Penalty/unfair deduction from wages - Is recouping recruitment expenses allowed?

05 December 2013

Ian Hunter, David Samuels

In Cleeve Link v Bryla, the Claimant signed an employment contract agreeing that, if within the first six months, she was dismissed for misconduct or left at her own request, the employer could recoup any sums that had been spent on her recruitment and initial training from her final pay check.

She was summarily dismissed for misconduct after less than three months. The EAT held that the employer could recoup its costs as provided for in the contract.

S.13 of the Employment Rights Act 1996 states that an employer can only make deductions for wages as authorised by law (such as PAYE income tax and NI contributions) or if the worker has previously agreed in writing that such deductions may be made. Such a clause was included in the Claimant’s contract. However, the EAT confirmed that tribunals must also consider the general law which would not allow for such a clause to be enforced unless it represented compensation for loss suffered by the employer as a result of the Claimant’s breach of contract.

The tribunal should consider the situation at the time when the contract was entered into. Here, there was a genuine reason for including the clause; the employer had made a serious financial investment in the Claimant before she had even started work. That investment, which was now the employer’s loss, could easily be quantified and there was no reason why it should not be deducted from the Claimant’s final pay cheque.                  

Point to note - 

  • This decision is understandable where the Claimant has, by her misconduct, broken the contract in which the employer had made a serious investment within the first six months. But what if she had simply resigned? She would not be in breach of contract. Would a tribunal be as willing to exercise its discretion and say that the employer was still entitled to make a deduction from her final pay? This question remains unanswered.