The claimant brought various claims to the ET, including one that argued that the respondent had unlawfully made deductions from her pay. She had been off sick, and eventually dismissed. During her period of sickness, she was initially paid in full, then she was on half pay, then she was paid in full again for the period of her notice. However, the respondent deducted an amount from her notice period pay, to represent the amount that they assumed she would be receiving in respect of incapacity benefit. The ET ruled that the claimant had been paid everything to which she was entitled and the deductions were 'to take account of benefits received'. The claimant appealed.

The EAT upheld the appeal. There was no evidence before the Tribunal of any contractual provision authorising the deductions and the Tribunal was not entitled to infer that there may have been such a provision on the say-so of witnesses or from the nature of correspondence given the contractual documentation produced to it.
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Appeal No. UKEAT/0391/11/LA

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8JX

At the Tribunal

On 23 April 2012

Before

HIS HONOUR JUDGE DAVID RICHARDSON, BARONESS DRAKE OF SHENE, MR P GAMMON MBE

MS W J FAHEY (APPELLANT)

PLYMOUTH HOSPITALS NHS TRUST (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MS ANYA PALMER (of Counsel)

Free Representation Unit

For the Respondent
MR GRAHAM WATSON (of Counsel)

Instructed by:
Bevan Brittan LLP
Kings Orchard
1 Queen Street
Bristol
BS2 0HQ

UNLAWFUL DEDUCTION FROM WAGES

The Respondent deducted sums from the Claimant's pay during her notice period in respect of incapacity benefit which it assumed she would be receiving. However, before the Tribunal the Respondent did not establish any statutory or contractual requirement or authority for the deductions (see section 13 of the Employment Rights Act 1996). Appeal allowed.

1. This appeal concerns one small aspect of a judgment dated 12 April 2011 by the Plymouth Employment Tribunal (Employment Judge Griffiths presiding). By its judgment the Tribunal dismissed claims brought by Ms Wendy Fahey ("the Claimant") against her former employers the Plymouth Hospitals NHS Trust ("the Respondent"). She appeals against the dismissal of a claim for unlawful deduction of wages.

1. The facts can be stated in a short compass. The Claimant was employed by the Respondent successively as a ward administrator and theatre co-ordinator. She was absent from work on the grounds of ill health from 24 July 2009 until her employment came to an end on 30 July 2010.

1. For much of the time between those dates the Claimant was on sickness pay – first at full rate, then at half rate. When she was given notice, however, the Respondent reverted to paying her in full at her basic rate of pay.

1. Her complaint of unlawful deduction relates to this notice period. She says that deductions were made from her basic pay in both June and July 2010 which were unlawful. Her wages slips indeed show that deductions were made in both June and July 2010 – respectively in the sums of £452.27 and £791.48. Allowing for some other adjustments, the Claimant says that the balance of £654.49 is due to her by reason of these deductions.

1. Before the Tribunal the Respondent said that it had made the deductions in respect of incapacity benefit. It was the Respondent's case that it was entitled to make this deduction; and that otherwise the Claimant would have been better off when sick than she would have been if she was working.

1. At this point it is convenient to set out relevant parts of sections 13 of the Employment Rights Act 1996 which confers upon a worker a right not to suffer unauthorised deductions from wages.

"13 Right not to suffer unauthorised deductions

(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 worker's contract, or

(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.

(2) In this section "relevant provision", in relation to a worker's contract, means a provision of the contract comprised –

(a) in one or more written terms of the contract of which the employer has given the worker a copy on an occasion prior to the employer making the deduction in question, or

(b) in one or more terms of the contract (whether express or implied and, if express, whether oral or in writing) the existence and effect, or combined effect, of which in relation to the worker the employer has notified to the worker in writing on such an occasion.

(3) Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker's wages on that occasion."

1. Section 14 sets out statutory exceptions for certain types of deduction (for example, overpayments of salary or expenses, agreed payments to third parties and payments required by court order). No relevant exception applies in this case.

