LRD guides and handbook May 2017

Law at Work 2017

Chapter 4

Overpayments and other exceptions 



[ch 4: pages 113-114]

A worker cannot bring a tribunal claim for unlawful deduction from wages 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 the money and cannot repay it. If the employee is no longer employed, it will be up to the employer to try to recover the money in the civil courts. The worker might sometimes be able to resist the claim by showing they changed their position mistakenly believing the money was theirs, spending it or taking on extra liabilities such as a mortgage. These are difficult arguments to win. In Commerzbank v Price-Jones [2003] EWCA Civ 1663, the Court of Appeal held that an overpayment that was clearly a mistake by the employer could be reclaimed unless the employee could show that it would be inequitable to have to repay it.
Workers in retail employment have extra 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, 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.



In a new ruling, Weatherilt v Cathay Pacific Airways Limited [2017] UKEAT/ 0333/16/RN, the EAT has decided that a claim for unlawful deduction of wages can be brought even if there is a contractual dispute between the parties as to whether the payment is due at all. The claimant has two potential legal claims - for breach of contract and unlawful deduction of wages. However, it is important to 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). While still employed, a claim for breach of the employment contract can only be brought in the civil courts. 



Remember too that in a contract claim, the employer will be allowed to counter-claim for any sums it says are owed by the employee. By limiting any tribunal claim to a statutory claim for the unlawful deduction of wages, the employer is prevented from bringing a counter-claim in the employment tribunal proceedings.