When calculating the National Minimum Wage, employers must first offset any expenses and fees incurred by the worker. In Augustine v Data Cars Ltd, the Employment Appeal Tribunal (EAT) held that, when deciding whether to make a deduction, tribunals must consider whether the expenditure was in connection with the worker’s employment and was not reimbursed by their employer.
Basic facts
In order to work as a taxi driver for Data Cars Ltd, Mr Augustine had to pay several different fees to the company. This included a “circuit fee” and a fee for renting equipment which had to be fitted in his car, as well as access to the Data Cars booking dispatch system. He also paid to rent a vehicle for which he was required to buy a certain level of insurance. In addition to fuel and cleaning costs, Mr Augustine paid out for a uniform which meant he was eligible to take on more valuable jobs.
He brought a number of complaints, including a claim that the company had failed to pay him the national minimum wage (NMW).
Tribunal decision
Having decided at an earlier hearing that Mr Augustine was an employee (and therefore entitled to the NMW), the tribunal now focused on whether any of the fees Mr Augustine had paid and expenses he had incurred should be offset against his earnings.
Because of a dearth of case law as to what constitutes an “expense”, the tribunal turned to guidance by HMRC which directs employers to deduct expenses that are “a requirement of the work, rather than by choice”. On that basis, it held that the costs that should have been deducted from Mr Augustine’s total earnings, including fuel and insurance costs, circuit fees, equipment rental fees, fuel costs and cleaning.
However, as he could have used his own vehicle and did not have to buy the uniform, it decided that these fell outside the remit of the national minimum wage regulations 2015.
Mr Augustine appealed, arguing that the rental for his vehicle and the cost of his uniform should also have been deducted as expenses under regulation 13. This states that deductions and payments are to be treated as reductions if they are “paid by or due from the worker … on account of the worker’s expenditure in connection with the employment”.
EAT decision
Regarding the car rental, the EAT held that as the only test was whether the expenditure was in connection with his employment and not reimbursed by his employer, it was irrelevant that Mr Augustine could have met his obligation by using his own vehicle. The amount he had paid out to rent the vehicle was therefore allowable as a deduction as it was clearly “in connection with his employment”. The EAT therefore substituted a decision to that effect.
As for the uniform, the EAT held that it was a fact that Mr Augustine had been designated a “gold driver” and was therefore required to wear the uniform in connection with his employment. Had the tribunal correctly applied the law to these “undisputed facts”, it would have concluded that this expenditure fell within regulation 13. Again, the EAT substituted a decision to that effect.
The test to be applied was not, therefore, whether the expenditure was a “requirement” of the employment but simply whether it was “in connection with the employment” and not reimbursed by the employer. It does not have to be a necessity, nor did it have to be “wholly or exclusively incurred”.