Unpaid Wages / Unauthorised Deductions

An employer’s duty to pay promptly agreed wages is essential to any employment relationship. The law recognises the importance of this duty by providing employees with two different types of remedies in the event of non-payment.

The first, traditional remedy is a claim for breach of contract whereby the affected employee may claim the unpaid wages as ‘damages’ together with interest thereon in the county court. In some circumstances, alternatively the employee may present a breach of contract claim in respect of unpaid wages (but without the right to recover interest) in the employment tribunal which has the power to award up to £25,000. However, a claim in the tribunal is not possible unless the non-payment arises or is outstanding on the termination of employment. Moreover, if a breach of contract claim is made, this entitles the employer to present a counterclaim.

The second remedy is to present a claim asserting that the non-payment amounts to an infringement of the statutory right note to have unauthorised deductions made from wages. This remedy has the benefit for the employee that he or she need not have ceased to be employed at the date of any claim. In normal circumstances a deduction is lawful only if it is authorised by law (e.g. tax deductions), by the employee’s prior written consent, or by a written contract of employment. However, there a various potential defences which may have application for an employer such as where the deduction is made in order to recoup a wages overpayment.

Together with the right not to have unlawful deductions made exist various other statutory rights such as in normal circumstances the right to not have to make payments to an employer (e.g. this generally prohibits ‘fines’ for poor performance or misconduct), and retail workers’ rights to not have deducted from their wages more than one-tenth on account of cash shortages or stock deficiencies.

Employees need to be aware that there exist strict time limits for presenting a claim in relation to unauthorised deductions – normally 3 months from the date of the deduction. However, where the deduction forms part of a series of deductions the time limit runs from the date of the last deduction. This means that in some cases an employer might face a claim for several thousand pounds deducted over a prolonged period. With the numbers of employment tribunal claims relating to unauthorised deductions increasing between 2007/08 and 2009/10 from 34,600 to 75,500* indicating greater awareness on the part of workers of this remedy, employers are wise to seek professional advice if they consider that they are at risk of infringing the law.

 

Employment Tribunal and EAT statistics 2009-10 (GB) 1 April 2009 to 31 March 2010, Ministry of Justice