COMMISSIONERS FOR HM REVENUE & CUSTOMS v LEISURE EMPLOYMENT SERVICES LIMITED [2006] UKEAT 0106_06_2703

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2006] UKEAT 0106_06_2703Case No Appeal No. UKEAT/0106/06Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
COMMISSIONERS FOR HM REVENUE & CUSTOMSAPPELLANTLEISURE EMPLOYMENT SERVICES LIMITEDRESPONDENT
Before
Mr Justice EliasDate 27 March 2006
[1]APPEARANCES For the Appellant MR GERARD CLARKE (Of Counsel) Instructed by: HM Revenue & Customs Solicitors Office East Wing Somerset House London WC2R 1LB For the Respondent MR JOHN BOWERS QC (One of Her Majesty's Counsel) Instructed by: Messrs Pickworths Solicitors 55 Marlowes Hemel Hempstead Herts HP1 1LE SUMMARY National Minimum Wage Complex matters of construction of the Statutory Minimum Wage Regulations. When are deductions, or payments by the employee to the employer, which take the wage below the National Minimum Wage, lawful? In particular, is a deduction/payment for gas/electricity a payment "in respect of the provision of living accommodation?" Is it received "for the use and benefit of" the employer? THE HONOURABLE MR JUSTICE ELIAS (PRESIDENT) This is the first case before this Tribunal raising for consideration the proper interpretation of the National Minimum Wages Regulations 1999 . The Appellant is Her Majesty's Commissioners of Revenue and Customs ("The Revenue"). One of their functions is the enforcement of the National Minimum Wages Act 1998 and its subordinate legislation for the benefit of low paid workers. The Revenue's enforcement officers can issue enforcement notices. They did so in this case, issuing two notices against Leisure Employment Services Ltd, the Respondent to this appeal, on 28 April 2005 and a third on 31 May 2005.[2]These notices alleged that workers identified in the schedule to the notices were paid less than the National Minimum Wage fixed by the legislation. The first two enforcement notices related to workers who had been the subject of a deduction of £6.00 per fortnight in respect of payment for utilities. The third enforcement notice related to a particular individual, a Miss Keenan who made a payment of £6.00 in respect of that same service. The Company successfully appealed to the Employment Tribunal pursuant to Section 19(5) of the National Minimum Wage Act 1999 . The enforcement notices were rescinded by the Tribunal. The Revenue now appeal to this Tribunal pursuant to Section 21 of the Employment Tribunals Act 1996 .[3]The case was determined on agreed facts. I take these from the Tribunal's decision, together with certain additional matters which were emphasised by the parties in their submissions to me. The Facts[4]The Appellant is a wholly owned subsidiary of Bourne Leisure Limited which operates three Butlins holiday resorts and the further 35 holiday resorts under the Haven and British Holidays brand. The workers at these resorts were employed by the Appellant. The Appellant provides the workers to all the holiday resorts around England and Wales. They are seasonal workers who act as bar staff, cooks, shop assistants, catering staff, receptionists, wardens, electricians, plumbers, entertainers and security guards. The workers spent the minimum of eight weeks in a particular resort particularly between March and October, which is the high season for holiday makers.[5]If a worker makes a request to occupy accommodation the Appellant may, subject to availability, provide accommodation. The accommodation consists of a caravan or a park chalet at, or very close to, the resort. The accommodation is shared between workers (either two or three according to its size). Approximately one third of the Appellant's work force occupy such accommodation. When a worker lives in the accommodation, he or she does so under a written agreement made between the Company and the worker. Under the Accommodation Agreement the worker agrees to pay the Company the sum of £6.00 per fortnight in respect of gas and electricity. The worker has a licence to occupy the shared accommodation but it is terminated once the employment ceases.[6]For the purposes of these appeals only, the Revenue accepts that the cost of the electricity and gas provided is more than £6.00 per a fortnight in respect of each individual worker. (The Tribunal decision, in fact, said that it was less but it is conceded that this was a mistake.) There was evidence that on average the cost of gas and electricity was greater than £6.00 and the Revenue did not challenge that evidence. However, it does not, of course, follow that £6.00 would be less than the actual cost for each and every individual. Someone who chose to stay elsewhere, for example, whilst occupying the accommodation, or possibly some particularly parsimonious individual might use heat and light to a lower value. The £6.00 per fortnight payment is normally taken as a deduction from salary through the Appellant's payroll and is described as "heat/light" on the fortnightly payslip given to the workers.[7]In April 2005 Miss Keenan agreed to make a cash payment of £6.00 to the Appellant rather than have the money deducted through the payroll. This is the second factual situation which is dealt with by the third enforcement notice of 31 May 2005. I was told that she did this specifically so that the legality of a payment, as opposed to a deduction, could be tested. The £6.00 payment is a standard payment. It does not vary from worker to worker nor from season to season.[8]There is a reference to the Accommodation Agreement in the written particulars of terms and conditions of employment which, it is accepted, constitute the terms of the worker's contract. Paragraph 11 is as follows:
"11. ACCOMMODATION: The Company may at your request permit you to live in accommodation which is owned or occupied by the Company ("
Accommodation") but only if any suitable accommodation is available. If you are offered Accommodation you will be required to enter into an Accommodation Agreement with the Company and to abide by the Terms and Conditions as laid down in that agreement." There is only an Accommodation Agreement for those who choose to take advantage of the available accommodation. Clause 1 is a definition provision and it defines accommodation as:
"any Accommodation owned or occupied by the Company in which the Team Manager of the Company agrees the Team Member can reside"
I interpose to note that the Team Member is a worker. There is a separate definition of Utilities as follows:
"'Utilities' means gas and electricity used by the Team Member during their occupation of the Accommodation."
