Mrs A Antony v Ernehale Lodge Carehome Ltd: 2601912/2017

EMPLOYMENT TRIBUNALS

Case No 2601912/2017

Between

Mrs Ashlin AntonyClaimant

Ernhale Lodge Carehome LimitedRespondent

Date 30 April 2019

JUDGMENT

Employment Tribunals Rules of Procedure 2013 – Rule 21

[1]The respondent has made an unauthorised deduction from the claimant's wages and is ordered to pay the claimant the gross sum of £1500.

[2]The hearing listed on 27 April 2018 is cancelled.

REASONS

This is the written version of the Reasons given orally at the hearing, written reasons having been requested on the day.

[1]This is the final hearing of a claim for £2,000 taken from the claimant’s wage packet in two lots, one of £500 and the other of £1500, in or around June 2017. It is claimed as breach of contract or alternatively unauthorised deductions.

[2]There is no dispute that the deductions were authorised by a relevant agreement. The case is about whether they were otherwise lawful and in this respect I have been referred to Cleeve Link Ltd v Bryla

[2014] IRLR 86

, EAT.

[3]This has virtually been a trial on agreed facts. There were two witnesses: the claimant herself and, for the respondent, Mr W Shafiq, a Director of the respondent. I am grateful to both of them, but, unfortunately for the respondent, Mr Shafiq is not really able to give evidence on the matters in dispute because his company was not the claimant’s employer at the time of any of the relevant events, other than the time of the deductions themselves. 1 of 7

[4]The claimant was employed from around 17 August 2015 to 26 June 2017 as a Registered Nurse at a care home in Nottingham. She TUPE-transferred to the respondent on or around 31 March 2017 from a previous employer. The claim, as I have said, is for a total of £2,000 which was taken from her wages in respect of an alleged loan.

[5]The claimant was recruited from India. A letter dated 18 June 2015, but apparently signed by the claimant on or about 4 September 2015, states that: “Owing to recent experiences with overseas nurses a decision has been taken by Milford Care [the respondent’s predecessor] to incorporate within their contracts of employment terms for a supervised practice training programme. As you are aware there are substantial costs incurred in staff training and we have decided to charge a fee of £2,000 which is payable on commencement of their supervised practice training programme. We have taken into consideration that the majority of the overseas nurses are not in a position to pay the training fees up front. For this reason we are offering a loan of £2,000 to each member of staff. This entails that the staff do not have to pay this amount up front, rather the organisation will bear this cost. However if and when any staff decides to leave this organisation before a period of completed 24 months after the staff receives their PIN number he/she is liable to pay this amount before leaving the organisation.”

[6]Essentially, what happened – and it’s common ground that this is what happened – was that no money actually changed hands but, nominally, the claimant was loaned £2,000. This was never paid to her and was effectively paid by the respondent’s predecessor to itself in respect of a training programme which was then to be given by the respondent’s predecessor.

[7]Subsequently, there was a statement of employment particulars. It is that statement of employment particulars, dated 12 May 2016 and signed, which contains the provision authorising the relevant deductions from wages. The provision in question is clause 16.3 (d), which states is that: “Where you leave our employment within 24 months of receipt of [your] PIN number you agree that we may deduct from any sum we owe to you the fee of £2,000. This £2,000 is fee is towards the cost of your supervised practice training.”

[8]The claimant received on the job training, in particular, over 200 hours of mentoring or supervision. Without this mentoring, she could not have got her RCN PIN. She gave unchallenged evidence that she also paid herself for particular bits of training outside of work that she needed in order to get her PIN. These were, in her words, “mandatory courses”. She did not expect to have to do so. Her expectation was that those bits of training would be included as part of the training programme she had been promised. However, insofar as it is in dispute (and I am not sure it is), I find the claimant was placed on the supervised practice training programme and she completed it, albeit belatedly, and was awarded her PIN. The £2,000 nominally loaned to her was, then, for something of substance. 2 of 7

[9]I also accept that there was a real cost to the respondent’s predecessor attached to that training programme. During at least parts of the mentoring, the claimant and her mentor were together effectively covering a single job but both being paid their full salaries. There would also have been a small amount of cost to administer the training programme.

