Tricia Palmer reviews the Court of Appeal case and discusses the practical complexities facing employers as they grapple with the impact of fluctuating decisions from the courts.
The recent Mencap Court of Appeal landmark case in relation to sleep-in payments determined that that the National Minimum Wage (NMW) does not apply to sleep-in shifts unless the worker is awake for the purpose of working. The previous Employment Appeal Tribunal (EAT) ruling of Royal Mencap Society v Mrs Tomlinson-Blake (Royal Mencap Society v Tomlinson-Blake (National Minimum Wage)), UKEAT, April 21, 2017,  UKEAT 0290_16_2104) had confirmed that sleep-in shifts in a care setting were “working time” and subject to the NMW.
While the Court of Appeal ruling is very clear, it has still left a number of providers in a state of uncertainty, especially as many had already responded to the previous EAT ruling that minimum wage did apply and they have upped their rates accordingly. The ruling has allayed the concerns of many providers on the need to pay significant and often crippling back pay (estimated at £800 million) but leaves them in a moral quandary on what is the “fair” pay for these shifts versus affordability.
The case that started this debate involved a care worker, Claire Tomlinson-Blake, who worked full time for Mencap supporting vulnerable adults living in their own homes. She sometimes had to work sleep-in shifts between 10pm and 7am. For this she was paid an allowance of £29.05, which included up to an hour of any time she had to perform duties. If she was woken in the night and had to work for more than an hour, she would receive extra for this time.
Mrs Tomlinson-Blake took Mencap to employment tribunal in 2016 claiming that she was entitled to be paid the minimum wage for these shifts. The tribunal found in her favour, and Mencap was faced with up to six years’ back pay for all employees who had been working these shifts.
Mencap appealed to the EAT, who agreed that, based on the facts and the legal arguments, the employment tribunal was entitled to reach the conclusion that the minimum wage applies. The National Minimum Wage Act 1998 created an entitlement for a worker to be paid the NMW in any pay reference period (normally a week or a month) in the form of an hourly rate of pay. The EAT concluded that, for the purposes of calculation, the sleep-in hours worked could be categorised under the National Minimum Wage Regulations as either salaried hours work, output work or unmeasured work. In its view, these types of work are not dependent on the duties carried out, but on the way the pay is calculated. It noted that “time work” under Regulation 30 of the National Minimum Wage Regulations refers to work that is paid for by reference to varying hours or set periods of time. These distinctions are important as we shall see when considering the later Court of Appeal decision.
It would appear that the question at the heart of this case is whether “time work” applies to the whole shift or only when the individual is required to be awake and working. There is some argument that the work should not have been considered as “time work” in the first place, as it was paid as a flat rate, ie an allowance, and therefore not referenced by time, and that it was in fact “unmeasured work” under Regulation 44. However, as this argument was not put forward at the initial tribunal stage, it would not be considered at the EAT stage. Mencap contended that the claimant was obliged to be available at her place of work during her sleep-in shift, but as a result of Regulation 32(2), time spent asleep does not count as “time work”. This seems a reasonable argument when you consider the wording of regulation 32(2):
“ .. hours when a worker is ‘available' only includes hours when the worker is awake for the purposes of working, even if a worker by arrangement sleeps at or near a place of work and the employer provides suitable facilities for sleeping”.
However, the EAT explained that its starting point was whether time counts as working and it concluded that Mrs Tomlinson-Blake was working during the entire time by being present, even if she was permitted to sleep. In this case its view was that Regulation 32(2) did not apply, but that each case would need to be determined on its merits. It highlighted the following factors when determining whether a person is working by being present, and it would appear to hinge on the degree of responsibility an individual may have and the absolute requirement to be present.
The employer’s particular purpose in engaging the worker may be relevant to the extent that it informs what the worker might be expected or required to do: for example, if the employer is subject to a regulatory or contractual requirement to have someone present during the particular period the worker is engaged to be present, that might indicate whether, and the extent to which, the worker is working by simply 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 may be relevant. This may include considering the extent to which the worker is required to remain on the premises throughout the shift on pain of discipline if he or she slips away to do something else.