Clause 6 of the Accommodation Agreement identifies the obligations of the worker. Clause 6.20 is as follows:
"6.20 That the liability to pay for any of the Utilities used during his/her occupation of the Accommodation ["the Liability"] is the responsibility of the Team Member. In satisfaction of the Liability the Team Member agrees to pay to the Utility Provider the sum of six pounds [£6.00] for every fortnight he/she occupies the Accommodation ["the sum"], or for a period of occupation of less than a fortnight an appropriate proportion of the Sum, and agrees that: a. To assist him/her in the payment of the Liability the Team Member has requested Leisure Employment Services Limited to transfer from his/her pay every fortnight the Sum into an account ["the Account"], or if for a period of less than a fortnight then an appropriate proportion of the sum, on the agreement that Leisure Employment Services Limited will use all the Sums transferred into the Account in payment of the Liability, and that in any event that the Liability exceeds the sum Leisure Employment Services Limited will not request any further payment from the Team Member."
[9]Accommodation is provided free of charge for every day in the pay reference period and the Company is entitled to a credit of £3.50 per day in assessing whether the worker has been paid the National Minimum Wage. This is an accommodation offset permitted by virtue of regulation 36 of the 1999 Regulations (the amount has, in fact, increased since the facts in issue arose). In none of the cases before the Court is there any contractual relationship between the supplier of the gas or electricity and the worker. The utility company provides invoices to the Company for the use of gas or electricity as the case may be. Those invoices are paid from the bank account of the Company. For accounting purposes, a nominal account exists into which the Company pays all the £6.00 payments deducted from the payroll or received from the worker and the amount of that nominal account is then regarded by the Company as being available to pay in part the respective utility companies' invoices. As all workers are in shared accommodation, it is impossible to calculate precisely the amount of gas and electricity consumed by each individual worker. It was agreed that the workers specified in the schedule to the enforcement notices were employed by the Company and received the hourly pay as identified in that schedule. It is also common ground that if the £6.00 payment is not deductible in making the correct calculation under the National Minimum Wage, then the hourly rate paid by the Company to the respective workers is above the statutory minimum. If, on the other hand, it has to be deducted, then the hourly rate falls below the statutory minimum payment. The Issue[10]The issue is therefore whether the employer is entitled to deduct the £6.00 or, in the case of Miss Keenan, receive the £6.00 payment even although by so doing, the worker will receive less than the National Minimum Wage in his or her hands after the deduction of the payment.[9]The Legislation " NATIONAL MINIMUM WAGE ACT 1998 19.(1) If an officer acting for the purposes of this Act is of the opinion that a worker who qualifies for the national minimum wage has not been remunerated for any pay reference period by his employer at a rate at least equal to the national minimum wage, the officer may serve a notice (an "enforcement notice") on the employer requiring the employer to remunerate the worker for pay reference periods ending on or after the date of the notice at a rate equal to the national minimum wage.(2) An enforcement notice may also require the employer to pay to the worker within such time as may be specified in the notice the sum due to the worker under section 17 above in respect of the employer's previous failure to remunerate the worker at a rate at least equal to the national minimum wage.(3) The same enforcement notice may relate to more than one worker (and, where it does so, may be so framed as to relate to workers specified in the notice or to workers of a description so specified).(4) A person on whom an enforcement notice is served may appeal against the notice before the end of the period of four weeks following the date of service of the notice.(5) An appeal under subsection (4) above lies to an employment tribunal.(6) On an appeal under subsection (4) above, the employment tribunal shall dismiss the appeal unless it is established- (a) that, in the case of the worker or workers to whom the enforcement notice relates, the facts are such that an officer who was aware of them would have had no reason to serve any enforcement notice on the appellant; or (b) where the enforcement notice relates to two or more workers, that the facts are such that an officer who was aware of them would have had no reason to include some of the workers in any enforcement notice served on the appellant; or (c) where the enforcement notice imposes a requirement under subsection (2) above in relation to a worker,- (i) that no sum was due to the worker under section 17 above; or (ii) that the amount specified in the notice as the sum due to the worker under that section is incorrect; and in this subsection any reference to a worker includes a reference to a person whom the enforcement notice purports to treat as a worker.(7) Where an appeal is allowed by virtue of paragraph (a) of subsection (6) above, the employment tribunal shall rescind the enforcement notice.