1. Section 23 provides for a worker to present a complaint to an employment tribunal on the grounds that a deduction has been made in contravention of section 13.

1. The Tribunal's reasons for the most part concern other claims which the Claimant had presented – in particular unfair dismissal and disability discrimination. It turned to her claim under section 23 of the 1996 Act in paragraph 30 of its reasons: –

"30. The claimant asserts that she is owed money deducted from her salary in respect of incapacity allowance. We are satisfied that she has been paid everything to which she is entitled. The Trust accepts that the way in which her pay was managed could have been better. She had a period of sickness absence on full pay, a period of sickness on half pay and a period while absent, when she was paid and entitled to holiday pay. She was in receipt of benefit and through some errors in the information as to the dates of her commencing her period of sickness absences, some overpayments were made which were then deducted in subsequent months, and then deductions made to take account of benefits received. The matter is not without its complexities, but we are satisfied that the respondent, following full enquiry and subsequent payments, has paid to the claimant all sums due to her arising out of her employment or its termination."

1. The Claimant's grounds of appeal are straightforward. She says that the Respondent accepted at the Tribunal that the deductions had been made, but never put forward any justification meeting the requirements of section 13. In particular she had never signified in writing her consent to the deduction; and the Principal Statement of Employment and attached conditions of employment which were produced to the Tribunal contained no provision requiring or authorising the deduction to be made. There was accordingly no basis in law or fact for the Tribunal's conclusion. On the evidence, the Tribunal was bound to find that an unlawful deduction had been made.

1. The Respondent, represented today by Mr Watson, is constrained to accept that the Tribunal had before it no contractual document requiring or authorising the deductions to be made. The Claimant's Principal Statement of Employment and attached conditions of employment indeed did not do so.

1. He submits, however, that the Tribunal was entitled to accept oral evidence from the Respondent's witnesses to the effect that employees on full notice pay were not entitled to accept Department of Work and Pensions Benefits as these would have represented an overpayment. Alternatively he submits that the Tribunal was entitled to infer, from correspondence where the Claimant was told that she was paid less "incapacity benefit assumed", that there must have been a contractual term entitling the Respondent to deduct benefits from pay. He says that the focus at the hearing was not on the right of the Respondent to make a deduction but on the nature of the benefit concerned.

1. We reject these submissions. The Tribunal found that deductions were made "to take account of benefits received". There was no evidence before the Tribunal of any contractual provision authorising these deduction. The Tribunal was not entitled to infer that there may have been such a provision on the say-so of witnesses or from the nature of correspondence given the contractual documentation produced to it.

1. The Tribunal was bound, on the evidence before it, to hold that the deductions were unauthorised. It follows that the appeal will be allowed; and an order made requiring the Respondent to pay to the Claimant the sum of £654.49.

1. As we leave this case, we should record the following points.

1. Firstly, when the Respondent filed an Answer to this appeal it also made an application to the Registrar of the Appeal Tribunal to adduce further contractual documentation, which did not on the face of it form part of the Claimant's Principal Statement of Employment or the attached conditions which were produced to the Tribunal. The Registrar rightly refused the application to adduce this evidence. If the Respondent wished to argue that it formed part of the Claimant's contract of employment the time for doing so was before the Tribunal.

1. Secondly, the Claimant says that in June and July 2010 she was not entitled to incapacity benefit as the Respondent thought; but was in receipt of Employment and Support Allowance. It follows that for the period of her notice, when she was paid full pay less the deductions to which we have referred, she may indeed be better off (once she has been paid the deducted sum) than if she had been employed. We record that the Department of Work and Pensions was notified by the Appeal Tribunal of this appeal and asked whether it wished to be a party. It declined to intervene. Although recoupment provisions apply to certain awards made by Employment Tribunals, they do not apply to an award made under section 23 of the Employment Rights Act 1996. This being so, whether any sum is repayable to the Department of Work and Pensions is a matter between the Claimant and the Department which does not concern the Appeal Tribunal.