Important NMW cases

The right to be paid the National Minimum Wage (NMW) has been in force since 1 April 1999 under the National Minimum Wage Act 1998 and the National Minimum Wage Regulations 1999.

On 1 October 2002, the NMW was increased to £4.20 per hour and the youth rate (18 to 21-year-olds) to £3.60 per hour. On the recommendation of the Low Pay Commission, the Government will increase the main rate to £4.50 and the youth rate to £3.80 from October 2003. Further increases in October 2004 to £4.85 and £4.10 have provisionally been accepted.

Workers entitled to the NMW

The definition of a "worker" who is entitled to the NMW is someone who "works under (i) a contract of employment or; (ii) any other contract, whether express or implied, to perform personally any work or service for another party except where that other party has the status of a client." There are exclusions covering, for example, family workers sharing meals and leisure activities. The following have been found to be workers entitled to the NMW: 
 catering stewards regarded by the Inland Revenue as self-employed (Hewitson & anor t/a Executive Coach & Catering Services v Inland Revenue (ET Case no.6403701/00) 
 a care worker provided with accommodation who did not share meals and leisure activities with the person she was caring for (Annis v Bouch (ET Case no.1700401/00).

But a sub-postmaster, whose job in the main could be delegated, was not contracted to carry out work personally, and so was not a worker (Commissioners of Inland Revenue v Post Office Ltd [2003] IRLR 199).

Void contractual terms

Under section 49 of the Act, any attempt to contract out of the NMW is void. Where an employer sought to rely on a term in a contract that new employees who failed to turn up for work in the first seven days of employment had pay docked, the tribunal held the term void insofar as it excluded the application of the NMW (Carter v Vive-Kananda & Anor t/a Strathmore Care Group (ET Case no. 3204318/99).

Enforcement notices

The Inland Revenue is the main enforcement agency of the NMW and has powers to demand records, enter premises and interview employers. The Court of Appeal held in Inland Revenue Wales & Midlands v Bebb Travel plc [2002] IRLR 783 that an enforcement notice could only relate to current, and not former workers - that loophole is due to be closed by the provisions of the National Minimum Wage (Enforcement) Bill. 
Where the enforcement notice requires wages to be paid that are actually incorrect, the employment tribunal can, and should, award the corrected sum (Inland Revenue v St Herman's Estates [2002] IRLR 783).

Detriment and dismissal

Under section 23(1), a worker has the right not to be subjected to any detriment by any act or failure to act for specified reasons relating to the NMW. To dismiss a worker because she has asserted her right to the NMW will be automatically unfair. Examples of detriment and dismissal cases include: 
 where an employer faced huge financial difficulties, a tribunal concluded that a dismissal was because of those difficulties rather than because the applicant had asserted her right to be paid the NMW (Roberts v Branford t/a Super Anglia Cars: ET Case no.1202308/99) 
 where an employer told a worker that she could only continue to work and receive the NMW if her hours were reduced, there was a dismissal that was automatically unfair (Durr v Gibson: ET Case no.2402474/99) 
 where there was a connection between the implementation of the NMW and a company's wish to increase productivity, a performance-related dismissal was still fair because the introduction of the NMW was neither the sole nor the principal reason for the dismissal (Bopari v Grasshopper Babywear (Wolverhampton) Ltd: ET Case no.5200810/00).

Existing rights

When calculating basic and compensatory awards, they should be based on what the employee should have received if the NMW had been paid (Paggetti v Cobb [2002] IRLR 861).

Calculating pay

To check if the NMW has been paid, two figures need to be worked out: 
 total pay received in the pay reference period 
 the number of hours worked in the pay reference period (which is one month, or if the worker is paid by reference to a period of less than a month, that lesser period).

Elements of pay that count towards the NMW, in addition to gross basic pay, include incentive payments, such as piece-work or commission payments, bonuses and tips or gratuities paid through the pay roll (see for example Nerva & Ors v United Kingdom [2002] IRLR 815). Various elements are excluded-such as loans, advances of wages and redundancy payments.

Do allowances count towards pay for the purpose of the NMW? Regulation 31(1)(d) provides that an allowance only counts towards the NMW if it is "attributable to the performance of the worker in carrying out [the] work".

In Aviation & Airport Services Ltd v Bellfield & Ors EAT 194/00, Mrs Bellfield was entitled to an attendance allowance. Her employer unilaterally consolidated the allowance into basic pay so as to comply with the NMW. The EAT found: 
 basic pay and attendance allowances were separate contractual entitlements. By reducing the attendance allowance, the contract had been breached and unlawful deductions made from wages 
 the attendance allowance could not be counted towards pay for the purpose of the NMW.

These principles could be particularly important in local government, for example, where we are aware that employers have sought unilaterally to consolidate allowances, which would not otherwise count towards the NMW, into basic pay.

Calculating hours worked

The NMW Regulations define four types of work for the purpose of calculating the number of hours worked: time work, salaried hours work, output work and measured work. The boundaries between the different categories are not always clear. In Walton v Independent Living Organisation [2003] IRLR 469, the applicant worked as a carer and her rate of pay varied according to the particular assignment. The Court of Appeal confirmed that this was "time work" because the work was not paid for by reference to the amount of time worked.

There have been helpful rulings in relation to night-working and on-call working, which present bargaining opportunities. Where night-working hours, whether asleep or awake, and/or on-call hours can be counted as hours in respect of which the NMW must be paid, this has the effect of diluting the hourly rate actually paid, often to levels below the NMW.

If workers are to be treated as "working" during particular hours even when they are free to do as they please, or indeed to sleep, then those hours will count towards the number of hours of "time work" worked. In British Nursing Association v Inland Revenue [2002] IRLR 480, duty nurses providing a telephone service from their homes between 8pm and 9 am were carrying out "time work" throughout those hours. There was no distinction between working at the employer's premises, where the time between calls would plainly count as time worked, and working at home. Time spent between calls therefore counted as time worked.

The Court of Session reached the same conclusion in Scottbridge Construction Limited v Wright [2003] IRLR 21. A nightwatchman was entitled to be paid the NMW for all the hours he was at work, irrespective of whether he was performing tasks or asleep during those hours.

There is a specific exclusion for on-call working, amended since the BNA case, which now provides that time work includes time when a worker is at or near their place of work for the purpose of doing time work and is required to be available except where (a) their home is at or near their place of work and; (b) the time is time the worker is entitled to spend at home. There is also an exclusion in relation to sleeping while on call which, crucially, only applies to time when the worker is on call and waiting to work. Neither the previous nor the current versions of these exclusions apply where the worker is on-call and actually working (even though possibly asleep) as in the BNA and Scottbridge Construction cases.