Zero Hours and Zero Pay
Thursday 3 April 2014
Aidan Briggs
Catherine Urquhart
Ely Place Chambers
Zero Hours and Zero Pay
The Speakers
Aidan Briggs
Aidan undertakes the full breadth of Employment work, representing Claimants and
Respondents at both Tribunal and Employment Appeal Tribunal level, specialising in
employment status, TUPE, holiday and NMW claims. He recently obtained the largest costs
award for a Respondent on record at over £117,000. Recent clients include Canon UK, the
London Boroughs of Waltham Forest, Camden and Islington, UCATT and former Corby MP
Louise Mensch. In addition, he advises and represents clients seeking to enforce in the
County Courts and High Court and often pursues bankruptcy, winding-up petitions and
charging orders to that effect. His specialist costs practice has involved County and High
Court appeals as well as ordinary detailed assessment proceedings. He is an ambassador for
the Free Representation Unit and a member of the Employment Law Bar Association.
Aidan is shortly to appear in the Court of Appeal in the leading authority on service
provision changes Rynda UK v Rhijnsburger.
Catherine Urquhart
Catherine joined Chambers upon completion of her pupillage in October 2011, and has been
instructed in a wide range of cases in the Employment Tribunal, from case management
level to multi-day full merits hearings. Recent cases include the successful defence of a
discrimination and whistleblowing claim brought against a school, a hefty award of costs for
her charity client in a four-day age discrimination claim found to have been brought with no
reasonable prospects of success, and hearings concerning constructive dismissal, TUPE and
interim relief. She is accredited by the Free Representation Unit and is a member of the
Employment Law Bar Association.
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Introduction
What is a ‘Zero Hours’ Contract?
1. CIPD defines a zero-hours contract as ‘an agreement between two parties that one may
be asked to perform work for another but there is no minimum set contracted hours.
The contract will provide what pay the individual will get if he or she does work and will
deal with circumstances in which work may be offered and possibly turned down’ – see
CIPD, employee survey for Labour Market Outlook, published 26 November 2013.
2. The Office for National Statistics (ONS) collects statistics on zero-hours contracts as part
of the Labour Force Survey (LFS). Respondents who are in employment are asked what
type of work arrangement they have, for example if they work flexible hours, work a
nine-day fortnight or are on a zero-hours contract. Estimates for the fourth quarter of
2013 suggest 583,000 people were on zero-hours contracts (1.9% of the total
workforce), up from 250,000 in Q4 2012.
3. The CIPD estimates that there
are just over 1 million people, or 3.1% of the UK
workforce, who
are employed under a zero-hours contract. In all, just under a quarter
(23%) of employers report that they employ people on zero-hours contracts. Seventy
per cent do not currently use individuals on zero-hours contracts and 7% do not know.
On average, organisations that use zero-hours contracts estimate that 19% of their
workforce is engaged using such arrangements.
4. Six in ten zero-hours workers report they are allowed to work for another employer
when their primary employer has no work available. A further 15% say they are able to
sometimes. Just 9% say they are never able to work for another employer and a sizeable
17% don’t know.
5. The TUC naturally take a different view of zero-hours contracts, arguing they are a
means to exploit the workforce, to minimize wage bills and to put employees in the
same position as agency workers. They point out that 44 per cent of zero hours contract
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jobs lasted for two years, indicating that they are not a temporary measure. In addition,
certain industry sectors disproportionately use zero hours contracts: 60 per cent of
domiciliary care sector workers, for example. Zero hours employees tend to work
shorter hours than their fixed-hours contemporaries and half of zero-hours workers earn
less than £15,000 per annum.
What are the key Clauses in issue?
“The Company is under no obligation to provide work to you at any time and you are under
no obligation to accept any work offered by the Company at any time.”
Normal working hours/days: 0 hours per week (Sunday – Saturday)
You have no normal hours of work, and your hours will vary according to the needs of the
Company. The Company is under no obligation to provide you with work, or to provide you
with a minimum number of hours work each day or week. If you have accepted an offer of
work you are obliged to complete it. You will only be paid for hours that you work.
What’s the Problem?
6. The BIS consultation identified two broad categories of problems with zero hours
contracts: Exclusivity and Transparency. The first relates to individuals on zero hours
contracts who are never allowed to work for another employer when their primary
employer has no work available for them. This amounts to around 9% of zero hours
workers and is dealt with below.
7. The Transparency issue concerns employers failing properly to advertise contracts, or to
make employees aware of their entitlements. Some employees complained of being
penalised for not making themselves available to do work, which is already remediable
under the existing law.
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8. There are two potential ramifications of exclusivity clauses. The first is to make it more
likely that an employee has an umbrella or ‘global’ contract of employment, with the
guarantee of work. The second is the incidence of the National Minimum Wage.
Employment Status
9. There is some uncertainty about whether zero-hours workers are classified in law as
having “employee” or “worker” status. Both are potentially compatible with zero hours
contracts.
Pulse Healthcare v Carewatch Care Services Ltd & Ors [2012] UKEAT 0608
10. 5 individuals were engaged by Carewatch to care for a person who required such levels
of care that a total of 15 people looked after her, on shifts. It was important to her care
that she retained a constant support team. They were provided with a ‘Zero Hours
Contract Agreement’. That agreement at clause 6 read:
“Carewatch recognises that Employees must work the hours necessary to fulfil a
contract. The Employee will work such hours and at such times as are agreed between
him/her and Carewatch. The Employer is not under an obligation to offer the Employee
any work and has specifically reserved the right to reduce the Employee’s working hours
whenever necessary.”