(8) If, in a case where subsection (7) above does not apply, an appeal is allowed by virtue of paragraph (b) or (c) of subsection (6) above- (a) the employment tribunal shall rectify the enforcement notice; and (b) the enforcement notice shall have effect as if it had originally been served as so rectified. " NATIONAL MINIMUM WAGE REGULATIONS 1999 Benefits in kind not to count as payments 9. For the purposes of these Regulations the following shall not be treated as payments by the employer to the worker- (a) any benefit in kind provided to the worker, whether or not a monetary value is attached to the benefit, other than living accommodation; (b) any voucher, stamp or similar document capable of being exchanged for money, goods or services (or for any combination of those things) provided by the employer to the worker. The pay reference period 10. (1) The pay reference period is a month or, in the case of a worker who is paid wages by reference to a period shorter than a month, that period. (2) When a worker's contract terminates regulations 14 and 30 to 37 shall be applied in relation to payments made in the period of a month beginning with the day immediately following the last day on which the worker worked under the contract as if such payments had been made in the worker's final pay reference period. …. Calculation of the hourly rate Method of determining whether the national minimum wage has been paid 14. (1) The hourly rate paid to a worker in a pay reference period shall be determined by dividing the total calculated in accordance with paragraph (2) by the number of hours specified in paragraph (3). (2) The total referred to in paragraph (1) shall be calculated by subtracting from the total of remuneration in the pay reference period determined under regulation 30, the total of reductions determined under regulations 31 to 37. (3) The hours referred to in paragraph (1) are the total number of hours of time work, salaried hours work, output work and unmeasured work worked by the worker in the pay reference period that have been ascertained in accordance with regulations 20 to 29. Reductions from payments to be taken into account 31. (1) The total of reductions required to be subtracted from the total of remuneration shall be calculated by adding together- (a) any money payments paid by the employer to the worker in the pay reference period that, by virtue of regulation 30(b) or (c), are required to be included in the total of remuneration for an earlier pay reference period; (b) in the case of- (i) work other than salaried hours work, any money payments paid by the employer to the worker in respect of periods when the worker was absent from work or engaged in taking industrial action; (ii) salaried hours work, any money payment paid by the employer to the worker attributable to the hours (if any) by which the number of hours determined under regulation 21(2) is required to be reduced under regulation 21(3) (worker entitled to less than normal proportion of annual salary because of absence from work), whether under the direct application of those regulations or the application of them required by regulation 22(5)(a); (c) any money payments paid by the employer to the worker in respect of- (i) time work worked by him in the pay reference period involving particular duties that is paid for at a higher rate per hour than the lowest rate per hour payable to the worker in respect of time work worked by him involving those duties during the pay reference period, to the extent that the total of those payments exceeds the total of the money payments that would have been payable in respect of the work if that lowest rate per hour had been applicable to the work; (ii) particular output work worked by him in the pay reference period that is paid for at a higher rate than the normal rate applicable to that work by reason of the work being done at a particular time or in particular circumstances, to the extent that the total of those payments exceeds the total of the money payments that would have been payable in respect of the work if the normal rate had been applicable to the work; (d) any money payment paid by the employer to the worker by way of an allowance other than an allowance attributable to the performance of the worker in carrying out his work; (e) any money payment paid by the employer to the worker representing amounts paid by customers by way of a service charge, tip, gratuity or cover charge that is not paid through the payroll; (f) any money payment paid by the employer to the worker to meet a payment by the worker that would fall within regulation 34(1)(b) (payments by workers on account of expenditure in connection with their employment to persons other than their employer) but for the worker's payment being met or designed to be met by the employer; (g) any deduction falling within regulation 32; (h) any payment made by or due from the worker in the pay reference period falling within regulation 34; (i) the amount of any deduction the employer is entitled to make, or payment he is entitled to receive from the worker, in respect of the provision of living accommodation by him to the worker in the pay reference period, as adjusted, where applicable, in accordance with regulation 37, to the extent that it exceeds the amount determined in accordance with regulation 36. (2) To the extent that any payment or deduction is required to be subtracted from the total of remuneration by virtue of more than one sub-paragraph of paragraph (1), it shall be subtracted only once. Deductions to be subtracted under regulation 31(1)(g) 32. (1) The deductions required to be subtracted from the total of remuneration by regulation 31(1)(g) are- (a) any deduction in respect of the worker's expenditure in connection with his employment; (b) any deduction made by the employer for his own use and benefit (and accordingly not attributable to any amount paid or payable by the employer to any other person on behalf of the worker), except one specified in regulation 33. (2) To the extent that any deduction is required to be subtracted by virtue of both sub-paragraphs of paragraph (1), it shall be subtracted only once. Deductions not to be subtracted under regulation 31(1)(g) 33. The deductions excepted from the operation of regulation 32(1)(b) are- (a) any deduction in respect of conduct of the worker, or any other event, in respect of which he (whether together with any other workers or not) is contractually liable; (b) any deduction on account of an advance under an agreement for a loan or an advance of wages; (c) any deduction made to recover an accidental overpayment of wages made to the worker; (d) any deduction in respect of the purchase by the worker of any shares, other securities or share