A legal action relating to care providers who provide “sleep in” care services is currently before the Court of Appeal.
Historically, most organisations have paid “sleep in” workers a flat rate for their time spent sleeping on the premises overnight and an hourly rate for the hours they are awake and working.
However, in the case of, Royal Mencap Society v Tomlinson-Blake, last year, the Employment Appeal Tribunal (EAT) determined that, in fact, workers should be paid national minimum wage for the entire period they are on shift, not just the hours they actually work.
What’s the impact on social care providers?
The effect of the ruling is that care providers are being told they have to pay six years’ worth of back pay and associated tax to employees and HMRC. Providers are being targeted to make the appropriate payments, with the threat of enforcement action by HMRC, including penalties and public naming and shaming if they refuse to do so, as well as the possibility of criminal prosecution. Providers cannot, therefore, ignore the issue in the hope or expectation that employees will not take direct action to recover money they are potentially owed as a result of this decision, as HMRC are taking the initiative in forcing compliance.
The impact on the industry, which comprises a mixture of charities and private care providers, is estimated to be £400 million. This is expected to have a crippling effect on charities and care providers which do not have the resources to pay the arrears of pay and tax.
HMRC has offered providers affected by this ruling an opportunity to opt into a scheme whereby, if they sign up and pay employees the arrears they are owed, the tax on those arrears is deferred until March 2019. For most providers, however, who do not have the cash reserves to immediately pay the arrears owed to their employees, let alone the tax on those arrears, the scheme does not provide a realistic or suitable solution to the issue.
What can care providers do?
Although the judgement made in Royal Mencap Society v Tomlinson-Blake does not provide a straightforward answer as to whether the National Minimum Wage should apply to “sleep-in” shifts, organisations in the social care sector should consider their circumstances carefully. Employers in this sector should consider the following:
Review all contracts to identify areas of risk and, where required, ensure employees are being paid the National Minimum Wage
Read and apply the guidelines provided by EAT to assess the level of potential risk to your organisation and enforce the appropriate changes
Assess the extent of liability for arrears of national minimum wage (and associated tax), their ability to pay this and the impact of this on your business
If your organisation is affected by the sleep-in crisis and would like more information on how you can protect your business as a result of it, please contact Alan Millband or Carl Mifflin.