11. In the schedule to the document against the heading “Hours of Employment” appear the
words “Zero hours”. Finally, under the heading “Mutuality of Obligation” clause 8
provided:
“Whilst zero hours contracts need flexibility on both sides, they do not exclude Employees
from working for another employer whilst unassigned to Carewatch.”
12. The ET accepted that the claimants worked an agreed number of hours each week, and
were paid during any periods of suspension. The ET found that the written agreement
was a sham, and that the claimants worked regular fixed hours and that there was
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mutuality of obligation: “Once the rota was prepared [the claimants] were required to
work and the employer was required to provide that work.”
13. The EAT distinguished between a global or “umbrella” contract of employment on the
one hand, and a series of individual contracts of employment covering individual
assignments, shifts or rosters. The former would undoubtedly give rise to employee
status, the latter might also do so, but with problems as to continuity of employment.
On the facts, the Tribunal had found a global contract and the EAT refused to interfere in
that decision.
14. Such a series of ‘assignment’ contracts are uncontroversial in principle - McMeechan v
Secretary of State for Employment [1997] ICR 549 (CA) (see paras 10, 14, 33-37) and
Cornwall County Council v Prater [2006] IRLR 362 (CA) (see paras 40, 43, 49-51). The EAT
also considered the ‘umbrella/assignment’ distinction in Drake v Ipsos Mori
UKEAT/0604/11.
G4S Secure Solutions (UK) Ltd v Alphonso UKEAT/0051/13
15. Mr Alphonso was employed by G4S from 2002 until October 2011 when he requested a
change from permanent employee to a zero-hours contract. Although this was agreed
by G4S, Mr A was not (the Tribunal found) informed of the termination of his
employment, nor was he given a copy of his new terms. The Tribunal found that he
should not automatically be taken to know that his employment had terminated.
16. The EAT referred to Court of Appeal in Clark v Oxfordshire Health Authority [1998] IRLR
125 at page 130:
“On the findings of the industrial tribunal, the authority was at no relevant time under
any obligation to offer the applicant work nor was she under any obligation to accept it. I
would, for my part, accept that the mutual obligations required to found a global
contract of employment need not necessarily and in every case consist of obligations to
provide and perform work. To take one obvious example, an obligation by the one party
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to accept and do work if offered and an obligation on the other party to pay a retainer
during such periods as work was not offered would in my opinion, be likely to suffice.”
17. HHJ McMullen QC considered this wider test:
“The finding on the Claimant's account was that the Respondent was not obliged to offer
him work if there was none available. That begs the question: What if there was work
available? It is circular to say that work must be offered when there is none available.
The point is, if there is work available, would it be offered to him?
The starting point is to examine the relationship on the occasion when work is actually
done. For, if that is an employment relationship, it is easier to bridge the gaps between
those days when work is done than it is if the work is done as an independent contractor.
In other words, you will not put up an umbrella relationship of employment when, on the
days work is done, there is not an employment relationship; rather it is the other way
round.”
Borrer v Cardinal Security UKEAT/0416/12 – Supperstone J
18. Mr Borrer was engaged by Cardinal on terms that simply stated “Your working hours will
be specified by your line manager”. He received weekly texts giving him a rota for the
following week. For two years or so, he worked 48 hours every week. Following a client
complaint, he was offered no work for a week and promptly resigned because the
Respondent did not offer him enough hours.
19. It was accepted that Mr Borrer was an employee. However, the EAT found that the
above facts did not mean he had no guaranteed hours of work, indeed the EAT found
that he did, on the facts, have 48 hours guaranteed each week. On that basis, Cardinal’s
failure to provide him with his guaranteed hours could be a repudiatory breach leading
to constructive dismissal.
20. Perhaps a safer form of exclusivity clause is one that is tied to the genuine needs of the
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business:
You may not, without the prior written consent of the Company (which will not be
unreasonably withheld) work for … any business … in competition with the business of
the Company or which could or might reasonably be considered to impair your ability to
act at all times in the best interests of the Company.
National Minimum Wage
21. Workers on zero-hours contracts are likely to have their wages paid on a ‘time work’
basis – i.e. work that is paid for by reference to the time for which a worker works which
is not salaried hours work – r.3 NMWR 1999. Time work includes time when a worker is
available at or near a place of work for the purpose of doing time work and is required
to be available for such work – r.15.
22. Workers on 'stand-by time', 'on-call time' and 'downtime' must still be paid the National
Minimum Wage if they are at their place of work and required to be there. Similarly,
such time is likely to count as 'working time' under the Working Time Regulations if the
worker is required to be on-call at the place of work. This makes it unlawful to ask
employees to 'clock off' during quiet periods but still remain on the premises.
23. A worker is entitled under the WTR to a rest period of not less than eleven consecutive
hours in each 24-hour period and a continuous period of 24 hours every seven days
whilst ‘working’ for his employer. Where a worker works more than six hours at a
stretch, he is entitled to a rest break of at least 20 minutes.