[10]There is, though, no evidence before me as to how the respondent’s predecessor came up with a figure of £2,000. Mr Shafiq was only able to tell me how he would come up with a figure of £2,000 in respect of the training programme now administered by the respondent.

[11]Also potentially noteworthy is the fact that the clause providing for repayment was an ‘all or nothing’ clause. If a member of staff left one day after getting their PIN they had to pay £2,000. If they left one year and 364 days after getting their PIN they had to pay £2,000. But if they left 2 years and a day after getting their PIN, they paid nothing.

[12]Looking at the parties’ pleaded cases, witness statements and claimant’s counsel’s skeleton argument, both parties seemed to me to be approaching this case as if there was one issue and one issue only: was the clause providing for payment of £2,000 a liquidated damages clause or was it a penalty clause? It has seemed to me from the outset that that was only one question that potentially needed to be answered and not even the most important of the questions that need to be addressed in this case.

[13]I suggested to counsel at the start of submissions that there were potentially three questions.

[14]The first of those three questions was: did the claimant ever commence the respondent’s predecessor’s supervised practice training programme? This was only a question in my mind because in the claimant’s pleaded case it was suggested that the respondent was in breach of contract in that the claimant was “not provided with any relevant training and support in respect of registration as a nurse in the UK and in particular in respect of providing supervised practice training” [my emphasis]. In fact the claimant’s true case – as above – is that she was provided with some but not all of the supervised practice training programme the respondent’s predecessor agreed to provide.

[15]Discussing this with claimant’s counsel during submissions, he sought to persuade me that the claimant had a fall-back case to the effect that the respondent’s predecessor had agreed to provide particular training and had not provided that in full and that therefore the claimant was entitled to damages for breach of contract. I am afraid that that is not the claimant’s pleaded case and from the fact that it was not mentioned in counsel’s skeleton argument, I don’t think it occurred to anyone that the claimant was potentially making a claim of that kind until I mentioned it during submissions. If that had been the claimant’s case, the likely measure of damages would be whatever it cost the claimant to 3 of 7 pay for these additional courses herself that she mentioned in her evidence, and she has not put evidence forward of what the cost might be.

[16]The claimant’s pleaded case is that the deduction was a breach of contract and/or that she was provided with nothing in return for £2,000 – effectively, total failure of consideration. Saying that the deduction was in breach of contract adds nothing to an unauthorised deductions claim. The suggestion that she got nothing in return for £2,000 is unsustainable on the facts (as above) and is contradicted by the claimant’s own witness evidence.

[17]The second question, as I see it, is the most important one. It appears to have been completely overlooked by the parties and counsel were unable to provide me with very much assistance in relation to it. The question is this: is the term of the contract permitting the respondent to deduct £2,000 a term providing for payment of a sum as damages for breach of contract or is it a term requiring payment of a sum as a debt?

[18]Paragraph 26-008 of Chitty on the Law Of Contracts provides as follows: “There is an important distinction between a claim for payment of a debt and a claim for damages for breach of contract. A debt is a definite sum of money fixed by the agreement of the parties as payable by one party in return for the performance of a specified obligation by the other party or upon the occurrence of some specified event or condition; damages may be claimed from a party who has broken his contractual obligation in some way other than failure to pay such a debt. … The relevance of this distinction is that rules on damages do not apply to a claim for a debt, e.g. the claimant who claims payment of a debt need not prove anything more than his performance or the occurrence of the event or condition on which the sum becomes payable; there is no need for him to prove any actual loss suffered by him as a result of the defendant’s failure to pay; the whole concept of the remoteness of damage is therefore irrelevant; the law on penalties does not apply to the agreed sum ….”