The degree of responsibility undertaken by the worker may be relevant: see Wray & J W Lees, where the EAT distinguished between the limited degree of responsibility in sleeping in at the premises to call out the emergency services in case of a break-in or a fire on the one hand, and a night sleeper in a home for the disabled where a heavier personal responsibility is placed on the worker in relation to duties that might have to be performed during the night.
The immediacy of the requirement to provide services if something untoward occurs or an emergency arises may also be relevant. In this regard, it may be relevant to determine whether the worker is the person who decides whether to intervene and then intervenes when necessary, or whether the worker is woken as and when needed by another worker with immediate responsibility for intervening.
In the EAT’s opinion, the fact that Mencap had a regulatory duty to have someone on site order to fulfil its contract with the council meant that Mrs Tomlinson-Blake was performing the role of a carer during her sleep-in shift and was therefore working. The EAT went on to say that compliance with the NMW could be achieved by ensuring that the average hourly rate is not less than the NMW. This is calculated by dividing the total remuneration in the relevant reference period by the number of hours worked, which in effect meant that the rate of pay could be averaged over the whole month (if that was the pay reference period) and as long as this average was not less than the minimum wage it was compliant.
The response from Mencap was one of disappointment, but measured in its concern for low paid employees. John Cowman, Director of Services at Mencap wrote:
“We did not take on this case lightly and our decision to pursue it is based on the need for clarity as the Government does not currently fund sleep-ins at the minimum wage. If sleep-ins have to be paid at the minimum wage the sector is faced with a real and potentially overwhelming funding crisis that will affect the wellbeing of hundreds of thousands of disabled people who rely on the personal support provided by organisations like Mencap to be able to live a fulfilled and independent life.
The estimated cost of sleep-ins to the sector is £800 million over three years and this is an additional cost to the £2 billion the Government pledged to social care in the Budget, which was a drop in the ocean anyway given the chronic under funding social care has received over decades. This will mean that we have no other choice than to ask already cash-strapped local authorities who contract us to provide these services to make up the shortfall.
The tribunals have in short called into question the flat rate that has been paid to support workers who spend the night in the homes of disabled people who because of their complex learning disabilities need to have a support worker in their home overnight, in case there is an emergency. There is the expectation that the support worker goes to sleep in a bedroom with very little chance of being woken. The law has always recognised sleep-ins as substantially different to time spent awake and working but the recent tribunal rulings have given a different view.
Clarity is needed not just for us, but for other providers, for our colleagues and as importantly for the disabled people we support.
It is really important to understand that we have not brought this case because we don’t want to pay our support colleagues properly. Far from it. We know they are carrying out some of the most challenging and important work in our society and we are committed to working with others to increase their pay over the longer term.”
Court of Appeal Decision
Given the potential financial disaster this decision presented, Mencap appealed to the Court of Appeal. The appeal was heard by Lord Justice Underhill and Lord Justice Singh together with a second case of Shannon vs Clifton House. I will deal mainly with the Mencap case in this article. As this case was considering a significant matter of principle, two organisations, Care England and the Local Government Association, were also given leave to provide evidence. It is interesting to note here that both parties attempted to make submissions on matters of policy, but the Court of Appeal declined to consider this as it is: “the job of the Court is not to decide what the law ought to be in this area but what it is”.
The Court of Appeal sought to consider whether the entirety of a sleep-in period spent on the premises must be taken into account in calculating an employer’s obligations to pay the minimum wage, or whether only the period spent actually engaged in performing specific activities is what counts. The Court argued that the essential point was that the worker is contractually obliged to spend the night at their workplace on the basis that they will be able to sleep for most or all of the night, unless they are woken to undertake a specific activity. In considering the matter, the Court took account of the reports from the Low Pay Commission (LPC), and believed them to be of fundamental importance when reaching its conclusion. The first report of the LPC, published in June 1998, considered what should constitute working time for the purposes of the NMW. The important point here is covered in paragraph 4.34 of this report:
“…For hours when workers are paid to sleep on the work premises, workers and employers should agree their allowance as they do now. But workers should be entitled to the National Minimum Wage for all times when they are awake and required to be available for work.”