24. "Time work" excludes such rest breaks as provided for by the WTR (reg.15(7)) and being
on standby at home. The minimum wage does however cover time where the worker is
required to be "at or near the place of work" (reg.15(1))
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25. Travelling time was identified as a particular issue by the BIS consultation, in the context
of care workers. Time spent travelling ‘for the purpose of duties … in the course of time
work’ attracts the minimum wage unless:
a. it is time spent travelling from home; or
b. The following three-part test is satisfied:
i. the travelling is incidental to the duties carried out (i.e. the worker is not
carrying out his duties by travelling, as might a bus driver or delivery
driver);
ii. the time work is not assignment work (i.e. it consists of assignments of
work to be carried out at a different places between which the worker is
obliged to travel that are not places occupied by the worker's employer);
and
iii. the time is time when the worker would not otherwise be working (with
any uncertainty resolved in favour of the worker).
26. Unless one of those two exceptions is satisfied, the worker is entitled to the NMW. This
also means that any expenses incurred in such travel must be reimbursed, or they will be
deducted in calculating whether the NMW has been paid.
27. Even if the worker is entitled to the NMW whilst travelling, that travelling time does not
count as ‘working time’ under the WTR – reg. 15(7) NMWR 1999.
28. A "worker" on a zero hours contract is entitled to paid leave and is likely to be
determined as having no "normal working hours". It would follow that holiday pay
would be calculated under s.224 of the ERA 1996, averaging pay over the last 12 weeks
worked. See Robinson-Steele v RD Retail Services Ltd (C-131/04) [2006] All E.R. (EC) 749
on rolling up holiday pay.
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What are the proposals for reform?
29. The Zero Hours Bill (a private member’s bill presented by Andy Sawford MP) proposes to
render void any ‘zero hours contract’:
A zero hours contract is a contract or arrangement for the provision of labour which fails
to specify guaranteed working hours and has one or more of the following features—
(a) it requires the worker to be available for work when there is no guarantee the
worker will be needed;
(b) it requires the worker to work exclusively for one employer;
(c) a contract setting out the worker’s regular working hours has not been
offered
after the worker has been employed for 12 consecutive weeks.
30. Such a contract will not be void if the employer can demonstrate a compelling business
reason (including confidentiality or the protection of trade secrets) to justify a
contractual requirement that the worker shall work exclusively for the employer in
question. The proposed terms would apply to any worker who is “engaged by another to
provide labour and is not genuinely operating a business on his or her own account”.
31. The Bill will have its second reading on 6 June 2014.
BIS Consultation Options:
32. The recent BIS consultation on zero-hours contracts indicated the following four
potential outcomes:

Legislating to ban the use of exclusivity clauses in contracts that offer no
guarantee of work. Under this option, the Government would consider how it
would be possible to ban exclusivity clauses in contracts that offer no guarantee of
work. A ban would prevent any individual having an exclusivity clause included in
their zero hours contract. A key consideration is whether an outright ban might
make any jobs which legitimately need an exclusivity clause unviable, and thus
prevent such jobs being created at all.
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
Zero Hours and Zero Pay
Government issuing guidance on the fair use of exclusivity clauses in employment
contracts. Issuing guidance would provide an alternative to an outright ban, thus
allowing some scope for exclusivity clauses in circumstances when they are justified.
The Government welcomes perspectives on what guidance should include.
Guidance might, for example, set out broad scenarios when an exclusivity clause is
or is not suitable.

An employer-led Code of Practice on the use of exclusivity clauses, with an option
of Government sponsorship of the Code. Under this option, the Government would
encourage employers and employer representatives, possibly by sector, to produce
Code(s) of Practice themselves. The Code would outline what is fair use of zero
hours contracts, and what is not. The Government welcomes views on whether and
how Government should endorse the Code. The Government also welcomes views
on how best a Code would capture the views of individuals and employee
representatives.

Rely on existing redress available through common law which allows individuals
to challenge exclusivity clauses. Individuals already have a legal route to challenge
exclusivity clauses. We welcome views on whether this is sufficient and whether
introducing Government action through any of the options above would undermine
business flexibility and individual choice.
33. Professor Keith Ewing, president of the Institute of Employment Rights identified three
key changes he would like to see:
a. Transparency: workers being entitled to the same s.2 statements of terms as
employees;
b. Regulation: every contract of service to have defined weekly or monthly hours, it
being unlawful for employees to work more than 20% above that threshold;
c. On-Call Pay: The National Minimum Wage should apply to workers ‘on-call’ at
home;
34. At present, we are still awaiting the outcome of the BIS consultation. A response will be
published “in due course”.
Aidan Briggs
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Zero hours? Zero pay!
Introduction
“I was…









forced to work over 8 hours a day – sometimes over 10 hours a day (they made me
sign a contract in which I had to agree with this)
given no payment, no meals, no accommodation, no transport money
forced to be available to work on public holidays and week-ends
given hard physical, mindless or non-educational work (such as tidying-up)
not given proper training
advised by the supervisor not to ask any questions related to their work as it disturbs
them and makes me too nosey
not (in the least) to expect a job offer
not even thanked for my work after working at least 480 hours for a profit-making
company
after spending hard labour and at least £1,200 (on accommodation, transport and
food) on this 3 month internship, giving the company valuable material to make
profit on, I was given nothing to help further my career”.