option, or of any share in a partnership. Payments made by or due from a worker to be subtracted under regulation 31(1)(h) 34. (1) The payments made by or due from the worker required to be subtracted from the total of remuneration by regulation 31(1)(h) are- (a) any payment due from the worker to the employer in the pay reference period on account of the worker's expenditure in connection with his employment; (b) any payment paid in the pay reference period on account of the worker's expenditure in connection with his employment to the extent that the expenditure consists of a payment to a person other than the employer and is not met, or designed to be met, by a payment paid to him by the employer; (c) any other payment due from the worker to the employer in the pay reference period that the employer retains or is entitled to retain for his own use and benefit except for a payment required to be left out of account by regulation 35. (2) To the extent that any payment is required to be subtracted by virtue of more than one sub-paragraph of paragraph (1), it shall be subtracted only once. Payments not to be subtracted under regulation 31(1)(h) 35. The payments excepted from the operation of regulation 34(1)(c) are- (a) any payment in respect of conduct of the worker, or any other event, in respect of which he (whether together with any other workers or not) is contractually liable; (b) any payment on account of an advance under an agreement for a loan or an advance of wages; (c) any payment made to refund the employer in respect of an accidental overpayment of wages made by the employer to the worker; (d) any payment in respect of the purchase by the worker of any shares, other securities or share option, or of any share in a partnership; (e) any payment in respect of the purchase by the worker of any goods or services from the employer, unless the purchase is made in order to comply with a requirement in the worker's contract or any other requirement imposed on him by the employer in connection with his employment. Amount permitted to be taken into account where living accommodation is provided. 36. (1) The amount referred to in regulations 30(d) and 31(1)(i) is whichever is the lesser of the following- (a) the amount resulting from multiplying the hours of work done in the pay reference period (determined in accordance with regulations 20 to 29) by 50p, and reducing that product by the proportion which the number of days (if any) in the pay reference period for which living accommodation was not provided bears to the total number of days in the pay reference period; or (b) the amount resulting from multiplying the number of days in the pay reference period for which living accommodation was provided by £2.85. (2) For the purposes of paragraph (1), living accommodation is provided for a day only if it is provided for the whole of a day from midnight to midnight".[11]The detail of the Regulations is complex, but the basic structure appears to be as follows. First, the total remuneration is calculated in accordance with regulation 30. This broadly covers all money payments paid by the employer with respect to the relevant pay reference period and also, where living accommodation is provided but no deduction is made nor money received from the worker in respect of it, the amount determined in accordance with regulation 36.[12]There are then certain reductions which have to be made from the total to determine the wage actually to be paid. These are identified in Sections 31 to 37 inclusive. The hourly rate is then determined by the following formula, namely total remuneration (regulation 30) minus total reductions (regulations 31 to 37) divided by the total hours calculated pursuant to regulation 14(3). If the hourly sum so calculated exceeds the National Minimum Wage, then the employer is acting lawfully. If it does not, the employer is in breach of his statutory obligation and the enforcement notice is properly imposed.[13]The reductions can be considered as falling into three categories. First, there are certain payments made by the employer to the worker which he is not allowed to count as part of the Minimum Wage. These are the sums identified in regulation 31(a) to (f) inclusive. They include, for example, pay referable to earlier pay periods, allowances unconnected with the work done and payment to meet work expenditure incurred by the worker.[14]Second, there are certain deductions which have to be subtracted from the total remuneration (see Reg 31(1)(g) and (i)). This means that the employer is not allowed to treat the sums deducted as though they were part of the total remuneration when determining whether the National Minimum Wage has been paid. The way in which these are identified is as follows. First, regulation 32 defines the deductions which have to be subtracted from the total remuneration. This means that they cannot lawfully be deducted to the extent that they bring the pay below the National Minimum Wage. However, there are certain exceptions where deductions do not have to be subtracted. In other words, they are deductions which are permitted and which will have no repercussions for the employer as far as the Minimum Wage is concerned. These are found in regulation 33.[15]Third, there are then payments made by the worker to the employer or due from the worker to the employer which also have to be subtracted. The logic of this is that if certain deductions have to be subtracted in determining whether the payment is below the National Minimum Wage, then the employer cannot be in a better position by handing over the money to the worker but then immediately taking it back. To all intents and purposes, such a payment from the worker has the same effect as if it were a deduction from the payroll by the employer.[16]Not surprisingly, the structure of the rules relating to payments by the worker is substantially similar to those which has been adopted in respect of deductions. Accordingly, payments by the worker to be subtracted under regulation 34 broadly replicate the same categories as found in the deductions to be subtracted under regulation 32.