[19]There is something on how this distinction is to be drawn in the Parking Eye case (Cavendish Square Holding BV v Talal El Makdessi

[2015] UKSC 67

). In the Judgment of the Supreme Court, in the speech of Lord Neuberger, the relevant passage runs from paragraph 12 to paragraph 15 and I shall now read extracts from it: In England, it has always been considered that a provision could not be a penalty unless it provided for an exorbitant alternative to common law damages. This meant that it had to be a provision operating upon a breach of contract… …there is a fundamental difference between a jurisdiction to review the fairness of a contractual obligation and a jurisdiction to regulate the remedy for its breach. Leaving aside challenges going to the reality of consent, such as those based on fraud, duress or undue influence, the courts do not review the fairness of men’s bargains either at law or in equity. The penalty rule regulates only the remedies 4 of 7 available for breach of a parties primary obligations, not the primary obligations themselves. … This means that in some cases the application for penalty rule may depend on how the relevant obligation is framed in the instrument, i.e. whether as a conditional primary obligation or a secondary obligation providing a contractual alternative to damages at law. Thus, where a contract contains an obligation on one party to perform an act, and also provides that, if he does not perform it, he will pay the other party a specified sum of money, the obligation to pay the specified sum is a secondary obligation which is capable of being a penalty; but if the contract does not impose (expressly or impliedly) an obligation to perform the act, but simply provides that, if one party does not perform, he will pay the other party a specified sum, the obligation to pay the specified sum is a conditional primary obligation and cannot be a penalty. However, the capricious consequences of this state of affairs are mitigated by the fact that, as the equitable jurisdiction shows, the classification of terms for the purpose of the penalty rule depends on the substance of the term and not on its form or on the label which the parties have chosen to attach to it.

[20]So, putting all of that together, the question for me boils down to this: is the reality of the agreement between the parties that there was an implied term of the contract requiring the claimant to continue in employment for 24 months after receipt of her PIN? I am afraid I think the answer to that question is very clearly “no”.20.1 There are express terms relating to contract termination. The claimant had to give 8 weeks’ notice, which could be given at any time. That’s one reason why there clearly isn’t some other obligation to serve 24 months (rather than a minimum of 8 weeks).

20.2 Clause 16 has various sub-clauses under it providing for various sums to be payable if employment terminates after different periods. There is a 3 month period in there and a 12 month period in there as well as the 24 month period provided in relation to repayment of the £2,000.

20.3 The employee, the claimant, has to pay the same if she leaves one day after getting her PIN as 23 months after getting her PIN i.e. there is no particular incentive on her to stay nearly 24 months. If she is going to go she may as well go straightaway.

20.4 Looking at it another way, on what possible basis as a matter of logic could one say that there was an implied term requiring the employee to stay 24 months? Yes, there was an incentive to stay 24 months and a disincentive to leave before then, but that doesn’t add up to an implied term. One couldn’t be implied from necessity or business efficacy or using any of the other possible bases for implying terms. If 5 of 7 one was to find an implied term to that effect one would have to find it within (i.e. by reading it into) an express term and it simply isn’t there.

[21]In case I am wrong about that, I will briefly go on to consider whether, if it is a damages clause, it’s a penalty clause. In short, I think it is – or, rather, would be were I wrong about it not being a damages clause.21.1 I can see no commercial justification for this clause in the evidence. The respondent’s evidence doesn’t show or prove any commercial justification, in that it merely demonstrates what the respondent’s justification for having a similar clause would be and not what it’s predecessor’s justification was.

21.2 The fact that there was a cost attached to providing this training doesn’t provide justification for payment of £2,000 in respect of that cost. One has to get £2,000 from somewhere and there is no proper evidence before me as to where the respondent’s predecessor got £2,000 from.

21.3 Moreover, what could be justified commercially would be for the sum payable to be on some kind of sliding scale. There would not necessarily have to be continual sliding scale, but at least something like reducing the amount payable after, say, 6 months and 12 months and 18 months; something like that.

21.4 By charging the same to someone who leaves after a day as someone who leaves after just shy of 2 years you inevitably end up with something wholly disproportionate. It has the effect of punishing anyone who leaves in less than 2 years but serves for a significant period of time after they get their PIN, as the claimant did. I think the clause could properly be described as extravagant because of its potential effect on people in that situation. It had that extravagant and disproportionate effect in the present case.