1. This account was posted on the website www.internsanonymous.co.uk, one of several
websites that collect accounts of interns’ experiences and campaign for improvements
to the way interns are treated. The rogue company concerned is described as small UKbased fashion label which has only one permanent employee, but some 15 interns
working for it every year.
2. There is no legal definition of “intern”, but over the past few years, especially since the
recession made it harder for graduates to obtain jobs, the word – like internships
themselves - has become more widespread. “Internships” are typically periods of work
lasting from six weeks to a year, aimed at providing relevant professional experience to
those at the start of their careers. They are particularly prevalent in such sectors as
media, politics, fashion, public relations and financial services. The term “work
experience” is also undefined in law, but is typically associated with a shorter period of
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work shadowing undertaken by a school pupil or student, and the phrase “work
placements” is often used to describe the period that students spend during their
university studies to gain experience that is relevant to their degree. However, these
phrases are often used interchangeably.
3. Some internships are paid and appear to offer interns a good start in their chosen field,
offering proper experience of the job and a salary. Others may be paid, but can be
particularly brutal experiences, as the case of Moritz Erhardt illustrates. Mr Erhardt, 21,
was an intern at Bank of America Merrill Lynch, and was earning £45,000 pro rata for his
seven-week internship. He was found dead in his shower after working for 72 hours in a
row. Although the coroner was unable to conclude definitively that exhaustion triggered
the epilepsy which was found to have killed him, his death in August 2013 led to a spate
of reports about interns in the finance world feeling compelled to work extraordinarily
long hours.
4. Many other internships, however, are unpaid, and as the example in the introduction
suggests, some are highly exploitative. The Chartered Institute of Personnel and
Development (CIPD) carried out research in 2010 which suggested that 37% of
internships were unpaid, and moreover that there can be potentially a quarter of a
million internship places over the summer, the time of year when most are offered. Alan
Milburn MP headed the Panel on Fair Access to the Professions in 2009 which found that
“Internships are an essential part of the career ladder in many professions... where once
they were an informal means of gaining practical insight into a particular career, today
they are a rung on the ladder to success... Yet, by and large, they operate as part of an
informal economy in which securing an internship all too often depends on who you
know and not on what you know.”1
5. A large proportion of internships are based in London, because of the preponderence of
businesses (such as in media, politics and fashion) based in the capital. The city’s high
cost of living exacerbates the difficulties faced by interns who are not paid – and of
1
http://www.agcas.org.uk/assets/download?file=1208&parent=465
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access to internships for people whose financial background does not permit them to
work unpaid for several months. The London Assembly is concerned about this and its
Economy Committee held a debate on this subject on 20 March 2014. It heard from
speakers from Intern Aware (www.internaware.org), which describes itself as “the
national campaign for fair, paid internships”, the National Union of Students and others,
and noted that internships are increasingly popular as a way for students to get a foot in
the door in competitive industries, but because they are not properly regulated, interns
may miss out on pay or proper training.
6. But there IS regulation of internships – and it’s very clear. The National Minimum Wage
Act 1998 (“the 1998 Act”) gives interns the right to be paid at least the National
Minimum Wage (“NMW”) if they qualify as a “worker”. The real difficulty is likely to be
that interns may be so grateful to get a foot in the door of their desired industry, that
they do not choose to exert their right to the NMW for fear of “rocking the boat” with a
company that they hope will eventually give them a paid job. Further, research suggests
that many companies, especially smaller ones, do not realise their legal obligations to
interns, potentially leaving them open to a tribunal or county court claim. A YouGov
survey for pressure group Internocracy in 2011 found that only 10% of 18-35s who had
heard of internships knew about their rights to be paid, and that only 12% of top, senior
and middle managers interviewed who had heard of internships knew that they might
be breaking the law by offering unpaid placements.
7. This part of tonight’s talk will consider the legal rights of interns (in particular with
regard to pay), what employers should be doing for their interns to comply with the law,
and what advice to give an employer client who chooses not to pay their interns. Finally,
for completeness it considers the status of other groups of workers, such as apprentices,
who are treated differently under, or excluded from the protection of, the 1998 Act.
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Quick refresher
8. Ten key facts about the National Minimum Wage:
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
It came into force on 1 April 1999;
It started out at £3.60 per hour and is currently £6.31 per hour for adults
(those aged 21 and over). It is paid at lower rates to younger workers: £5.03
for 18- to 20-year-olds, £3.72 for 16- to 17-year-olds and £2.68 for
apprentices;
On 1 October 2014, those figures will rise to £6.50, £5.13, £3.79 and £2.73
respectively;
The NWM covers part-time workers, agency workers, home workers,
freelance workers and casual workers;
It does not apply to self-employed workers, who are paid based on the price
they agree with their clients;
There are other categories of worker who are not entitled to the NMW,
including members of the armed forces, volunteers and prisoners;
There are no exceptions for small businesses – employers must pay the NMW
no matter what size their business;
There are no regional variations in the amount of the NMW;
Employers cannot contract out of paying it (s49 of the 1998 Act);
Workers have two routes to enforcing it – by bringing a claim themselves, or
by reporting their employer to HMRC. The employer may also face criminal
charges for failing to pay it or to keep appropriate records (s31 of the 1998
Act).