(b) )

[17]Again, the exceptions in regulation 35 mirror the exceptions in regulation 33 save that there is an additional exception in the case of a payment which is not found in the context of deductions. This is regulation 35(e). That covers certain payments made for goods or services from the employer, save where there is a requirement to obtain them under the worker's contract or otherwise pursuant to any other requirement imposed by the employer in connection with the employment.[18]Presumably, the rationale for that provision is that it is thought that this exception should only apply in circumstances where the employee has received the money into his own hands. That is more likely to make the decision to purchase goods or services one of real choice. In any event, whatever the rationale, that is an exception found in relation to payments by or due from the worker which is not applicable to deductions. In other words, payments by the employee falling within regulation 35(e) do not have to be subtracted from the total remuneration, but they do if the arrangement whereby money is received by the employer takes a form of a deduction from the payroll.[19]Finally, there is the specific provision relating to deductions or payments made in respect of living accommodation. Those are to be subtracted, but only to the extent that they exceed the amount permitted by regulation 36. The Issues in this Case[20]I turn to consider the issues that arise in this case. The Revenue contend that there are two quite independent routes by which this money, whether it takes the form of a deduction or a repayment, has to be subtracted. First, it is submitted that the sums received by the employer for gas and electricity constitute deductions or payments made in respect of the provision of living accommodation. As such, since they exceed the allocated allowance, they must be subtracted from the total remuneration. Mr Bowers QC, counsel for the Company, denies that such deductions or payments fall into that category. Second, and in any event, the Revenue contend that the sums fall within either regulation 32(1)(b) if a deduction, or regulation 34(1)(c) if a payment. In other words, they are monies received by the employer for his own use and benefit within the meaning of those provisions.[21]This raises the issue of whether the monies can properly be said to be for the employer's use or benefit. Mr Bowers submits that they cannot. But even if he is wrong about that, he says that the pay arrangements within this case fall under two exceptions. First, there is an exception applicable to both deductions and payments where they relate to an event in respect of which the worker is contractually liable. The issue here is the meaning of "event". Can the periodic deduction of wages properly be said to constitute a deduction in respect of an event and similarly for payments by the worker?[22]Second, there is an exception in regulation 35(e), as I have mentioned, for the purchase of certain services. The employers submit that this exception applies. The Revenue say that it does not for three reasons.[23]First, it is common ground that it only applies to payments and not deductions. However, Mr Bower submits that the withholding of pay to secure a contribution for payment to a utility company, such as in this case, constitutes a payment rather than a deduction and therefore this exception applies equally to all these cases.[24]Secondly, the Revenue do not accept that securing the provision of services (which is what they concede the employer has done with respect to gas and electricity) can properly be described as the provision of the service itself.[25]Finally, they say that, in any event, the obligation to secure that the employer received this sum, whether by way of a deduction or a payment, was imposed either as a result of a requirement imposed under the worker's contract or was, at the very least, pursuant to requirements connected with his employment. The Employment Tribunal's Decision[26]The Employment Tribunal concluded that the enforcement notices had not been lawfully imposed and should be rescinded. The Tribunal held that "living accommodation" referred only to the physical structure and not to the provision of the utilities, hence the payment was not in respect of living accommodation. Nor did the Tribunal think that a deduction or payment was made in the circumstances here for the employer's own use and benefit. He did not gain financially from this arrangement and there was a material benefit to both employer and the workers concerned. Accordingly, the Tribunal concluded that the payments should not have been deducted from the total remuneration.[27]However, had they concluded that the money received was for the employer's use and benefit, then (as I read their decision) they would not have found that any of the exceptions were applicable. They concluded that it was not a deduction or payment in respect of an event and although there is some dispute about this (because of the wording of paragraph 6.6 of the Decision is not altogether clear) I think they intended to conclude that regulation 35(e) was not applicable either.[28]Since the issue before me is one of construction, both parties accepted that it was not strictly necessary to determine precisely what conclusion the Employment Tribunal had reached as to the proper construction of reg.

