MRS S L SANDS-ELLISON v ONE CALL INSURANCE [2002] UKEAT 0002_02_2211

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2002] UKEAT 0002_02_2211Case No Appeal No. EAT/0002/02Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MRS S L SANDS-ELLISONAPPELLANTONE CALL INSURANCERESPONDENT
Before
His Honour Judge J Altman Professor P D WickensDate 22 November 2002
[1]APPEARANCES For the Appellant MR ADAM OHRINGER (Representative) Instructed by: Free Representation Unit Peer House 4th Floor 8-14 Verulam Street London WC1X 8LZ For the Respondent NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT HIS HONOUR JUDGE J ALTMAN This is an appeal from the Employment Tribunal held at Sheffield on 18 October 2001 when the application for an unlawful deduction from wages was dismissed.[2]The Tribunal held that the Applicant (Appellant) left her employment on 7 March 2001. She gave no notice of termination and in due course received her final wage but the Respondents withheld payment of commission for sales and holiday pay. They rely upon a term in the contract of employment generated by the Respondents in standard form:
"We require any employee with over 2 months employment to give at least one week's written notice. Any employee with over one year's employment is to give at least two week's written notice. Upon working your full notice you will be entitled to any outstanding holiday pay and bonus."
And this was followed by the rather curious note:
"*PLEASE NOTE: Any holiday accumulated but not used will be deducted from your final wage."
[3]The Tribunal found that that provision authorised the Respondents to make the deduction from the final pay where there had been failure to give and work notice and the deduction could include holiday pay and bonus, including the commission to which we referred earlier.[4]The Tribunal rightly referred itself to section 13 (1) (a) of the Employment Rights Act 1996 which prohibits an employer from making a deduction from wages, except where it is permitted by contract. However, the Tribunal concluded that the deduction was a contractual deduction in accordance with the terms to which we have just referred.[5]Mr Ohringer, who has appeared here today on behalf of the Applicant and to whom we are greatly indebted for his most succinct and persuasive Skeleton Argument, draws our attention to the wording of the reference to the effect of working full notice. It is simply, as he rightly points out, that where the reference to notice is contained in the contract of employment there is an encouragement to employees to give their full notice because they are reassured that they will get any outstanding holiday pay and bonus. However, it rather looks, on the face of it, that when that has been given with the right hand it is taken away by the left hand in the next provision that enables the employer to deduct accumulated holiday from the final wage, which, although it is not before us today, is probably an unlawful provision in any event.[6]It is rightly said that simply to give an employee a reassurance in a contract as to when payment will be made and to set out specific circumstances when payment will be made is quite different from saying that there are circumstances where you would normally be entitled to the payment but will be deprived of it. Nowhere do we find in the contract any provision that entitles the employer to withhold pay as a penalty for not giving proper notice.[7]Accordingly we find that the clause of the contract referred to does not entitle an employer to withhold monies that are otherwise due at the end of a contract of employment.[8]The matter does not end there because, as Mr Ohringer rightly points out, the only entitlement to make a deduction from a final pay package in these sort of circumstances, where someone has not given notice, is where the failure to give notice is a genuine pre-estimate of the loss or damage that flows from the failure to give notice.[9]On the face of it, this is not a genuine pre-estimate of loss and damage that the Respondents have suffered; quite the opposite; it is a penalty, on the face of it, completely irrelevant to the effect on the employer of not being given notice, that there is an obligation to pay holiday pay and bonus. After all, in the case of some employee that has accumulated a very large sum of holiday pay and a large amount of commission, when compared to another employee who has no outstanding holiday pay and no outstanding bonus, it is difficult to see what distinction could be drawn between them if one were assessing the damages that each would cause the Respondent by failing to give, for instance, the same period of notice. The very fact that it makes a distinction between employees in that way shows that it is clearly not a genuine pre-estimate of loss or damage but is a penalty and, as was pointed out in Giraud UK Ltd v Smith [2000] IRLR 763, a penalty is not damages and does not give rise to an entitlement to make a deduction. So for that reason also the Employment Tribunal fell into error and accordingly this appeal falls to be allowed.[10]There was a cross-appeal on the basis that the deduction was lawful because there had been an overpayment of £540 but there is no supporting material. The Respondents have notified the Tribunal that they do not propose to attend today and we have proceeded on the basis of the information and material before us.[11]This appeal falls to be allowed on the basis that for the finding of the Employment Tribunal is substituted a finding that the Respondents unlawfully deducted £408 from the wages of the Applicant and they are ordered to pay that sum to her.