The National Minimum Wage Act 1998 – what rights does it confer?
9. If an intern is classed as a “worker” for the purposes of the 1998 Act, then they should
be paid the NMW.
10. Under s1(2) of the 1998 Act:
A person qualifies for the national minimum wage if he is an individual who –
a) Is a worker;
b) Is working, or ordinarily works, in the United Kingdom under his contract; and
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c) Has ceased to be of compulsory school age.
11. Under section 54(3), a “worker” means
an individual who has entered into or works under (or, where the employment has
ceased, worked under) –
a) A contract of employment; or
b) Any other contract, whether express or implied and (if it is express) whether oral
or in writing, whereby the individual undertakes to do or perform personally any
work or services for another party to the contract whose status is not by virtue of
the contract that of a client or customer of any profession or business
undertaking carried on by the individual…
12. This is the same definition of “worker” as is to be found at s230(3) of the Employment
Rights Act 1996, and reg 2(1) of the Working Time Regulations 1998 (SI 1998/1833).
13. There is extensive case law on the definition of a “worker” and, when considering
whether an intern fulfils this definition, a tribunal will look for the usual indicators – an
intention to create legal relations, mutuality of obligations, personal service, are all
factors that may be persuasive.
14. The issue was considered in James v Redcats (Brands) Ltd [2007] ICR 1006, a case
brought under the 1998 Act to determine whether the claimant, who worked as a
courier delivering parcels for the respondent, was entitled to the NMW. The key issue
was whether she was working under a contract to perform personally any work or
services for Redcats (Brands) Ltd, and so was a worker within s54(3)(b) of the 1998 Act,
or whether she was conducting a business and the respondent was a customer of hers,
in which case she was not eligible for the NMW.
15. Although these facts are very different from a situation where an intern may be claiming
the NMW, Elias P set down several general propositions of law as to the definition of a
worker for the purpose of the 1998 Act.
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At paragraph 6 he said:
The definition of a worker [at s54(3)(b)] is very wide, no doubt intentionally, given
the purpose of the legislation… There are three elements to the definition. First,
there must be a contract to perform work or services. Second, there must be an
obligation to perform that work personally. Third, the individual will not be a
worker… if the provision of services is performed in the course of running a
profession or business undertaking and the other party is a client or customer…
At paragraph 33:
… if the individual is free to work or not at his own whim or fancy, then that would
be inconsistent with his being a worker at all…
And at paragraphs 67-68 Elias P considers the “dominant purpose” analysis:
… the courts are seeking to discover whether the obligation for personal service is
the dominant feature of the contractual arrangement or not. If it is, then the
contract lies in the employment field; if it is not – if, for example, the dominant
feature of the contract is a particular outcome or objective – and the obligation to
provide personal service is an incidental or secondary consideration, it will lie in the
business field.
This is not to suggest that a tribunal will be in error in failing specifically to apply the
“dominant purpose” or indeed any other test. The appropriate classification will in
every case depend upon a careful analysis of all the elements of the relationship…
He went on to refer immediately after this passage to the reverse burden of proof,
to be found at section 28 of the 1998 Act. This states that, if a claim for the NMW is
presented, it shall be presumed that the individual qualifies or, as the case may be,
qualified at that time for the national minimum wage unless the contrary is
established.
Elias P finds that this reverse burden must have some significant in the judicial
balancing exercise when the definition in that Act is under consideration (para 69).
16. Two cases at ET level, which have not been appealed, show that tribunals are willing to
view interns as “workers” for the purpose of NMW law.
17. In Vetta v London Dreams Motion Pictures Ltd (ET Case no. 2703377/08), Nicola Vetta
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was taken on as an intern with a film production company on an “expenses-only” basis
to work as a full-time assistant to a production designer for four weeks. After some
workplace disputes, the media and entertainment union BECTU became involved and
represented her at tribunal. She argued that she was not a volunteer but was a worker
due to the type of work she was doing, and the fact that she was not on any sort of
training programme.
18. The tribunal found that she was a worker because it was clear that “she carried out all of
the tasks that one would have expected of an assistant in that position” and should have
been paid the NMW at least. She successfully recovered some £2,000 in wages and pay
in lieu of holiday.
19. A similar conclusion was reached in Hudson v TPG Web Publishing Ltd & Ors (ET Case no.
2200565/2011). Keri Hudson, 21, was a member of the National Union of Journalists,
who assisted her in her claim against the respondent, which published the My Village
website. For six weeks in 2010, Ms Hudson worked for this site each day from 10am to
6pm and was personally responsible for and in charge of a team of writers, training and
delegating tasks, collecting briefs, scheduling articles and even hiring new interns. But
the company had told her she was not eligible for any pay because they considered her
an intern.
20. In her evidence, Keri Hudson said she had been asked when the site was taken over by
TPG Web Publishing Ltd if she would stay on and work for the new company. She was
assured her pay would be fixed. After five more weeks she was informed she would not
now be receiving a payment for the work she carried out – she resigned and took out a
grievance.
21. The tribunal found she was a worker in law even though she didn't have a written
contract, and was therefore entitled to be paid at least the NMW and holiday pay. The
discussions that she had had with the company to the effect that she would be paid
were sufficient, along with the extent of the work she undertook, to show that there
was an implied contractual relationship and that she was a worker. She recovered
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£1,024.98 in unpaid wages and holiday pay.
