Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
Industrial Tribunals Northern Ireland Decisions
You are here: BAILII >> Databases >> Industrial Tribunals Northern Ireland Decisions >> Curran v John Moran trading as Moran's ... [2011] NIIT 00871_11IT (26 August 2011)
URL: http://www.bailii.org/nie/cases/NIIT/2011/871_11IT.html
Cite as: [2011] NIIT 871_11IT, [2011] NIIT 00871_11IT
[New search] [Printable RTF version] [Help]
THE INDUSTRIAL TRIBUNALS
CASE REF: 871/11
CLAIMANT: Catherine Curran
RESPONDENT: John Moran trading as Moran’s Retail Group
DECISION
The claimant has suffered an unlawful deduction of wages contrary to Article 45 of the Employment Rights (Northern Ireland) Order 1996 and the respondent is ordered to pay the claimant the sum of £676.00 in respect of outstanding wages.
Constitution of Tribunal:
Chairman (sitting alone): Miss E McCaffrey
Appearances:
The claimant was represented by Ms Carla Rogers of the Law Centre.
The respondent was represented by Ms Deirdre Forbes, Human Resources Officer.
1. The Facts
1.1 The claimant gave evidence at the hearing but there was no evidence given on behalf of the respondent and none of the claimant’s evidence was disputed in any way. The claimant was employed by the respondent as a duty manager. Under her contract of employment she was to work a minimum of 27 hours per week but advised that she normally worked more than this. She commenced employment on 7 April 2009 and her employment ended on 19 February 2011.
1.2 In December 2010, the claimant indicated that she had a meeting with the respondent at which he indicated that her hours would probably reduce to two shifts per week, namely 18 hours. The claimant told him that she could not afford to work only two shifts. The explanation for this was that the respondent said his wife would work two days per week. The claimant explained to him that she could not afford to work two shifts and she then started to look for other employment. As it transpired the cut in hours did not happen immediately. The respondent told the claimant it would be after Christmas. In the New Year, the claimant asked Mrs Moran what the position was and was told that Mrs Moran would be coming in to do shifts so the claimant expected the cut shortly. In January 2011 she applied for another job and was offered that job on 11 February. She was asked what notice she needed to work. The claimant thought it was only one week, but then checked her contract, according to which she was obliged to work a month’s notice. The relevant part of the claimant’s contract was Clause 17(A), which provided that an employee was required to give one month’s notice after one month’s continuous service. The clause also provided:-
“Where an employee, without permission, fails to work out his/her notice period (whether the company or employee gives notice) he/she will forfeit a sum equal to wages for the unworked period, from any arrears of wages and/or holiday pay which had not been paid. This applies regardless of the fact that these monies have already been earned.”
1.3 In this case the respondent produced to the Tribunal a copy of the claimant’s written terms and conditions of employment which had been signed by her and which include a clause at the end reading as follows:-
“I have read and understood the sections above on holidays and notice and the supply of uniforms. I hereby authorise the employer to deduct from my wages a sum to offset any excess holiday pay received, unpaid balance owed on uniforms and also up to one week’s wages if I terminate my contract without giving proper notice.
I have read and understood the sections above on deductions and liability and hereby authorise the employer to deduct from my wages a sum not exceeding 10% per week in respect of any loss or damage from which I am held to be accountable. I further understand that the 10% limit will not apply to my final wages, if the sum outstanding is greater than 10%.”
The claimant agreed she had signed the contract.
1.4 The claimant gave notice by email at 10:30pm on the evening of 11 February. The email was addressed to the respondent and Donna Moran and was also copied to Deirdre Forbes and Paul Moran. The relevant part of the email reads:-
“Hello people,
Maybe this will come as no shock to you, but I wish to hand in my resignation.
If you cannot release me from my Contract immediately my last shift will be on Saturday 19th February 2011. I do understand that it is only eight days away and I haven’t given one month’s notice, but with the nature of my new job I need to start on Monday 21st February 2011. My reason for leaving are the erratic hours, also that John you told me I would probably go down to two shifts per week. As I said at that meeting, two shifts are not enough, and I’m still not convinced that the reason I didn’t get the night shifts are because I didn’t drive. This was never told to me when I was offered full time Duty Manager, in fact I feel as if I’m being pushed out.
I also understand that you can maybe keep my last week’s wages off me for not serving the full notice, but I am willing to forego that if I have to.
I wish you all the best and hope you do the same for me.
My next shift is Sunday morning, I will still do my job to the best of my abilities until I leave.
Cathy”.