21.5 If we assume that it really did cost something like £2,000 to train somebody and that that would be the cost to the respondent’s predecessor had the claimant left one day after getting her PIN but that that cost has reduced to nil, or effectively to nil, after 24 months, then in relation to the claimant or someone like the claimant who left 13 months (I think it was) after getting her PIN, she would be paying more than twice the amount actually ‘lost’ by the respondent at that point. I agree with claimant’s counsel’s submission that if you are paying twice the true cost that can properly be described as disproportionate.

[22]Accordingly, for those reasons, if I were wrong on the damages / debt point, the claim would succeed. However because I do not think this is a damages clause at all but simply a clause providing for payment of a particular sum on the happening of a particular event, the rules relating to penalty clauses don’t bite at all and, therefore, the claim fails. 6 of 7

[1]This is the written version of the Reasons given orally on the day for my decision in the claimants’ favour, written reasons having been requested by the respondent.

[2]By way of background, I refer to the Judgment and Reasons which I gave at the final hearing on 24 July 2018, the written version of which was subsequently sent to the parties. My judgment was that the claimant’s claim failed and was dismissed.

[3]The claim is for a sum of £2,000. The cause of action is unauthorised deductions from wages. The claimant’s argument as to why this was an unauthorised deduction was essentially no more and no less than that the deduction was made pursuant to an unenforceable penalty clause. I decided the penalty clause point in the claimant’s favour. However, the claim failed because I also decided that the clause in question was not a damages clause of any kind – that, in fact, it was a debt clause.

[4]The claimant applied for reconsideration and has also appealed. I am not concerned with the appeal, although I understand that the appeal overlaps almost completely with the reconsideration application.

[5]Four points are made in the reconsideration application, labelled a, b, c, and d. Points a and d have been withdrawn during the course of this hearing. Point a was an allegation that there was no consideration. Point d was a point about the National Minimum Wage Regulations. I should say, provisionally (without, obviously, finally deciding the point), that the claimant’s arguments in relation to the National Minimum Wage Regulations have some force, but the reason why that argument has been withdrawn is that, on any view, it was not raised before me. There was no discussion or argument or evidence concerning the National Minimum Wage Regulations at all at the final hearing.

[6]The points that remain are, then: b. – “Whether or not the term for repayment is properly to be considered a debt obligation and so not a penalty clause, having regard to the intention of the parties and the true nature of the transaction to avoid a capricious outcome”; and c. – “Whether or not the repayment was properly to be considered a loan debt, since this was not a true loan, being at no point available to [the claimant] in cash to do with as she pleased, and since there was no evidence before the tribunal to consider that it had in fact been paid to any third party”.

[7]I am allowing the reconsideration application and setting aside my decision against the claimant and replacing it with a decision in favour of the claimant on the basis of ground b. I reject ground c.

[8]This case is about what I understand to be an increasingly common practice of certain care providers, where they get nurses from abroad to come over and work in their care homes or hospitals, although this seems mainly to be something that care home owners do. As part of the contracts of employment, they essentially say to these nurses, “During the initial period of your employment, you will be given some training. That training costs us money and therefore we are going to charge you for it. The way we are going to charge you for it is by nominally making a loan to you, although no money will change hands, and if you carry on working for us for a period [and in this present case this was a period of 24 months] after you have got your PIN authorisation – the signifier of official registration to work as a nurse – you won’t have to pay anything, but if you do leave our employment within that period [that is to say, in this case, within a period of 24 months] you will have to repay something.”

[9]In the present case, it was an ‘all or nothing clause’, which is one of the reasons why I decided the penalty clause point in the claimant’s favour. In other words, if she did 23 months’ work and then left the respondent’s employment she would have to repay £2,000 in full; if she left after one day she would have to pay £2,000 in full; but if she left one day after 24 months she would have to repay nothing.

[10]I have used the verb “repay”, but my finding was that, in reality, this was an obligation to pay £2,000 if she didn’t work for the respondent for 24 months. I shall return to that later.

