LAW
Regulation 13 of the National Minimum Wage Regulations 2015:
Deductions or payments as respects a worker’s expenditure
13. The following deductions and payments are to be treated as reductions if the deduction or payment is paid by or due from the worker in the pay reference period—
(a) deductions made by the employer, or payments paid by or due from the worker to the employer, as respects the worker’s expenditure in connection with the employment;
(b) payments to any person (other than the employer) on account of the worker’s expenditure in connection with the employment unless the expenditure is met, or intended to be met, by a payment paid to the worker by the employer.
FACTS
Mr Augustine was a taxi driver for Data Cars. As part of his employment, he paid fees totalling £160 p/week, comprising of a “circuit fee” and an equipment rental fee (the equipment being the booking dispatch system in his car). He was also charged for valeting of the car.
He also rented a car from his employer, which required a certain kind of insurance (as dictated by Transport for London), totalling over £2,000, and as a “designated gold driver” had to wear a uniform for which he paid.
EMPLOYMENT TRIBUNAL
The ET held that the rental and uniform payments did not fall within the NMW regulations, but the insurance and valeting costs did. This was due to the fact the uniform was only required for a certain level of work, and he could have opted instead to use his own car rather than leasing one through his employer.
EMPLOYMENT APPEALS TRIBUNAL
The EAT found that the ET had applied the wrong legal test to assess these deductions. Whereas the ET looked at whether or not the expenditure could have been avoided by meeting the obligations in another way (in this case, using his own vehicle rather than leasing one from the company), the EAT held that the correct legal test is whether the “…expenditure incurred by the claimant was in connection with the employment.”, and the fact that the obligations could have been met in another way was “irrelevant” as the expenses do not have to be a requirement of the employment to fall within these rules.
This case provides clarity for employers on which deductions do and do not fall with the NMW regulations. The judgement is explicitly clear – where the expense is incurred in connection with the employment, it should not cause the pay to fall below national minimum wage within the relevant reference period. It does not matter if there was a choice whether or not to incur the expense, or if there were alternative options, just that the expense was incurred in connection with the employment.
However, the EAT’s decision in this case appears to be at odds with the HMRC National Minimum Wage Manual which provides guidance on deductions. While both agree that expenses should be deducted for NMW purposes if they can be shown to be connected with the employment, the latter distinguishes between expenses which are required for work and optional expenses that are chosen by the employee. Where an expense is of the second kind and is a payment from worker to the employer HMRC guidance states that the payment should not be deducted when calculating NMW. It is however worth noting that this is guidance only, and the judgement refers back to the parliamentary intention in the wording of “…connected to.”.