The Court determined that it was reasonable to believe that the Government proposed to follow the Commission’s recommendations in drafting the regulations. In particular the Commission dealt expressly with the case of workers who sleep in residential homes, but are required to be on-call, which is precisely the case for the Mencap workers. It referred to existing practice, which was that the worker was paid an agreed allowance and recommended that only the time when they are awake and required to be available for work should count for NMW purposes. Indeed, many legal commentators have long held the view that it was Parliament’s intention that somebody working a sleep-in would not be entitled to the minimum wage for all the hours that they slept-in. They believed that the drafting of the regulations reflected this, and this has been the practice adopted universally by providers. The LPC further reiterated this point in section 3 of its fourth report issued in March 2003:
“3.55 Having considered the overall economic impact of the minimum wage on the social care sector, we now turn to a more specific policy question of particular relevance to the sector, namely how the National Minimum Wage applies to ‘sleepovers’. ‘Sleepovers’ cover situations where, for example, someone works a day shift in a care home and then sleeps in the home overnight and is available to deal with emergencies but would not necessarily expect to be woken. Similar situations may arise with workers who care for an elderly or disabled person in his or her own home and sleep on the premises, or with wardens in sheltered housing who are available to deal with emergencies during the night.
3.56 In our earlier reports we concluded that for ‘sleepovers’, where the assumption is that the worker will not normally be woken, the National Minimum Wage should not apply (in practice an allowance is usually paid) but workers should be entitled to the National Minimum Wage for the times when they were awake and required to be available for work. We noted the difference between these ‘sleepovers’ and on-call or standby arrangements where a worker is required to be at the workplace outside of normal working hours with the expectation that he or she will be required to work, for which the National Minimum Wage is payable. The Government accepted and acted upon our recommendations, and we believe that these still reflect the right approach.”
Anthony Collins Solicitors made the following comments in submissions in 2014 to the Government as part of the consultation on draft Consolidated National Minimum Wage Regulations :
“We do not believe that would have been Parliament’s intention when drafting Regulation 15(1A) [now Regulation 32]. That provision was, in our view, designed to ensure that where a worker who sleeps at or near a place of work and is provided with facilities for sleeping and is permitted to use those facilities for sleeping, they are only carrying out time work when the worker is awake and carrying out duties. […] We believe our interpretation of Parliament’s intention is reflected by the Low Pay Commission’s recommendations made at the time the legislation was introduced. We therefore consider that it is clear from the government guidance that the intention behind Regulation 15(1A) was to ensure that somebody working a sleep-in would not be entitled to the minimum wage for every hour of that sleep-in.”
They subsequently wrote that they believed case law had taken various wrong turns over the years, which had resulted in the massive confusion among providers and their workers. The Court of Appeal took a more common-sense approach to sleep-ins in that workers who are “expected to sleep for most of the night but may be woken if required to undertake some specific activity” are only entitled to the NMW while awake performing those activities. This is in contrast to the multifactorial approach taken by the previous body of case law.
