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Overpayments and other exceptions
[ch 4: pages 108-109]A worker cannot bring a claim for unlawful deduction from wages in the employment tribunal if the reason for the deduction is that the employer made an overpayment (section 14, ERA 96). This is the case even if the error is because the employer wrongly calculated the amount due.
However, if there is a dispute and the worker genuinely believes they have not been overpaid, a tribunal can decide, as a matter of fact, whether or not there has been an overpayment.
Often, a worker accepts that they have been overpaid once it is brought to their attention, but has spent all the money and cannot repay it. If the employee is no longer employed when the employer discovers the overpayment, it will be up to the employer to bring a claim to recover the money in the civil courts. The worker might be able to resist the claim by showing that they had not realised there had been a mistake and had changed position believing the money was theirs, spending it or taking on extra liabilities such as a mortgage. But these are difficult arguments to win. In Commerzbank v Price-Jones [2003] EWCA Civ 1663, the Court of Appeal held that an overpayment which was clearly a mistake on the employer’s part could be reclaimed by the employer unless the employee could show that it would be inequitable for them to have to repay it.
The following relatively extreme case is a first instance decision and therefore not binding. Nevertheless it is useful, because it is a reminder that tribunal outcomes are not always predictable. Barclays did not appeal against this decision:
Following a TUPE transfer from Woolwich to Barclays Bank, part-time bank worker Mrs Keenan was given new terms and conditions, showing her salary as £17,000 (an increase from her pre-transfer salary of £9,500). She assumed the change reflected a hoped for pay rise in recognition of her long service. In fact, it was a mistake by Barclays, who had forgotten to pro-rata the full-time salary for her post to reflect her part-time hours. She was paid this higher salary for two years, during which Barclays failed to spot its mistake, even when providing her with a staff loan, an overdraft, a Barclaycard and a mortgage reference.
When it finally noticed its error, Barclays tried to reclaim the money and to cut Mrs Keenan’s salary to its part-time level. Mrs Keenan raised a grievance, as a result of which Barclays waived any claim to “historic overpayments” but insisted on cutting her salary. Mrs Keenan brought a tribunal claim alleging an unlawful deduction from wages.
Barclays argued that Mrs Keenan knew or ought to have known she was not entitled to such a high salary. The tribunal judge found for her, concluding that she had not known (and could not be expected to know) of the mistake and that if she had known, she would have told her employer. The judge took into account the bank’s failure to notice its own error for two years. Mrs Keenan was allowed to keep the overpayment and stay on her higher salary.
Keenan v Barclays Bank ET1100791/2009
Workers in retail employment have additional protection limiting deductions for cash shortages or stock deficiencies to a maximum of 10% of any one pay packet, except for the final one.
Deductions made because a worker has taken part in a strike or other industrial action short of a strike, are excluded by section 14 of the ERA 96, and cannot be pursued as an unlawful deduction from wages claim. However, the tribunal can consider whether there was in fact industrial action (Gill v Ford Motor Co [2004] IRLR 840). If the worker wants to challenge the amount of pay deducted, this must be done using the civil courts.
The rules prohibiting unlawful deductions from wages are not for use where there is a dispute as to whether the worker is contractually entitled to the payment at all. Instead, the right course is to bring a breach of contract claim (Coors Brewers Ltd v Adcock & others [2007] EWCA Civ 19). In practice, it may be sensible to claim under both headings, and to let the tribunal decide. However, remember that unlike a statutory claim for unlawfully deducted wages, a claim for breach of contract can only be brought in the employment tribunal once the employment has ended (see Chapter 3: Other remedies). While still employed, a claim for breach of the employment contract can only be brought in the civil courts.
Remember too that if you bring a contract claim in the employment tribunal against an employer, the employer will be allowed to counter-claim in the tribunal proceedings for any sums it claims are owed by you. In contrast, by limiting your claim to a statutory claim for the unlawful deduction of wages, your employer is prevented from bringing a counter-claim against you in the employment tribunal.