United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR R REES Tribunal Representation Unit Milton Keynes Citizens Advice Bureau 7 Wetherburn Court Bletchley Milton Keynes MK2 2UH
For the Respondents	Ms A HUNT Personnel Manager Hunt Contracts Ltd 91 Cowley Road Uxbridge Middx UB8 2AG


 


MR JUSTICE WOOD (PRESIDENT): By an Originating Application dated the 12th May 1989 the Applicant, Mr Potter, claimed that his employers Hunt Contracts Ltd (the Company) had made an unlawful deduction of wages in breach of the provisions of Section 1(1) of the Wages Act 1986.

On the 20th July 1989 and Industrial Tribunal sitting in London (North) under the Chairmanship of Mr Williams decided against him. He appeals.

The Tribunal expressed their opinion of the merits of his case thus:-

"We consider this claim to be completely without merit."

This view is not seriously disputed by Mr Rees representing Mr Potter before us and indeed we would concur, but it is for us to grapple once more with the provisions of the 1986 Act and Mr Rees submits that the law is on his client's side.

We heard the Appeal on the 15th October and allowed it. We now give our reasons.

Mr Potter started his employment with the Company on the 27th March 1989. Prior to that date he had been employed by a drivers' Agency. The Company offered him full time employment. The Agency had placed Mr Potter on a course for HGV drivers and he had entered into agreement with them that should he leave within a given period he would pay some part of the fee for that course. The fee was £545.

Upon joining the Company, Mr Potter told Mr Andrew, the Company Secretary, about his HGV Driver's Course and the Company agreed to pay the Agency that fee of £545. Mr Potter had not repaid anything by that date. Mr Andrews then drew up a loan contract with Mr Potter for the repayment of that sum.

This was contained in a letter of the 28th March 1989. The letter reads:

"Dear Mr Potter,

In connection with your training course fee for HGV Class 1, the fee being £545.00.

Should you leave the Company within twenty four months from the date of your joining, you shall be required to return the fee on a diminishing basis based on £22 per month.

Please sign and return the attached copy of this letter to me as soon as possible.

I trust, however, you shall remain with the Company and progress satisfactorily.

Yours sincerely

on behalf of Hunt Contracts Limited,

(Signed) Amanda Hunt

Personnel Manageress

I, W F Potter, agree to the terms and conditions set out in this letter

signed (Signed) W F Potter"

Mr Potter's employment terminated on the 2nd May 1989. He was told he would have to go

"as it was not working out due to travelling".

He had worked for over a month and the amount repayable under the loan agreement was £545 less £22 (£523). As this was more than the amount due in wages, he was paid nothing. He assumed that there would be a deduction but did not consent in writing. In answer to a direct question from a Member of the Tribunal he had answered:

"I would be obliged to pay a lump sum if I left".

In fact Mr Andrew was content that it should have been paid off in stages.

The final pay slip was for the sum of £438.50; this included a figure of £160 -"in lieu of notice". We therefore with the agreement of the parties before us, have assessed the sum due to him as "wages" on his departure as £278.50.

Section 1(1) of the 1986 Wages Act reads:

"1(1) An employer shall not make any deduction from any wages of any worker employed by him unless the deduction satisfies one of the following conditions, namely -

(a) it is required or authorised to be made by virtue of any statutory provision or any relevant provision of the worker's contract; or

(b) the worker has previously signified in writing his agreement or consent to the making of it."

It seems to us quite clear that the conditions in (a) or (b) can only be satisfied by a document in writing. Not only is this view supported by the wording of Section 1(3) and (4), but Section 1 of the Employment Protection (Consolidation) Act 1978 also emphasises the importance of writing and in the view of the Industrial Members it is clearly desirable so far as possible to eliminate any scope for misunderstanding.

We emphasised the importance of this in PENAME LTD v. PATERSON [1989] ICR 12; another case where an employer was trying to act entirely responsibly.

Providing that the evidence is in writing the first stage of enquiry under Section 1(1) will often be to decide whether the writing was a condition of the contract of employment; if not, whether on the facts it falls within Section 1(1)(b). Thereafter, however, it will be important to ensure that the source from which the deduction is to be made - wages - is clearly stated and secondly, that deduction is agreed to be made from that source.

Finally, it will be important to construe or if necessary to imply a contractual term which covers the various ways in which the contract of employment may end before final repayment of the loan. If an employee leaves or is lawfully dismissed - we use that phrase because it could occur within the qualification period - no problem is likely to arise; but if termination occurs for some other reason it may be important to analyse the position.

In the present case the Tribunal construed the phrase "should you leave the Company" as "whether the applicant departed voluntarily or by dismissal" and such a construction was clearly open to them.

However, we are unable to agree that the letter of the 28th March indicated with sufficient clarity the source from which the deduction was to be made - his wages - or that the deduction was authorised from that source. Each would need to be sufficiently identified in order to satisfy the true intent of Section 1(1).

In our judgment this was a loan agreement in writing; any consent to deduction was oral.

It follows that there has been an unlawful deduction of £278.50. We shall make a declaration to that effect under Section 5(4) and order repayment.

The balance of the loan is £244.50 pence. Before the Industrial Tribunal Mr Andrew, who appeared for the Company, gave an undertaking not to take any steps to recover the balance of what was owed. We will release him from that undertaking. Section 5 sets out provisions relating to remedies for unlawful deductions; the following are relevant:

"5(1) A worker may present a complaint to an industrial tribunal -

(a) that his employer has made a deduction from his wages in contravention of section 1(1) (including a deduction made in contravention of that provision as it applies by virtue of section 2(3)) or

..........................................

5(4) Where a tribunal finds that a complaint under this section is well-founded, it shall make a declaration to that effect; and (subject to subsections (5) and (6)) -

(a) in the case of a complaint under subsection (1)(a) or (b), the tribunal shall order the employer to pay to the worker the amount of any deduction, or to repay to him the amount of any payment, made or received in contravention of section 1; and

............................................

5(7) Where a tribunal has under subsection (4)(a) or (b) be ordered an employer to pay or repay to a worker any amount in respect of a particular deduction or payment falling with subsection (1)(a) to (d) ("the relevant amount") the amount which the employer shall be entitled to recover (by whatever means) in respect of the matter in respect of which the deduction or payment was originally made or received shall be treated as reduced by the relevant amount."

The provisions of subsection (7) are clearly intended as a sanction against unlawful deductions by employers and once a tribunal has ordered an employer to repay any amount on the basis that a particular deduction or payment was invalid, the employer loses the right to recover the money in any other way.

Thus the sum of £278.50 is irrecoverable, but the sum of £244.50 is still owing. Mr Potter is entitled to seek to enforce the Order of this Court for the former sum in his local County Court, but if he does so the Company will no doubt consider making a claim for the £244.50.