22. The key point emerging from both Vetta and Hudson would appear to be that the
claimants in essence did an actual job, for which other workers might well in fact be paid
by the respondent companies. They were not merely shadowing other employees, nor,
it seems, were they free to come and go as they wished, but were performing personal
services themselves, with regular hours, deadlines and expectations, and were
performing a valuable service to those employers.
23. However, in IT Asset Management Solutions Limited v The Commissioners for HMRC (ET
Case no. 3302665/12), an appeal against a Notice of Underpayment issued by the
Respondent (about which, more below), the tribunal held that a young man, Kurtis Fehr,
did not fall into the category of “worker” and so the Claimant succeeded in appealing
the Respondent’s decision that Mr Fehr was entitled to the NMW.
24. Mr Fehr, 19, had written to ITAMS Ltd, an IT company, thus: “I’m more than willing to
come work for a period of time for little or no wage whatsoever just to gain experience
and show how dedicated I am and how much of an asset I could be.”
25. ITAMS Ltd were impressed by his enthusiasm and offered him voluntary, unpaid work
for up to four months to gain insight into how they operated. He did not have to attend
every day but was encouraged to do so. ITAMS Ltd agreed to pay for his driving lessons
as if he were to gain a job with them, he would need a driving licence. He was not given
a written contract, but a letter offering him “work experience, unpaid, for a period of
four months”. There were other features of the arrangement that arguably indicated
worker status: he was given some tasks which appeared to be junior-level work; he was
given regular office hours and told he was entitled to seven days’ annual leave, which
needed to be approved in advance; and he was given a one-week notice period.
26. After four months, Mr Fehr was given a junior level job with ITAMS Ltd on the minimum
wage. Two months later, the day after he passed his driving test at ITAMS Ltd’s expense,
Mr Fehr resigned in spectacular circumstances, sending an inflammatory and
defamatory email to all members of the company including extensive character
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references, slurs and unfounded allegations about its staff. He then brought a claim for
unpaid wages during the four months of his work experience. HMRC supported his claim
and calculated that ITAMS Ltd owed £2,535 to Mr Fehr and were liable for a penalty
payment of £1,261.
27. The Judge found in favour of the appellants, who succeeded in discharging the burden of
proof by establishing that the contract between the parties was not one to do or
perform personally any work or services. The tribunal found that overall, Mr Fehr’s
activities at this time did not add value to the company (nor were they supposed to),
and that he spent a considerable amount of time undertaking training activities. The
Judge was persuaded that the “dominant purpose” of the contract, considering the
James v Redcats (Brands) Ltd analysis, was to provide Mr Fehr with work experience and
training, although she accepted that he did provide the Appellant with some assistance
which could properly be characterised as work.
28. Whilst this case turns on its somewhat unusual facts, it is clear that the more an intern
does what might be considered to be the job itself, rather than training or work
experience/shadowing, the more likely it is that they will be found to have worker
status.
29. The rights conferred by the 1998 Act extend into other areas of employment law.
Section 23 of the 1998 Act gives workers the right not to suffer detriment by reason of
asserting their right to the NMW, and Section 25 of the 1998 Act inserts section 104A
into the Employment Rights Act 1996 to the effect that an employee who is dismissed
because they sought to enforce their right to the NMW is unfairly dismissed.
30. “Worker” status also confers on an intern other rights:
a.
b.
c.
d.
e.
Protection from unlawful deductions from wages;
Holiday pay;
Rest breaks;
The right not to work more than 48 hours per week;
As set out above, the right not to be subject to a detriment for raising these
rights.
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Employers taking on interns
31. Employers who are prepared to pay interns the NMW (or more) should reap benefits in
being able to identify the best candidates who are likely to become the future stars of
their business. It also widens the pool of potential interns, by enabling those who could
not afford to support themselves for months of unpaid work the opportunity to apply.
Employers should bear in mind:
a. The responsibility is on the employer to decide whether someone is a worker
for the purposes of the NMW, and if so whether an exemption applies to
them. The law places the onus on the employer to pay the NMW unless they
can prove they are not obliged to;
b. A worker’s entitlement does not depend on their job title or description, but
on their contractual relationship (if any) with the employer. So describing a
position as “expenses-only” or “unpaid” makes no difference to the
employer’s potential liability;
c. As with any worker or employee, it makes sense to have a written contract
setting out what is expected of the intern, and that in return they will receive
the NMW;
d. The Government has extensive sources of advice – a good starting point is
www.gov.uk/employment-rights-for-interns
e. The CIPD has produced a guide for employers, Internships That Work, which
includes a sample Internship Agreement2.
Employers who do not wish to pay their interns
32. Many companies take the legitimate view that they can help youngsters get a start in a
profession by offering genuine internships which allow the person to gain some
experience of what the work is like, and perhaps some training. Other, less scrupulous
companies see interns as a source of cheap or free labour, and even as a replacement
for salaried staff.
