Inland Revenue v BEBB Travel Plc

The Court of Appeal held that an enforcement notice under section 19 of the National Minimum Wage Act 1998 can only be validly served in respect of a person who is, at the date of the notice, a "worker who qualifies for the national minimum wage". Section 19(1) empowers an officer to require remuneration for pay reference periods ending on or after the date of the notice (ie current and future periods) and section 19(2) is supplemental: it permits the same enforcement notice also to require payment of past shortfalls under section 17 in respect of that same present worker. The court relied on the present tense of the word "qualifies", the statutory definitions in sections 55 and 1(2), the use of the definite article in section 19(2) and the ordinary meaning of "also" to conclude that section 19(2) does not create a free-standing power to pursue former workers for past pay.

Background and parties: Bebb Travel Plc employed stewards who received a basic pay which, when calculated under the regulations, produced an hourly rate below the national minimum wage. The company permitted stewards to sell refreshments and treat that activity as self-employment. A compliance officer acting for the Inland Revenue inspected records and, after the stewards had been dismissed, served an enforcement notice under s.19 on 6 October 2000 requiring Bebb to pay shortfalls to 25 former stewards. The sums sued for were past pay (some relating to periods long before the notice) and the enforcement notice threatened substantial daily penalties under s.21 if not complied with.

Procedural posture: Bebb appealed to the Employment Tribunal seeking rescission of the enforcement notice. The Tribunal allowed the appeal and rescinded the notice (11 September 2001). The Employment Appeal Tribunal upheld that decision (16 August 2002) and granted the Inland Revenue permission to appeal to the Court of Appeal on a point of general significance.

Relief sought and issues: The appellant sought to uphold a s.19 enforcement notice served in respect of former workers and contended that s.19(2) created a free-standing power to require payment of past shortfalls to past workers. The principal issues were (i) the proper construction of s.19(1) and (ii) whether s.19(2) is dependent on s.19(1) (so that an enforcement notice must relate to a present qualifying worker) or whether s.19(2) authorises a separate enforcement notice against an employer in respect of past workers.

Court’s reasoning: The court examined the statutory language and relevant definitions. It emphasised that the phrase "a worker who qualifies for the national minimum wage" is defined by s.55 with reference to s.1(2) and is expressed in the present tense. Section 19(1) authorises a notice requiring remuneration for pay reference periods ending on or after the date of the notice, which naturally applies to present workers. Although s.19(2) uses the indefinite article "an enforcement notice", the court found other textual indicators — the reference to "the employer" and "the worker" and the phrase "the sum due to the worker under s.17" — point back to the worker and employer identified in s.19(1). The ordinary meaning of "also" was held to be "in addition", so s.19(2) permits inclusion of past shortfalls for the same present worker rather than creating an independent power to pursue former workers. The court declined to adopt a strained construction in order to achieve a broader enforcement purpose, and noted the penal nature of s.21 would militate in favour of a clearer meaning if ambiguity remained. The court also noted practical oddities and potential unfairness that would flow from the appellant’s construction (for example, unlimited retrospective enforcement and penalties against employers unable to trace former staff).

Result: The Court of Appeal dismissed the appeal and affirmed the Employment Appeal Tribunal’s decision rescinding the enforcement notice because the statutory scheme confines enforcement notices to present qualifying workers (with power to include past shortfalls for those same workers).

Appeal dismissed. The Court held that section 19(1) of the National Minimum Wage Act 1998 authorises an enforcement notice only in respect of a person who, at the date of the notice, "qualifies for the national minimum wage" (ie a present worker under the definitions in s.55 and s.1(2)). Section 19(2) is supplemental to s.19(1) and permits the same enforcement notice to also require payment of past shortfalls under s.17 for that same present worker; it does not create a free-standing power to pursue former workers for past pay. The construction followed the plain meaning of the statutory language, the defined terms, and the natural meaning of "also" and "the" in s.19(2).