Court of Appeal arguments
The Court of Appeal decision is well argued in relation to both the Low Pay Commission (LPC) evidence and the meaning of the National Minimum Wage Regulations. The regulations were first enacted in 1998, but have been amended from time to time and have been replaced by the National Minimum Wage Regulations 2015, which consolidated the previous regulations and amendments but did not change their effect. The broad scheme of the regulations was to clarify the calculation of the hourly rate to be paid in pay reference period. The Court sought to understand the hours worked for the purpose of the NMW by the Mencap employees, when they were sleeping-in. This may appear a simple calculation, but is hampered by the fact that the regulations give no definition of what is meant by work, although in Regulation 7 it does refer to types of work for pay purposes, namely:
salaried hours worked
The tribunals and the Court of Appeal all agreed that the sleep-ins fell under the definition of “time work”, which is defined as “work that is paid under a worker’s contract by reference to the time for which a worker works and is not salaried work”. This is also clarified in relation to sleep-ins by Regulation 32 of the 2015 Regulations, which reads:
“(1) Time work includes hours when a worker is available, and required to be available, at or near a place of work for the purposes of working unless the worker is at home. (2) In paragraph (1), hours when a worker is ‘available’ only includes hours when the worker is awake for the purposes of working, even if a worker by arrangement sleeps at or near a place of work and the employer provides suitable facilities for sleeping.”
The Court of Appeal then went on to say it would consider the effect of the regulations as regards to sleep-ins without reference to previous case law. This is helpful as it allowed the Court to take a more common-sense approach to the matter. The judgment gives a detailed analysis of National Minimum Wage Regulations and concludes that “the effect of all three versions of the Regulations is that a worker who is, and is required to be, (a) available for the purpose of working (b) at or near his or her place of work is entitled to have the time in question counted as time work for NMW purposes unless: (i) he or she is at home; or (ii) the arrangement is that they will sleep (and be given facilities for doing so), in which case only those hours will count when they are, and are required to be, awake for the purpose of working.”
The Court of Appeal was of the view that use of the word “availability” in the regulations were deliberately intended to mean that an individual was available for work rather than actually working — a distinction that was not previously made by the EAT. The Court goes on to say in the context of the regulations that “it would not be a natural use of language, in a context which distinguishes between (actually) working and being available for work, to describe someone as ‘working’ when they are positively expected to be asleep throughout all or most of the relevant period”. Although I would if necessary reach that conclusion on the basis of the regulations alone, it is in my view strongly reinforced by the fact that it gives effect to the recommendations of the LPC. It follows that, on a straightforward reading of the regulations (in the light of the first report of the Commission), workers sleeping in under arrangements of the kind identified above will only be entitled to have their sleep-in hours counted for NMW purposes where they are, and are required to be, awake for the purpose of performing some specific activity.
The Court of Appeal then turned to consideration of previous case law, which I do not plan to deal with extensively here, as their consideration did not change the overall decision. However, it is worth noting that there are a large number of authorities relating to this case, some of which the Court considered in detail and I will pick out a couple to illustrate some of the points made. With regards to The British Nursing Association v Inland Revenue  EWCA Civ 494,  ICR 19, the Court of Appeal decided that it did not apply to the Mencap case, although it had no problem with its reasoning or outcome that NMW applied. The difference here was that while the shifts were worked at home, the staff were required to answer the phone within four rings and must be available throughout the duration of the shift without “protected” periods of sleep.
The case of Burrow Down Support Services Ltd v Rossiter  UKEAT 592/07,  ICR 1172, represented an important step in the development of case law. This case was one of an individual who worked two nights a week at a care home for people with learning difficulties. He had to monitor health and safety and be available should emergencies arise. He was required to be awake for a quarter of an hour to effect a handover of duties, and to assist with the breakfasts of the residents between 7am and 8am. Otherwise, he could be asleep, save when his duties required him to be awake, such as if he heard noises requiring investigation or if anything else untoward occurred. Indeed, his job title was “night sleeper”. The employee claimed that the entirety of the shift counted as “time work” for the purposes of the regulations and the employment tribunal upheld this claim, relying on the earlier British Nursing Council case. The EAT also dismissed the employer’s appeal.
