SA 1821 Minimum Wage and Sleep in Pay
"Clarity at last for the UK care sector" said one of the headlines after the court of appeal ruled, on 13 July 2018, that social care and other staff who are required to be on call or on standby at or near their place of work, but have an arrangement under which they can sleep when they are not working, are entitled to national minimum wage (or national living wage, for workers aged 25 or over) only when they are required to be, and actually are, awake and working – not when they are sleeping, and not when they are awake but not working. But this decision, in Royal Mencap Society v Claire Tomlinson-Blake, may be appealed to the supreme court. So for the time being it is clear that time while not actually working is not included when calculating minimum wage, but until we know whether it will be appealed to the supreme court, there is no long-term certainty for either employers or workers.
As was explained in legal update 1811 on 28 March 2018, Mencap had appealed against decisions by the employment tribunal in August 2016 and employment appeal tribunal in April 2017, that Mrs Tomlinson-Blake had to be paid the national minimum wage (NMW) for the full time she was required to be at the home of a person she cared for, even for time while she was asleep or was awake but not working. Mencap appealed because this decision created a potential back pay liability of £20 million to 3,500 of its staff over a six-year period. Care England, representing private and voluntary sector care providers, said these providers could face a total bill of up to £400 million for six years' back pay.
The court of appeal heard the Mencap appeal on 20 and 21 March 2018, along with another case involving sleep-in work, John Shannon v J & P Rampersad (t/a Clifton House Residential Home). In the latter case, the employment and employment appeal tribunals had ruled that the worker, Shannon, was not entitled to minimum wage while on call but not working, and Shannon had appealed. The court of appeal announced its decision on 13 July 2018.
Where a worker is provided with living accommodation or sleeping facilities at or near work but is required to be available on call or standby to carry out duties if required, there is a statutory right under the National Minimum Wage Regulations 2015 (formerly 1999) to be paid at least national minimum wage for the hours the person is "awake for the purpose of working". In the past, this had been interpreted as meaning that only periods while the person is actually carrying out his or her duties are taken into account when determining whether the worker has been paid NMW. Most social care organisations have been paying on-call sleep-in workers a flat fee of less than minimum wage for their sleep-in shift, with minimum wage paid for the time they are actually working. HMRC internal guidance for its compliance staff, published after a Freedom of Information Act request, shows that until 9 March 2016, HMRC supported this approach.
However, employment appeal tribunal (EAT) decisions in 2013 and 2014 (Whittlestone v BJP Home Support Ltd, and Esparon v Slavikovska) had said that in most circumstances – and in particular where there is a statutory requirement for the worker to be present and/or where the worker would face disciplinary action if they left the premises – NMW is payable even when the worker is sleeping, or is awake but not working. These decisions were applied in the Mencap employment tribunal decision in August 2016, but it was not until October 2016 that the Department for Business, Energy & Industrial Strategy (BEIS) public guidance was updated to reflect this.
In the Mencap EAT decision in April 2017, the judge emphasised that a multifactorial approach must be used in each on-call sleep-in situation. According to that decision, factors to be taken into account when assessing someone is "working" for the purposes of NMW should include:
The reason(s) for engaging the worker. If an employer needs someone to be on site at all times in order to comply with a regulatory or contractual obligation, it is more likely that the individual will be classed as working throughout their whole shift, even if they are asleep or have nothing to do.
Restrictions on the worker's activities. A worker who is required to remain on the premises throughout their shift and who would be disciplined for leaving is more likely to be working for minimum wage purposes just by being present than someone who is able to come and go as they please.
Level of responsibility. A care worker who must keep a listening ear throughout their shift and act if required is more likely to be working for their whole shift than someone who is on call from their own home and is only required to respond to an alarm pager for emergency call-outs.
The immediacy of the requirement to provide services. This is not just about the speed with which a worker is required to act; it is also connected to the level of responsibility they have. The EAT compared a worker who must decide whether to intervene and then deal with the issues, with a worker who is woken by another member of staff who has immediate responsibility for intervening.
This paragraph is from "Pay for sleep-in and on-call shifts", Russell-Cooke solicitors, May 2017:
In cases involving sleep-in workers providing social care, an assessment of these factors would often mean that the worker is entitled to NMW for their entire shift, even while sleeping. This is what could lead to the huge back pay bill for the sector.
The court of appeal decision
For its decision on 13 July 2018, the court of appeal (CA) looked in detail at more than a dozen previous decisions, involving not only sleep-in care workers but also security staff and others. It found that in a significant case in 2008, Burrow Down Support Services Ltd v Rossiter, the employment appeal tribunal had been wrong to conclude that the worker was entitled to NMW for every hour at work, even while sleeping. Subsequent decisions based on Burrow Down, such as Whittlestone in 2013 and Esparon in 2014, and the multi-factorial approach set out by the EAT in the Mencap case in 2017, could therefore not serve as precedents for the Mencap and Shannon cases presented to the CA – even though, as the CA said, the EAT in the Mencap case had made "a valiant attempt" to reconcile the multiple factors involved in previous decisions.
The CA went on, "One advantage of a conclusion that Burrow Down was wrongly decided is that this difficult and intractable case law can be simply put to one side". Where a worker is provided with living accommodation or sleeping facilities at or near work and is expected to sleep some or all of the time, but is required to be available on call or standby to carry out duties if required, the correct interpretation of the NMW regulations, the CA ruled, is that NMW has to be paid only for the time when the worker is, and is required to be, awake and is carrying out specific duties.