2
http://www.cipd.co.uk/hr-resources/guides/internships-employers-guide.aspx
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33. To ensure employers stay on the right side of the law if they wish to take on interns, but
not pay them, the following guidelines may assist:
a. Consider carefully the wording of any vacancy for an intern. HMRC is on the
lookout for adverts which suggest the intern will be working illegally. In
November 2013, HMRC sent warning letters to 200 businesses who had
advertised placements for unpaid internships that they could be “publicly
named and shamed” and may be liable for a £5,000 fine if they are found to
be in breach of NMW laws;
b. Do not insist rigidly that the intern attends at set times. Whilst you can
suggest that they attend between, say, 9am and 5pm you should not sanction
them if they do not attend for the entire day, nor if they wish to leave the
premises during the day (although it is reasonable to point out that
timekeeping and being on the premises are both important aspects of
learning about the job);
c. Do not rely upon the work done by an intern. Whilst the intern might be
undertaking the sort of work done by an employee, as a way of learning
about the job, that work should not be a substitute for the work done by the
employee;
d. Similarly, do not set the intern targets. Whilst it is helpful to show interns
what sort of targets they might have to meet if they worked in this field, they
should not be treated as an employee in terms of being expected to
complete work to a deadline;
e. Do not leave the intern to work unsupervised. They should be shadowing an
employee during their placement;
f. Do not indicate that a job is the likely end result of the internship. If the
intern shows promise, the possibility of employing them can be raised at the
end of the internship and a formal, open interview process can take place.
“Stringing the intern along” by talking about the possibility of a salary went
badly for the respondent in Hudson and a tribunal may construe it as a
benefit in kind which makes the person a worker for the purposes of the
1998 Act;
g. Keep the internship short – between two and eight weeks at most;
h. Draft a carefully worded intern agreement, laying out clearly what is and
what is not expected of the intern, to protect the company in the event of a
dispute. Documenting their learning objectives and recording that the
company will pay out of pocket expenses will not, without more, amount to a
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contract of employment, or a contract to personally perform work or
services;
i. Ensure that any expenses are a true reflection of the costs (of travel or lunch)
that have been incurred. Paying a flat fee of, say, £10 per day in lieu of
expenses could suggest that the person is a worker and entitled to the NMW;
j. Likewise, promising an intern ‘perks’ such as film tickets, DVDs or a future
percentage of money earned by the employer on a particular project are
benefits in kind which have a monetary value and are likely to suggest worker
status;
k. Charities may have a valid exemption if the interns truly are volunteers (see
below).
Exceptions to the rules: apprentices, students, volunteers and others
34. The National Minimum Wage Regulations 1999 (SI 1999/584) (“the 1999 Regulations”)
create exemptions for various categories of workers who are not entitled to receive the
NMW, or only to receive it at a lower level.
35. Since 1 October 2010, apprentices have had their own category of NMW (before this,
they were excluded from protection under the 1998 Act). Apprentices who are under 19,
or aged 19 and over and in the first 12 months of their apprenticeship, are entitled to be
paid £2.68 per hour from 1 October 2013. Apprentices over the age of 19, and those
who have completed at least one year of their apprenticeship, are entitled to the NMW
rate that applies to their age.
36. Regulation 13 of the 1999 Regulations defines the right of apprentices to the NMW, and
sets out what counts as an apprenticeship: the person must be employed under a
contract of apprenticeship either by being a worker within the meaning of s54(3) of the
1998 Act, or because they are engaged on a Government scheme such as an
Apprenticeship, Advanced Apprenticeship, Modern Apprenticeship, etc (reg 13(6)).
37. In Chassis & Cab Specialists Ltd v Mr JD Lee (UKEAT/0268/10/JOJ), Underhill J held – in a
case based on events prior to the introduction of the current reg 13 in 2010 – that
determining whether a contract was one of apprenticeship or employment did not
necessarily turn on the label the parties gave it, but on the nature of the relationship
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between the parties – the fact that the apprentice was being taught in a systematic
fashion to obtain a qualification, for example. “The essential purpose of the contract…
was that the Claimant should receive training so as to achieve a given level of skill,
attested by a recognised qualification… It is true that the term ‘apprentice’ was not used
in the Agreement or in any document involving the Appellant and the Claimant. But the
way that the parties described their relationship in the documentation is not
determinative…” (at [21]).
38. Regulation 12 clearly envisages that other types of student or trainee may be exempt
from receiving the NMW. Even if they are a “worker” within the meaning of s54(3) of the
1998 Act, they will not receive the NMW if they are caught by reg 12. These groups are:
a. Those on training schemes funded by the Government or the European Social
Fund (including work trials with prospective employers of up to six weeks):
reg 12(4A)-(7);
b. Students on work experience which does not exceed one year, if it is part of
certain higher or further education courses: reg 12 (8)-(9C);
c. Charitable or non-profit-making schemes which provide shelter and other
benefits to people who were previously homeless: reg 12(10)-(12);
d. Those who are participating in European Community programmes such as
Leonardo da Vinci, Erasmus, Comenius or the European Community Youth in
Action Programme (reg 12(13)-(16).
39. There has been considerable publicity about the issue of jobseekers being obliged to
undertake work in return for keeping their Job-Seeker’s Allowance: for example, the
“Poundland” case, R (on the application of Reilly and another) v Secretary of State for
Work and Pensions [2013] UKSC 68.
40. The way the NMW legislation is framed raises a dichotomy between the way that
jobseekers and interns are treated. Whilst interns are now increasingly exhorted to
assert their right to the NMW, those on benefits but who are working full time under a
Government scheme are specifically excluded from it. Is that joined-up policy making?
