Sleep-ins – what next?

The Court of Appeal’s judgment in the Royal Mencap Society v Tomlinson-Blake is not yet the final word on sleep-ins.…

The saga of sleep-ins has now been long-standing and continuing for a number of years. In the social and health care sectors traditionally, staff have been paid a set allowance for undertaking a “sleep-in” shift. This is where someone is paid to sleep on site, but no duties are usually performed. It applies to children’s and adult social care as well as some healthcare provision.

Whether that sleep-in is 8 or 10 hours, usually the allowance was a relatively nominal sum, not comparable with the hourly rates of pay within the National Minimum Wage or more recently, the National Living Wage. There have been a number of challenges to this, all of which have tended to suggest that sleep-ins ought to more properly be regarded as work for the purposes of National Minimum Wage Regulations.

Some organisations became aware of earlier case law and began to make changes to accommodate the minimum wage but even into 2017, a large number of providers had not made any changes.

The Royal Mencap Society was one of those organisations paying a nominal sleep-in allowance. Their payment mechanism was challenged as a breach of the National Minimum Wage Regulations and underpayments successfully claimed by staff in the Employment Tribunal. They were also successful in the Employment Appeal Tribunal. This led to what has been described as a £400m black hole in funding for the sector.

In July 2018, the Court of Appeal heard Royal Mencap Society’s appeal and overturned the two earlier judgments. They concluded sleep-ins were not the type of work where the worker involved was required to be paid the minimum wage. However, that is not the end of the story:

Appeal to the Supreme Court

We know that permission has been sought by the employees’ union for permission to further appeal. Currently we anticipate the Supreme Court will decide whether or not to accept the appeal in October 2018. If the Supreme Court refuses to accept the appeal, then the Court of Appeal’s judgment ought to be final. It should be the final guidance on the application of sleep-ins, overturning previous case law.

However, if the Supreme Court allows the appeal to proceed, then the matter will proceed to be heard in 2019. This leaves social care and healthcare providers with the unenviable uncertainty that the matter could yet be overturned and the £400m black hole returns.

Social Care Compliance Scheme (SCCS)

In light of the Court of Appeal’s judgment, HMRC, the regulator for the National Minimum Wage, indicated that it needed some time to consider the issue. Having done so, it has now contacted most providers who were already part of the SCCS and provided a limited response: “it is appropriate to continue to operate the Social Care Compliance Scheme (SCCS) allowing participating employers to complete a self review, taking the judgment into consideration, and make a declaration to HMRC”.

In deciding to keep the scheme open, HMRC also states that they will be updating their guidance on calculating the minimum wage (for use within the SCCS) once the Department for Business, Energy and Industrial Strategy (BEIS) have reviewed their guidance. That guidance will be published “in due course”.

As the SCCS is limited in time and due to conclude at the end of 2018 (with payment by the end of March 2019), it is to be hoped that HMRC know that the BEIS are shortly going to finalise their revised guidance and HMRC will, themselves, update their own guidance immediately. In the context of a potential appeal in the Supreme Court, this underlines the continuing uncertainty which providers face.

Local Authority Commissioners

Notwithstanding the potential appeal in the Supreme Court, local authorities are themselves considering the implications of the Court of Appeal judgment. Some are already looking to move forward on the basis of the Court of Appeal’s judgment: that sleep-in payments need not be paid as part of the minimum wage. Whether local authorities will be looking to make reductions in contract payments has yet to be seen, but this is the likely direction of travel.

Way Forward for Providers

Given the extent of the SCCS, those providers who are already in the SCCS ought to now consider their own sleep-in practices in line with the Court of Appeal judgment. Many will likely regard their sleep-ins as operating in the same way and, therefore, not part of the minimum wage calculation. HMRC’s SCCS guidance needs to be updated and providers will need to revisit this when it comes out.

If the Supreme Court accept the appeal, then HMRC and providers will undoubtedly have a further period of uncertainty, but in the meantime, commissioners may look for further cost savings. Providers will need to keep a careful eye on the implications of commissioner demands and the potential for sleep-in liabilities returning.

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Sleep-ins – should they form a part of the National Minimum Wage calculation?

The long awaited appeal by Mencap has now been considered by the Employment Appeal Tribunal (EAT). This appeal is based on the way care is provided, predominantly in the social care sector but also has an impact on healthcare providers too. In recognition of the importance to the sector, this appeal was heard by Mrs Justice Simler, the President of the EAT, and brought together three separate appeals. Mencap operate their sleep-ins in common with most social care providers and pay a mostly flat rate sleep-in payment. They were unsuccessful in arguing that the hours during sleep-in shifts were not to be taken into account in calculating the National Minimum Wage.

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