1.5 On 15 February the claimant received an email from John Moran, expressing his surprise that she had decided to leave and suggesting that she would wish to reconsider. The claimant however decided to leave employment. On 23 February she received a letter from Deirdre Forbes, setting out the amount to which she was entitled, namely her gross pay up to and including 19 February 2011 of £416.25, holiday pay of £198.75 and a tax rebate of £61.00. Against this, the letter set out the purported deduction of the claimant’s forfeited notice pay of £795.00, leaving an amount due to Moran’s Retail Group of £119.00.
1.6 On 25 February the claimant sent a letter to Deirdre Forbes, requesting her outstanding wages plus holiday pay and alleging this was an unlawful deduction of wages. She added in that letter,
“Please send all monies owed immediately. If not paid within 28 days I will have no alternative but to progress to the Industrial Tribunal on the grounds of unlawful deduction of wages.”
1.7 The claimant was invited to a grievance meeting by the respondent but exercised her right to use the modified grievance procedure by letter of 18 March 2011. She indicated that unless payment was received in full that she would issue proceedings. By letter of 24 March 2011 from Deirdre Forbes to the claimant, the respondent’s response to the grievance was set out. The respondent indicated that the re-calculation from the claimant’s final wages was not a penalty but was a genuine pre-estimate of loss to the company. This was indicated under four headings namely:-
· Loss of sales within the claimant’s departments of responsibility due to shortage of stock and non-ordering caused by insufficient time for a proper handover and delegation of duties;
· Additional staffing costs affecting all three sites caused by putting staff on emergency cover;
· Travel expenses incurred pulling duty managers from other stores in emergency cover; and
· Emergency training costs.
1.8 In her evidence to the Tribunal, the claimant disagreed with these allegations by the respondent which were also set out in the response filed in the Tribunal Office. On the question of increased wastage due to lack of managerial control, the claimant indicated that the only meat and poultry sold in the store were chicken fillets. She indicated that she had dealt with frozen food, but the Day Manager had taken it over before she left as she was only working two day and two nights per week. Regarding additional staffing costs, she pointed out that there were three managers and the owner available to cover shifts. She did not believe that there was any additional cost to the owner, as any additional shifts she had covered had been paid at the basic rate, so she did not believe that there was any additional costs to the employer from that point of view. As far as travel expenses were concerned, she pointed out that there were enough managers on the Londonderry site to cover the shifts. She also pointed out that B McAdams, one of the managers, lived less than three miles from the site and so she could not understand why he was apparently paid mileage for seven shifts at 64 miles.
As far as emergency training costs were concerned, she indicated that she could not understand why any other emergency training would be needed, as all the managers on site perform basically the same duties. The respondent’s representative wished to introduce a document regarding this loss, but as it had not been shared with the claimant in advance of the hearing and there was no witness available to give evidence as to its contents, I ruled it should not be admitted in evidence. No explanation for these estimates was given by the respondent and I therefore accept the claimant’s evidence on these points.
2. Relevant Law
2.1 The relevant law in relation to this matter is set out in Articles 45 and following of the Employment Rights (Northern Ireland) Order 1996. Article 45 provides as follows:-
“(1) An employer shall not make a deduction of wages from an employee employed by him unless -
(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker’s contract, or
(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.
(2) In this Article “relevant provision”, in relation to a worker's contract, means a provision of the contract comprised -
(a) in one or more written terms of the contract of which the employer has given the worker a copy on an occasion prior to the employer making the deduction in question, or
(b) in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing) the existence and effect, or combined effect, of which in relation to the worker the employer has notified to the worker in writing on such an occasion …”
2.2 The claimant’s representative helpfully referred me to relevant case law in relation to this matter. While the employer would be entitled to deduct an amount which is a genuine pre-estimate of damage if they are contractually entitled to do so, a penalty clause will generally be held to be unlawful. This was the view of the House of Lords in Dunlop Pneumatic Tyre Company Limited v New Garage & Motor Company Limited [1914] UK HL1. In that decision Lord Dunedin summed up the position by saying “the essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre-estimate of damage.” He also quoted various tests which had been applied in earlier cases, such as that it would be held to be a penalty if the sum stipulated is “extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach.”
