On Friday 19 March 2021 the Supreme Court published its decision on the sleep in pay case involving Mencap v Tomlinson-Blake, as to whether workers who “sleep in” as part of their shifts are entitled to the national minimum wage (NMW). In great news for employers, the Supreme Court agreed with the Court of Appeal’s decision that the national minimum wage is not payable.

The Supreme Court confirmed that if a worker is permitted to sleep during their shift and is only required to respond to emergencies, their hours only count for the purpose of the national minimum wage where the worker is awake for the purpose of working.

Employers can therefore continue to pay sleep-in allowances, which may be less than the national minimum wage, for sleep in shifts for hours where the worker is not called upon.

Employers in the care sector breathed a large sigh of relief as this judgment marks the end of this long running issue, which if it had gone in the worker’s favour would have resulted in significant claims for back pay and penalties.

Why was there uncertainty as to whether the national minimum wage applied to sleep in shifts?

When the NMW was introduced, the rules made a distinction between hours when employees were “available for work” only and when they were actually “working”. Employees were only entitled to NMW for hours that they were “working”. Hours that employees were merely “available for work” did not count for NMW. The NMW rules provided special rules for employees who spend part of their shift “on call” or “on standby”. There were two main categories under the rules:

1. Employees on call but permitted to be at home or near the workplace: These employees were to be treated as being “available for work” only. This means that they are only entitled to NMW whilst on call for hours that they are actually called out, i.e. hours they actually come into work.
2. Employees that are not working but merely required to be at work to be available for the purpose of working and are provided facilities for sleeping: This category covered traditional sleep in shifts where employees are required to be on the premises, but entitled to and expected to sleep. These employees were again only entitled to NMW when actually called upon to work.

These shifts have traditionally been paid via a “sleep-in allowance”, a set rate per night, which is significantly lower than NMW. These shifts are particularly common in the care and education sectors. From 2015 onwards the nuances of the second category started to be considered by the courts. Confusion arose as the courts started to say that whether an employee fell within the second category was actually a multifactorial test, which looked at various factors such as why the worker needed to be there, how much responsibility they had and what restrictions were placed on them to determine if they were “working” or merely “available for work”.

In earlier decisions made by the Employment Tribunal and the Employment Appeal Tribunal in the Tomlinson-Blake case this multifactorial test led to the Tribunals concluding that Mrs Tomlinson-Blake was “working” for the entirety of her shift. The Court of Appeal reversed these decisions in 2018 and confirmed that Mrs Tomlinson-Blake and others in this position were merely available to work and not entitled to National Minimum Wage, in a move which was welcomed by employers. Due to the importance of this issue, however, permission was then granted to appeal and therefore some uncertainty remained.

What factors was the Supreme Court decision based on?

The Supreme Court gave weight to the recommendations of the Low Pay Commission which was set up at the same time as the NMW was introduced. It had originally recommended that sleep-in workers should receive an allowance and not the NMW unless they are awake for the purposes of working.

The Supreme Court agreed with the Court of Appeal that if the employer has given the worker the hours in question as time to sleep, and the only requirement on the worker is to respond to emergency calls, the worker’s time in those hours is not included in the NMW calculation, unless the worker actually answers an emergency call, in which case only the time they spend answering the call is included.

It follows that, however many times the sleep-in worker is (contrary to expectation) woken to answer emergency calls, the whole of their shift is not included for NMW purposes. Only the period for which they are actually awake for the purposes of working is included.

The Supreme Court found it was inconsistent with the NMW regulations to say that a person was working during a night shift when they were positively expected to be asleep throughout all or most of the relevant period.

What is the test now for whether the national minimum wage applies during sleep in shifts?

If a worker is expected to sleep for most or all of their shift, with just the chance of being occasionally woken to carry out an unexpected task, they are working a genuine “sleep-in” shift and do not need to be paid NMW for the full shift. They are only entitled to be paid for hours that they are actually called upon. This also applies to workers that are working from their own home.

Employers can now be confident that genuine sleep in shifts will not attract the NMW.

Employers should bear in mind however, that there are still some circumstances where NMW may be payable during night shifts where the worker is permitted to sleep part of the time. The Supreme Court agreed with the Court of Appeal’s comments that not every worker who is permitted to take a nap between tasks is a sleep in worker, and that a person may, depending on the facts, be working, as opposed to being merely available for work, even if his work is only intermittent.

If an employee is expected to carry out tasks during the shift and are merely permitted to sleep in between, this may still amount to working time. The key factors to consider when assessing this risk are:

1. Is the employee provided with suitable sleep-in facilities by the employer?
2. Is the employee expected to sleep during the shift? (i.e. how often in practice are they disturbed? Is this occasional or regular?)
3. Is the employee expected to carry out tasks at set points during the shift? If so, this increases the likelihood that the employee is at work throughout the shift and this should be reviewed.

Employers also need to continue to ensure that workers do receive NMW for hours when they are actually disturbed during the shift and undertaking work.

What are the consequences if this process isn’t followed?

Employees who are not duly paid the NMW over the relevant pay reference period can enforce the payment of arrears in one of two ways:

1. Issue a claim at the Employment Tribunal, usually for Unlawful Deduction from Wages (if within relevant time limits)
2. Report the employer to HMRC who will undertake an investigation into whether the NMW has been paid. A HMRC officer will be appointed to carry out an audit of the employer’s pay records and will then issue a Notice of Underpayment if it is found that the NMW has not been paid to a relevant employee or employees. As well as requiring payment of the underpayment, a penalty will be imposed. Employers will also be “named and shamed” as underpayers.

There’s therefore a risk for employers that if they do not correctly pay the NMW to workers then the affected employees could take legal or enforcement action.

Summary

The law relating to the NMW is complex and employers need to consider carefully whether they have employees who are not being paid the NMW but should be. This will in all likelihood affect employers who have staff working on call shifts or “sleep-in” shifts either at their premises or at home. There are severe penalties imposed by HMRC if it is found that an employer has not been paying the required NMW to its employees, ignoring the cost, time and stress of dealing with an HMRC inspection. Ultimately, whether an employee is working or merely on call will be decided by the facts and circumstances of the case and employers are encouraged to seek expert legal advice if they are in any doubt.

If you would like to discuss any of the issues raised by this decision please contact a member of the Employment team.