There could be a short-term failure of the social care provider market if a tribunal ruling that staff should be paid the national minimum wage for sleep-in shifts is upheld, a partner at a law firm involved in the case has warned.
The tribunal ruling in 2015 against Mencap left providers with a collective liability estimated at £400m for wages backdated over six years, as care staff had been routinely paid a lower flat-rate allowance for hours spent sleeping.
Mencap, supported by Care England and the Local Government Association, took the case to the Court of Appeal, with a ruling due in the coming weeks.
They argue the way the tribunal interpreted national minimum wage regulations relating to sleep-in shifts, which were last updated in 2015, was inconsistent with the intention of Parliament.
The government at the time said it had accepted the Low Pay Commission’s recommendation that an allowance should be paid to cover hours of sleep.
However, in an interview with LGC, Matthew Wort, a partner at Anthony Collins Solicitors which is representing Care England, said a lack of clarity in the regulations has resulted in case law that could have a devastating impact on the care market.
Mr Wort said many providers would go out of business and others would be reluctant to step in to take over services as they would become liable for the back-pay bill relating to staff who would have to be transferred over.
“In the short term I think there could be a market failure [if Mencap loses the case],” said Mr Wort. “Unless there was effective insolvency and those liabilities go away people are not going to want to take on services so things could be disrupted and there is a whole risk around continuity of care.”
Mr Wort said surviving providers would be forced to find further savings to cover back pay, with a resulting impact on the quality of care provided.
“This could mean cuts to frontline staffing, cuts to benefits, pay freezes and the services [providers] deliver could be slimmed down,” he said. “It will have a knock-on effect on the quality of services.
“In many cases sleep-ins have been provided because there has been a risk identified and sleep-ins are the best way of managing that risk. Whenever you are taking someone off-site, it increases the risk of something going wrong.”
The LGA has called for the government to provide extra funding to cover the costs of sleep-in payments.
The government has said it is consulting with the European Commission to determine whether financial support to providers would be subject to rules on state aid.
But Mr Wort said it is unlikely the government will step in.
“If they had the political will to do this they would have set a more positive commitment to it by now,” he added.
Mr Wort said the uncertainty over sleep-in shifts is already having a significant impact on the social care market, with contracts being delayed and provider mergers collapsing over potential liabilities.
“There are providers that are not developing new services because they have got a potential massive risk hanging over them,” he said. “There are businesses at somewhat of a standstill because they have a risk that they don’t know will crystallise.”
In November the government launched the social care compliance scheme, which gave providers a year to calculate how much they owe staff in pay arrears and pay the full amount by March 2019.
Mr Wort said the scheme should now be extended beyond the end of the current legal process, as there is likely to be an application to the Supreme Court following the Court of Appeal ruling.
“It should be open until a period of six months following the conclusion of the Mencap case otherwise it is unfair on providers who may be expected to be paying out or facing Her Majesty’s Revenue & Customs inspection when the law still won’t be settled,” he added.