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The scope of the Employment Tribunal’s jurisdiction to hear complex wages claims came to the fore in the recent decision of Jandu v Crane Legal Ltd [2014].

Mr Jandu, a solicitor, commenced a claim in the Employment Tribunal against his former employers, Crane Legal, claiming unfair dismissal, unlawful deduction of wages and breach of contract arising from the termination of his employment. The claim failed at first instance and Mr Jandu appealed to the Employment Appeal Tribunal.

Under Mr Jandu’s contract of employment, he was entitled to a base salary of £30,000 plus an annual bonus calculated with reference to the amount of net profit costs billed in the previous year. The bonus was subject to Mr Jandu’s billing at least £120,000 net profit costs. In December 2011, Mr Jandu produced a schedule of net profit costs totalling £478,170.76 for calculation of his bonus.

Crane Legal, which had previously held concerns that Mr Jandu was unlikely to meet the £120,000 base level, began an investigation into the amount of costs being claimed. Several discrepancies were uncovered, including evidence of work carried out by Mr Jandu’s brother (also a solicitor at the firm) being claimed by both parties and of files being significantly over-charged.

A disciplinary process was instigated, which concluded with Mr Jandu’s dismissal for gross misconduct. No bonus was paid. Mr Jandu claimed, among other things, that Crane Legal’s refusal to pay him a bonus was an unlawful deduction from wages or a breach of the terms of his employment contract.

Unlawful deduction of wages

Under Part II of the Employment Rights Act 1996, workers have protection from unlawful deductions from wages. Subject to certain, limited exceptions, any deduction from the sums properly due to a worker can give rise to a claim against the employer, unless in accordance with section 13(1) of the Employment Rights Act:

“(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker’s contract; or

(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.”

In the tribunal, damages in respect of unlawful deductions from wages claims are uncapped and the claim can be brought while the employment relationship is continuing. A key limitation, however, is that such claims should be straightforward. As discussed in Coors Brewers Ltd v SP Adcock [2007], the tribunal has no jurisdiction under Part II Employment Rights Act to hear “claims for unquantified damages for the breach or breaches of express or implied terms in [a] claimants’ [contract] of employment,” as the complexity takes such matters outside of the unlawful deductions from wages regime.

Breach of contract

The Employment Tribunals Extension of Jurisdiction (England and Wales) Order 1994 allows the tribunal to hear claims arising from an employer’s breach of contract, subject to certain limitations. Such claims are permissible, providing that the loss is outstanding on or arising from termination of the employee’s employment; therefore, the claim cannot be brought while the employment relationship is continuing. Importantly, article 10 of that order provides that such claims are subject to a maximum aggregate award of £25,000.

The Employment Tribunal found against Mr Jandu.

Employment Appeal Tribunal

The Employment Appeal Tribunal (EAT) also found against Mr Jandu. In giving judgment, Mr Justice Supperstone took the opportunity to comment on the jurisdictional point. He expressed concern that “the loss, if any, as is clear from the evidence, [is] very difficult to quantify,” and that “a number of factors to be considered in the quantification involved the exercise of some discretion and judgment.” This led to the conclusion that the complexity of the matter pushed it outside of the unlawful deductions from wages regime and placed it more firmly into the realm of breach of contract. Had Mr Jandu succeeded in his breach of contract claim, therefore, his damages would have been subject to the £25,000 cap.

Points to note

While the claimant in this matter was ultimately unsuccessful, the judgment serves as a handy reminder that any deduction from a worker’s wages must comply with the rules set out in Part II of Employment Rights Act. Any failure in this respect can give rise to an uncapped claim, which, if the deduction forms part of a ‘series of deductions’, can stretch back as far as the first instance in the series, providing that the claim is brought within three months less one day of the most recent deduction.

Further, for complex claims related to deduction from wages or breach of contract, the correct venue for such matters is the High Court. This has several ramifications including costs recovery for the successful party and conversely the risk of a substantial costs bill for the unsuccessful side.

For advice on any aspect of the above article or on any other employment law matter, please contact Lyons Davidson’s employment law team.