How to avoid prosecution and backpay claims in respect of low paid workers - now a particular risk for health & social care.
Employers whose employees work at different locations – such as maintenance and home care staff – and employers following the 'agile workforce' trend - need to read on: Jodie Sinclair explains this month's news on a care worker's claim for paid travel time and also provides a briefing on the latest legal position on NMW/NLW requirements and enforcement action. Providers and commissioners of homecare need to be particularly alive to this issue as there is renewed focus on compliance in this sector.
It has been reported in the press this month that one of the biggest providers of homecare in the UK, MiHomecare, has entered into settlement arrangements for a claim for non-payment of the minimum wage in respect of travel time between appointments.
The claimant, Caroline Barlow, worked as a carer for patients in their own homes. Ms Barlow was paid for the time she spent undertaking work at patients' homes, but was not paid for travel time between appointments.
Ms Barlow lodged a claim in the Bristol employment tribunal, alleging unlawful deduction from wages / underpayment of the minimum wage, caused by a failure to take account of travel time between appointments. HMRC was also notified and launched an investigation into MiHomecare. We understand that the company has undertaken a review of pay arrangements and is now minimum wage compliant, and any underpaid staff have been reimbursed.
Although this case was settled before a full hearing, it suggests that HMRC may well interpret national minimum wage legislation as meaning that workers should generally be paid the minimum wage for time spent travelling between appointments. This is in line with minimum wage guidance, which requires that time spent travelling in connection with work should be 'counted' as working time for the purpose of calculating the minimum wage.
So far, so clear. But what is the position if workers are travelling between appointments and this also incorporates some rest time – for example, if an appointment finishes early and the worker is able to take a longer lunch? Again, this will come down to the interpretation of the National Minimum Wage (NMW) Regulations but it is likely that such time should still be included in minimum wage calculations, in line with BIS guidance. This specifies (at page 33) that rest breaks taken during travel connected with work should be included in minimum wage calculations.
Contrast, however, the position in relation to minimum wage calculations and travel between
- home and the first appointment of the day, and
- the return journey home at the end of the last appointment of the day.
This time is unlikely to be counted as working time for the purpose of calculating the national minimum wage. The NMW Regulations (and guidance) specifically exclude travel time from home to a place where an employee is working (see page 33 of the guidance and NMW Regulation 34.) However, last year's Spanish case on working time established that for the purposes of the Working Time Regulations (WTR), travel from home to the first appointment of the day, and the return journey home, should be counted as working time. Does this mean that employees are entitled to be paid for this time? No: the WTR and NMW regulations are separate – but it may be that employees will attempt to challenge this position, perhaps arguing that it is unworkable to have two parallel but different categories of working time: travel time that 'counts' as work under the WTR but does not 'count' as work under the NMW Regulations.
Employers in low wage sectors, such as health and social care, should be particularly alive to the risks around minimum wage payments, especially as UNISON is currently focussing on the issue: it published a report this month 'Calling Time on Illegal Wages in the Homecare Sector' and UNISON is also calling for increased reporting, inspection and transparency on minimum wage payments when local authorities commission care. Furthermore, according to a BBC report earlier this month, HMRC has said it is investigating more than 100 care providers and "as part of this [HMRC] are taking targeted action against some of the biggest social care providers".
Human resources professionals and in-house legal advisers must ensure that they are clear on their NMW obligations - not only because this is a complex, technical area which is easy to get wrong, but also because there are a range of enforcement options available; furthermore, the government announced at the end of last year that it will be shining a particularly bright light on this area.
The main source of enforcement action is HMRC, usually initiated by a complaint from workers or a third party. However, officers also have the power to carry out inspections at any time, without providing a reason, and can require employers to produce records and provide other information, or access, to determine the level of pay received by workers. We have been working with clients who have received unannounced inspections, including demands for detailed records.
In September 2015, BIS announced a package of measures intended to improve compliance with the NMW and the National Living Wage (NLW) when the latter is introduced tomorrow, 1 April 2016 (click here for more information on the NLW). Non-compliant employers will face higher fines and will potentially be disqualified from holding company directorships. A new Director of Labour Market Enforcement has also been proposed, who will oversee the various state enforcement bodies, including enforcement of the NMW and National Living Wage by HMRC.
A 'notice of underpayment' may be issued and a 'penalty notice' of 100% of the total underpayment applies, with a reduction to 50% if the employer pays within 14 days. If an employer fails to comply with an underpayment, then civil and criminal proceedings may brought. Where an underpayment notice is issued, then BIS may also publicly 'name and shame' the employer in question.
A worker who does not receive the NMW to which they are entitled may bring a claim
- for an unlawful deduction from wages under section 13 of the Employment Rights Act 1996
- for breach of contract, either in the employment tribunal or the county court
- unfair dismissal and detriment.
On 14 March 2016, the Prime Minister announced national minimum wage increases to take effect on 1 October 2016. The following hourly rates of national minimum wage will apply from 1 October 2016.
- Workers aged 21 to 24: up 3.7% to £6.95.
- Development rate (workers aged 18 to 20): up 4.7% to £5.55.
- Young workers rate (non-apprentices aged under 18 but above compulsory school age): up 3.4% to £4.00.
- The apprenticeship rate: up 3% to £3.40.
The landscape for employers in lower wage sectors is set to become more complex when the NLW takes effect (1 April 2016). The NLW is, in effect, a premium of an additional 50p per hour, paid on top if the national minimum wage, for workers over 25 years old. It has been reported in the press that employers are preparing to cut overtime pay and rates for weekend work, in order to offset the additional cost of the NLW.
We have been advising clients on preparing for, and implementing, contractual changes in advance of the NLW, including ensuring that any restructuring of payments falls within the legal framework. We are also regularly advising clients on compliance with NMW requirements and responding to investigations. Please do contact me, or your usual Bevan Brittan contact for further information.