Mr R Geary v Tangible Building Solutions Ltd: 3304296/2024
JUDGMENT
The complaint of unauthorised deductions from wages is well-founded. The respondent made an unauthorised deduction from the claimant's wages in the period May 2023 – February 2024. The respondent is ordered to pay to the claimant the gross sum of £52,427.56 deducted from pay.REASONS
[1]These are the reasons for my judgment of 25 November 2024. It appears that the judgment was sent to the respondent on 23 January 2025. They requested these written reasons on 27 January 2025 and that request was forwarded to me on 10 February 2025.[2]Some points are in dispute between the parties but the following items are not in dispute:a. The claimant was the finance director of the respondent and acted much as would be expected for a finance director of such a body. It was his full time job and he worked from home.b. He was a director and shareholder of the company, and had been brought on board in 2019 initially to carry out debt recovery under the auspices of another company, but in 2020 working directly for the respondent. This was part of a business expansion plan that also involved the appointment of another director and shareholder closely associated with the claimant. At that time the respondent had four directors and shareholders, all paid equally.c. The plans for expansion did not come to fruition and by May 2023 the claimant was not being paid what he had understood to be his full salary. Case No: 3304296/2024 2 From September 2023 onwards he was paid nothing. He resigned giving three months notice in November 2023.d. Surprising for two such experienced business parties, none of the arrangements for the claimant joining or working for the respondent were documented in any way.[3]There are three points for decision by me. The first is whether the claimant was an employee, the second is what the arrangements were for paying him and the third (depending on the answer to the first two) is what further payments may be owed to him as unlawful deductions from wages.[4]On the face of it the claimant worked full time for the respondent. He was a director and shareholder but this would not preclude him being an employee. Indeed, cases such as Clark v Clark Construction Initiatives [2008] IRLR 364 seem to suggest that in such a situation there is a strong indication that he would be considered an employee. Perhaps this is somewhat weakened by there being no written agreement, but there is nothing in writing suggesting any alternative arrangement.[5]In his closing submissions Mr Wilkins helpfully referred me to the case of Rainford v Dorset Aquatics (EA-2020-000123-BA), which he regarded to be effectively identical to the position in the claimant’s case.[6]That case concerned a director and shareholder paid (at least in part) by PAYE and without any written document governing their work. That is the same as the claimant’s case. In Rainford HHJ Shanks goes on to reinforce that the question of whether such an individual is an employee is a question of fact for the tribunal, and “where matters have been dealt with informally it may be a difficult question”. One point that seems to have been of importance in that case but does not apply here is the tribunal finding as a fact that the director had a right of substitution, which would usually be thought to be inconsistent with a contract of employment. There has been no suggestion of such a right in this case.[7]It seems to me that Rainford is best regarded as a repetition by the EAT that questions such as this are matters for the discretion of the tribunal, and in circumstances such as this where the claimant has acted in the traditional manner of a finance director, with no question of substation arising, I have no hesitation in finding that he was an employee.[8]There is then the question of what the arrangements for pay were. The claimant says this was simply a traditional monthly salary, together with a car allowance. Mr Wilkins says “it was explicitly understood by all involved … that director’s remuneration was inherently uncertain and subject to fluctuations based on the companies financial health … Remuneration would only be paid when the company had sufficient funds to cover all essential expenses.”. None of this was documented one way or another at the time the claimant started work. Case No: 3304296/2024 3[9]I can well understand that in a small company directors may waive or postpone their entitlement to remuneration in hard times, but that is a slightly different point to what Mr Wilkins seems to be suggesting, which is that there was no particular fixed amount due to be paid to any director. Remuneration was “inherently uncertain”. As I discussed with Mr Wilkins there seems to be considerable difficulty with this, not least being what would happen if there was disagreement amongst the directors as to what the company could afford any particular month. Mr Wilkins said that point never arose, or never arose until the claimant’s complaint. Perhaps that is the case, but surely if this was the arrangement there must also have been some way of resolving any disputes, otherwise each director really had no legally enforceable right to remuneration of any kind.[10]I do not think that any director would have agreed to or expected such an arrangement. It seems to me much more likely that there was basic remuneration agreed. There is some documentation to suggest that exactly how this was paid could be agreed between the parties, with Mr Wilkins receiving some funds from the company by way of a director’s loan. There would always have been the opportunity for directors to sacrifice or postpone their remuneration for the good of the company, but that would have been by way of voluntary agreement, and there is no sign that Mr Geary ever agreed that.[11]Therefore I find that Mr Geary was an employee and the pay arrangements were as he contends they were, not as Mr Wilkins contends they were.[12]There does not seem to be any dispute that in those circumstances the amount due is the amount claimed: £49,277.56. What remains is whether I should allow Mr Geary to amend his claim to also include the amount of the car allowance. I have decided that I should. In reality this is simply a loss that flows from his non-payment, raising no legal issues that have not been dealt with earlier, so I will allow him to make that claim and the total award will be £52,427.56. Approved by