(e) Analysis

[29]I will deal with the relevant issues in turn. In interpreting these Regulations, both Counsel accept that I should adopt a purposive approach to the construction of the provisions. Both rely on the well-known dictum of Lord Diplock in Jones and Hudson v The Secretary of State for Social Services [1972] 2 WLR 210, a passage which was, in fact, referred to in the decision of the Employment Tribunal. Lord Diplock said this (at page 212): "To find out the meaning of particular provisions of social legislation of this character calls, in the first instance, for a purposive approach to the act as a whole to ascertain the social ends it was intended to achieve and the practical means by which it was expected to achieve them. Meticulous linguistic analysis of the words and phrases used in different contexts…should be subordinated to this purposive approach".[30]I take the purpose here to be specifically the elimination of payment by benefits in kind and a desire to ensure that workers should receive cash in hand of at least the National Minimum Wage, save where carefully circumscribed exceptions apply. Not surprisingly, both Counsel submit that the construction of the Regulations which they advance better gives effect to the statutory purpose. The Provision of Living Accommodation[31]The first issue is this. Is a deduction or payment "in respect of the provision of living accommodation"? If so, then it is common ground that the Company has already taken full advantage of the amount which it is permitted to take into account in relation to such accommodation without adversely affecting the calculation of the minimum wage, and it would be required to subtract this excess from the total remuneration.[32]Mr Clarke, for the Revenue, submits that it is artificial to distinguish payment for utilities such as gas and electricity from payment as regards the use of the building itself. He submits that since the £6.00 charge has to be paid, whether by way of deduction or separate payment, whenever the accommodation is in fact occupied, then it must be treated as a payment in respect of the provision of living accommodation. The words "in respect of", he submits, should be interpreted widely. If the worker could not make use of this accommodation without making the payment, then it is caught either as a deduction or a payment in respect of the provision of living accommodation. It is not a sum which varies with the extent to which particular use is made of gas or electricity and does not vary depending on the time of year. Even if an individual chooses to spend much of his time living elsewhere, or chooses to be exceptionally parsimonious with his heat and light, he will still have to make the requisite payment or permit the deduction.[33]The Revenue recognise that if the worker went into a direct relationship with the utility companies and had to pay, for example, through a metered system, then such payments would not be caught since payment would not be to the employer at all. Mr Clarke submits that that would be an entirely different case. Here, even if the payment actually made by the worker is, on average, less than the worker would pay direct to the utility company (if some form of metered supply were to be adopted) nevertheless it falls within the scope of this provision. One simply has to ask: how much does the worker have to pay to the employer if he wishes to take advantage of the accommodation on offer? That is the sum which must be treated as having been paid in respect of living accommodation whether it includes utilities charges or maintenance charges, charges for connections to mains, drains or other service charges - it makes no difference. The purpose behind this legislation is to ensure that the worker ends up with a certain sum in his hands. It would be wrong for the Court to take a liberal view of the exceptions to that principle.[34]Mr Bowers submits that this is an unjustified approach. He points out that under the terms of the Accommodation Agreement, that Agreement itself distinguishes between accommodation and utilities. He submits that payment in respect of the provision of living accommodation simply means such sums as are referable to the accommodation itself, not to any additional benefits which may be conferred in connection with it. He says that the Employment Tribunal correctly identified the nature of living accommodation when they said this: "The term 'living accommodation' in the 1999 Regulations includes the physical structure provided to the worker, together with sanitary ware, baths and showers, kitchen appliances and appliances for space and water heating together with other fixtures such as cupboards and wardrobes, but does not include the gas or electricity supplied to the respective appliances and units within the physical structure".[35]He contends that it is highly unattractive to accept that if the payment can be made directly to the utility company, then it is not part and parcel of the payment in respect of living accommodation, but that if it is paid directly to the employer who himself meets the obligation to the utility company and, in fact, charges the worker typically less than the utility company would do, then it is caught. Indeed, if the employer cannot charge for it, then it is potentially a benefit in kind chargeable to tax under the Income Tax legislation. Mr Bowers submits that the Minimum Wage legislation requires a sensitive and sensible construction and it would be in no-one's interests for the law to be construed so as to defeat this sensible arrangement, beneficial to employer and worker alike.[36]I have some sympathy for Mr Bower's position, but I have come to the conclusion that Mr Clarke's submission is correct. It seems to me that if a worker is under an obligation to pay a particular sum of money in order to be permitted to make use of the accommodation on offer, then the sum paid should properly be described as "being in respect of the provision of living accommodation". If I pay rent for furnished accommodation, it is still what I have to pay for that accommodation, even although some of the payment may strictly be referable to the provision of furniture rather than the building itself. I think it becomes difficult and artificial to separate out different elements which may go to make up the payment. Would this justify a separate payment for rates or for other services charges? I think it is unlikely that this is what was intended by the draftsman. Nor, in my judgment, is the employer assisted by the fact that the accommodation agreement distinguishes between accommodation and utilities. The statutory definition must be the same irrespective of any particular agreement made by a specific employer.