Sleep-in shifts do not count as time work for national minimum wage

The Court of Appeal has allowed the appeal of the employer in Royal Mencap Society v Tomlinson-Blake (Care England intervening) [2018] EWCA Civ 1641. The decision has important ramifications for the social care sector.

The individual employee was a “sleep-in” care worker in residential accommodation. She was rarely awakened during the night. When at work during the day she was paid an hourly rate which reflected her entitlement to the rate of national minimum wage (NMW). While asleep, she was paid a flat-rate allowance plus the amount of one hour of pay, to reflect the possibility that she might, from time to time, be woken up.

Regulation 32(1) and (2) of the National Minimum Wage Regulations 2015 (reflecting provisions previously to be found in the 1999 Regulations) provide, in summary, that in addition to time when the worker was working, “time work” for NMW purposes included time when the worker was available for work, but only if the worker was awake for the purpose of working. However, various decisions of the Employment Appeal Tribunal, and one of the Inner House of the Court of Session, had held that where the worker was “working even when asleep” the provision that she had to be awake for the purpose of working in order to be entitled to NMW did not apply. So, a worker who was asleep might nonetheless be entitled to NMW for the entirety of a sleep-in shift.

In the present case, the Employment Appeal Tribunal (Simler J) had held that the question whether someone was “working” when asleep was “multi-factorial”. She did not give an exhaustive list of factors. The answer, apparently, was to be gleaned from evaluation of a basket of factors (some identified, and some not), each to be given indeterminate weight by the diverse variety of employers, workers, trade unions, HMRC enforcement officers, employment tribunals and County Courts who would have to grapple with the problem of entitlement. The difficulty with these multi-factors was that they were potentially variable in their application and impact, were not predictably available to social care funders, employers and workers, and the weight to be given to them even when identified was completely uncertain. They required individual assessment, worker by worker and potentially shift by shift, of the nature of the duty potentially to be performed by the sleeping worker.

The Court of Appeal took a different view.

In making the regulations to give effect to the National Minimum Wage Act 1998, the Secretary of State was bound by statute to have regard to the First Report of the Low Pay Commission (1998), and to report to Parliament if the government proposed not to follow the recommendations of the Commission. The First Report however, showed clearly that it was intended by the Low Pay Commission that “sleep-in” shifts need not attract NMW protection for periods when the worker was available for work if woken, but was in fact asleep. The Secretary of State did not report to Parliament that the Government intended not to follow the recommendations of the Commission. Indeed, it announced the contrary. The EAT declined to have regard to this material.

The Court of Appeal allowed the appeal, taking the view that the terms of the Low Pay Commission’s report were decisive. For similar reasons it refused an employee’s appeal (relating to salaried work) in a linked case, namely Shannon v Rampersad. It declined to follow the decision of the Court of Session – which had not been referred to the Low Pay Commission material, and overruled as wrongly decided the EAT decisions which were to different effect.

The issues now disposed of in Royal Mencap are of great importance to the social care sector, which has been subjected to changing, and conflicting, guidance from BEIS and HMRC as to how those undertaking sleep-in shifts should be remunerated. In 2017 HMRC, as the enforcement authority for NMW, recognising the problem and (doubtless) its potential liability to judicial review, set up the “Social Care Compliance Scheme” to give employers in the sector the opportunity to calculate and pay (what were said to be) arrears of NMW. Accepting that HMRC’s guidance had been “potentially misleading” no penalties would be charged for those who entered the Scheme within the appropriate period. Nonetheless the arrears themselves amounted to hundreds of millions of pounds, putting the financial stability of the sector at risk. The government regarded itself as unable to bail out the sector, not least because of EU restrictions on State Aid, on which topic it had already approached the European Commission.

The result of the decision of the Court of Appeal is to remove from the social care sector liability for enormous unexpected arrears of pay. The original guidance was not misleading at all: it was correct and employers were correct to follow it. The error arose when, with the encouragement of some unsatisfactory EAT authority, the guidance was changed to a position which was simply wrong.

The decision of the Court of Appeal also renders HMRC’s Social Care Compliance Scheme largely redundant, save insofar as it might, by a side wind, pick up some failures to pay NMW which are unconnected to sleep-in shifts.

Timothy Brennan QC acted for Care England, one of the bodies which successfully applied to intervene in the Royal Mencap appeal.

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