Miss E Steele v Ben Rose Estate Agent Ltd: 2401142/2024
JUDGMENT
[1]The claimant’s complaint of unauthorised deductions from wages is not well-founded.[2]The claim is dismissed.REASONS
[1]Miss Steele worked for the respondent estate agency for approximately 11 months in 2023. As explained further below, she was overpaid throughout that period, with the gross amount of the overpayment totalling £1,800.00. The respondent discovered the overpayment at the time she left employment. Her final pay packet was expected to be £600.52. The respondent withheld that money to partly cover the overpayment. The respondent has made requests of the claimant to repay the remaining £1,199.48.[2]The claimant brought a claim of unauthorised dedictions from wages in respect of the £600.52. I gave an oral judgment which determined that the respondent was entitled to withhold that sum, and no unauthorised deduction had occurred. The dispute over the remaining £1,199.48 was not part of these proceedings.[3]I considered it important that both parties had the written record of the reasons for my decision, given the outstanding dispute between them and given that neither side had legal representation. I informed them the written reasons would be sent out in due course, without either party being required to make a request. These are the written reasons.The Hearing
[4]The hearing took place by video and there were no significant technological difficulties. The start was slightly delayed due to a large number of law students joining. Both parties were nervous about the number of observers, but there was a supervising lecturer who was able explain who the observers were and what their purpose was in joining the hearing, which reassured the parties.[5]I had an agreed bundle of 139 pages, and witness statements from Miss Steele and, on behalf of the respondent, Miss Cookson and Ms Byfield. All three witnesses gave evidence and were cross-examined by the opposing party. Each party then had opportunity to make submissions.The Issues
[6]The claim had originally come before Employment Judge Leach for a final hearing on 15 August 2024. Miss Steele did not attend but was represented on that day by her mother, Ms Steele. Employment Judge Leach discovered that the parties were unprepared for a final hearing on that date, and had converted the hearing to a case management hearing. In his case management summary, he explained the issues arising in the case to the parties as follows (I have changed the paragraph numbering for clarity):The Issues
[1]Was there an overpayment of wages? Wages have statutory protections under Part II Employment Rights Act 1996 (ERA). There is protection against unauthorised deductions from wages. But this protection is not without exceptions. The exceptions are at section 14. Section 14(1) provides as follows:- “14(1). Section 13 (the section which sets out the right not to suffer an unauthorised deduction from wages) does not apply to a deduction from a worker’s wages made by his employer where the purpose of the deduction is the reimbursement of the employer in respect ofa. An overpayment of wagesb. ………….. Made (for any reason) by the employer to the worker.”[2]There is another relevant exception at section 13. “13(1) An employer shall not make a deduction from wages of a worker 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 workers contract.”[3]The Tribunal will need to decide whether there was an overpayment of wages (and the deduction was made to recover some or all of that overpayment) in order to decide whether these exceptions apply (Gill v. Ford Motor Company Limited 2004 UKEAT 1006). Given that the claimant does not accept that there were overpayments, the parties must exchange evidence so that the Tribunal is in a position to reach a fair decision on this point.[4]The claimant has a separate and additional argument. Ms Steele told me that she had received legal advice (or carried out legal research) alerting her to an argument that the employer may be “estopped” from recovering an overpayment where it would provide an unfair outcome. She referred to the term “estoppel by representation.”[5]Ms Steele will need to put forward a case that this argument should be considered and decided on by an Employment Tribunal. At the next hearing the Employment Tribunal may decide that the argument is irrelevant to the decision about whether the deduction from wages was legally permitted (even though the argument might become relevant in any legal action taken by the employer to enforce the remainder of what the respondent says is an overpayment). If the Employment Tribunal finds that the deduction is for an overpayment it may decide that the consequence of that finding is that the exception at section 14(1) and/or the contractual term (assuming the Tribunal finds it to be valid) prevents it from considering the issue further.[6]The argument (if valid at all) will require evidence from the claimant herself for example about whether she was in any way at fault in causing the overpayment/not identifying it at an earlier stage; about whether she accepted her pay in good faith and spent it believing it to be her own.Findings of Fact
[7]Miss Steele started work for the respondent, an estate agency, on 9 January 2023. The parties have described her role as a Sales Negotiator. In fact, the major part of her role was to take enquiries from potential new vendors and book their properties in for a valuation appointment. Other members of staff conducted the valuation appointment and took matters forward with the client. It is common for people to book valuations and not proceed with engaging the agency to sell their property. That might be because they decide not to sell at that time, or because they opt to proceed with a competitor agency.[8]Miss Steele signed an offer letter and was later provided with a statement of particulars of employment, which she did not sign. I find that she had no particular objection to any of the terms, but there was confusion as to whether she was meant to sign the particulars at the time she was given them, or at the conclusion of her probation period. The respondent did not ‘chase’ Miss Steele to sign the terms.[9]The key term here, however, was the commission arrangement. That arrangement was set out in the letter as well as in the statement, and both sides in evidence agreed that it applied.[10]The terms of the commission agreement meant that Miss Steele was entitled to a £50 commission every time she booked a valuation of a property which then came to market with the respondent. However, that entitlement was subject to a threshold. Generally, the threshold would be six properties per month, so that on the seventh property coming to market in a given month commission would start to accrue.[11]The arrangement provided, however, that the threshold would be lowered to two properties so commission would become payable on the third property, whilst Miss Steele was working at Bamber Bridge. As Bamber Bridge was a new office there was an expectation that there would be less throughput of work.[12]An administrative error was made in the spreadsheet that was used to calculate employee’s wages and commission. The threshold figure should have been entered into the spreadsheet but no figure appeared. Miss Steele was therefore, in fact, paid commission in respect of every property where she had booked the valuation, and the property was later made available for sale throughout her ten months of employment.