[37]If this analysis is right, then it follows that the Company was not entitled to make this deduction and treat it as part of the minimum wage since it has already exhausted the amount permitted by regulation 36. It is agreed, in the circumstances, that this means that the employers are paying less than the minimum wage. For His Own Use and Benefit[38]I go on, however, to consider the alternative way in which the Revenue put their case. As I have said, the contention here is that the deduction is made by the employer for his own use and benefit or, in the case where a payment was made by the worker, it was a payment made which the employer was entitled to retain for his own use and benefit; and in each case that none of the relevant exceptions apply.[39]The Revenue say that the money is available to the employer to be used in any way he thinks fit. True it is that he has an obligation to pay the contractual sums he owes to the utility companies, but there is no obligation on him to use the particular monies obtained from the workers in any specific way. The employee has no direct contractual liability to any utility company and the fact that paragraph 6.20 of the accommodation agreement purports to suggest that there is a liability between the worker and the utility provider is simply wrong. Nor can the contract between the worker and the employer create such a contract with the utility company. It is not possible to say that the employer is imprinted with a duty to make the payment in order to discharge the liability of the employee since no such liability exists.[40]Mr Bowers contends that the concept of "his own use and benefit" is a much broader one. It envisages a Tribunal reaching a conclusion of fact as to whether the deduction is entirely or solely for the use and benefit of the employer or whether it is also for the use and benefit of the employee. If the latter, then he submits that the deduction will still not fall within the meaning of regulation 32(1)(b) (or, in respect of a payment, 34(1)(c)), provided that overall, it is for the benefit of the employee.[41]If, on the other hand, it is obviously to the detriment of the worker, such as where the payment plainly exceeds the costs of the utilities to the employer, then it will be for the benefit of the employer. It is in this way, he says, that the Tribunal is able to control any potential abuse by the employer. In this case, he relies upon the finding of the Tribunal that there was a mutual benefit to worker and employer. He submits that that was plainly justified on the facts and, in any event, is not challenged. On the evidence, the employer was benefiting the worker who, on average, was paying less than would otherwise be the case and the whole arrangement was much more satisfactory than using pay-as-you-go meters when, indeed, the share of any individual using shared accommodation would be impossible to identify with any precision in any event.[42]I do not agree with Mr Bowers that this concept is a matter of fact for the Tribunal. It seems to me that the concept "the use and benefit of the employer" is a much more precise one. I think its meaning can be gleaned from the words in brackets in regulation 32(1)(b) (surprisingly not replicated in Section 34 but I am satisfied that the meaning must be the same in each section) namely "and accordingly not attributable to any amount paid or payable by the employer to any other person on behalf of the worker". In other words, if the money is deducted by the employer with an obligation to account to a third party on behalf of the worker, then it is not deducted for the employer's own use and benefit. In those circumstances, it is imprinted with a trust and the employer has the obligation to pay in accordance with that trust, namely, to pay specifically to the third party. Here the worker has no liability to the utility companies at all. That is a liability of the Company. (In fact it is an associated company, but it is agreed that nothing turns on that.)[43]If Clause 6.20 is attempting to impose any such direct liability on the worker, in my judgment it is ineffective to do so. Liabilities cannot be assigned: A and B cannot together agree that B will be directly indebted to C for part of A's debts to C, not at least unless C has agreed to such a course. I agree with Mr Clarke that there is no legal limitation on the way in which the employers could use the sums received from the worker. To the extent that the accommodation agreement seeks to establish an undertaking by the employer to use the money to pay the employer's own liability to the utility company, I do not think that this helps them. This does not prevent the sums deducted or paid from the worker still being for the use and benefit of the employer. The worker could not compel the employer to use the sum partially to discharge the debt to the utility companies, and he would have no interest in so doing in any event.[44]The employer is not simply facilitating the payment by the worker of an obligation or liability which the worker has towards the third party. Accordingly, in my judgment, whether the £6.00 is taken by way of a deduction or paid by the worker, it plainly falls within the terms of either reg. 32(1)(b) or Reg 34(1)(c) respectively. The Meaning of "Event"[45]Mr Bowers nevertheless contends that even if the payment falls into those categories, two of the specific exceptions apply. First, in relation to both deductions and payments, he relies upon Regs 33(a) and 35(a) and, in particular, submits that the deduction (or payment as the case may be) is in respect of "any other event in respect of which he…is contractually liable". Mr Bowers submits that the contractual obligation to make the payment in respect of utilities to the Company is such an event within the meaning of that section.[46]Mr Clarke disagrees and submits that, read in context, "any other event" as defined in those Regulations must mean some specific event akin to the concept of conduct which is specifically identified in those provisions. He suggests, for example, that it could involve negligence or bad workmanship. It could not sensibly cover a continuing obligation to pay in relation to the regular supply of gas and electricity. Furthermore, he contends that if Mr Bowers were right then, in effect, any contractual liability could be said to fall within the concept of "other event". If that were so, it would be otiose to have certain of the exceptions which are found in the Regulations: for example, the exception relating to deductions on account of an advance under an agreement for a loan in reg. 33(b) or in relation to payments in the exception provided by 35(e).[47]I agree with that submission. In my judgment, the concept of "event" is to be much more narrowly construed than Mr Bowers contends. I do not think that it can extend to a contractual obligation of this nature; neither the natural meaning of the word nor the context justifies such a reading. Regulation 35(e): Deduction or Payment?