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A new stage?

As the dust settles following the Court of Appeal’s judgement in the Mencap case, providers will be facing decisions about their next steps. Matt Wort from Anthony Collins Solicitors LLP explores the Court’s ruling and looks at the options providers have now.

When the decision on sleep-ins back-pay was announced, and it was realised that the £400m back-pay bill had been rescinded, providers and commissioners throughout the country took a collective deep breath. It seems, that at least for now, care packages can continue to be delivered and we now wait to see whether Unison will be given leave to appeal by the Supreme Court. Our view is that the Supreme Court will give them leave to appeal and we can expect a Supreme Court hearing in late 2019.

Somewhat understandably, unions have raised their concerns about the outcome of the Mencap case. The suggestion that providers, local government and the NHS don’t care about care workers couldn’t be further from the truth. Most providers recognise that their workforce is their key asset and want to invest in them as far as possible. However, they can’t pay staff more than they receive in funding. The sleep-ins issue originally stemmed from court decisions creating confusion, even though the drafting of the legislation on the subject was clear. The Government’s failure to act and bring clarity when it had the opportunity compounded the confusion, and commissioners funded sleep-ins at a low rate.

Court of Appeal judgement

The Court of Appeal concluded that it was not the intention of Parliament that all hours of a sleep-in should be counted when calculating National Minimum Wage (NMW). This is because the Regulations were seeking to implement the Low Pay Commission’s recommendation that providers should be able to continue to pay a flat rate for sleep-ins, provided workers were paid the NMW when they were awake and working.

The drafting of the legislation reflected this, and this practice was adopted across the sector for many years. Sadly, the case law took various wrong turns over the years resulting in a huge amount of confusion amongst providers and their workers and, most recently, significant HMRC enforcement activity and the Social Care Compliance Scheme.

As Judge Underhill, who ruled on the case, stated, ‘It would not be a natural use of language…to describe someone as “working” when they are positively expected to be asleep throughout all or most of the relevant period’.

Who does the judgement apply to?

Most providers will have structured their arrangements for payment of sleep-ins such that the judgement should clearly apply.

Providers who have arrangements with staff where there are set tasks for periods of a sleep-in will want to ensure this doesn’t blur the lines between a period of availability for work and periods of actually performing work. To help providers differentiate between different shift types, the Court of Appeal distinguished a typical sleep-in from a previous case of a night-watchman. The Court stated, ‘It is also material that the employee in that case [Scottbridge Construction Ltd v Wright (2003)] had significant duties at either end of the shift, beyond mere hand over. The period during which he could normally count on being able to sleep was only five hours.’

Therefore, providers should review shift arrangements and responsibilities to clarify if the judgement applies. Where a worker is, in reality, trying to sleep between required duties during a sleep-in, NMW is likely to be payable throughout the shift.

Considerations for now

For those providers who introduced top-ups, there are some difficult choices. Mencap was quick to announce it would not be stopping the payment of top-ups, but what will happen if commissioners simply revert to their previous practice? Providers should seek dialogue with their commissioners before deciding their pay strategy for sleep-ins.

Many providers who introduced top-ups did so on a temporary basis, pending further guidance/case law. Those providers will be able to review their approach and consider whether to end the payment of top-ups. However, they will need to be mindful that market practice has moved on and will need to ensure their approach is broadly reflective of other providers in the market. Providers will also want to wait and see whether the Supreme Court give Unison leave to appeal before coming to a conclusion.

Different views on future pay are likely, given the significant challenge of recruiting staff in any event. Some providers will want to await notice from their funders that their approach is changing.

The work that goes into calculating top-ups is significant and they can unfairly penalise staff on higher hourly rates/salaries. Providers could instead consider an enhanced, competitive flat rate, also in the region of £40-£50 per sleep-in, so the market leads the way on setting an appropriate rate.

Payment for waking time

It is important to ensure the differentiation between actual work and a sleep-in shift spent asleep is clear, both in definition and in remuneration. It cannot be right that someone who is awake and carrying out duties receives the same pay as someone who is expected to sleep other than to deal with emergencies. Waking night staff are disciplined if they fall asleep. Sleep-in staff are provided with a bed to sleep in and are not typically expected to do anything unless they are disturbed. It can’t be fair for both types of workers to receive the same rate.

A key part of the decision is that the time workers spend awake and working counts as working time. Providers will still need to maintain clear records as to when someone is disturbed during a sleep-in, so it is clear that the predominant role is sleeping, and it is not the case that there are simply lulls in activity where they are entitled to sleep.

Providers may take the view that their flat-rate payment is sufficient to cover these hours, however we have seen arguments from HMRC in the past that the flat rate will not count for NMW compliance purposes. We consider HMRC would be wrong to take that view but believe it is appropriate to pay the standard hourly rate for any significant time spent awake and working for time and salaried work. We consider such an approach to be correct and consistent with many providers’ historical practice.

Future fair pay

The Court’s decision does not take away the fact that the previous flat-rate levels of pay were too low, with some sleep-in rates just £25 per night. Most flat-rate payments for sleep-ins are now between £35 and £50 per night. Cash-strapped local authority and NHS commissioners have to decide where to allocate their own scarce resources in light of the Mencap ruling, and should avoid reverting to low rates. Poor pay and workers feeling undervalued contribute to persistent difficulties in not only recruiting, but also retaining quality care workers across the sector. More needs to be done to promote the care sector as an attractive career choice, particularly when considering the vital role care workers have, and returning to low rates for sleep-in shifts will not help to achieve this.

Therefore, I believe a workable, universally-agreed and regulated minimum rate should be introduced and this should be addressed by the Low Pay Commission as soon as possible. The rate will be open to discussion but, in my view, a nine-hour sleep-in should attract in the region of £40-£50. With a minimum flat-rate, commissioners will have a clear understanding of the cost to make it affordable for care providers to deliver sleep-ins. Given the differing lengths of sleep-in shifts across providers, the most straightforward approach may be to set a minimum hourly rate for time spent sleeping during sleep-ins of something in the region of £5 per hour or perhaps two-thirds of the NMW rate moving forward.

Change isn’t going to be easy; it will require commitment from the Government to provide the necessary additional funding and a collaborative approach in lobbying for clarification of the legislation that ensures commissioners cannot reduce amounts paid for a sleep-in.

In order to safeguard against the future of the sector and its users, guidance on how to pay workers for sleep-ins must be updated.

Social Care Compliance Scheme

The scheme no longer has much relevance unless the Supreme Court grants leave to appeal. Providers’ options are:

  1. Leave the scheme now.
  2. Remain in the scheme and submit a nil-declaration.
  3. Remain in the scheme for now and await HMRC’s announcements on the future of the scheme.

Providers who are thinking of leaving the scheme may want some confirmation that HMRC is going to change its internal guidance and approach to sleep-in enforcement immediately in light of the Court of Appeal decision, but we consider HMRC doesn’t really have any other option. It has already announced a temporary suspension for those providers in the scheme and will provide an update later in August. We expect they will not say anything significant until they know whether the Supreme Court has granted Unison leave to appeal. There is no immediate rush for any provider to leave the scheme and it would be sensible for providers to await a further announcement from HMRC before deciding their next steps.

So, the sleep-in issue can’t be put to bed just yet, but, hopefully, the sector will unite and find a workable solution for all stakeholders over the coming months.

Matt Wort is Partner at Anthony Collins Solicitors LLP. Email: Twitter: @mattwort1

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