More sleepless nights for care providers? The implications of the Mencap case on sleep-in shifts

Background

• A Mencap care worker carried out sleep-in shifts from 10pm to 7am (9 hours), for which she was paid £29.05.

• No specific tasks were allocated to her during the sleep-in shift. However, she was obliged to remain at the premises and keep an ear out in case support was needed.

• She was expected to intervene and deal with incidents as and when they arose.

• It was a regulatory and local authority contractual requirement for her to remain at the service user’s home during the sleep-in shift.

Decision

The Employment Appeal Tribunal decided that:

• The sleep-in shift was ‘time work’ under the National Minimum Wage Regulations 2015 as the payment was made by reference to the time worked; and

• as it was time work, the starting point was to consider whether the care worker was working simply by being present during the sleep-in shift. If so, the entire shift would be subject to the National Minimum/Living Wage.

The court found that, due to the nature of Mencap’s sleep-in arrangement, the care worker was working simply by being present. The entire shift was therefore working time and subject to the National Minimum /Living Wage. It was irrelevant that she spent the time asleep.

Guidance from the court

In reaching its decision, the court established a multifactorial test to determine when a worker would be deemed to be working simply by being present at their place of work. This included:

• the employer's particular purpose in engaging the worker. For example, a regulatory requirement to have someone present at all times might indicate that the worker is working simply by being present.

• the extent to which the worker's activities are restricted by the requirement to be present and at the disposal of the employer. This may include considering whether the worker could be disciplined if they left their post during the shift.

• the degree of responsibility undertaken by the worker and the types of activities that they may be called upon to perform.

• the immediacy of the requirement to provide services if something untoward occurs or an emergency arises, may also be relevant.

Whilst each case has to be determined on its facts, this test indicates that the vast majority of care sector sleep-in shifts will be subject to the National Minimum/Living Wage.

What are your options?

If you aren’t currently treating sleep-in shifts as working time, here are some options.

• Increase your sleep-in rates. However, in the current funding crisis this may be easier said than done. You already have to absorb rises in the National Living Wage and pension contributions and many local authorities pay less than the National Minimum/Living Wage for sleep-in shifts (£30 for a 9 or 10 hour shift is not uncommon).

• Offset higher pay rates for day work against underpayments for sleep-in shifts. If your pay rates for day work exceed the National Minimum/Living Wage, it may be possible to offset the enhanced amount against any underpayment for sleep-in shifts. The offset rules are not straightforward so you should seek legal advice to ensure you are compliant and on the potential risk of other claims this arrangement can give rise to.

• Negotiate with local authorities to increase the sleep-in rate. We have seen that local authorities are willing to engage in negotiations, and given that the legal and ‘cost of care’ arguments are in favour of providers, this option can have the desired effect.

• Can you treat the sleep-in shift as ‘unmeasured time’ (rather than ’time work’)? If a care worker is paid by reference to the difficulty and duration of their work, rather than the time spent on it, it could be ‘unmeasured time’, which is treated differently by the Regulations. This arrangement could mean that sleep-in time is not caught by the National Minimum/Living Wage. Unfortunately, this argument was not pursued in the Mencap case and has been left open for legal challenge another time.

Serous risks for providers

The risks of failing to comply with the National Minimum/Living Wage are significant and include:

• Employment Tribunal claims for unlawful deductions of wages

•  Notice of Underpayment from HMRC requiring you to repay underpaid staff for the last 6 years (including those who have left the business)

• HMRC penalties of 200% of the amount owed, up to a maximum of £20,000 per worker

• Criminal prosecution

• Being publicly named and shamed by HMRC

The financial implications of non-compliance could be substantial. There are undoubtedly providers who will be at risk of crippling financial penalties if HMRC inspect due to historic non-compliance. Inspections are likely as HMRC has been specifically targeting the care sector for a number of years, having previously found high levels of non-compliance. We have experienced this heightened level of enforcement activity first hand in the increasing number of providers we have been advising on this issue.

What’s the solution?

It is our view that care providers have been unfairly put in the financially precarious position of having significant historic liability for sleep-in payments, due to a lack of clarity over how the minimum wage regulations should be interpreted. To protect the financial viability of providers, we are calling for:

• Clarity from Parliament on whether sleep-in shifts can be treated as ‘unmeasured time’, so that only the time spent awake and working counts towards the National Minimum/Living Wage.

• Action from Parliament if it decides that sleep-in shifts should be treated as ‘time work’, as non-compliance has been due to a lack of clarity over the law. Principally, Parliament could limit providers’ liability to HMRC by capping or waiving historic liability and giving providers a period of grace to change their pay arrangements to become compliant.

  Looking to holiday pay claims as an example, when businesses were faced with significant potential liability due to developments in EU case law, the Government responded by introducing a two-year cap on back-pay claims in the Employment Tribunal to ensure that businesses were not unfairly penalised. A similar principal could be applied in respect of HMRC liability for sleep-in payments.

• More funding for social care and greater pressure on local authorities to comply with the Care Act and pay lawful rates for sleep-in shifts.

Managing your sleep-in shifts

We can help you with any of the issues mentioned in this article, to ensure you become compliant in the most cost-effective way possible. Whether it’s an audit of your pay arrangements and current compliance, a free review of staff contracts or support with challenging HMRC enforcement action, we are on hand when you need it.