On the surface, the concept of a National Minimum Wage (NMW) may appear a simple one. For every hour worked an employee or worker aged 23 and over must receive a minimum of £8.91 (as from April 2021) with lower rates applicable to those aged between 16 and 22. However, the waters are somewhat muddied when an employer makes deductions from wages of payments which will need to then be accounted for as they ultimately reduce the amount of total earnings for the purpose of NMW.
You may recall back in 2018 that the restaurant chain Wagamama, amongst others, hit the headlines after they were fined for failing to pay NMW. They fell foul of the requirements due to their policy that front of house staff wear black jeans or a black skirt with their branded tops. This was deemed to be a requirement for those workers to buy a form of uniform which, once that deduction was applied, resulted in their total earnings falling below the relevant rate at the time.
Well, fast forward to 2021, and the issue of calculating NMW is once again in the spotlight and the Employment Appeal Tribunal have issued guidance on deductions in the recent case of Augustine v Data Cars Limited.
The Claimant, a mini cab driver, was required to pay fees for equipment to be fitted to his car and for access to the booking app to allow him to carry out his work. Although initially using his own vehicle during his time with Data Cars he also changed to renting a vehicle from a company associated with the Respondent. Furthermore, he had additional costs relating to insurance, fuel, cleaning and the purchase of a Data Cars uniform.
In the first instance, having found that the Claimant was an employee, the Tribunal looked at the fees / costs which had been paid and determined that some, but not all, needed to be deducted from the total earnings for the purpose of NMW calculations. They found that the fees paid for equipment, access to the app, insurance, cleaning and fuel should be deducted. However, it was held that as the fees in relation to car rental and uniform were both optional expenses, they did not. That decision was appealed.
On appeal, the EAT disagreed with the Tribunal’s decision in respect of the cost of car hire and the purchase of uniform and held that these were indeed deductions for the purpose of calculating NMW. They reasoned that the relevant statutory test is whether the expenditure is “in connection with employment” and that the same is not reimbursed by the employer. It was held that the fees / costs did not have to be a requirement of employment, nor did the incurring of such have to be necessary. In these circumstances it was irrelevant that the Claimant could use his own vehicle or wear his own clothing. The fact remained that he had hired the vehicle and worn the uniform in connection with his employment and that was sufficient. It is worth noting that this appears at odds with HMRC guidance which distinguishes between choice and requirement, which only amplifies the need to seek legal advice when dealing with such issues.
As if this was not a big enough blow for employers, the EAT also clarified that when a worker or employee asserts that they have been paid less than NMW, it will be presumed correct unless the contrary can be established. Therefore, the onus falls firmly on the employer to prove they have met their NMW obligations.