Having a number of clients in sectors such as social care and education means the issue of whether sleep-in shifts attract the National Minimum Wage has been an area I have been actively advising on for many years now. Several court decisions had come through where National Minimum Wage was held to apply in sleep-in situations, and many employers were facing claims for back pay. My article from last year summarises the background in this complex area.

Like many others, I had eagerly awaited the Court of Appeal's judgment in the latest key case, in the hope that it would give some much-needed clarity.

The case was actually two joined together - Mencap v Tomlinson-Blake and Shannon v Rampersad, but I'll refer to it as the Mencap case for ease, as the charity was the most high-profile party to the appeal.

In short, the Court of Appeal concluded that the employees in question had not been entitled to National Minimum Wage for each hour that they had worked a sleep-in shift. This was a surprising development, as it went against the previous cases and therefore what most people had expected.

The key distinction the Court considered in the Mencap case is between whether someone is working, or whether they are just available for work. Time spent being available for work doesn't attract the National Minimum Wage. In some of the previous cases, it had been successfully argued that for care workers, particularly where their presence is a requirement (such as to meet staff/resident ratios) just them being on site means they are working. However, this approach was rejected by the Court of Appeal, which found that National Minimum Wage was only payable when someone is 'actually working' rather than they are asleep.

The difficulty is that we still do not have a clear definition of when something constitutes 'actual work', and the Court of Appeal's judgment suggests that they weren't quite sure about it themselves: “the distinctions are subtle, but they are in my view sufficient to justify a difference in outcome: it must be borne in mind that the decision which side of the line dividing “actual work” from “availability for work” a given case falls is factual in character, and in marginal cases different tribunals might well assess very similar facts differently.”

At first glance I have no doubt that many employers will be pleased with the decision, and I can understand that it may come as a reilef that the threat of back pay has been lifted. However, the decision goes against a considerable body of previous case law (albeit from the lower courts), and I would recommend caution. As this is a Court of Appeal decision it means that there is still one more appeal to be made (to the Supreme Court) and it seems highly likely that the case will need to be dealt with there in order to get a truly definitive decision. Mencap have also made a statement calling for the Government to legislate for proper funding and pay for those in the care sector.

Many employers have of course already altered their arrangements on the understanding that sleep-ins did attract National Minmum Wage, and it will be difficult for those to be reversed now, at least for existing members of staff. However, the special arrangements HMRC had put in place to assist employers in the care sector in dealing with claims for NMW back pay are expected to be revised.

There will almost certainly be more to come in the Mencap case, and as always, we'll keep you updated via our future ebulletins.