Following the Government’s announcement of a new sleep-in shift pay compliance scheme, we have updated our advice.
Executive Summary
There are four issues to consider:
- The risk of back-pay claims from your current and former staff, which could go back up to 6 years.
- The risk of enforcement action by Her Majesty’s Revenue & Customs (HMRC), which could include penalties and public ‘naming and shaming’.
- The possibility of claiming increased fees against your commissioners.
- The need to take specialist legal advice if any of the three issues apply to your service, and you are unsure what approach to take.
Background
The National Minimum Wage regulations state that all workers must receive the NMW as an average for all “hours of work”. The Whittlestone case established that “hours of work” may include hours spent asleep. This principle has been upheld in subsequent high profile judgments – most recently the Mencap case – and applies equally where sleeping facilities are supplied by the employer or the person receiving care services.
The Mencap case is being appealed and therefore the law could change. However, the current tilt of case law suggests that a ‘sleep-in’ shift will count as “hours of work” if the employee is required to be present and prepared to work if necessary, regardless of whether they are actually required to work during a given shift. As an employer, you will need to think – and perhaps take legal advice – about whether the employee is there to comply with a legal or contractual requirement; whether their activities are restricted (i.e. are they able to leave at will or would this be a disciplinary act); and whether they would be expected to take action if required during the sleep-in.
In all likelihood the caselaw suggests that sleep-in support will be considered in law as hours of work for the purposes of the NMW legislation. However, each worker’s employment situation is often slightly different from another’s, even within the same organisation. This is because of different contract wording, different service user needs, and other factors such as the employer’s policies. The risks of being found non-compliant are increased by the fact that HMRC actively enforce the regulations (i.e. against employers), as well as the Courts / Employment Tribunals hearing individual employees’ claims. There are therefore two separate avenues by which an employer could be on the ‘wrong end’ of a requirement to pay out.
You must consider each care worker’s circumstances individually. If there is a risk that one or more staff have not been receiving NMW for all hours of work, they could bring a claim for up to 6 years back pay. This could be a substantial sum, and could include Court costs and interest in addition to the pay.
CFW is not able to advise on individual cases, because this is a highly technical legal issue and we are not lawyers. If you are concerned about your own situation, it is important that you take legal advice from an employment law specialist to understand (a) what your risk is in terms of back pay claims and / or action by HMRC; and (b) what you can do going forward to reduce the possibility of such claims or action. Taking legal advice can be costly, particularly as the lawyer will need to go into some detail about your individual arrangements and then compare these with the caselaw. However, the cost of getting those arrangements wrong could be even more costly. We are aware of CFW members who have taken advice and have succeeded, over a period of time, in working through a strategy that has reduced or eliminated the risk of a back pay claim. There are also avenues for engaging with HMRC that can help reduce the risk or effect of enforcement action, but again this is a specialised area.
The fact that local commissioners may not have paid you the NMW rate for sleep-ins will not provide any defence if your employees claim NMW back pay from you, or if HMRC pursue enforcement action against you. If commissioned fees are not sufficient to enable you to meet your NMW obligations, there may be an avenue of claim you could pursue against your commissioners, depending on the precise wording of your contract and any costings submitted and agreed at the time.
For instance if fees have been set with a specific reference to sleep-ins it might be possible to argue that the fee needs to be reviewed in the light of recent case law, and there might even be a back claim that you could bring against the commissioners. Otherwise, whilst the Local Authority is obliged to consider your full and fair costs, they are not obliged to pay fees that necessarily cover those costs; the Local Authority is entitled to consider other factors, such as affordability. The options in such a situation are limited and if the commissioner refuses to indemnify you against future legal action by your employees and you cannot afford to pay NMW for all “hours of work”, you may have to refuse to take or continue with contracts that involve sleep-ins.
Again, however, this is a legal argument that turns on the facts of each situation, and we advise members to take legal advice – sooner rather than later – if you think you may have grounds for a claim against commissioners. CFW’s external legal adviser, Alison Castrey, is able to advise on claims against commissioners (but not any employment law or HMRC claims). You can contact Alison on 0117 962 2356 or via email careregulation@castrey.com. We would emphasise that any such claim against your commissioners would not be a defence against claims brought by your employees (including ex-employees). Neither will HMRC hold off an investigation or enforcement action just because you are making or exploring a claim against commissioners. They are separate issues in legal terms.
There are significant financial penalties for getting the approach to sleep-ins wrong. In addition to the potential for having to repay the arrears for up to six years, in HMRC terms any adjudged failure to pay carries criminal penalties and fines equivalent to 200% of the arrears (capped at £20,000 per worker). This has not changed despite HMRC’s recent announcement of the Social Care Compliance Scheme (SCCS). Deciding whether to participate in the SCCS is, again, a matter upon which you may need to take independent and service-specific legal advice.
There is a helpful advice note published by Anthony Collins Solicitors which you may find useful in understanding some of the issues involved around the SCCS: https://newsroom.anthonycollins.com/wp-content/uploads/2017/11/Sleep-in-announcement-1-November-The-key-questions.pdf If you wish to take advice from Anthony Collins Solicitors on either the HMRC scheme or potential backpay claims you may be facing from staff, you should contact Matthew Wort on 0121 214 3501 (direct dial) or by email at matthew.wort@anthonycollins.com
You should also bear in mind the danger of reputational damage as the Department for Business, Energy and Industrial Strategy regularly publish details of non-compliant employers for arrears in excess of £100.
Conclusion
The stakes are very high, including possible insolvency if a provider makes a bad decision and does not seek to rectify the problem sooner rather than later. CFW will continue to raise the issue behind the scenes with Welsh Government and other authorities. However, we remain concerned that some providers are not taking their own legal advice to try to mitigate the situation.
We do not want to generate publicity about the issue, as this risks staff being alerted en masse to the possibility of back pay claims. Our overall advice is that each employer who uses sleepover shifts (or has done so within the last 6 years) should take legal advice to ascertain the level of risk, and then follow the individualised advice to reduce the risk for your business. The steps you take may not be the same as your competitor’s, because your contracts and arrangements may be different.