In April last year the Employment Appeal Tribunal (EAT) were asked to consider the proper approach to sleep in shifts under the National Minimum Wage Regulations.
The EAT concluded that the correct approach was to use a 'multi-factorial' evaluation, which took into account;
- The wording in the worker's contract,
- The employer's purpose in engaging the work,
- The extent to which the worker was restricted in where they could go and what they could do,
- The degree of responsibility the worker had during their shift, and
- Whether the worker was required to assist if there was an emergency.
The decision in the EAT led the government to change their guidance on sleep in shifts. So where workers had previously received a flat rate for the shift, plus an hourly rate for time spent providing care, they were now entitled to the minimum wage for the whole of their shift.
This decision caused shock waves in the care industry, and Mencap, one of the parties involved in the legal claim, suggested that it would leave them with a £20 million exposure to back pay and that it might have to make redundancies as a result.
With the support of Care England, Mencap appealed the EAT decision to the Court of Appeal, and the hearing was held on the 20th and 21st March 2018. We have now received the Court of Appeal's decision and they have rejected the EAT's judgment.
The Court of Appeal has confirmed that the clear intention of the National Minimum Wage Regulations is that workers who carry out sleep in shifts should only be paid for the time when they are awake and working. The result is that the only time that counts for NWM purposes is time when the worker is required to be awake for the purposes of working.
There's every chance that the decision may be appealed to the Supreme Court, however in the meantime, it looks as though social care providers are freed from the black cloud of potentially very costly back-pay claims.
In response to the original EAT decision however, the large majority of affected employers started paying minimum wage for sleep in shifts straight away in order to minimise their exposure. Most were also pressured under duress into signing up to HMRCs hastily convened Social Care Compliance Scheme (SCCS) under which they were then committing to paying 6 years worth of back-pay or face extreme financial penalties. As to the SCCS, presumably this is now dead in the water. Tricky questions remain however around whether affected employers want to revert back to their previous practices in this regard (i.e. a flat rate per shift), and what will now happen where employers have already made payments out to individuals. No doubt this is a stage that will roll on for some time yet.