The CA made an important distinction between situations where workers were expected to sleep during their shift and only carry out duties when required, and situations where they were basically working throughout the shift, but permitted to doze during slack times. For a short explanation of this distinction, see the Squire Patton Boggs briefing under Resources, below.
At the time of writing (30 July) Unison has said it is considering an appeal to the supreme court on behalf of Tomlinson-Blake, and Shannon was reportedly also committed to appealing. The supreme court would have to grant permission for the appeals.
For the moment, there is no obligation to count all of a sleep-in shift as working time. But employers should be aware that if the case goes to the supreme court and it overturns the CA decision, this will change, so it will be sensible to continue assessing potential liabilities. And as CMS solicitors point out [see Resources, below], "Those employers who made contractual commitments to pay full NMW rates for sleep-in shifts must remember that they cannot revert to flat rate sleep-in allowances without amending the employment contract. If there is a strong desire to revert to flat rate allowances it would be worth waiting to see if an appeal will be submitted before taking this change of action. We also recommend taking legal advice to ensure the correct process is followed."
TLT Solicitors, in their briefing on 13 July, said "Workers will be disappointed by the decision and it will particularly impact those who are lowest paid. It is possible that the government will consider stepping in and legislating for a 'sleeping wage' to ensure that workers are not exploited. However with Brexit consuming the picture at the moment, it is unclear how soon that could be."
The social care compliance scheme
Following the Mencap EAT decision in April 2017, saying that minimum wage had to be paid for entire sleep-in shifts, the government in July 2017 waived penalties (but not liability for the actual arrears) for sleep-in shift underpayments arising before 26 July 2017, and between 26 July and 1 November 2017 temporarily suspended enforcement for sleep-in shifts in the social care sector. It then announced, on 1 November, a voluntary social care compliance scheme (SCCS) under which employers who joined would have up to a year to assess their own back pay liability, would receive technical assistance from HMRC to do this, and would then have three months to repay any wage arrears to workers (but these had to be paid no later than 31 March 2019). The carrot was that organisations joining the scheme would receive technical assistance, would not face any financial penalty and would not be named and shamed; the stick was that those which did not join would face a full HMRC investigation, additional financial penalties (double the amount owed to workers, to a maximum of £20,000 per worker), and public naming and shaming. Needless to say, the sector and unions were not happy with this, especially as no new funding was announced.
Decisions about joining the scheme were made more difficult because of the uncertainty about when the court of appeal case would be heard and its decision would be issued, and because there had been no indication of whether the government would provide any funding towards the back pay, despite them saying in November that they were "exploring options to minimise any impact on the sector". About 1000 care providers – approximately 40% of them charities – are thought to have joined the SCCS.
Shortly after the court of appeal decision on 13 July, HMRC started contacting employers who had joined the SCCS. According the Civil Society (25 July), HMRC was advising employers either to suspend their self-review pending further advice from HMRC, or "continue their self-review taking account of the court of appeal judgment and considering all other national minimum wage risks". When asked to comment, an HMRC spokesperson said only that HMRC was considering the Mencap decision and social care employers should continue their self-review until they heard further from HMRC
However, a House of Commons briefing issued on 20 July [see Resources, below] says, "In light of the court of appeal's judgment, it appears likely the social care compliance scheme will be suspended and possibly discontinued, pending the outcome of an attempt to appeal to the supreme court."
"National minimum wage: Sleep-in care", House of Commons Library briefing paper CBP 8243, 12pp, 20 July 2018: https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-8243. Clear and helpful.
Court of appeal transcript in Mencap v Tomlinson-Blake and Shannon v Rampersad: http://www.bailii.org/ew/cases/EWCA/Civ/2018/1641.html.
Employment appeal tribunal decision in Mencap v Tomlinson-Blake, which Mencap appealed against:
"Sleep-in shifts judgment is a huge mistake", Unison press release, 13 July 2018:
"What the Mencap ruling means for social care charities", Civil Society, 25 July 2018:
Four short briefings from law firms, emphasising different aspects of the court of appeal ruling:
"Sleepovers and the NMW: Clarity at last for the UK care sector", Squire Patton Boggs solicitors, 18 July 2018: https://www.employmentlawworldview.com/sleepovers-and-the-nmw-clarity-at-last-for-the-uk-care-sector/.
Good summary of distinctions between actual work v availability for work, and expectation of sleep v permitted to sleep.
"Care workers not entitled to minimum wage for sleep-in shifts", Lewis Silkin solicitors, 18 July 2018: http://www.lewissilkin.com/Insights/Care-workers-not-entitled-to-minimum-wage-for-sleep-in-shifts.
Includes comparison with British Nursing Association v Inland Revenue (2002), where workers were expected to be working much of time but permitted to doze during quiet periods, and NMW was payable for the full period, even when sleeping.
"Sleeping on the job?", CMS Cameron McKenna Nabarro Olswang LLP, 17 July 2018:
"Employment insight: Worker to pursue appeal to supreme court in sleepers-in case", Bates Wells Braithwaite, 19 July 2017:
source sandyadirondack1821 30.7.18