A Court of Appeal ruling on payments to care workers on ‘sleep-in shifts’, which says they should receive a flat rate per night and not the national minimum wage (NMW), is set to save social care providers £400m in back pay, but looks likely to raise a number of issues regarding HMRC’s enforcement approach
The latest ruling overturns an earlier employment tribunal judgment from April 2017, when three social care providers, including the learning disability charity Mencap, faced claims from workers for loss of earnings.
The carer workers were all paid a flat rate sum of between £25 and £29 for an eight-hour ‘sleep in’ shift in an individual’s home, rather than the hourly NMW rate which applied during daytime work. During this night time period they were available if their client required assistance, but were otherwise asleep.
The judge at the tribunal said: ‘The question at the heart of the appeals is whether employees who sleep-in in order to carry out duties if required, engage in “time work” for the full duration of the sleep-in shift or whether they are working for national minimum wage payment purposes only when they are awake to carry out any relevant duties.’
The judge ruled against all three companies, citing in the case of Mencap, the regulatory obligation to have someone on the premises and their responsibility throughout the sleeping shift both to be and remain present throughout and to keep a listening ear and exercise professional judgment as to whether or not to intervene, and if required to act straightaway.
Back pay demands
This meant that social care providers faced large demands for back pay for workers who should have been paid the NMW for shifts. HMRC began investigations for underpayment of wages for up to six years, but was then forced to temporarily suspend enforcement activity and waive historic financial penalties against employers after pressure from social care employers and local councils, who warned of extreme financial pressures on the sector.
Mencap took the case to the Court of Appeal, which has now reversed the employment tribunal decision. [Royal Mencap Society and Claire Tomlinson-Blake; John Shannon and Jaikishan and Prithee Rampersad (t/a Clifton House Residential Home), Care England, the Local Government Association,  EWCA Civ 1641].
The judge at the Court of Appeal concluded: ‘For the reasons which I have given I believe that sleepers-in, in the sense explained at para. 6 above, are to be characterised for the purpose of the regulations as available for work, within the meaning of regulation 32, rather than actually working, within the meaning of regulation 30, and so fall within the terms of the sleep-in exception in regulation 32 (2); and we are not bound by authority to come to any different conclusion.
‘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.’
Charlie Barnes, an associate director and employment lawyer at RSM Legal, said the decision presented challenges for HMRC because of its decision following the employment tribunal ruling to set up the social care compliance scheme (SCCS) for care providers to opt into to avoid the financial penalties and naming and shaming for failing to pay NMW for sleep-ins.
'The Court of Appeal’s decision turns the SCCS on its head and leaves many questions for HMRC to answer. For example, will those who have already paid penalties, back pay or incurred significant cost in calculating underpayments be compensated? And how do you compensate for the reputational damage that arose from being named and shamed purely for failing to pay NMW for sleep-ins?
'It also begs the question why HMRC chose not to halt all enforcement action until the outcome of the appeal? Opting into the SCCS still meant care providers had to pay back pay to affected workers. Surely, a fairer approach for a sector that was already suffering from cuts in government funding would have been to pause any enforcement of back pay as well as penalties,’ Barnes said.
He argued the outcome underlined the need for a rethink about the current approach taken to enforcement when those who are trying to do the right thing are unfairly punished.
Derek Lewis, Mencap chair, said: ‘The Court’s decision has removed the uncertainty about how the law on the National Living Wage applies to sleep-ins. The prospect of having to make large unfunded back payments had threatened to bankrupt many providers, jeopardising the care of vulnerable people and the employment of their carers.
‘Many hardworking care workers were given false expectations of an entitlement to back pay and they must be feeling very disappointed.
‘We did not want to bring this case. We had to do so because of the mayhem throughout the sector that would have been caused by previous court decisions and government enforcement action, including serious damage to Mencap’s work in supporting people with learning disabilities.’
Royal Mencap Society and Claire Tomlinson-Blake; John Shannon and Jaikishan and Prithee Rampersad (t/a Clifton House Residential Home), Care England, the Local Government Association,  EWCA Civ 1641] is here.
Report by Pat Sweet