[11]My initial response to the reconsideration application – and I commented on this when allowing the reconsideration application to go forward pursuant to rule 72(1) – was that the claimant was seeking to raise arguments as part of a reconsideration application which had not been raised before me. The claimant [counsel on her behalf] at this hearing accepted that point, as I have already mentioned, in relation to the National Minimum Wage argument, but did not accept it in relation to the other parts of the reconsideration application. Ultimately, I was persuaded that the arguments which were being raised in the reconsideration in b and c were the kind of arguments that it was permissible for somebody to raise and that the reconsideration application was not, in this respect, an impermissible attempt to get a second bite of the cherry.

[12]My focus is on point b because that is the point which has led to me deciding this reconsideration application in the claimant’s favour. The point that the claimant is making which I consider to be her best point – and which has in fact been determinative – relates to what was stated in a letter from the respondent to the claimant dated 18 June 2015.

[13]The claimant’s employment actually started on 17 August 2015. The letter dated 18 June 2015 was, it appears, the only document (or the only relevant document that was before me) provided to the claimant by the respondent before she started her employment, albeit she did not sign to confirm that she had read and understood it until 4 September 2015, which was after she started her employment. (The claimant’s address on the letter of 18 June 2015 is an address in Kerala, India, so presumably what happened was it was sent to her in June 2015 and then she was required to sign a copy of it after she arrived in the UK, in the first weeks of her employment. However I don’t think there was any evidence about that at the hearing, presumably because it didn’t seem important at the time.)

[14]What the letter says which is relevant is: … there are substantial costs incurred in staff training and we have decided to charge a fee of £2,000.00 which is payable on commencement of their supervised practice training programme. We have taken into consideration that the majority of the overseas nurses are not in a position to pay the training fees upfront. For this reason, we are offering a loan of £2,000.00 to each member of staff. This entails that staff do not have to pay this amount upfront; rather the organisation will bear this cost. However, if and when any staff decides to leave this organisation before a period of completed 24 months after the staff receives their PIN number he/she is liable to pay this amount before leaving the organisation. When the staff completes 24 months employment with this organisation after the receipt of their PIN, the organisation considers that it has recouped its training cost through staff’s service during this period. …. After completion of your adaptation course and registration with the Nursing and Midwifery Council, you will be offered a permanent position at the Milford Care. This entails that should any staff decide to leave our employment prior to repayment of the initial loan and before completing the mandatory 24 months period after gaining registration then they will be required to repay the loan amount of £2,000 in full.

[15]The key to this reconsideration application is the phrase “mandatory 24 months period after gaining registration”.

[16]At the final hearing in July 2018, everyone’s focus was on another document: the employment agreement dated 12 May 2016. Its first clause is, “Your employment commenced on 17 August 2015…”, and its second clause, “As of 4 May 2016 you are employed as a Registered Nurse…”. Clearly, then, the date of the employment agreement is correct. The fact that this agreement of 12 May 2016 dated from some time after the commencement of employment was not something that either party made anything of at the final hearing and nobody has sought to make anything of it in relation to this reconsideration application.

[17]The relevant part of that agreement is clause 16.3(d): “Where you leave our employment within … twenty-four months of receipt of PIN number you agree that we may deduct from any sum we owe you the fee of £2,000.00. This £2,000.00 fee is towards the cost of your supervised practi[c]e training.”

[18]The claimant argues that if you take all the circumstances into account, and in particular the use of the phrase “mandatory 24 months period” in the letter of 18 June 2015: there was an obligation on the claimant to work for 24 months after obtaining her PIN; and therefore that the term requiring her to pay a particular sum of money in circumstances where she did not work for 24 months after the receipt of her PIN was a damages clause not a debt clause; and therefore, given that I decided that if it was a damages clause and not a debt clause that it was an unenforceable penalty clause, the claim should succeed.

