United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR J PINDER (Representative)
For the Respondent	No appearance or representation by or on behalf of the Respondent

SUMMARY

10B

Unlawful Deduction from Wages – out of time

The alleged "deduction" from wages was in fact an alleged underpayment some time after the termination of the contract of employment. In finding that time for claiming in respect of such deduction ran from the date of termination, the Tribunal fell into error. Time would normally begin to run from such date where there had been a complete non-payment, but where the claim was for an underpayment, time runs from the date when the underpayment was made for it was to be treated as the sum form which the deduction was made. Decision of EAT in Group 4 Nightspeed Ltd v Gilbert [1997] IRLR 398 clarified. Also there was a procedural issue on the application for a review.


 


HIS HONOUR JUDGE ALTMAN

1. This is an appeal from the judgment of the Employment Tribunal held at Bedford on 7 December, the reasons having been promulgated on 5 January 2006. The claim before the Employment Tribunal by the Appellant, Mr Arora was for unauthorised deductions from wages under Part 2 of the Employment Rights Act 1996. His complaint was for underpayment of overtime and commission payments properly due following his dismissal. The Employment Tribunal found that the claim was out of time and the Employment Tribunal therefore had no jurisdiction.
2. This case raises the oft litigated problem about the time limits in this area of the law. The Employment Tribunal held that Mr Arora worked for the Respondents from January 2005 until 4 March when his employment ended. He wrote to ask for the reasons for the termination of employment and in the words of the Employment Tribunal, "mentioned he was due payment for overtime".
3. On 15 April the Respondents wrote to Mr Arora giving the reason for termination as unsuccessful completion of the probationary period and setting out the payment due on termination of employment which included an amount of £1,096.50 for overtime. This led to the raising of a grievance because it was not enough, Mr Arora said. As the employment had ended on 4 March the Tribunal found that 4 June was the end of the original time limit for making the complaint, and the grievance that was made on 16 June was therefore raised after the time limit had expired, so as to fail to act as a means of extending the time limit.
4. It is argued by the representative of Mr Arora that 15 April was the date of payment of the wages from which the deduction was made and therefore time did not start to run until then so as to make the grievance in time.
5. It is important to look carefully at the statutory provisions here. We say at this stage that the Respondents, following an indication given by the Judge at the Preliminary Hearing, have determined not to participate in this appeal. The position is not wholly free from difficulty generally. Where a claim is made for unauthorised deductions that may be of three types. There may be a straightforward deduction expressed to be so, or a payment may have been made but it is alleged that there is a shortfall, or thirdly there may be no payment whatsoever but it is regarded as a complete non-payment. As to a simple deduction the time limit, and indeed the only time limit provided by statute, is contained in section 23(2) of the Employment Rights Act 1996 which provides:

"…an Employment Tribunal shall not consider a complaint under this section unless it is presented before the end of the period of 3 months beginning with-

(a) in the case of a complaint relating to a deduction by the employer, the date of payment of the wages from which the deduction was made"

It is not there stated that it is the date when the wages are payable, nor is it suggested that it is anything to do with the date upon which the employee is made aware of the true position.

6. This is not a case of strict deduction. Therefore it is necessary to look beyond that to the case law on the interpretation of that. At one time the Courts had made a judgment that this statutory provision related only to deductions and not to simple non-payment. But the matter was resolved in the case of Delaney v Staples [1991] ICR 331 and in that case the statute was broadened to interpret "deduction" as covering "non-payment". Reliance was placed in particular on section 8(3) of what was then the Wages Act 1996 and is now contained in section 13(iii) of the Employment Rights Act 1996 which provides:

"Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker's wages on that occasion."

7. Mr Arora was not represented before the Employment Tribunal and we anticipate that that section was not drawn to the attention of the Chairman then, or indeed in the application for a review which came later or in the appeal to this Tribunal. But Nicholls LJ, as he then was in the Delaney case, made it clear that in his judgment that meant that:

"wages which are properly payable but not paid are to be treated, to the extent of the non-payment, as within the scope of the expression 'deduction'."

8. On the evidence before the Employment Tribunal it is clear that the letter of 15 April came fairly and squarely within section 13(iii) of the Employment Rights Act 1996 so that that is the deduction and the time limit therefore provided in section 23(ii) must start to have run on 15 April so that the grievance raised two months later or just over two months later was in time.
9. Interestingly, however, at page 340 Nicholls LJ said:

"The section 5(2) time limit (now section 23(ii) of the Employment Rights Act) for making a complaint will run from the date on which the wages payment ought to have been made."