[13]It was suggested by the respondent that the error had happened when Miss Steele moved from the Bamber Bridge office to a more established office a few weeks into her employment, and the ‘2’ which would have appeared in the relevant cell in the spreadsheet had been deleted, rather than replaced with a ‘6’.[14]I find this suggestion difficult to accept, as Miss Steele was paid commission on one property in the first month of her employment, when no commission ought to have been payable irrespective of whether she was on Bamber Bridge threshold or the standard threshold. In any event, the respondent accepts that the overpayment was entirely due to an administrative error on its part.[15]The error came to light at the end of 2023. Miss Steele had resigned her employment but agreed to being kept “on the books” to provide cover for absences. In changing her pay arrangements, the respondent’s finance manager noticed the error in the spreadsheet. It was then calculated that Miss Steele had been overpaid by a total of £1,800 during her employment. That is, she had been paid commission in respect of 36 properties which should have been under the commission threshold.[16]The respondent acted by stopping the final wages payments that was due to be made to Miss Steele, in the sum of £600.52. Miss Steele was informed of this in a telephone call on 7 December, the date her November wages were due to be paid. She was also informed, initially by phone and then in correspondence, that she would have to repay the remaining £1,199.48.[17]I accept, as a matter of fact, that Miss Steele had no idea she was being overpaid until she received that phone call. As I understand its case, the respondent also accepts that.[18]It is uncontroversial that staff booking valuations would have no idea which of those clients, or how many, would go on to make their properties available for sale through the respondent. The most the respondent can say is that Miss Steele had access to KPI reports which showed the numbers of properties listed for sale against each individual. It argues that she should therefore have realised that she was being paid commission in respect of all properties, realised this was an overpayment and queried it. However, people don’t query their pay unless there is something to cause them to suspect it might be wrong. In the specific circumstances of this case, I agree with Miss Steele that there was nothing to make her suspect anything was wrong. The KPI reports, as the parties agree, are not commission reports. They do not state whether the figures given are before or after the application of the threshold. I can see from the perspective of the business why it might be said that ‘it was obvious’ but I am satisfied that it would not be obvious at all to an employee who has been paid consistently from day one.[19]In the circumstances, Miss Steele was understandably very shocked when she received the call informing her that she would not be receiving her November pay. I accept her evidence that this caused her financial difficulties with regard to buying Christmas presents and generally financing herself over the Christmas period. She had sensibly planned on the basis that she could use that money until the new year, when she would start new employment. Relevant Legal Principles[20]The applicable legal principles are effectively summarised in Employment Judge Leach’s discussion of the issues, set out above.Discussion and conclusions
[21]There was an issue between the parties about the whether the terms in the unsigned statement of terms and conditions applied to Miss Steele. Ultimately, however, I did not need to resolve that issue, as I find that commission arrangement I have set out above formed part of the contract between the parties irrespective of whether the full statement of terms and conditions did.[22]The reason for that conclusion is that the commission arrangement was included in the offer letter, which was signed. Further, Miss Steele candidly acknowledged in her evidence that it applied to her. I therefore find that it was an express term of the contract, incorporated by agreement.[23]Given that the commission arrangement applied, it is clear that there were overpayments. By the end of the hearing, Miss Steele did not seek to argue otherwise. She also accepted that the figures given by Ms Cookson in her witness statement for the number of properties made available and the commission paid against those properties were correct.[24]Miss Steele also accepted that the correct threshold changed from two to six properties when she left Bamber Bridge. Although there was some confusion about when that actually happened, I find that it didn’t actually make a difference to the claim. Miss Steele was responsible for one property being made available in January 2023 and two in February 2023, she would therefore have been under threshold in both months even if the lower threshold was applied, and no commission was therefore payable. By March 2023, she had left Bamber Bridge, working initially in Chorley and then in Leyland.[25]I find that Miss Steele was right to accept that overpayments had been made. There is no other realistic conclusion on the evidence before the Tribunal.[26]Given that overpayments were made, I then had to consider whether the purpose of the deduction from wages on 7 December 2023 was to recover that overpayment. I find that it was.[27]In those circumstances, s.14(1) Employment Rights Act 1996 (set out above) clearly provides that the protection under s.13 (the right not to suffer unauthorised deductions) does not apply. That is the claim that Miss Steele has brought in the Tribunal, and I find that it cannot succeed.[28]There are common law principles that apply to recovery of overpayments where the amount is claimed in the court. However, even if the employer would not be entitled to recover the amount in the court, that does not affect the applicability of s.14(1) to claims in the Tribunal (see SIP Industrial Products Ltd v Swinn 1994 ICR 473). The Tribunal does now have a jurisdiction to determine contractual claims in some circumstances (in contrast to the position when Swinn was decided) but there was no contractual claim in this case.[29]Given my conclusions in respect of the first issue identified by Employment Judge Leach, the possible exception at Regulation 13(1) does need to be determined. Further, I am unable to consider any arguments about estoppel. Those arguments may still be relevant to any claim brought by the respondent in the civil courts to recover some or all of the remaining £1,199.48.[30]I have a great amount of sympathy for Miss Steele. I consider that there are few reputable employers who would have acted in the way this employer did by stopping pay with no notice on the day it was due to be paid, and asking for full repayment (albeit over an period of time), in respect of a sum of money that is relatively insignificant given the scale of the business and an error that was, on anyone’s view, the respondent’s fault.[31]Unfortunately for Miss Steele, however the terms of the Act are clear and that means that she is not entitled to recover the £600.52. I want to emphasise today that my findings relate only to the £600.52 deduction. It does not mean, and should not be taken to mean, that the respondent is entitled to recover the additional money. If the parties cannot reach an agreement about that then it would be a matter for the court.