[19]I have accepted that argument. I refer to paragraph 20 of my Judgment and Reasons from the final hearing: “the question for me boils down to this: is the reality of the agreement between the parties that there was an implied term of the contract requiring the claimant to continue in employment for 24 months after receipt of her PIN?” I answered that question in the negative and today I answer it in the positive.

[20]Before explaining why I have changed my mind in relation to that, I need to explain why it is that I am happy for this point, that was not raised before me at the final hearing, to be raised now.

[21]The particulars of claim attached to the claim form only referred to clause 16, as did the claimant’s skeleton argument for the final hearing. The letter of June 2015 was mentioned in the claimant’s witness statement, but only in passing. This was understandable because any differences between the wording of clause 16 in the employment agreement and in the equivalent part of the letter would not have been important in relation to the argument that the claimant came to the tribunal in July 2018 to argue: the penalty clause point. It only becomes important when looking at the debt / damages point and in particular in relation to the question which I posed in paragraph 20 of my decision – see above.

[22]Clearly, there isn’t a bright-line distinction between the kinds of arguments or issues which somebody is entitled to raise on reconsideration or on appeal which weren’t put forward at the original tribunal but which a claimant is entitled to raise and those which he or she isn’t entitled to raise.

[23]The reason I think this falls into the first category and not the second are:23.1 the letter was before the tribunal;

23.2 this is a subsidiary point within an argument that was discussed extensively at the hearing, namely the argument over whether or not this was a debt or a damages clause. If this were the respondent’s reconsideration application and we hadn’t got into the debt-or-damages point at all at the final hearing and the respondent, having lost on the penalty point, was now seeking reconsideration on the basis that this isn’t a damages clause but a debt clause, that would seem to me to fall on the wrong side of the line. But we had a discussion over what type of clause it is at the final hearing and all this amounts to is another reason why this might be said to be a damages clause rather than a debt clause, moreover one that relies only on a piece of evidence that was before the tribunal and that was discussed, albeit briefly, during the final hearing;

23.3 there is no new evidence and had this argument been raised during the final hearing this would not have made any difference in terms of what happened other than that the respondent might have put forward some additional submissions. One of the difficulties the respondent had at the final hearing was that its only witness was somebody who was not ‘on the ground’ at the time when the contract with the claimant was entered into. The claimant had TUPE-transferred into the respondent’s employment so the respondent inherited all relevant contractual rights and obligations, including the right to have the ‘loan’ ‘repaid’. Putting to one side (but not forgetting) the fact that people’s subjective intentions are not supposed to be relevant to construing a contract, the respondent’s witness, Mr Shafiq, was not even in a position to say why the claimant’s employer had entered into this agreement; what its thoughts were at that time; where the figure of £2,000 had come from; and so on and so forth. This was because he wasn’t there. The respondent, which he was the owner and director of, was not the company that had entered into those obligations. All he was able to tell me – and unfortunately for him it wasn’t really very relevant – was why his company would or might have entered into a similar obligation with the claimant. So, in summary, had this subsidiary point been made at the final hearing it would not have made any difference to anything at all of substance. All that would have happened, potentially, is that the respondent would have argued the point and they’ve had an opportunity to argue the point at this reconsideration hearing: it’s flagged up in the reconsideration application. The respondent has put in written submissions and for reasons I can quite understand has elected not to attend. The respondent has had its opportunity to meet this point. Therefore it is not unduly prejudiced by this point being raised now rather than at the final hearing.

[24]In all of those circumstances, I think this is the kind of thing which it ought to be open to someone to raise as part of reconsideration (or, indeed, as part of an appeal, but that is not a matter for me) and therefore I am allowing the claimant to raise it.

[25]Returning to the substance – the merits – of the point itself, the issue I was deciding (see paragraph 20 of my decision) was: was there an obligation on Mrs Antony, the claimant, to remain in employment for at least 2 years? There was, of course, a strong economic incentive on her to remain in employment for 2 years and that was clearly what the clause was there to do – to provide that incentive. The respondent’s predecessor, I am sure, entered into this kind of agreement because it wanted to do its best to ensure that it didn’t have to recruit other people. It spends money on recruitment and therefore it likes people to stay with it for some time. I can quite understand that from a commercial point of view and there is nothing improper about that from a commercial point of view. But the existence of a strong economic incentive is not enough to make it a contractual obligation.

