MINIMUM WAGE

Revenue and Customs Comrs v Leisure Employment Services Ltd

EAT: Elias J (President): 28 March 2006

The respondent company employed seasonal workers for holiday resorts. Free accommodation was provided on request subject to an agreement between the company and the worker under which the worker agreed to pay the company £6 a fortnight in respect of gas and electricity. Two of the workers had the sums deducted from their salary through the payroll and a third made cash payments to the company. The revenue issued enforcement notices under section 19 of the National Minimum Wage Act 1998, alleging that the workers were paid less than the national minimum wage. The company appealed, and an employment tribunal rescinded the notices on the ground that the sums for gas and electricity were neither payments "in respect of the provision of living accommodation" within regulation 31(1)(i) of the National Minimum Wage Regulations 1999, nor deductions received for the company's "own use and benefit" within regulation 32(1)(b), and so did not have to be subtracted before calculating the workers' minimum wage, with the result that their hourly rate of pay was above the statutory minimum.

The revenue appealed.

ELIAS J (PRESIDENT) held:
(1) Adopting a purposive approach to the construction of the National Minimum Wage Regulations 1999, their purpose being to eliminate the payment of benefits in kind and ensure workers received cash in hand of at least the minimum wage, save where carefully circumscribed exceptions applied, a sum which a worker was obliged to pay in order to make use of accommodation on offer was properly described as being "in respect of the provision of living accommodation" for the purposes of regulation 31(1)(i). It followed that the sums paid or deducted in respect of gas and electricity had to be included in the reduction of the workers' remuneration under regulation 31(1) in calculating their minimum wage.

(2) Further, where money was deducted from a worker's wages, or paid by a worker, without any obligation on the employer to account to a third party on behalf of the worker, it was a deduction, or payment, made for the employer's "own use and benefit" within the meaning of regulations 32(1)(b) and 34(1)(c). Accordingly, as the worker had no liability to the utility companies and could not, and had no interest in, compelling the company to use the sums paid or deducted in the discharge of the debt to the utility company, regulations 32 and 34 required the sums to be excluded when computing the minimum wage, and there could be no exception from the operation of regulation 32(1)(b) or 34(1)(c) pursuant to regulations 33(a) and 35(a), since the deduction or payment could not be said to be in respect of any "event" in respect of which the worker was contractually liable.

(3) While there was no reason in principle why the making available of gas and electricity could not be described as the provision of a service by the employer for the purposes of regulation 35(e), the payment by the worker was made pursuant to a requirement imposed on her either under her contract or in connection with her employment and fell to be subtracted under regulation 31(1)(h).

The appeal was allowed.

Appearances: Gerard Clarke (Solicitor, Revenue and Customs) for the revenue; John Bowers QC (Pickworths, Hemel Hempstead) for the company.