The Court of Appeal believed the Burrow Down decision was wrongly decided, as the essential reasoning — that the worker was working throughout the shift — was contrary to its understanding of the meaning of the regulations, as reinforced by the LPC. The Court of Appeal went on to conclude that while the EAT took account of the view (taken from Scottbridge Construction Ltd v Wright  IRLR 21) that an employer can always get full value from an employee by finding them specific tasks during their shift, they were unconvinced by this argument. Its view on this was stated clearly in the summing up “...Even if it were always practicable to find worthwhile tasks to occupy a sleeper-in for eight hours (which I doubt), that does not address the basic artificiality of describing someone as ‘working’ — still more, as actually working — during a shift when it is positively expected that they will spend substantially the whole time asleep.”
Mencap’s response and practical implications
This is clearly a landmark case for providers and workers in the care sector alike, and the chair of the Royal Mencap Society made the following statement:
“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.
What is clear though, is that dedicated care workers deserve a better deal. They work hard and support some of the most vulnerable people in society, but many are among the lowest paid. We and many other providers have been paying for sleep-ins at a higher rate for over a year now, and we intend to continue despite the Court’s decision. We now call on Government to fulfil its responsibilities by legislating so that all carers are entitled to this, and their employers are funded accordingly. We also call on Government to ensure that the social care sector and, in particular, the specialised support that is required for people with a learning disability is properly funded and its workers are paid what they deserve in the future.”
This view is reflected throughout the social care community, where the balance between wanting to pay their workers a “fair” wage and their ability to do so because of severe financial constraints creates extreme tensions. Many providers signed up to the HM Revenue & Customs (HMRC) voluntary compliance scheme in 2017, in exchange for not receiving penalties of up to £20,000 per worker or being publicly named for under-payment. They have commenced paying the NMW for these shifts and started the calculations of back pay. Employees have been given high expectations of significant amounts of back pay. At the time of writing, the HMRC had given no indication of how it will treat this outcome, other than it will issue a statement in due course. Common sense must be that since the Court of Appeal has ruled that the NMW does not apply to these type of sleep-in arrangements, there is therefore no under-payment of wages or taxes, and logically the voluntary compliance scheme must fold.
This still leaves employers with the practical difficulties of what they should continue to pay for sleep-ins, especially if they have already started paying the NMW. The employee relations fallout would be significant should providers determine they would now revert to the old sleep-in allowance and (worse) attempt to claim back payments already made. The complexities relating to contractual entitlements would depend on individual circumstances and whether contracts have been changed, and how much custom and practice could be relied upon. The market is in disarray with providers paying significantly different rates, but with many finding that this has severely damaged their financial position and made some of their operating costs unviable.
Many commentators are laying blame at the Government’s door, stating that this is more to do with the crisis in the under-funding of social care. Tom Long, legal director and healthcare employment specialist stated that “Regardless of the ruling there is no doubt that the sector needs further support. To relieve the significant ongoing cost pressures facing the sector it is essential that local authorities and care providers look to central government for workable funding solutions. This should enable the sector to maintain high standards of care for the years to come.”
Clearly UNISON, the trade union who originally brought this case on behalf of the employee, is disappointed with this outcome and it is considering appealing to the Supreme Court. Dave Prentice, UNISON General Secretary, told the BBC the ruling was a "mistake" and that the blame should be "laid at the Government's door". “Ministers are so consumed by Brexit that they're ignoring huge problems around them. Sleep-in shifts involve significant caring responsibilities, often for very vulnerable people."
It is clear that this is a long running issue, which will not be resolved quickly. The Court of Appeal decision has for the moment given clarity and legitimacy to the status of sleep-in allowances, but this does not mitigate the low pay concerns of these workers. Heightened expectations together with vastly varying pay rates will only reinforce the traditional transitory nature of this type of workforce. Providers will continue to struggle to provide a good quality service to the most vulnerable in our society, and in my view we should not have to rely on the Courts to ensure that we pay a “fair” wage to those people working in such services.
Royal Mencap Society v Mrs Tomlinson-Blake (National Minimum Wage), UKEAT, April 21, 2017, (2017) UKEAT 0290_16_2104
Royal Mencap Society v Mrs Tomlinson-Blake, UK Court of Appeal July 13 2018, (2018) EWCA_Civ_1641