Government announcement: Sleep-in shifts, NMW compliance and financial penalties

Background

As most providers will be aware for many years and, in particular, since late 2013, there has been much confusion over the legal requirements to ensure that workers are being paid the appropriate wage for sleep-ins.

The most recent cases, however, in particular, Tomlinson-Blake v Royal Mencap Society (EAT April 2017), decided that where a care worker is doing time/salaried work, even when they are asleep and waiting to work, they are in fact working. Those decisions have been reached primarily on the basis that in those cases there was a requirement for the workers to be at their place of work and they could not come and go as they please, and therefore their time asleep was deemed to be working time. Being present at the place of work was determined, of itself, to be work.

In contrast, as some providers who had been inspected by HMRC will be aware, before summer 2016 HMRC appeared to take a clear and consistent view that it was only the time spent awake and working during a sleep-in shift that would count for National Minimum Wage (NMW) purposes. However, this approach changed, and HMRC now takes the view that every hour of a sleep-in counts where:

1. there was a requirement for the workers to be present during the night, and
2. those workers were not allowed to leave the service during the hours they are required to sleep-in.

 Today’s announcement

Following months of lobbying from the social care sector, the Government this morning announced the following:

• Financial Penalties – The Government will waive the financial penalties faced by employers who are found to have underpaid their workers for “sleep-in” shifts in any pay reference period that ended before 26 July 2017. Employers should note that this only confirms that financial penalties will not be imposed for pay reference period that ended before 26 July 2017

• Arrears of Wages – The announcement does not affect wage arrears due to workers in cases of NMW underpayment.  HMRC, therefore, retain the power to issue a Notice of Underpayment in respect of any pay reference period before 26 July 2017 and employers would be liable for the payment of wage arrears for that period where NMW non-compliance is found. HMRC, as set out above, take the view that where a care worker is doing time/salaried work, even when they are asleep and waiting to work, they are in fact working where:

1. there was a requirement for the workers to be present during the night, and
2. those workers were not allowed to leave the service during the hours they are required to sleep-in.

• Enforcement action before February 2015 – The Government has stated that the written guidance from the Department for Business, Innovation and Skills’ (BEIS) published before February 2015 was potentially misleading in relation to “sleep-in” shifts. The Government has not made it clear, however, in its announcement what approach HMRC will take to enforce the NMW before February 2015. Our view is that it will now be very hard for HMRC to justify issuing Notices of Underpayment in respect of arrears of wages from before that date.

• Sleep-in shifts pay after 26 July 2017 – The Government has confirmed that it expects all employers to pay their workers as set out in the BEIS guidance ‘Calculating the National Minimum Wage’ and any employer underpaying their staff for “sleep-in”  shifts in the future will be liable to pay financial penalties. This statement is, therefore, formal confirmation that the Government’s position is that where a care worker is doing time/salaried work, even when they are asleep and waiting to work, they are in fact working where:

1. there was a requirement for the workers to be present during the night, and
2. those workers were not allowed to leave the service during the hours they are required to sleep-in.

There are a number of ways employers may want to manage compliance going forward:

• Pay NMW for every hour of the “sleep-in” shift;
• Increase flat sleep-in rate;
• Introduce top-up arrangements;
• Continue to pay a lower flat sleep-in rate but seek to agree on unmeasured working arrangements with HMRC and enter into a daily average agreement (therefore structuring the pay arrangements in a way that allows payment as before). HMRC has not yet responded to our requests to agree on this approach, and until providers receive approval, this is a high-risk option.

Social care sector

The Government will continue to work with representatives from the sector to find a way to minimise any impact on the provision of social care as a result of this situation. To allow this work, the Government will temporarily suspend any enforcement activity regarding “sleep-in” shifts until 2 October 2017. This suspension is temporary, and its purpose in light of the other announcements, namely that employers remain liable for the payment wage arrears for the period before 26 July 2017 is unclear. We understand that this period of suspension will be used to see how the issues of NMW and sleep-ins are managed going forward.

Today’s announcement fails to reference the underfunding and commissioning practice that is the core reason why providers are unable to pay NMW for sleep-ins. We hope that Ministers will address this issue as part of the ongoing conversations.  This stay on enforcement action reflects what was already becoming apparent from HMRC practice.  We have been arguing for many clients that enforcement action would potentially be unlawful and susceptible to challenge in the Employment Tribunal and by way of judicial review. We have had no well-reasoned response to the points we have raised. It remains to be seen whether inspections and ongoing enquiries with providers will continue whilst enforcement action is stayed, but we suggest providers argue that no action takes place ahead of any further announcements.

How else can we help you?

At Anthony Collins Solicitors LLP we have a team of NMW experts that have experience of, and can assist with:

• Reviewing your current arrangements;
• Checking and drafting contracts of employment, daily average agreements and relevant policies and procedures;
• Assisting with implementation of any proposed changes and drafting correspondence to staff and unions;
• Dealing with any employee complaints including grievances and defending Employment Tribunal proceedings;
• Helping you prepare for HMRC inspections and challenging the HMRC approach (in particular in relation to any historic back pay);
• Negotiating fee increases and challenging Local Authority poor procurement practices.

Further information

For further information and assistance with any NMW issues or HMRC inspections, please contact Anna Dabek, Matthew Wort or your usual contact in our employment team.