Or a Government favouring the middle-class intern, likely to move in to a promising
career, over the working-class job seeker living on benefits?
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41. Other groups of workers are excluded from obtaining the NMW under the 1998 Act.
a. Voluntary workers are excluded by section 44, which protects the position of
charities and other organisations that rely on the services of unpaid volunteers.
They need not be paid the NMW if:
b. They work for a charity, voluntary organisation or statutory body; and
c. They receive only reasonable expenses arising from the performance of duties,
or benefits in kind such as subsistence or accommodation; or
d. They are placed by the charity or similar, with another charity or similar and
receive money for subsistence. Thus, for example, voluntary workers who have
been placed in a hospital or charitable care home by a charity that specialises in
such placements, and are given some living expenses, would be caught by this.
42. The decision as to what constitutes “reasonable” expenses and accommodation, so that
a worker receiving those is excluded from entitlement to the NMW, is a matter of fact
for the tribunal. In Best v St Austell China Clay Museum Ltd UKEAT/0924/03/TM, the EAT
found that section 44 was not just confined to workers who were volunteers and worked
without obligation to do so. It excluded from the NMW protection workers (as defined in
s54) who receive no pay but did receive subsistence, expenses and/or free
accommodation relevant to their employment.
43. Other groups of worker who do not qualify for the NMW include: resident members of
religious communities employed by that community (s44A); prisoners (s45); those
discharging fines by way of unpaid work (s45A) and share fishermen (s43).
Enforcement – two routes
44. Someone who believes they are entitled to the NMW and has not been paid it, or not
been paid it in full, has two means of recourse. They can bring a claim in the
employment tribunal or the county court for breach of contract, or can bring a claim in
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the tribunal under Part II of the ERA 1996 for unlawful deduction from wages. In both
circumstances, the reverse burden of proof applies, and the employer will have to satisfy
the court by producing records to demonstrate that the worker has been paid at least
the NMW. Provision for such record-keeping is laid down by section 9 of the 1998 Act
and regulation 38 of the 1999 Regulations.
45. The second method of enforcement is to complain to HMRC. Sections 19 to 19H deal
with the issuing of Notices of Underpayment, which HMRC can issue to an employer
upon receipt of a complaint that the NMW has not been paid. Under section 19, a Notice
of Underpayment can be issued requiring the worker to pay the calculated arrears
within 28 days, and under section 19A, the employer is obliged to pay a financial penalty
of 100% of the arrears, subject to a minimum of £100 and a maximum of £20,000. These
figures rose from 50% of the arrears, and a maximum of £5,000, last month.
46. Appeals from a Notice of Underpayment lie to the employment tribunal (section 19C).
Catherine Urquhart
Ely Place Chambers
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The Employment Group
The Employment Group at Ely Place Chambers is nineteen members strong. Members
regularly appear for both employers and employees before the ET, EAT, High Court and
Appellate Courts not only in England & Wales but also in Jersey, Scotland and Northern
Ireland, and have been involved in some leading cases including Wardle v Credit Agricole
Corporate and Investment Bank and Fareham College v Walters
The Group is well represented across all levels of experience and includes QCs, a member of
the Attorney General’s Panel of approved counsel, a Fee-Paid Employment Judge, juniors
recognised by the Chambers and Partners Guide to the Legal Profession and the Legal 500 as
leaders in their field as well as a Deputy High Court Judge and two recorders.
Members are also instructed for High Court Injunctions and undertake representation
before regulatory and disciplinary hearings. The group also has members who have
experience of sitting on professional disciplinary panels and matters that involve matters of
national security.
The Employment Group provides expertise in:
 All forms of discrimination
(including equal pay), harassment
and victimisation claims
 Wrongful dismissal and other
breach of contract claims
 Collective labour law
 Working time and holiday pay
claims





Unfair and constructive dismissals
including redundancy claims
Whistleblowing
Restraint
of
trade,
noncompetition and team moves
Transfer of Undertakings
National security sensitive matters
(r94 and Sch 2 ET Rules 2013)
Our barristers also advise in more specialist areas such as health and safety, psychological
injuries, industrial relations and union activity, costs, and the liability of public bodies.
Chambers counts some of the country’s largest unions, public-sector and private employers
amongst their clients.
Members of the Employment Group
William McCormick QC
Malcolm Bishop QC
Nicholas Stewart QC
William Evans
Angus Gloag
Gillian Crew
Michael Salter
John Samson
Bushra Ahmed
1985
1968
1971
1977
1992
1998
1999
2001
2001
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Amy Stroud
Jonathan Price
David Mitchell
Tom Kirk
Liam Ryan
Aidan Briggs
Paul Powlesland
Anna Lintner
Catherine Urquhart
Max Cole (sol 2001)
2004
2004
2004
2007
2007
2009
2009
2009
2010
2011
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CONTACT US
Christopher Drury:
cdrury@elyplace.com
Richard Sheehan:
rsheehan@elyplace.com
Kevin Morrow:
kmorrow@elyplace.com
Dave Lovitt:
dlovitt@elyplace.com
Ely Place Chambers
30 Ely Place
London
EC1N 6TD
Tel:
020 7400 9600
Fax:
020 7400 9630
DX:
291 London Chancery Lane
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