After a two-year of legal battle, Middlesbrough FC won the right to pay staff less than the minimum wage when considering in the cost of their season tickets.
A labour court in Teesside Magistrates on Monday overturned a ruling that the Championship football club had broken employment laws when deducting the cost of 2016/17 cards over several weeks from the pay of staff receiving the National Minimum Wage (NMW).
The team had claimed for two years that it was only responding to the wishes of employees who requested the arrangement, but HMRC was firmly convinced that the club had ignored laws and has to be prosecuted for these offences.
Although being severely criticised for pursuing the action, HMRC refused to back down and said it will continue to chase cases where employers pay under the NMW threshold. This has led experts to caution that businesses must be on top of all minimum wage matters, even when they believe they are helping low-paid employees with non-cash sperks and other benefits.
Never a penalty
After a numbers of claims against corporates including the retailer John Lewis which paid £36m to cover its payroll error, and fusion eatery Wagamama which was fined for its minimum wage infraction, HMRC went into the legal encounter full of confidence.
Government lawyers said that the club had the “benefit and use” of the season ticket payments, which were paid directly into the Middlesbrough bank account, and as a result, must be found in breach of the legislation.
However, Robin Bloom, the club’s barrister, responded that it was “a deduction that has been made on the behest of the employee and for the benefit of the employee”, and at the end of the day, the court agreed.
“On the face of it, this seems a sensible result,” said Charlie Barnes, associate director and employment lawyer at RSM UK. “When assessing NMW compliance there are certain deductions which must, by law, be taken into account.” He said these include when a deduction is for expenditure in connection with the worker’s employment or if the deduction is for the employer’s own use or benefit.
Steve Gibson, the Boro’ chairsman blasted HMRC’s tactics, stating the case was “a huge waste of public money”.
Funny old game
The current legislation in this area paints a confusing draw, both for employer and employee and the Middlesbrough FC case is an illustration of why more clear guidance is required, according to Philip Richardson, partner and head of employment law at Stephensons Solicitors.
When an employee choose to deduct a percentage of their salary in exchange to a benefit provided by their employer, such as a season ticket, in this case, tribunals may be hesitant to intervene with that scenario, Richardson said, irrespective of whether that then takes employees below the national minimum wage.
Despite the setback, HMRC said it was entitled to make the case against Middlesbrough, and would do so again.
They said minimum wage laws are protective legislation and no worker can agree to receive less than the relevant NMW rate.