And earlier he says this:

"If on his 'pay day' when an employee is due to be paid, a worker receives less wages than he should have done, the deficiency is to be regarded as a deduction for the purposes of the act."

However, we are driven to the conclusion that although Nicholls LJ, as he then was, conducted a detailed analysis of the statutory provisions, he did not consider the impact of what he was saying on the actual time within the time limit provisions of the Act.

10. What happens in the third situation is worthy of mention; that is where there is complete non-payment, not a shortfall payment such as occurred in this case, and it is perhaps worth clarifying an earlier judgment of the Employment Appeal Tribunal in this context. In Group 4 Nightspeed Ltd v Gilbert [1997] IRLR 398, Colin Smith J, in the judgment of the Tribunal said:

"It is only when an employer fails to pay a sum due by way of remuneration at the appropriate time, i.e. at the contractual time for payment, that a claim for an unlawful deduction can arise."

In that case it had been argued that the unlawful deduction had been made at an earlier date than the date when, under the contract of employment, the payment would have been due.

11. I consider that it would be wrong to apply that construction to the current situation and to say that time begins to run when the contractual obligation arises. The reason for that is that in the Group 4 case the Tribunal were concerned with identifying the moment in time when the deduction became unlawful and held that it was not unlawful until the contractual date had passed. But that does not, it seems to us, detract from the wording of the statute which in circumstances where there has been an actual deduction, or a shortfall, makes it clear that it is only when the payment has been made to which the deduction has been applied, that time starts to run.
12. Accordingly, the position appears to be as follows: where there has been an actual deduction in breach of contract, the time for the complaint to start to run is the date when that deduction is made, or the payment from which the deduction is made has been tendered. Where all that happens is that the employer pays too little and there is a shortfall the same principle applies, time starts to run from the moment when the reduced payment is made. However, where there is no payment, time may start to run in effect at an earlier date; it will start to run at the time when the contractual obligation to make a payment arose.
13. The irony in a sense is that the employee who receives something from his employer rather than nothing may have longer in which to bring his complaint to the Tribunal. But that seems to us the inevitable consequence of this aspect of the law. We can understand that the Chairman who was not presented with the detailed statutory provisions overlooked the particular provisions that apply in this particular case but it is clear on the face of the times set out in his decision that the claim was in fact in time.
14. There is a further matter which should be drawn to the attention of the Regional Chairman at Bedford and that is as follows. Judgment was on 7 December by means of a short oral decision in the Tribunal. On 10 December the representatives of Mr Arora wrote to the Tribunal asking for a review. They had earlier also applied for extended written reasons and the detailed reasons for the review were set out in that cover sheet. Extended reasons, as I have said, were furnished and promulgated on 5 January but there was no response to the request for a review. Mr Pinder has appeared, very helpfully if I may say so, on behalf of Mr Arora, and has supported the appeal with a clear and helpful Skeleton Argument. He has said that not having had a reply and before the promulgation of full reasons, Mr Arora's advisers rang the Tribunal on 10 January and the information given was that the case had been closed and archived.
15. Following that the review application was actually copied to the Tribunal at the clerk's request but no response was received. This failure to respond to a request for review was part of the Grounds of Appeal because the failure to consider an application for review is clearly, on the face of it, an error of law. In the event it makes no difference to the outcome of this appeal but I anticipate that it is a matter that the Regional Chairman would wish to have drawn to his attention and we so direct.
16. Finally, I would also draw attention to a matter that has not been raised at any stage before us and that is the discretion that a Tribunal has to extend time limits in cases of this kind where under section 23(iv) the Employment Tribunal is satisfied that it was not reasonably practicable for a complaint under the section to be presented before the end of the relevant period of three months. Again, perhaps it would have been helpful in the absence of Mr Arora for that subsection to have been considered. It may make relevant one of the features that Mr Pinder suggested should be taken into consideration and that is the fact, for instance in this case, that Mr Arora only became aware of an unlawful deduction at a later stage, 15 April, and I simply observe that that is an aspect of the law available to parties.
17. Accordingly, I allow this appeal and substitute a finding that the complaint of Mr Arora is in time and I direct that the matter be remitted to the Employment Tribunal for a full merits hearing. However, I wish it to be clearly understood that I have no view whatsoever as to the merits of Mr Arora's claim; for all I know the Respondents may have a complete answer to it.

Terms of settlement

18. The parties having agreed terms of settlement the appeal is allowed by consent. The terms of settlement having been reached by consent the decision of the Tribunal is set aside and the original proceedings stand as dismissed on withdrawal.