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You are in: Home Page | About Thompsons | Publications | LELR Issue 116
LELR Issue 116 (November 2006)
In the News
Fixed Term Work Directive
Working Time Regulations
Monitoring Employees
Pension Benefits
Payment on Sick Leave
Admissable Evidence
Deductions from Wages
The only time limit provided by statute for claims relating to unlawful deductions from wages relates to straightforward deductions, and states that time runs from the date that the deduction was made.
The Employment Appeal Tribunal (EAT) has clarified in Arora -v- Rockwell Automation Ltd that the same time limit applies to claims involving an alleged shortfall.
Mr Arora worked for Rockwell Automation Ltd from January to March 2005 when his employment ended. He subsequently wrote to ask why he had been dismissed, and at the same time “mentioned he was due payment for overtime”.
He did not get a reply from the company until 15 April, when they wrote to say that the reason for termination was “unsuccessful completion of the probationary period”. They set out the payment he was due, which included just over £1,000 for overtime.
Mr Arora then took out a grievance, saying he was owed more. However, as his employment had ended on 4 March, the tribunal said that the time limit for making a complaint was 4 June. His grievance, which he lodged on 16 June, was also outside the time limit and could not be used to extend it under the dispute resolution procedure.
He appealed, arguing that time did not start to run until 15 April (the date of payment of the wages from which the deduction was made), and that his grievance was therefore still in time.
The EAT identified three types of unauthorized deductions – a straightforward deduction which is identified as such; a complete non-payment; and a payment that is alleged to have a shortfall (as was the case here).
Originally, the courts said that the law governing this area could only cover straightforward deductions and did not include non-payments.
It was not until the 1991 case of Delaney -v- Staples that the term was widened to include the latter.
This is now contained in section 13(iii) of the Employment Rights Act (ERA) 1996 which states that:
“Where the total amount of wages paid on any occasion by an employer to a worker … is less than the total amount of the wages properly payable … the amount of the deficiency shall be treated … as a deduction made by the employer from the worker’s wages on that occasion.”
The EAT said this clearly covered the underpayment of overtime and commission to Mr Arora.
The EAT said that with a straightforward deduction in breach of contract, the time limit was set down in section 23(2) ERA.
This stipulates that a tribunal cannot consider a complaint unless it is presented within three months from “the date of payment of the wages from which the deduction was made."
Where there is a complete non-payment, however, the situation is different and time begins to run from the payment date stipulated in the contract.
So what happens when the employer makes a payment, but with a shortfall? The EAT said this was no different to the situation when there has been an actual deduction in breach of contract. In other words, time runs from the moment the reduced payment is made.
It was clear according to the EAT that the letter from the company dated 15 April fell within section 13(iii) of the Employment Rights Act 1996. In this case time therefore started to run from 15 April, meaning that the grievance raised just over two months later was in time.
The EAT also drew attention to the fact that tribunals have a discretion to extend time limits where it was not reasonably practicable for the complainant to present their claim before the end of the three month period.
As the EAT noted, the irony of this situation is that time may start to run at an earlier date for employees who receive nothing from their employer, compared to employees who receive at least some payment. However, it concluded “that seems to us the inevitable consequence of this aspect of the law”.