Unlawful deductions from wages: what constitutes a series of deductions?

What constitutes an unlawful deduction from wages?

Pursuant to section 13(1) of the Employment Rights Act 1996 (“ERA 1996”), an employer cannot make a deduction from the wages of a worker unless the deduction is required or authorised by virtue of a statutory provision (e.g. income tax or national insurance contributions) or a provision of the worker’s contract (e.g. if the employer has provided a loan to the worker); or unless the worker has confirmed in writing their agreement or consent to the deduction.

Section 13(3) of the ERA 1996 provides that if the total amount of wages paid to a worker is less than the total amount properly payable to them on that occasion, the amount of the deficiency is treated as a deduction made by the employer.
Section 27 of the ERA 1996 defines ‘wages’ as “any sums payable to the worker in connection with his employment.” Wages would therefore include, for example, holiday pay, bonuses, commission, or any statutory entitlements such as statutory maternity pay.

Time Limits

The time limit for bringing a claim of unlawful deduction from wages is three months, less one day from the date of the deduction, the date of deduction being the date that the worker should have received their wages.

If there has been a series of deductions, the time limit is three months, less one day from date of the last deduction. However, where there is a series of deductions, the established position has been that there must not be more than a gap of three months or more between each period of deduction.

In addition, Section 23(4A) ERA 1996 provides that once a claim has been issued, an employment tribunal is not to consider “a deduction where the date of payment of the wages from which the deductions was made was before the period of two years ending with the date of presentation of the complaint.”

Deksne -v- Ambitions Ltd [2024] EAT 171 (“Deksne”)

In the recent case of Deksne, among other claims, on 1 July 2022 the Claimant brought a claim for unlawful deduction of wages in respect of holiday pay she had not received or had been underpaid for. The most recent claim was for holiday in July 2021 and the period relied on before that was in August 2020.
The Respondent admitted that it had calculated the Claimant’s entitlement to holiday pay incorrectly.

Judgment of the Employment Tribunal (“ET”)

In assessing the Claimant’s claim for holiday pay, the ET held that it could only consider claims from August 2019 onwards due to the two-year rule (s23(4A) ERA 1996).

However, the ET held that it did not have jurisdiction to hear the Claimant’s claims for holiday taken in August 2020 because the gap was too large between that date and the next holiday period relied on as the series of deductions in July 2021. The ET stated that, “the Claimant either needed to bring the claim sooner or have gaps of less than three months between deductions.” The Tribunal therefore did not have jurisdiction to hear any of the claims prior to April 2021.

Judgment of the Employment Appeal Tribunal (“EAT”)

In making its judgment, the EAT referred to the definition of ‘series’ given by the UK Supreme Court in Chief Constable of the Police Service of Northern Ireland and another -v- Agnew and others [2023] UKSC 33 (“Agnew”). Lord Kitchen and Lady Rose provided:

“whether a claim in respect of two or more deductions constitutes a claim in respect of a series of deductions is a question of fact, and in answering that question all relevant circumstances must be taken into account, including…their similarities and their differenced; frequency, size and impact; how they came to be made and applied; what links them together; and all other relevant circumstances.”

The Supreme Court further stated that, “it mattered not that the interval between these payments was from time to time in excess of three months; and these intervals of more than three months did not, in and of themselves and as a matter of law, break the series or bring it to an end.”

Adopting the Supreme Court’s approach in Agnew, the EAT held that all of the Claimant’s holiday pay shortfalls as far back as August 2019 were, in accordance with section 23(4A) ERA 1996, part of a series of deductions and were therefore within the jurisdiction of the ET to consider.

However, instead of remitting the case back to the ET for reconsideration, the EAT substituted the ET’s findings with its own.

29 November 2024.