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The National Minimum Wage – Suspension of Enforcement Activity

Nicole Ridgwell Solicitor Ridouts

On 26 July 2017, the Government announced plans to temporarily suspend national minimum wage (NMW) enforcement activity; to the relief of social care providers and the disappointment of carers and unions alike.

The issue dates back to the introduction of the NMW in 1999 and the exceptions to its application; one of which was that sleep-in support in a service user’s home was not ‘work time’ but was rather designated ‘on-call’, paid at a flat rate and not eligible for NMW.

The collective appeal against this exception was heard before the Employment Appeal Tribunal (EAT) in April 2017. The EAT decision that NMW should apply was based on a number of factors, including the requirement to remain on the premises and an acknowledgement of the constant vigilance and exercise of professional judgement required of those ‘on-call’ to decide when intervention was required.

The HMRC’s response to the EAT judgment, in line with its National Minimum Wage and Living Wage guidance, was that employers discovering they had paid a worker below the correct minimum wage must pay arrears immediately; hence enforcement action ensued.

This is not the first set of cases to attempt to provide clarity to the grey area of ‘on-call’ working; nurses, pub managers and night watchmen have all had their days in Court, with varying degrees of success.

Nor does this judgment provide that clarity. It is fact-specific and relates only to care workers in certain situations, but that will not diminish its impact. The decision should mean that 200 or so organisations employing care workers would be liable to their employees for up to six years back pay. UNISON estimates that the total amount owed ranges from £160m to £400m.

Following the decision, the HMRC started processing demands for back payments, to the horror of providers whose stark message was ‘can’t pay, won’t pay’. With the recent announcement to suspend enforcement, the Government appears to have listened.

Within the announcement, the Government states that “workers in that sector should be paid fairly for the important work they do”. This may have been a reassuring message for those on the frontline, but for the fact that the meat of the statement tells the opposite story.

Whilst praising the workforce, the announcement’s main message was the suspension of enforcement action against those who have, according to the EAT, been withholding from their workforce wages that were rightfully theirs. UNISON’s general secretary, Dave Prentis, spoke for many within the sector when stating that “This announcement is a huge blow for low-paid workers… It sends out a message to care workers that they are of little value”.

Providers, however, argue that their refusal is not routed in an unwillingness to pay, but an inability to do so. The responsibility, providers argue, is the Government’s, as enshrined within the Care Act.

The Act’s guidance specifically states that local authorities must not threaten the sustainability of the provider market and must not set fees below a sustainable level. In recent months, providers have been using the Care Act in judicial review proceedings, arguing that the Act places on local authorities a duty to pay a financially viable package to allow them to run their services. With the introduction of this sudden obligation to provide a £400m back-dated payment to their employees, providers claim that their businesses would no longer be financially viable, creating an unsustainable provider market.

With legislation placing a strict obligation on Government to guarantee a sustainable provider market, considered in conjunction with the Government’s u-turn on enforcement action, the pleas from the sector that the Government must take responsibility for the £400m refund may therefore not seem as farfetched as they initially appeared.

 

 

 

 

 

 

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