Do workers have a right to be paid for sleeping-in at their workplace?
23 July 2018
In Royal Mencap Society v Tomlinson-Blake, the Court of Appeal considers whether workers are entitled to be paid the National Minimum Wage (NMW) for “sleep-in” shifts at work. The case also has wider implications with respect to how the judgment was arrived at, and is therefore of interest to all employers.
Recent years have seen many challenges for employers in relation to NMW compliance. With HMRC proactively enforcing compliance, a six-year ‘look-back’ period, penalties at 200% of any arrears due to workers and automatic naming and shaming, the stakes are high. At the same time, compliance is a real challenge given the technical complexity of the regulations and many employers find themselves in accidental breach. The increasing level of the NMW itself continues to increase operating costs.
The NMW regulations require workers to be paid a minimum average hourly rate of pay. However, assessing compliance is not straight forward and requires employers to:
- correctly identify what type of work is being done (there are four different types of work with a different NMW calculation for each one);
- only take the correct pay elements into account in calculations (not all payments count in the NMW calculation and there are complex rules around deductions;) and
- capture the working time which needs to be included in the calculations accurately.
The NMW regulations stipulate that for time work, working time is (a) time spent actually working and (b) time when an individual is available, and required to be available, at or near a place of work for the purposes of working other than when they are at home or asleep (the availability provisions).
The care sector often relies on workers “sleeping in” at their workplace to provide care if needed. Historic industry practice has been for workers doing sleep-ins to receive an agreed allowance, on the understanding that the worker was only working (and entitled to NMW) when awake and performing duties and not while asleep.
However, there have been a number of challenges in recent years on the basis that the entirety of the time spent on sleep-in shifts should be treated as time actually worked for NMW purposes. A series of cases in the Employment Tribunals and Employment Appeal Tribunal (EAT) held that the sleep-in time should be regarded as working time, leading to a liability across the sector which had been estimated to exceed £400m and which many believed would put some care providers out of business.
One employer dealing with this challenge was Mencap, which appealed to the Court of Appeal against the decision that had gone against it in the EAT and left it facing an estimated £20m unfunded liability.
Overturning a series of previous cases, the Court of Appeal has given a decisive judgment in the Mencap case that NMW does not apply to sleep-in shifts unless the worker is awake for the purpose of working. Time when the worker is asleep does not need to be paid at NMW rate.
The decision gives clarity to employers across sectors where sleep-ins are common. In addition and with wider potential implications, a key finding of the case was that the Low Pay Commission report which led to the introduction of the NMW regulations can be used to resolve ambiguity in the regulations themselves.
Given HMRC’s ongoing enforcement drive and complexity around NMW compliance, all employers should look carefully at their pay arrangements to make sure they are not inadvertently caught out and left facing substantial financial and reputational costs. We have extensive experience advising employers on NMW issues. Please contact us or your usual PwC contact if you would like to talk about how we can help your business.