Employers in the care sector will welcome the Court of Appeal's recent decision in Royal Mencap Society v Tomlinson-Blake and Shannon v Rampersad (t/a Clifton House Residential Home).  The Court held that workers are not entitled to the national minimum wage (NMW) for sleep-in shifts where the expectation is that they will sleep but be on-call to deal with emergencies.  

Royal Mencap Society v Tomlinson-Blake and Shannon v Rampersad (t/a Clifton House Residential Home). 

This decision represents a break away from previous case authorities which had typically found that a worker was working for NMW purposes when sleeping at their employer's premises.  Indeed, in April 2017, the President of the Employment Appeal Tribunal (EAT) issued guidance that suggested a worker would be working for the whole of a sleep-in shift, even when asleep, where the employer was under a duty to have a worker on the premises at all times and the worker was not free to leave the premises.

This guidance had significant ramifications for employers in the care sector, who faced steep rises in their future pay bills to cover the cost of sleep-in shifts.  They also had to grapple with the risk of back-pay claims for historic underpayments.   In November 2017, HMRC set up the Social Care Compliance Scheme which gave care sector employers a year to voluntarily self-identify what they owed to workers for sleep-in shifts and a further three months to pay the back pay to workers. By signing up to the scheme, employers were shielded from HMRC enforcement action and penalties.  

The legal background

All workers are entitled to be paid not less than the current hourly rate of the NMW that applies to them.  In order for an employer to know whether it is complying with the NMW legislation, it needs to know the worker's hourly rate of pay.  This is done by looking at the total pay received in the relevant pay reference period and the total number of hours worked during that same period.  The hours for which a worker is entitled to be paid the NMW will depend upon the type of work done.  There are four different categories of work, however, "salaried work" and "time work" are the most common form of working pattern (and the ones that arose in this appeal).  

"Salaried hours work" is where a worker is paid for a set basic number of hours in a year and receives annual salary which is paid in equal instalments. "Time work" is work that is not salaried hours work and is: (i) work that is paid for by reference to the amount of time the worker works; or (ii) work that is paid for by reference to a measure of output per hour or other period of time during which the worker is required to work.

In both cases, the starting position is that any hours that the worker spends available at the place of work for the purposes of working are treated as working hours.  However, the waters are muddied where the worker is engaged with the intention that they will sleep overnight on the employer's premises.  Should they get paid for the whole shift, even when they are sleeping?  It is this issue that lies at the heart of the Court of Appeal's decision.

What happened in these cases?

Royal Mencap Society v Tomlinson-Blake

Ms Tomlinson-Blake was a care support worker who provided care for two vulnerable adults.  She was required to work a 9-hour sleep-in shift from 10pm to 7am.  She was paid a flat allowance of £22.35 plus one hour's pay of £6.70 (the applicable NMW hourly rate at the time) i.e. a total of £29.05 per sleep-in shift.  She was also paid an additional hourly rate for any hours where she was woken to perform duties.  She brought claims arguing that there had been a shortfall in pay for each sleep-in shift.  The Employment Tribunal agreed with her.  They held that the whole of the sleep-in shift counted as time work and she was entitled to be paid the NMW hourly rate for the whole 9-hour period.  

Mencap's appeal to the EAT was dismissed.  The EAT highlighted that the Tribunal had carried out a proper evaluation to decide whether the sleep-in shift hours represented time work. In particular, it was relevant that Mencap was legally obliged to have someone present on the premises to comply with their statutory and contractual obligations.  Furthermore, Ms Tomlinson-Blake had to remain on the premises throughout and use her own judgement to decide whether and when to provide assistance to those in her care.

Shannon v Rampersad (t/a Clifton House Residential Home)

Mr Shannon was an on-call night care assistant at a registered residential care home.  He was provided with free accommodation and was paid £90 per week.  He was required to be in his flat for a 9-hour period from 10pm to 7pm.  He was able to sleep during those hours, but remained on-call to provide assistance to the night care worker who was on duty overnight, although this rarely happened in practice.  

Mr Shannon brought claims arguing that the NMW rate applied to the full 9-hour nightly on-call shift on the basis that these were salaried hours work.  The Employment Tribunal did not agree, finding that he was not entitled to be paid for the hours when he was asleep and that he had been paid properly for the hours that he had been called upon to work.  Mr Shannon's appeal to the EAT was dismissed: they agreed that he was only entitled to be paid the NMW for the actual hours that he was awake and working.

What did the Court of Appeal decide?