2.3 In Giraud UK Limited V Smith [2000] IRLR 763, the facts of the situation was broadly similar to this case. Mr Smith was employed by Giraud UK Limited as a Driver, his contract of employment required him to give four weeks’ notice of termination and provided that “unless agreed otherwise, failure to give proper notice and work it will result in a deduction from your final payment equivalent to the number of days short.” When Mr Smith terminated his employment without notice, the employer refused to pay him payments which would otherwise have been due to him on that date, claiming that they were entitled to payment from him equal to four weeks pay. The Employment Appeal Tribunal hearing the case re-stated the principle that a contract of employment may contain a lawful liquidated damages clause, provided that it is a genuine pre-estimate of loss or damage and not a penalty. They believed however that the clause in this case did not represent a genuine pre-estimate of loss, it did not seek to place any limitation on the right of the employers to recover damages for the actual loss suffered in the event of its being greater than that specified in the clause and the calculation which it laid down accordingly the employee was in a position where if the actual loss turned out to be nil he would be liable for the contract sum indeed if the actual loss was greater than the calculable sum Mr Smith might face an unlimited claim for the balance. In those circumstances the EAT found the clause at issue was a penalty clause and as such unenforceable.
2.4 In Tullett Prebon Group Limited v El-Hajjali 2008 IRLR 760, a different conclusion was reached. The court ,while observing that they would be reluctant to interfere with the terms of a contract agreed between two parties well capable of protecting their own respective commercial interests, noted that the one situation where a court would interfere is where the contract contained a penalty clause. They indicated that according to case law the test for distinguishing between the two was whether, at the time the contract was entered into, the predominant contractual function of the provision was to deter a party from breaking the contract or to compensate the innocent party for the breach. The court noted,
“Any clause which provides for the payment of a substantial sum of money upon breach is likely to deter a breach, even if it is a genuine attempt to estimate the potential loss arising from a breach. That is why the predominant contractual function has to be to deter the breach for the clause to be a penalty. Two purposes, the terms and compensation, may often be relatively equal where each side is of equal bargaining power and represents that a substantial loss, which is not easy to calculate, may occur if the contract is not performed.”
They also noted that in this particular case, a bargain had been struck by two parties of equal bargaining power, each of them legally represented.
3. Decision
3.1 In this case the contract of employment specifically provides for the employer to recover from the employee a sum equivalent to wages for any unworked period of notice from arrears of wages and/or holiday pay which has not been paid. This clause of the contract was signed by the claimant, and she did not raise any issue in relation to that. Accordingly I find that the claimant had consented to the deduction of wages. The issue however remains as to whether the contractual clause is a genuine estimate of loss of whether it is a penalty clause, in which case it is unlawful.
3.2 The respondent did not produce any convincing evidence to substantiate the allegations which it had made both in its letter to the claimant in response to her grievance and in the response form lodged to the Tribunal. In particular I find the estimated sum of £458.91 for “increased wastage costs due to lack of managerial control” to be spurious. Assuming that the employer arranged for management cover for the shifts which the claimant did not work, presumably all the relevant managers should have been responsible for making sure that the necessary managerial control was exercised. Similarly the sum of £288 for “emergency costs” has not been substantiated in any way and I find this amount totally spurious. The “additional staffing costs” referred to by the respondent have not been verified or made out in any way. I also accept the claimant’s evidence that managers were not paid at any higher rate for working overtime and therefore the employer should not have been put to any additional expense by covering her shifts. As for the additional mileage which is referred to, the respondent did not provide any verification for this. Further, the claimant gave evidence that Mr McAdams, who is alleged to have been paid mileage for 64 miles for each of seven shifts, lived a short distance from the Londonderry store. Accordingly I cannot accept the respondent’s assertion in relation to this matter.
3.3 The respondent’s letter of 23 February 2011 refers to a sum for forfeited notice of £795.00, but it is not clear to me how this amount is made up. Although the clause does provide a limit for the amount of damages in that it is limited to a period of unworked notice up to a maximum of one month, it seems to me nevertheless that this is a penalty clause and it is there to try to prevent employees giving less than one month’s notice. Accordingly, I hold that Clause 17 of the claimant’s contract with the respondent is unlawful in so far that it purports to impose a penalty on the claimant. Accordingly I order the respondent to pay to the claimant the amount due to her for unpaid wages, holiday pay and a tax rebate.
Accordingly I order the respondent to pay to the claimant the following sums:-
|
1. |
Unpaid holiday pay: |
£198.75 |
|
|
|
|
|
2. |
Tax rebate: |
£61.00 |
|
|
|
|
|
3. |
Unpaid wages: |
£416.25 |
|
|
|
|
|
|
|
|
|
|
TOTAL: |
£676.00 |
|
|
|
|
4. This is a relevant decision for the purposes of the Industrial Tribunals (Interest) Order (Northern Ireland) 1990.
Chairman:
Date and place of hearing: 27 July 2011, Strabane.
Date decision recorded in register and issued to parties: