Can an employer part pay salary with season tickets for a football club even if this takes the employee’s wage below the national minimum wage? This is the interesting case that presented itself in the EAT’s decision in HMRC v Middlesbrough Football and Athletic Company (1986) Limited.
The case began as HMRC, who are responsible for enforcing the National Minimum Wage (NMW), determined that the club were not paying some of its workers the and issued an enforcement notice. The issuance of an NMW enforcement notice is one of the few occasions an employment tribunal claim can be lodged when one of the claimants is not a worker/employee (the other that springs to mind is when a union can lodge a protective award claim) and in this case the case was lodged by Middlesbrough FC appealing the enforcement notice.
The factual background to the case is that Middlesbrough FC allowed staff to voluntarily buy season tickets for the club’s football games at a reduced cost with the cost being taken from the salary.
The central issue concerned Regulation 12 of the National Minimum Wage Regulations 2015. Regulation 12(1) stipulates that
12.—(1) Deductions made by the employer in the pay reference period, or payments due from the worker to the employer in the pay reference period, for the employer’s own use and benefit are treated as reductions except as specified in paragraph (2) and regulation 14 (deductions or payments as respects living accommodation).
In essence the case concerned whether the the deductions were for the “employer’s own benefit” (they sold the tickets and had additional supporters at games). If they were then the remuneration left for employees after the deduction placed the employee’s wage below the NMW, if not then the NMW had been paid.
In the EAT the decision of the employment tribunal was overturned. The fact that the season tickets were to the benefit of the employees did not mean it was not also for the benefit of the employer. And, that being the case, the deductions were such that the employees did not receive the NMW.
There was no suggestion that Middlesbrough FC had actively sought to subvert the NMW and, it has to be said, the legislation is complex. It is likely had the repayments been categorised as an employee loan agreement effect would have been that there would not have been and breach of the NMW. One suspects that Middlesbrough FC will feel hard done by, and others reading the judgement may agree because the employer were offering staff the option of a convenient way of paying for the companies services employees voluntarily agreed to.
However, more than the decision – which is quite technical – the case is interesting in the role the purpose of the NMW legislation had to play in the outcome. The following section of the judgement is instructive here:
There may be any number of situations which involve arrangements which, in the eyes of the common law, are voluntary, but which, viewed through an economic, social, or some other policy-driven lens, may be regarded differently, and in respect of which Parliament may choose to make specific provision. These are not necessarily confined to situations in which there is a concern about the possibility of some form of attempt to avoid payment of the national minimum wage, or other abuse by the employer (and, to repeat, neither was alleged to have occurred here). Parliament’s concerns may not be confined to such scenarios.
It must be inferred that part of the purpose is to ensure a floor beneath which the lowest paid workers in society do not fall, in terms of the minimum cash remuneration they can expect to receive, subject to limited exceptions. If Parliament had wanted to allow workers to opt out of, or vary the applicability of, that regime to themselves, by a voluntary written agreement along the lines permitted by the general deduction from wages legislation, it could have done so; but in the national minimum wage legislation it has taken a different, more stringent, approach.
The EAT has therefore adopted the view that core principle is to avoid NMW avoidance measures, one of the principle avoidance measure is remuneration by way of ‘benefits in kind’. Whilst there are some benefits in kind which can be factored into NMW calculations (such as some employer provided accommodation) this case is a good reminder that this should be the exception, even where the benefit in kind is voluntary and not an intentional NMW avoidance measure it may still fall foul of the law and, in this case, inadvertently pay less than the minimum wage. And so, deductions for transport to and from work and some salary sacrifice scheme can have the effect to take a worker’s pay below that allowed.
Of course most NMW avoidance is more nefarious (and unlikely to prompt a ET application given the bad press it will generate). For those who think they may be paid less than the NMW the TUC have a online calculator that will help individuals identify potential underpayment which is well worth a look (and bookmark).
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