Workers who were paid less than the UK national minimum wage in previous jobs gain the right from today to claim back-pay from their former employers.
The law already entitles workers to claim back-pay from their current employers, but former employers have until now been able to escape liability because of a loophole in the 1998 legislation which introduced the national minimum wage.
The legislation has been introduced following an Employment Appeals Tribunal decision in August last year. It will enable the Inland Revenue to force firms to pay arrears to former, as well as existing, staff employed since last August.
Unions welcomed the decision, saying it would help those who were too afraid to speak out over being underpaid for fear of loosing their jobs.
"Our experience has been that many low paid workers only have the confidence to complain about underpayment after they have left the offending employer," said Brendan Barber, General Secretary of the Trades Union Congress.
"The government has already recovered £13m for workers cheated out of the minimum wage. This law will help them keep up the pressure and ensure that there is no hiding place for bad bosses."
The Confederation of British Industry also welcomed the new legislation and added that it did not support any employer that ignored the minimum wage.
Employment relations minister, Gerry Sutcliffe, said that the Government would continue to ensure that all workers were paid fairly.
"The national minimum wage is one of the Government's finest achievements, but we are not complacent when it comes to enforcing the rules and, where necessary, we will tighten them up," he said.
On October 1, the minimum wage for adults aged 22 or over will rise from £4.20 to £4.50. The development rate, for workers aged 18-21 inclusive, will increase from £3.60 to £3.80. Ministers say between 1.3 million and 1.6 million low-paid workers will benefit from the increases.