that it had been paying its workforce less than the National Minimum Wage.

The Inland Revenue has the power to issue an enforcement notice to order the employer to pay any shortfall. However, Bebb Travel successfully argued that under the current law the order could only cover workers who are still employed by the employer on the date when the notice is issued.

The government announced that it would amend the law, after an earlier tribunal ruling in the same case.

The failing in the law is highly significant as many low-paying sectors have very high staff turnover and so employees are more at risk of losing out on their entitlement.

The Court of Appeal ruling is in the case of Bebb Travel v Inland Revenue of Wales and the Midlands.