Ms M J Clark v Joseph James Furniture Outlet LLP: 2402399/2024
JUDGMENT
[1]The claimant’s claim that she suffered an unlawful deduction of wages is well founded. Quantum was agreed in the amount of £815.38.[2]The claimant averred that she no longer wanted to pursue her claim in respect of her annual leave pay. That claim is dismissed upon withdrawal.[3]The respondent is ordered to pay the claimant the amount of £815.38.REASONS
[1]The Response did not dispute that the claimant worked the 8 days identified in her Claim Form, namely 8 February 2024 to 17 February 2024. The respondent contended that the claimant did not work her full notice period and that amounted to a breach of contract, so they withheld this money.[2]The respondent had made an employer’s contract claim but this claim was dismissed by Employment Judge Ainscough on 4 July 2024.[3]At the hearing today, Mr Shenton said that the respondent was entitled to withhold the claimant’s wages as she has signed a term in her contract entitling them to do so. The claimant accepted that she had signed her contract electronically and this contained the following term: We shall be entitled, and you hereby authorise, us to deduct from any payment due to you, any money which you may owe to us at any time. This may include, but is not limited to: (a) Any fines, penalties or losses sustained that is a result of your carelessness, negligence, deliberate vandalism, dishonesty or a breach of our rules. …[4]Mr Shenton accepted that the claimant had not been careless, negligent, a vandal or dishonest. He said she breached the respondent’s rules about her notice period.[5]The respondent is entitled to make deductions where the worker has given her written consent or agreement. However, where this is such a term of the contract, any fine or deduction should be a genuine pre-estimate of the loss suffered by the employer as a result of the employee’s breach and that anything in excess of this is regarded as a penalty, which is void: see Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd 1915 AC 79, HL. In Giraud UK Ltd v Smith 2000 IRLR 763, EAT, a term in the employee’s contract allowing his employer to deduct a sum from his final payment in the event that he failed to give notice and work out his notice period was held to be a penalty clause as it was not a genuine pre-estimate of the loss that the employer could suffer in the event of the employee’s breach.[6]A similar issue arose for consideration in Yorkshire Maintenance Company Ltd v Farr EAT 0084/09 — namely, whether a contractual provision allowing for a deduction from wages was unenforceable as a penalty clause. F’s claim for damages for his wrongful dismissal (ie breach of contract for his notice pay) following his dismissal for gross misconduct was unsuccessful, but the employment tribunal decided that he was entitled to accrued pay which had been withheld by YMC. In accordance with a clause in F’s contract of employment, the employer had argued that it was entitled to make deductions from his wages because he had failed to comply with a contractual requirement to obtain the signature of clients as proof of work done. On YMC’s appeal, the Employment Appeal Tribunal (“EAT”) held that contractual terms like this should be subject “to a considerable degree of scrutiny” due to the possible disparity in economic power between employers and employees, and the potential for abuse by an employer of such power. Moreover, courts had to be alert to employers being judge and jury when they had included in a contract of employment an express term requiring an employee to repay certain costs and expenses. The EAT referred to the guidance contained in Giraud UK Ltd v Smith (above) on the distinction between a penalty and a genuine pre-estimate of loss.[7]Mr Shenton’s position at the Tribunal was that the claimant had work the hours contended but as she later breached the notice obligations the respondent refused to pay the outstanding wages. The claimant disputed any breach of contract (as well as the respondent’s quantification) and I explained to the parties that I was not going to deal with the employer’s contract claim.[8]The above clause is clearly a penalty clause and therefore it is void. It is not authorisation for liquidated losses or damages. Indeed, the respondent did not adduce any evidence to support either(a) the losses incurred and(b) proper quantification of those losses.[9]The claimant claimed £815.38 which she said was the figure provided by the respondent. I had worked out the amount as more, but the claimant and Mr Shenton were content to proceed on the amount set out in the Claim Form.[10]The claimant said that she did not wish to pursue her claim in respect of accrued and untaken holiday pay.