National minimum wage: Taxi driver's car and uniform rental payments should have been deducted in national minimum wage calculation

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National minimum wage: Taxi driver's car and uniform rental payments should have been deducted in national minimum wage calculation

Published 7 December 2021

 The EAT has held that an employment tribunal should have allowed a taxi driver's car and uniform rental payments to be deducted for national minimum wage purposes although the payments were optional.

THE FACTS

Mr Augustine was employed by Data Cars Ltd as a taxi driver.  He had the option of using his own vehicle or renting a vehicle.  He opted to rent a vehicle from a company associated with Data Cars.  He also had the option (which he took) of renting a uniform from Data Cars: if he did so, he would work as a “gold driver”, meaning that he could take on more jobs.

After his employment ended, Mr Augustine brought several claims in the employment tribunal, including a claim that he had not been paid the national minimum wage (the NMW).  To calculate whether he had received the NMW, the tribunal had to decide what costs should be deducted from his salary.  It held that fuel and insurance payments should be deducted, but not payments in respect of his uniform and car rental because these were optional. 

Mr Augustine appealed to the EAT, which held that the tribunal had applied the wrong test and that, had it applied the correct test, it could only have concluded that both the uniform and car rental payments were deductible.  For payments to be deductible under the NMW , the requirement is that the payments are “in connection with the employment” and not reimbursed by the employer.  The EAT held that there is no requirement for the payments to be necessarily, exclusively or wholly incurred by the employee, so the fact that rental of a vehicle and uniform was optional was not relevant to the test.   Additionally, he clearly wore his uniform in connection with his employment, which was why he rented it.  As a result, his salary for NMW purposes had to be assessed on his earnings after the deductions had been made.

WHAT DOES THIS MEAN FOR EMPLOYERS?

This case clarifies that, in calculating NMW, the fact that the employee is not required to make certain payments, for example for uniform, is irrelevant for determining whether the payments should be deducted from their salary thereby reducing the salary paid to under NMW requirements.  The test set out in this case is whether or not payments are “in connection with the employment” and not reimbursed by the employer.

It should be noted that the HMRC have historically looked for some legal or contractual requirement to incur costs for them to be deductible for NMW purposes.  This is at odds with this EAT decision, and further clarity would be welcome.  In the meantime, employers who offer workers options regarding uniforms need to be prepared for challenges where such payments take the workers’ pay under the NMW threshold.

Mr W Augustine v Data Cars Ltd

Authors

Hilary Larter

Hilary Larter

Leeds

+44 (0)113 251 4710

Zoë Wigan

Zoë Wigan

London - Walbrook

+44 (0)20 7894 6564

Ceri Fuller

Ceri Fuller

London - Walbrook

+44 (0)20 7894 6583

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