Legal implications of the Mencap decision
The Supreme Court hears the appeal against the Court of Appeal's ruling in Royal Mencap Society v Tomlinson-Blake (the Mencap case) this week, although it is unlikely we will get a decision for some months. Currently employees undergoing sleep-in shifts are only entitled to the national minimum wage (NMW) when they are awake and carrying out duties; what are the implications if the Supreme Court decides that this is no longer the case?
Whatever the Supreme Court decides there will be issues for care providers to consider. This bulletin sets out the ramifications of the two alternative scenarios.
THE DECISION IS UPHELD
This will come as a great relief to care providers and will provide final certainty in an area which has been nebulous for quite some time.
- Can continue to use workers for sleep-ins in the same way
There will be no need to reconfigure sleep-in services as the NMW will only be payable when the person carrying out the sleep-in is actually awake and carrying out duties, and not for the additional time that they are sleeping.
- No need to worry about back pay
Most providers have declared the potential back-pay as a contingent liability. They will no longer have to do so.
- Ongoing employment disputes
Some providers with cases on hold will be able to apply to have those cases struck out.
- What about staff relations?
Some employees may have been resting their hopes on a payment of back-pay and an increase in sleep-in rates following the Supreme Court's decision. If these expectations haven't been managed then providers may find themselves with staff relations difficulties.
- Future funding of sleep-ins
There are many different sorts of contracts in circulation with Commissioners at present, but very few fund sleep-ins at the NMW. This leads itself to a discussion about proper funding of care provision, especially when other costs arise.
THE DECISION IS OVERTURNED
This will necessitate instant action, and, for some providers, a great deal of work.
- Those carrying out sleep-ins will have to be paid for the entirety of their shift
It will no longer be possible for workers to be paid the NMW only for time that they are awake and carrying out duties. They will have to be paid for the entirety of their shift. This will have obvious budgetary implications, and many providers will struggle with this additional liability. In May 2018 VODG, Agenda and Trowers & Hamlins undertook the biggest survey on sleep-ins. At that time, a reported 52% of services would have become unviable within a year.
- Calculate back pay liability
Back pay liability becomes an issue again. Those who haven't made a back-pay assessment as part of a contingent liability exercise will have to embark on this time-consuming task. In addition, back pay since July 2018 to the date of the Supreme Court decision may become payable.
- Those still in the SCCS
For those that stayed in the Scheme, the Son of SCCS beckons! HMRC have confirmed that they expect to reopen the scheme and pick up where they left off. We anticipate that HMRC will ask providers to "re-declare" their back pay liability and then to make arrangements for payment.
- Those not in the SCCS
We anticipate that HMRC will invite those providers not in the scheme to re-join or alternatively take enforcement action against them. This starts the ball rolling again in calculating back pay from the date of entry into the SCCS or at the date of the Notice of Enforcement.
- Existing contracts with commissioners?
In the 2018 survey respondents reported that only 7% of commissioners funded sleep ins and all on costs. Existing contracts very rarely provide for payment of the NMW during a full shift. Providers should consider the payment mechanisms and terms of the contract to decide whether they can be renegotiated to cover additional costs, or terminated.
- Past contracts with commissioners
We think it unlikely that commissioners will be able to clawback funding before the Supreme Court judgment (unless they have a contractual right to do so).
- Review or reconfigure services
A number of providers have already been doing this to see if the amount of sleep-ins carried out can be reduced, using different staffing, tech, and reassessing care provision. Some will also consider packing up, or merging with other organisations.
- Can unmeasured time agreements be used?
Some providers have called sleep-ins "unmeasured time" and reached agreement with their workforce not to pay the NMW. The Court of Appeal refused to look at whether or not this was lawful, but its decision implied that this approach would no longer be safe, as sleep-ins were found to be "time work".
Depending on the outcome of the Supreme Court decision it may be that there will be a resurgence in unmeasured time agreements as a way of getting round paying the NMW. However, it may also be a challenge getting the workforce to agree to signing up to such an agreement so to what extent this will be a practical solution remains debatable.
- Revision of BEIS guidance
Following the Court of Appeal's decision in Mencap the BEIS guidance was changed to make it clear that if an employer provides suitable facilities for sleeping, the NMW must be paid for time when the worker is required to be awake for the purposes of working, but not for the time when they are permitted to sleep. This will have to be changed following the Supreme Court's decision.
Mencap will provide certainty at least in this area. Unfortunately if the Court of Appeal's decision is overturned then many care providers who are already struggling to make ends meet will face some difficult times.
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