[26]However, because I was focussed purely on the 2016 employment agreement, I had (and I have to confess this) completely overlooked the fact that in the letter of June 2015, which is signed by both parties and clearly contains part of the contract between the claimant and the respondent, the word “mandatory” was used. If you read the part of the letter using that word in conjunction with clause 16.3 of the employment agreement, it takes on a quite different flavour.

[27]If I look at the arguments which I put forward in paragraphs 20.1 to 20.4 of my Reasons to explain why I decided that there wasn’t an obligation to continue in employment for 24 months:27.1 I will pass over paragraph 20.1 and will return to that in a moment;

27.2 in paragraph 20.2, I refer to the sub-clauses of clause 16.3 other than sub-clause (d) providing for various sums to be payable if employment terminates after different periods. That no longer applies because what is said in the letter about the 24-month period being “mandatory” is not said about any of those other periods referred to in those other sub-clauses and so there is no potential problem of inexplicable inconsistency between the obligations contained in the different subclauses of clause 16.3. There is an inconsistency, but it’s not a problem because there is a reason for the inconsistency, namely that there is a letter – the June 2015 letter – which has to be read in conjunction with sub-clause (d) that doesn’t have to be read in conjunction with the other sub-clauses;

27.3 my point in paragraph 20.3 of the Reasons is that the claimant has to pay the same if she leaves one day after getting her PIN as 23 months after getting her PIN. If she is going to go, she may as well go straightaway. In the absence of an express clause – something using the language of obligation in the employment agreement in relation to service for 24 months (such as referring to it as a “mandatory … period”) – what I was looking at was whether there was an implied term requiring her to continue in employment for 24 months. In relation to whether there was an implied term to that effect, the argument set out in paragraph 20.3 of the Reasons had some resonance for me, because it seemed to me that it was unlikely that there would be an implied term requiring her to stay for 24 months which, if breached, would have no worse consequence for the claimant if the breach occurred after a day than if it occurred after 24 months less one day. However, having now noticed that there is an express term using the language of obligation, I do not have to worry about something making an implied term unlikely. Putting it another way, if serving 24 months is mandatory, the fact that this may have some peculiar effects is neither here nor there, really;

27.4 paragraph 20.4 of the Reasons was: “on what possible basis as a matter of logic could one say that there was an implied term requiring the employee to stay 24 months?”. The point I was making by posing that rhetorical question was valid when I was purely looking at clause 16.3 of the employment agreement, but is not so when I take the June 2015 letter into account. That letter answers the question posed: the basis upon which one could say this is – that there was a letter, signed by both employer and employee and sent to the employee before she commenced employment, describing serving 24 months as “mandatory”;

27.5 in paragraph 20.1 of the Reasons, I referred to the express terms relating to the termination of the contract. The claimant had to give 8 weeks’ notice, which could be given at any time. Had I taken the June 2015 letter properly into account at the final hearing, what I would have been faced with when making my decision was two potentially competing or contradictory clauses. On the one hand, the letter was to the effect that it was “mandatory” to stay for 24 months. On the other, there was a clause in the employment agreement seemingly telling the claimant that she could give 8 weeks’ notice at any time. I am now presented with that apparent contradiction and have to construe the two documents together so as to give meaning to both of them. My conclusion – and it is the conclusion I think I would and should have reached at the final hearing – is that the overriding obligation was to stay 24 months, but that there was a subsidiary obligation to give 8 weeks’ notice of leaving whenever the claimant decided to leave. There is no contradiction between, “you must serve a minimum period of 24 months” and, “if you leave, whenever you do so, you must give us 8 weeks’ notice”. They are two separate and distinct obligations.

