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Hewett's Legal Corner - February 2014 #4

Welcome to our 4th edition of Hewett's Legal Corner.  This employment law bulletin is courtesy of Brabners

TO DEDUCT OR NOT TO DEDUCT...WHEN IS A DEDUCTION FROM WAGES LAWFUL?

         
 In the recent case of Cleeve Link Ltd v Bryla the Employment Appeal Tribunal (EAT) overruled an Employment Tribunal (ET) decision that a clause entitling an employer to make deductions relating to the cost of recruiting the employee was unenforceable as a penalty. The EAT confirmed that Tribunals should consider the law relating to penalties when dealing with unlawful deductions claims and noted that if a sum is a penalty then its deduction cannot be lawful.                                                                         

In the recent case of Cleeve Link Ltd v Bryla the Employment Appeal Tribunal (EAT) overruled an Employment Tribunal (ET) decision that a clause entitling an employer to make deductions relating to the cost of recruiting the employee was unenforceable as a penalty. The EAT confirmed that Tribunals should consider the law relating to penalties when dealing with unlawful deductions claims and noted that if a sum is a penalty then its deduction cannot be lawful.

By way of reminder:
•    Under Section 13 of the Employment Rights Act 1996 it is unlawful for an employer to make a deduction from a worker's wages unless:
(a) The deduction is required or authorised by statute or a provision in the worker's contract or (b) The worker has given prior written consent to the deduction.
•    A provision which requires an employee to make certain payments to the employer if the employment terminates may be unenforceable for being a penalty clause unless it reflects a genuine pre-estimate of the employer's losses.
Ms Bryla was a Polish national and recruited in Poland to work for Cleeve Link Ltd (Cleeve) as a live in care worker. Cleeve paid a recruitment fee of £400 to a company in Poland and the cost of bringing Ms Bryla to the UK.
 
Her contract of employment stated that if she terminated her employment or was dismissed for misconduct within the first six months, Cleeve could recoup the costs of recruitment, bringing her to the UK and training from her from any money due to her.

Ms Bryla was dismissed for gross misconduct after three months. At the time she was owed £1,200 in unpaid wages which were reduced to nothing after Cleeve enforced their right to recoupment of costs under the employment contract.
 
Ms Bryla brought an unlawful deduction from wages claim. The ET upheld the claim on the grounds that the costs were unenforceable as a penalty clause and so the deductions to her pay were unlawful. Cleeve appealed and the EAT found in favour of Cleeve on the basis that the main purpose of the clause was to genuinely pre-estimate loss that Cleeve would suffer rather than to deter a party from breaking the contract, and therefore a lawful deduction had been made.
 
 Practical tips
•    Ensure that you review your contracts of employment and determine what your provisions are for making deductions from wages.
•    It is vital that you have appropriate consent before making a deduction and that the deduction is authorised by the contract of employment.
•    Penalty clauses must reflect genuine pre-estimate of losses or they will not be enforceable.


If you would like more information about deduction from wages or help with any other employment law matter, then please contact us. Brabners - Manchester




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