The Employment Rights Act 1996 (ERA 1996) covers the protection for workers against unauthorised deductions (commonly known as “unlawful deductions”) being made from their wages.

 

It is unlawful for an employer to make a deduction from a worker’s wages unless:

 

• The deduction is required or authorised by statute or a provision in the worker’s contract; or

• The worker has given their prior written consent to the deduction.

 

In addition, it is unlawful for an employer to receive a payment from one of its workers unless:

 

• The payment is required or authorised by statute or a provision in the worker’s contract; or

• The worker has given their prior written consent to the making of the payment.

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Unlawful deductions claims enables workers to claim unpaid (or underpaid) wages through an employment tribunal even while they continue to be employed.   This is a different claim to a breach of contract in an employment tribunal, in that respect where they do not have the jurisdiction (power) to deal with a breach of contract claim until the employment relationship has ended.

 

The definition of worker includes not only an employee, but an individual who has entered into “any other contract... to do or perform personally any work or services”, unless the individual is carrying on a “profession or business undertaking” and the other party to the contract is “a client or customer” of that undertaking.

 

There is no qualifying period of service required in order to bring a claim, this means that from day one a worker can bring a claim for unlawful deductions from wages.

 

A deduction from wages claim can include a worker enforcing their rights to the National Minimum wage.

 

For the purposes of an unlawful deduction of wages claim, wages are defined by section 27 of the Employment Rights Act 1996 ("ERA 1996").   The definition makes specific inclusions and exclusions - Wages means "any sums payable to the worker in connection with their employment", and includes:

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• Any fee, bonus, commission, holiday pay or other emolument referable to the worker's employment, whether payable under their contract or otherwise.

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• Any payment in the nature of a non-contractual bonus which is, for any reason, made to a worker by their employer. The amount of the payment is treated as wages and as payable to the worker as such on the day on which the payment is made.

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• Although unlawful deductions from wages includes statutory payments, the employment tribunal does not have jurisdiction to determine an entitlement to these statutory payments: this rests with HMRC, with any appeal to the Revenue and Customs Commissioners. Those statutory payments include:-

  • Statutory sick pay

  • statutory maternity pay 

  • statutory paternity pay

  • statutory adoption pay 

  • statutory shared parental pay

 

• Statutory guarantee payments. 

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• Payments to which an employee is entitled for time off under Part VI of the ERA 1996 which includes:

  • Taking time off to look for work or to arrange training, as provided by sections 52 to 54 of the ERA 1996.

  • Taking time off for antenatal care, as provided by sections 55 to 57ZD of the ERA 1996. 

  • Taking time off to attend adoption appointments, as provided by sections 57ZJ to 57ZK and sections 57ZN to 57ZO of the ERA 1996.

  • Taking time off to perform duties as an occupational pension scheme trustee, or to undergo training relevant to the performance of those duties, as provided by sections 58 to 60 of the ERA 1996 (section 27(1)(e), ERA 1996).

  • Taking time off to perform duties as an employee representative in a collective redundancy or TUPE ('Transfer of Undertakings (Protection of Employment) Regulations 2006' and its amendment in 2014). transfer, as provided by sections 61 to 63 of the ERA 1996.

  • A young person (aged 16 or 17) in Wales or Scotland taking time off to train as provided by sections 63A to 63C of the ERA 1996 (section 27(1)(e), ERA 1996). 

  • Payment for time off for carrying out trade union duties under section 169 of the Trade Union and Labour Relations (Consolidation) Act 1992 ("TULRCA 1992"). 

  • Remuneration on suspension on medical grounds under section 64 of the ERA 1996. 

  • Remuneration on suspension on maternity grounds under section 68 of the ERA 1996 or on ending the supply of an agency worker on maternity grounds under section 68C of the ERA 1996.

  • Sums payable under orders for reinstatement or re-engagement by the employment tribunal.

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• Any sum payable pursuant to an order for the continuation of an employment contract under the interim relief provisions in either section 130 of the ERA 1996 or, in relation to a dismissal on grounds related to trade union membership or activities, under section 164 of TULRCA 1992.

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• Remuneration under a protective award made under section 189 of TULRCA 1992 

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Payments that are excluded from the definition of wages are those where:

 

• Advances of wages or payments under a loan agreement between the worker and employer. However section 13 of the ERA 1996 will apply to any deduction made from the worker’s wages in respect of any such advance. 

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• Any payment in respect of expenses incurred by the worker in carrying out their employment 

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• Any payment by way of a pension, allowance or gratuity in connection with the worker’s retirement or as compensation for loss of office 

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• Any payment referable to the worker’s redundancy.

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• Any payment to the worker otherwise than in their capacity as a worker.

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• Any monetary value attaching to any payment or benefit in kind provided to a worker by their employer, with the exception of any voucher, stamp or similar document which is of a fixed value expressed in monetary terms and which is capable of being exchanged (either alone or with other vouchers, stamps or similar documents, and whether immediately or only after a time) for money, goods or services (or any combination of two or more of those things).

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For a deduction  to be found to be unlawful the question of what is "properly payable" is a key aspect of understanding the law in this area to apply to individual circumstances, because there cannot be a deduction unless the wages claimed are properly payable in the first place under section 13(3), ERA 1996).  It should be noted that where there has been an error made on computation this is not classified as a deduction.

 

The employment tribunal will consider all relevant circumstances when determining whether a sum is “properly payable” and this involves assessment of the contractual position. Furthermore, in order to fall within section 13, the claim has to be for a specific sum of money or a sum capable of quantification which had not been paid by the employer and was properly payable upon termination of employment.

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The time limit for bringing an unlawful deductions from wages claim is 3 months less one day from the last deduction  or payment where there has been a series of deductions.  However, since 1 July 2015 the employment tribunal has a two year backstop period, and can only look back for this period of time.  If your case goes back further than two years and it is for a substantial amount the employment tribunal jurisdiction may not be appropriate and it may be that a civil claim in the courts is the right jurisdiction for your claim.  It is important that you obtain legal advice as early as possible so as to avoid, losing any rights that may be best exercised in an employment tribunal where, the costs of pursuing a claim can be a lesser risk than civil courts.