LRD guides and handbook May 2018

Law at Work 2018

Chapter 4

Overpayments and other exceptions 


[ch 4: page 103]

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 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 they are no longer employed, it will be for the employer to try to recover the money in the civil courts. A worker might sometimes be able to resist the claim by showing that 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 must be repaid 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 contract claim, the employer is allowed to counter-claim for sums it says are owed by the employee. By contrast, in a statutory claim for the unlawful deduction of wages, the employer cannot counter-claim for money owed (although the employer can bring a separate claim against the employee for breach of contract in the civil courts).