[48]Finally, Mr Bowers submits that, in relation at least to payments by the worker to the employer, regulation 35(e) applies. On the face of it, this does not assist him where there are deductions. However, his submission is that money taken by the employer as a contribution towards the payment of the utility services is not a deduction although, as I understand it, he accepts that it must at least be a payment. The advantage of it being so characterised is that it at least raises the issue whether regulation 35(e) applies to prevent the payment being subtracted from the total money paid. Deductions[49]I do not accept that the fact that it is taken as a contribution towards the cost of utilities prevents the monies withheld being treated as a deduction. In my judgment, the act of withholding money at source from the sums which would otherwise have been paid to the worker constitutes a deduction. A deduction is to be contrasted with a payment by the employee which is a situation arising where the money is initially formally paid over by the employer to the employee but is then paid back to the employer. The distinction simply focuses on the mechanism whereby the money is received. It has nothing to do with its purpose. The purpose would be relevant to the question whether a deduction is of a nature which would adversely impact on the calculation of the Minimum Wage, but it does not alter the fact of there being a deduction.[50]In my judgment, there is no doubt that a deduction occurs when an employer withholds money from the employee at source. It would be a distortion of language to call it anything else. It follows that regulation 35(e), if applicable at all, can only assist the employer in the case of Ms Keenan who actually paid the £6.00 to the employer. Is the Employer providing a Service?[51]Regulation 35(e) provides that payments made in respect of the purchase of any goods or services are not to be subtracted unless the purchase is made in order to comply with the requirements of the worker's contract or any other requirement imposed on him by the employer in connection with his employment. So, if in this case, the worker goes into a shop on the camp run by his employers and chooses to buy food, for example, that will clearly fall within this exception.[52]The first question is whether the making available of gas and electricity can properly be described as provision of a service. Mr Clarke accepted that it could properly be described as making an arrangement for the provision of the service, but was somewhat equivocal as to whether it actually amounts to the provision of a service within the meaning of the regulation. I see no reason in principle why it should not. If the employer were, for example, to secure a hairdresser to be on site to be available to cut the hair of those who wanted to take advantage of that facility, I see no reason in principle why he should not be treated as thereby providing a service. Is the Payment pursuant to a Requirement?[53]The crucial issue is, however, whether the payment is made pursuant to a requirement either in the worker's contract or a requirement imposed in connection with his employment. In my judgment, reference to the worker's contract must be a reference to the contract of employment rather than any other independent contract which he may have with his employer. However, the worker in this case undertakes, under the terms of that contract, that he will abide by the terms of the accommodation agreement if he chooses to take any available accommodation; and those terms include a duty to make this payment.[54]I think it can fairly be said that this therefore is a requirement imposed under the worker's contract. But if I am wrong about that, I have no doubt at all that on any view there is a requirement to make the payment pursuant to a requirement imposed on him by the employer in connection with this employment.[55]The worker is only making use of the accommodation because it is convenient for his employment and is made available to him in that context, albeit he has no obligation to use it. The licence terminates when the employment ceases. Having chosen to take the accommodation, he is contractually obliged to abide by the terms and conditions laid down in the accommodation agreement and that requires the obligation to make this payment. It is plainly, it seems to me, made in connection with his employment. Accordingly, I do not think that regulation 35(e) is of any assistance to the Company either. Conclusion[56]For all these reasons, in my judgment this appeal succeeds and the enforcement notices must be restored. I have sympathy for the employers in the circumstances of this case. On the face of it, this was not an unreasonable arrangement and had they left it to the workers to pay for their own gas and electricity direct to the utility companies, they would not be liable to reimburse these payments. Moreover in this case the employers were not, it seems, charging too much for the services offered (at least when assessed across the board; individuals may have had to pay more than they used). However, it seems to me that there is no way of regulating the employer who does seek to give what are, in effect, benefits in kind and who charges a distortionate price. The legislation has to take a strong line to ensure that the statutory minimum wage is properly secured for workers even if this means that certain arrangements, not objectionable in themselves, cannot be permitted.[57]Mr Bowers submits that the abuse could be controlled by the Employment Tribunal determining that in those cases where excessive payments were charged, the deduction or payment could be characterised as for the use and benefit of the employer and not for the benefit of the employee at all. However, for reasons I have given, I do not accept that the concept of "use and benefit" can be interpreted in that way, nor do I see on what basis it can, as a matter of construction, be limited to the situation where the employer alone benefits or where both employer and worker do, but the employer benefits disproportionately to the worker. I think that the approach urged upon me by the Revenue, which I have accepted, better reflects the statutory language and is more likely to achieve the objectives of this particular legislation.[58]It follows that I allow this appeal and the enforcement notices must stand. I give leave to appeal because this case raises important points of construction which have not been considered by the Court of Appeal and moreover, there are a number of decisions of Employment Tribunals where different approaches have been taken to the issues of construction which I have had to consider in this case.