Unpaid trial periods risk breach of rules

Following parliamentary scrutiny from both Westminster and Holyrood, employment practices concerning the use of unpaid workers during trial periods and training has gained national attention. With the potential savings making them tempting to some in the retail and grocery sector, what is the legal status of these work periods?

Laura Morrison is an employment lawyer at Dentons (laura.morrison@dentons.com)

What does the law say about unpaid trial periods and training?

Most workers in the UK are entitled to be paid the National Minimum Wage (NMW). Anyone who works under a contract of employment (which does not have to be in writing), or is obliged to undertake work personally for an employer is regarded as a worker for this purpose and is entitled to be paid the appropriate rate.

The definition of a worker for NMW purposes is intentionally broad. This ensures that the vast majority of the UK workforce is captured. While the relevant legislation states that unpaid trial periods and training are acceptable for certain specific government-run schemes such as JobCentrePlus, and do not qualify for NMW, this exception does not extend to other organisations or businesses.

As for unpaid training, the legislation confirms that periods of training attended by workers during normal working hours and approved by the employer will be considered ‘working time.’ Organisations seeking to run unpaid trial periods will therefore be breaching NMW legislation.

What penalties could employers face for such practices?

There are both civil and criminal penalties for underpayment of NMW as well as potential for significant reputational damage. The civil penalties include receiving a notice of underpayment, which will set out the pay arrears owed to the worker by the employer as well as a financial penalty of up to 200% of the total underpayment. The maximum overall penalty is £20,000 per unpaid worker. While civil enforcement is usually enough of a ‘wake-up call’, there is the possibility for a criminal investigation to be pursued in cases of persistent non-compliance, including failing to keep the required records. After issuing a notice of underpayment, HMRC will refer the matter to the Department for Business, Energy & Industrial Strategy for ‘naming and shaming’ the employer on its website.  There are very limited grounds for arguing that an employer should not be ‘named and shamed’.

In January 2017, the Government released the “most bizarre excuses for underpaying staff the National Minimum Wage” it had received. One employer exemplified the misconceptions that can surround the status of trial employees, suggesting that workers who are “still learning… aren’t entitled to the National Minimum Wage”.

How can unpaid trials and training impact other employment obligations such as preventing illegal working?

These practices may also lead to inadvertent breaches of other employer obligations. Employers are now under an obligation to prevent illegal working. As such, they must carry out ‘right to work’ checks on all prospective employees as well as follow-up checks when required during the course of the employee’s employment. Businesses that use unpaid trial workers may not think to undertake the necessary checks prior to a trial. This places such business at risk of incurring additional penalties – again up to £20,000 per illegal worker – as well as potential criminal sanctions in some cases.

Recommendations for employers

It is recommended that businesses think carefully before using practices that involve not paying anyone who could be considered a worker, as the costs may outweigh the desired benefits. One alternative would be to utilise a probationary period for the worker to assess performance in the first few months of employment.

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