Mencap and Mr Shannon both appealed to the Court of Appeal.  The appeals were heard together and the decision was handed down on 13 July 2018.  The Court allowed Mencap's appeal and dismissed Mr Shannon's appeal, meaning that neither worker was entitled to receive the NMW for the entirety of their sleep-in shifts.   

The Court concluded that the NMW legislation was clear. In respect of "time workers" such as Ms Tomlinson-Blake, it provided that a time worker who is, and is required to be, available to work at (or near to) his place of work is entitled to have that time counted as "time work" for NMW purposes. However, if the worker is:

• available for work;
• at or near to his place of work (or at home);
• permitted to sleep; and 
• provided with facilities to sleep,

then the only hours that count will be the hours where the worker is awake for the purpose of working. 

In respect of "salaried hours workers", such as Mr Shannon, the position was virtually identical, save that the relevant "availability" provisions only applied where the salaried hours worker claimed to have worked hours in excess of their basic working hours for the relevant pay period.

In both cases, the legislation intended to treat sleep-in workers as merely "available" for work as opposed to actually working.  Therefore, sleep-in workers (whether time hours workers or salaried hours workers) were only entitled to count the hours in which they were actually awake for the purpose of performing work.  The Court went on to consider the authorities in this area, as some did not dovetail with the Court's conclusion:  

• The Court distinguished the appeals from British Nursing Association v Inland Revenue.  That case established that workers who were actually working on overnight shifts were entitled to nap during intervals between tasks. Naps of this kind did not undermine the fact that they were treated as actually working for the whole shift.  The Mencap and Shannon cases were different because the essential feature of the arrangement was that the workers were expected to go to sleep for the duration of the shift, and be on call to work if needed.
• Similarly, the decision in Scottbridge Construction v Wright could be distinguished from the appeals.  In that case, a nightwatchman was held to be actually working throughout his shift, even though he was permitted to sleep for around 5 hours in each 14-hour night shift.  The Court distinguished the decision from Mencap and Shannon on the basis that the worker in Scottbridge had significant duties at either end of his shift and, whilst he was permitted to sleep, he was only provided with a mattress on the floor as opposed to a proper bed and he could only count on sleeping for 5 hours.
• The Court also considered the case of Burrow Down Support Services v Rossiter.  In that case, the EAT held that a sleep-in worker was working for the whole of his shift, even when asleep.  However, the EAT had wrongly relied on British Nursing Association to reach that conclusion.  They had been wrong to do so because the staff in British Nursing Association actually worked throughout their night shift and only took naps at appropriate moments.  In Burrow Down, the purpose of the arrangement was quite different: the worker was expected to sleep through the shift.

In conclusion, the Court held that both Ms Tomlinson-Blake and Mr Shannon were sleep-in workers who were merely available for work.  This meant they were only entitled to NMW pay for the hours in which they were awake for the purpose of working.  It was irrelevant that they may have been required to have a "listening ear" for any issues requiring their attention – this was the very purpose being available to work.  Nor was it relevant that their liberty was restricted – again, making yourself available for work inevitably places limits on your freedom.

Where does this leave employers?

This decision will come as a relief for many employers in the care sector by removing the burden of significant unfunded liabilities.  However, it will be bittersweet for those employers who have already made back pay payments to workers under the Social Care Compliance Scheme and are unlikely to be able to recover them.

Of course, now would be a good time for care sector employers to review how they remunerate workers for sleep-in shifts.  Whilst each case will turn on its own facts, we can draw out two general rules from this decision:

• Where a worker is actually working during night shift and perhaps taking naps during quiet periods, then it is likely that the worker will be viewed as working for the whole shift and will be entitled to the NMW.
• Where the worker is expected to sleep during the night shift and be on call to deal with emergencies, then it is likely that the worker will be viewed as being merely available for work.  This means they will only be entitled to the NMW for the hours when they are required to be awake for the purpose of working.

Of course, the tricky issue is working out where the dividing line falls between actual work and mere availability for work.  The Court of Appeal recognised that this is a fact-specific question and in borderline cases different Tribunals might reach different conclusions on very similar facts. If you are concerned about which side of the line your employees stand, please get in touch with your usual AG contact.

The final point to note is that Unison, the trade union backing Ms Tomlinson-Blake's claim, has indicated that it will seek permission to appeal to the Supreme Court.  Therefore, the Court of Appeal's decision may not be the last word on this matter and care sector employers should to keep a watching brief on this potential appeal.