Whilst Middlesbrough Football Club lost its most recent Championship game to Brentford 2-1 to leave the club 12 points adrift of the automatic promotion places that would get it back into the Premier League by right, the club can take solace in the fact that it recently defeated the HMRC at Newcastle Employment Tribunal (sitting at Teeside Magistrates Court) in its national minimum wage case
Middlesbrough FC's National Minimum Wage Case
Middlesbrough Football Club were issued with a notice of underpayment by HMRC after employees requested that the club deduct the cost of 2016/17 season tickets from their wages over a period of time. HMRC argued that these deductions then took those employees below the national minimum wage.
As with the recent case involving the Iceland Christmas savings scheme, the issues related to whether the deductions are made for the employer’s own use or benefit. Where they are deemed to be for the employers own use or benefit, as they have for the most part in cases relating to uniforms, then the deductions will be deemed to reduce the employees pay and could therefore potentially reduce the employees pay below the national minimum wage, and place the employer in breach of the same. However, just as Iceland have argued that the Christmas savings scheme could not possibly be construed as being for the employers own use or benefit given that staff are voluntarily paying into the scheme to help them fund Christmas expenditure, and the employees have the option of withdrawing the money at any time, Middlesbrough FC argued that likewise the decision by employees to fund season tickets through deductions was voluntary and not therefore for the employers own use or benefit. Given this, Middlesbrough FC appealed against the notice of underpayment to the employment tribunal within the required 28 days
The Middlesbrough FC national minimum wage case was heard by Newcastle Employment Tribunal on the 5th February 2019. The tribunal metaphorically showed HMRC a red card, and found in favour of Middlesbrough FC. The tribunal determined that the deductions were not for the employers own use or benefit, and could not therefore be deemed to have taken the employees below the national minimum wage. Robin Bloom, Counsel for Middlesbrough FC, had argued that "this is a deduction that has been made on the behest of the employee and for the benefit of the employee." and the tribunal agreed.
Reaction
Steve Gibson, the Chairman of Middlesbrough FC stated: "I am delighted that our appeal has been successful. We have maintained for two years that the position that HMRC had adopted was unreasonable and that it was not in the public interest to pursue this matter against the Club. We reiterated this within the last month and invited them to withdraw the Notice of Underpayment in respect of the Season Cards but they refused. This left us with no alternative to bring the matter to Tribunal. In my eyes this is a huge waste of public money.....I believe this is symptomatic of a bureaucratic civil service who are out of touch with the real world. Ultimately it is the tax payers who are paying for this shambles and our politicians need to take notice and demand a more professional approach in the future. I am delighted that the tribunal vindicated our decision to fight this case."
All HMRC could say in response was: "HMRC is unapologetic in its enforcement of the national minimum wage for workers.....The legislation does not draw a distinction between breaches arising from uncertainty or mistake and deliberate underpayment which means HMRC has no discretion to make these distinctions either. Employers are either compliant and pay their workers correctly, or they do not." What a ludicrous attitude to adopt! HMRC ought to be extremely apologetic and contrite about having wasted a colossal amount of public money on an issue where it has fundamentally misinterpreted the rules.
Misinterpretation Of The Rules
In the Middlesbrough national minimum wage case, as in the Iceland case, employees had volunteered for and asked for the deductions to be made for their own benefit, and where that is the case, it is absolutely ridiculous for the HMRC to have issued a notice of underpayment. When determining whether a deduction has been made for the employers own use and benefit, the two questions to be asked are: who has asked for the deductions and why, and in terms of the why, what was the intent behind/the purpose of the deductions. The answers to these questions will provide the best indication as to whether the deduction is for the employers own use or benefit. For instance, in uniform cases, it has invariably been the employer who has demanded the deductions to pay for uniforms that it wants its staff to wear. Accordingly, those deductions are purely for the employers own use or benefit. In that case, should the deductions reduce the employees salary below the national minimum wage, then the employer is in breach. However, should the employee request the deductions themselves for their own benefit, in circumstances where the employer either gains nothing, or a benefit that is no more than incidental (i.e. such as the sale of another season ticket in the case of Middlesbrough FC), then clearly such deductions should not warrant a notice of underpayment. That is because the intent behind/the purpose of the deductions was to benefit the employee (i.e. who wanted a season ticket in the Middlesbrough FC case), and not for the employers own use or benefit.
The Iceland Case And The Government's Stance
The Iceland case against HMRC remains ongoing. Meanwhile, the Business Secretary, Greg Clark, said that he would review what he indicated, were potentially "overly complex" national minimum wage rules. He stated in a letter to the British Retail Consortium that the potentially "overly complex" national minimum wage rules may require reform should it be concluded that they "unnecessarily burden and penalise." He stated that reform would be contemplated "when evidence shows that rules unnecessarily penalise employers, and that changing them will not reduce the protection offered to low-paid workers." In his letter, Mr Clark highlighted salary sacrifice schemes as an area for reform. A spokesperson for the British Retail Consortium, Fionnuala Horrocks-Burns, stated that the rules "needed updating to reflect modern pay practices." Accordingly, a consultation was launched on the 17th December 2018, with the deadline for responses being the 1st March 2019. The outcome to the consultation is expected in the next few months.
