Case of the week
£2.38 per hour - failure to pay the minimum wage costs car wash business £86,093.90. At £6 for the average wash, it will take 14,349 washes to recoup the wages shortfall and penalty!
£2.38 per hour rising to £2.85 per hour after two weeks. That’s a tad below the minimum wage
What happens to employers who don’t pay the National Minimum Wage (NMW)? I’ve posted a couple of times when the government have named and shamed employers, some of them well known, who have paid staff at rates below the NMW.
The reasons for the underpayments are varied, but most common is not taking into account deductions, such as payment for uniform, into the overall calculation. When these deductions are factored into the equation it can bring wages down below the minimum threshold.
No doubt the businesses claim it was an oversight, a clerical error and non-intentional. That may be the case, but there really are no excuses.
What’s far worse though is when an employer is completely aware they are paying below the minimum wage and are exploiting staff simply because the workers are unaware of the correct minimum wage rate or because they are unsure what counts as work and working time and are so are denied pay for hours worked when they should be.
Today’s case is an example of just that. It’s the local hand car wash. We’ve all been there at some time. They seem to have taken over a vacant spot in most towns over the last couple of decades.
It’s a simple business plan. Set yourself up on a disused garage forecourt, source a couple of pressure washers and some willing labour and you’re away. You just need somewhere safe to keep all that cash that keeps pouring in. My local car wash was so busy this week the queue was stretching some way down the road.
Many of these businesses are owned and operated with migrant labour. There is nothing illegal in running a hand car wash business, but there have been many reported instances of labour exploitation.
Speed Car Wash Specialists has six staff and provides a vehicle washing and valeting service. It is run by Mr Bhatia.
In 2016 an anonymous complaint was made to HMRC and a Compliance Officer duly investigated. Following both announced and unannounced visits to the premises the Compliance Officer established that the workers were being underpaid for the number of hours they were working and therefore in breach of the National Minimum Wage Act1.
There was a dispute between Mr Bhatia and the officer as to how many hours they worked. He produced pre formatted completed timesheets and RTI submissions suggesting that for the hours they worked they received the minimum wage.
However, the officer disagreed and having spoken to the staff, considered that they were working considerably more hours than Mr Bhatia suggested, so a Notice of Underpayment was served on the company requiring the business to pay arrears in the sum £33,368.67 and imposed a penalty of £52,725.23.
If a business disagrees with the Notice of Underpayment it can appeal to the Employment Tribunal. This is what Mr Bhatia did in Speed Car Wash Specialists v Commissioners for HM Revenue and Customs.
Mr Bhatia claimed that working hours were very flexible, ‘done on trust’. None of the workers had written employment contracts. HMRC sent a questionnaire to the workers enquiring about their working hours and pay. One was returned which stated:
He worked at the car wash from September to November 2015.
He worked from 8.00am to 7.00pm, from Monday to Sunday;
He had 30 minutes break from 12.-00-12.30pm;
His rate of pay was £25 per day for the first two weeks after which the rate was £30 per day;
His pay was £175 per week and he was paid weekly in cash.
His rate of pay was £2.38 per hour rising to £2.85 per hour.
Another member of staff said that they were simply made to sign a statement by the employer and had also been instructed to answer by saying that they received £7.20 per hour and worked six hours per day, thirty hours per week.
The fact was that the information provided by Mr Bhatia, director the business was at odd with what the Compliance Officer had observed and what he had been told by the workers.
In the judgment the tribunal was somewhat critical of Speed Carwash, stating:
“There were considerable discrepancies in the accounts given by Mr Bhatia and about the basis on which he paid his staff and the documents which he produced to substantiate this. Nor indeed did the Tribunal consider that the documentation produced was sufficient.”
“The Tribunal concluded on the balance of probabilities that the documentation that was produced by Mr Bhatia as to the pay that was given was not accurate or reliable. Further, the Tribunal considered that the letters purportedly signed by or received from the workers claiming to have been paid national minimum wage for all hours worked were similarly unreliable. Further, there were inadequate records documenting periods of absence.”
“The time sheets were pre-printed with start times, finish times and deducted hours for times when the Appellant stated the workers were not working. Further, the Appellant recorded one-hour lunch breaks every day when both the Appellant and the workers indicated that they had a thirty-minute paid break.”
A fairly damning summing up and, not surprisingly, the company’s appeal was dismissed. Mr Bhatia subsequently asked the tribunal to reconsider their decision but was refused2
These types of businesses are a hotbed for worker exploitation. My further comments are not directed at Speed Car Wash specifically, but in an environment where foreign workers are employed without contracts, paid in cash, receive more than they would in their home country and are provided with accommodation (however basic) it is not surprising that they close ranks and are reluctant to engage with the authorities.
Many have an inherent distrust of government institutions which makes it difficult to investigate alleged breaches of the NMW Act. They are tricked into coming to the UK with the dream of a better life but sadly all that awaits is a life of modern slavery.
If you think this case is bad, spare a thought for workers at the Shiny car wash in Carlisle. They were given little or no protective equipment and suffered chemical burns. One man told how water had “eaten away at his feet” after he was made to work nine days in a row without proper equipment. The bosses were jailed following a seven week trial.
If you suspect workers are being exploited by a hand car wash company, you can download the Safe Car Wash App
(1) A person who qualifies for the national minimum wage shall be remunerated by his employer in respect of his work in any pay reference period at a rate which is not less than the national minimum wage.