Pay for sleep-in shifts - Court of Appeal delivers good news for employers

Employers in the care sector have been on tenterhooks for several years over the question of pay for workers who sleep overnight in the workplace. A Court of Appeal decision published earlier this month provides some long-awaited comfort.

The Royal Mencap Society brought the appeal against a decision by the Employment Appeal Tribunal (EAT) that every hour of a sleep-in shift should be counted as working time for national minimum wage (NMW) purposes. Royal Mencap estimated that the EAT's finding would have cost them £20 million in back pay.

Sleep-ins and the National Minimum Wage

In recent years, a body of case law developed which required employers to conduct a 'multifactorial evaluation' in order to decide whether a worker who was required to sleep on the premises and provide services from time to time was working at all times for NMW purposes. The Court of Appeal in the Royal Mencap case described this line of case law as "difficult and intractable" and said that it should be put to one side.

The Court of Appeal examined the wording of the National Minimum Wage Regulations (the "Regulations") and looked at reports by the Low Pay Commission from around the time the Regulations were introduced, which recommended that employers should continue to agree an allowance for sleep-in shifts, as they had done in the past.

The Court of Appeal concluded that workers who are required to be on call and sleep on their employers' premises (e.g. in residential homes) will only be entitled to have their sleep-in hours counted for NMW purposes if they are required to be awake for the purpose of performing a specific activity and it allowed Royal Mencap's appeal.

What now?

Some charities in the care sector have already increased pay for sleep-ins in light of the earlier cases. Some have even made back-payments to staff to compensate for historic underpayments of the NMW. It is likely to be difficult to reverse contractual changes to pay and impossible to recoup compensation in the majority of cases.

The Court of Appeal's decision also throws into question the future of the Government's Social Care Compliance Scheme (SCCS). We wrote about the introduction of the SCCS last year and suggested that there may be a benefit to delaying sign-up until the December 2018 deadline, given the uncertainties. If charities have already signed up to the SCCS, it is likely they will withdraw, given the impact of the Court of Appeal's decision. As at the time of writing, HMRC's SCCS website does not mention the Court of Appeal's decision, but an official announcement is likely to follow in due course.

Finally, the trade union Unison, which acted for the worker in the Royal Mencap case, says it is considering a further appeal to the Supreme Court. This may not be the end of the story.

While this case is certainly a welcome relief for charity employers in the care sector, there are likely to be some strategic decisions to be taken in light of the Court of Appeal's judgment. Contact our charity and social business team if you have concerns or need advice and assistance.