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Posted 29 November 2013
by Martin Laver

Do repayment clauses amount to unlawful deduction of wages?

In a recent case by the Employment Appeal Tribunal (EAT), the court held that, in that case, it did not.

Ms Bryla relocated from Poland to Britain to work for her employer as a care worker. Her employer paid for the recruitment fees to the agency and her flights. Her contract stipulated that this money would have to be repaid to the employer through her wages each month. The employer summarily dismissed her for gross misconduct during her 12th week of employment whilst money was still outstanding.

The employer sought to recover the remaining fees and flight costs.  The claimant claimed that this clause amounted to a penalty clause and was therefore an unlawful deduction of wages.

The Employment Tribunal at first instance agreed with Ms Bryla and order the employer to repay the money.  On appeal, the EAT held that:

  • The clause did not amount to a penalty and instead, it was a pre-estimate of loss.
  • The important position to analyse was when the contract was entered into, not when the dispute arose.
  • The trial judge should have looked at the maximum amount that would have been available in a common-law action for damages for breach of contract and the amount which was stated in the contract between the parties.
  • The tribunal should have considered whether there was ‘an extravagant or unconscionable difference’ between the two, which would have shown whether the clause was a penalty or a pre-estimate of losses.

Whilst the employee was unsuccessful, this case highlights that Employment Tribunal will be willing to consider and apply the contractual provisions around penalty
clauses. This means that a clause requiring the repayment of training or other costs will be subject to scrutiny.  A well drafted clause will give an employer protection.

Perhaps the time is right to review the repayment provisions in your employment contracts?

For queries or more information, contact the employment team on telephone 01392 207020 or by email employment@tozers.co.uk.

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About the author

Martin Laver

Partner

Partner in the commercial litigation team specialising in disputed trusts and Wills