This case arose out of an HMRC notice of underpayment issued against the respondents under Section 19 of the National Minimum Wage Act 1998.   The notices were made in respect of the respondent’s workers who it considered to be underpaid due to deductions taken from their pay, which were made for the provision of accommodation (known as ‘accommodation offset’) and the cost of mandatory training.

The accommodation involved was furnished flats that were provided to the employees by a letting business which happened to be owned by the respondent’s chief executive.   There was no requirement either in the tenancy agreement or the contract of employment that the rent be taken from the wages yet some of the employees requested that it be deducted in this manner.

The mandatory training provided was only repayable to the employer insofar as the employee had voluntarily left within the first year of their employment.    The deductions were only ever made in compliance with the contractual provision.   The ET held that the accommodation costs were not reductions for the purposes of national minimum wage as the accommodation was not provided by the employer.    However, the ET found that the training costs were reductions as it related to the conduct of workers were who were contractually liable under the National Minimum Wage Regulations 2015.    HMRC appealed the finding vis-à-vis the accommodation costs and the respondent cross-appealed in relation to the training costs.

The EAT stated that the issue for the accommodation costs was one of statutory interpretation.   They outlined that for ‘social’ legislation there should be a purposive approach taken to interpretation but that it should not extend to rewriting the terms of the statute in favour of HMRC.   The 1998 Act outlined that an employer was the individual who the employee was employed by.   The appeal centred upon this meaning of ‘employer’ under the 1998 Act and the EAT held that there had to be a narrow approach taken so that the Chief Executive of the respondent could not be regarded as the employer for the purpose of the National Minimum Wage regulations.  The EAT did state that the meaning of ‘provision of living accommodation’ could have been construed more widely to cover situations like this but it had not been subject to the appeal so could not have led to a successful challenge. HMRC’s appeal was dismissed.

In terms of the training costs, the EAT found that as the training was mandatory, it was clearly in connection with the employment.  The argument from the respondent that it was only recouped if the employee left within the first year made no difference nor did the contractual character of the deduction.  The EAT further outlined that the fact that the employment could not be secured without the training meant that protection should be given to low-paid workers.   They stated that to put workers into the position where they would face a substantial reduction due to training costs could put them into a position of particular hardship.  For this reason, the respondent’s appeal was also dismissed.

Practical Lessons

This case demonstrates how the Tribunal is seeking to ensure that the legislation serves its practical purpose of protecting low-paid workers yet ensuring that they do not re-write the legislation for that aim.  The difficulty is that the accommodation having to be provided by the employer for it to be a deduction does provide only a narrow form of protection.  It may be preferential to ensure that there is greater protection for this vulnerable group of workers but that would have to come from Parliament and not from the Tribunal.
https://www.gov.uk/employment-appeal-tribunal-decisions/commissioners-for-hm-revenue-and-customs-v-ant-marketing-ltd-ukeat-0051-19-oo