[28]What I am left with is a situation where there was a (from the employer’s point of view, deliberately) strong economic incentive on an employee to stay for 24 months, because there was a clause to the effect that leaving before the 24 months were up would have significant financial consequences, and where that obligation was explained to the employee in a letter referring to, “completing the mandatory 24 months period after gaining registration”, and where the letter was sent to them before they commenced employment and which they were expected to sign (and in the claimant’s case did sign) shortly after they started. In this context, if “mandatory” doesn’t have its usual meaning of ‘something the employee has to do’, I don’t know what it does mean. Giving the word its natural and ordinary meaning and looking at the reality of the situation, I am satisfied that there was the relevant obligation under this contract to remain in employment for at least 24 months.

[29]The contract consisted of two documents: the June 2015 letter and a later set of written terms and conditions. When read together, the obligation on the claimant was to work for the respondent’s predecessor and any successor for a minimum of 24 months after gaining registration. It was “mandatory” for her to do so.

[30]In conclusion, the clause that the claimant had to repay £2,000 was a damages clause and not a debt clause and therefore her claim succeeds, on the basis of my decision at the final hearing that if it was a damages clause, it was an unenforceable penalty clause.

[31]I turn, briefly, to the claimant’s other argument – argument c.

[32]There is the same potential difficulty in relation to c as to b: it wasn’t raised at the final hearing, or, at least, it wasn’t raised in the way it is being raised now. As to that, essentially: the same points arise as in relation to b; I think this is something the claimant is entitled to raise in a reconsideration application for the same reasons I decided the claimant could raise b.

[33]The claimant’s argument in c, as I understand it, is as follows: this was put forward to the claimant as a loan; to be an authorised deduction, it has to be lawful; this was not lawful because the respondent failed to produce any evidence that a loan was ever made; the respondent has to prove every part of its case; in order to recover a loan, the bare minimum is to prove that a loan was made; they failed to prove that and therefore the claim should not have succeeded – and the respondent would have been unable to enforce this repayment obligation in the County Court for the same reasons.

[34]I am afraid I don’t accept that argument. The word “loan” was just a label. In fact, if we look at the June 2015 letter, it refers to a “fee” and it explains very clearly what is going to happen. There was never any suggestion that money was going to change hands when the ‘loan’ was made. The letter sets out the commercial situation and that was well understood by the claimant: it costs us money to provide you with training; we are going to charge a fee of £2,000 for that training; the way in which we will fund that fee – because you are not going to be able to come up with £2,000 upfront – is by nominally loaning you the £2,000 in order for you to pay it back to us and we do that by nominally paying ourselves £2,000; you will pay it back by working for us for 2 years or, if you leave within 2 years, by actually paying it to us as a sum of money. The “loan” was entirely illusory.

[35]What this amounted to was: in consideration for us providing you with some training, if you leave within 24 months you will have to pay us £2,000. That was the substance and the reality of the obligation here. There is nothing unlawful about that, subject to the penalty clause point (and any other valid points, e.g., possibly, the National Minimum Wage point). It makes not a jot of difference if no money changed hands, or that it was labelled as a loan.

[36]If this were: in consideration for us paying you £2,000, you have to do such-and-such, then the respondent would have to show that it had done it’s side of the bargain, namely paid the £2,000. But that was not what this was, nor what it purported to be. What it was and what it purported to be was: the charge for providing you with training is £2,000; the way we levy that charge is by pretending we have loaned you £2,000 and that you have paid it to us. That was pretty much what the paperwork said in terms. No money was ever going to change hands, so the claimant cannot say the failure to show that money changed hands is relevant, let alone important. There was no breach of any relevant obligation by the respondent. The obligation was to provide the training and I found at the final hearing that training had been provided and that there had not been a total failure of consideration in this respect.

[37]There was no failure by the respondent to provide money which it had contracted to provide because that was not the nature of the transaction. I am repeating myself, but labels aren’t important. It was referred to as a loan, I assume, to make it more palatable; it was purely cosmetic. There was, however, no breach of any relevant contractual obligation and therefore this doesn’t provide a basis for saying that the respondent made unauthorised deductions.

[38]The claim succeeds, however, because the respondent recovered the £2,000 the claimant is claiming pursuant to an unenforceable penalty clause.