FULL RECOMMENDATION
SECTION 7(1), PAYMENT OF WAGES ACT, 1991 PARTIES : AN EMPLOYER (REPRESENTED BY CATHAL MCGREAL, B.L., INSTRUCTED BY THE EMPLOYER'S IN-HOUSE SOLICITORS) - AND - A WORKER (REPRESENTED BY TOM MALLON, B.L., INSTRUCTED BY CARLEY & CONNELLAN, SOLICITORS) DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Murphy Worker Member: Ms Tanham |
1. Appeal of Adjudication Officer Decision No ADJ-00015109.
BACKGROUND:
2. This is an appeal of an Adjudication Officer’s Decision made pursuant to Section 6 of the Payment of Wages Act, 1991. The appeal was heard by the Labour Court on 7th June 2019 in accordance with Section 44 of the Workplace Relations Act, 2015. The following is the Court's Determination: -
DETERMINATION:
This is an appeal by an Appellant against an Adjudication Officer’s Decisions ADJ-00015109, CA-00019652-001 under the Payment of Wages Act, 1991 (“the Act”). The Complainant claimed that unlawful deductions were made from his salary by his employer.
For ease of reference the parties are given the same designation as they had at first instance. Hence the Appellant will be referred to as “the Complainant” and the Appellant’s employer will be referred to as “the Respondent”.
The Complainant submitted his claim under the Act to the Workplace Relations Commission on 8thJune 2018. The Adjudication Officer held that the complaint was not well-founded and the complaint, therefore, failed.
Background
The Complainant commenced employment as a Civil Servant in or around 1995. By 2010 he was at Higher Executive Officer (HEO) grade.
Prior to his promotion to Assistant Principal Officer in October 2016, the Complainant was on the 9thpoint of the scale, HEO LSI 2, €58,294 per annum and was paid an extra duty allowance of €19,635.68 giving him a total renumeration of €77,929.68 per annum. This allowance was payable due to the nature of the work and the requirement that an Officer in that role is required to give full flexibility in regard to his attendance (including weekend attendance) as the requirements of the job dictate.
On 10thOctober 2016 the Complainant was promoted to Assistant Principal Officer (APO) level and placed on the 8thpoint of the scale, AP LSI 2, yielding him a cap salary of €76,224 per annum. He was placed on this salary on a “marked time” basis, as per the standard procedure in Circular 34/77 whereby an existing allowance would be taken into account in determining the point of the scale to which he was to be appointed.
[“marked time” i.e. a person marks time by not receiving annual increments until their notional pay matches their actual pay and, once this occurs, increments then become payable in the normal way.]
In February 2017 he applied for a position in an external Agency attached to his Department which position attracted an extra duty allowance of €19,635.68 per annum in recognition of the special nature of the assignment. He was successful and was assigned to the Agency with effect from 17thJuly 2017. He was then paid at APO LSI 2, €78,451 per annum, plus the extra duty allowance, yielding him a total renumeration of €98,086 per annum.
In January 2018 the Respondent discovered that an error had occurred in the Complainant’s renumeration and proceeded to deduct arrears from his salary in March 2018.
The Complainant’s salary was adjusted from 26th March 2018 and this resulted in a reduction in salary at the rate of €508.59 per fortnight.The amount of €2,542.95 has been deducted from the Complainant’s salary in the period from 26thMarch 2018 up to 4thJune 2018 and the Respondent proposes to deduct further arears in the amount of€341.07 gross per fortnight from the Complainant’s salary until the amount of €8,898.64 gross has been recovered, being the full amount of the overpayment due.
The Complainant claimed that these deductions were unlawful and submitted a claim under the Act to the Workplace Relations Commission on 8thJune 2018.
Summary of the Complainant’s Case
Mr Tom Mallon, B.L., instructed by Carley & Connellan, Solicitors, on behalf of the Complainant, asserted that unlawful deductions were made from the Complainant’s salary and therefore rejected the Respondent’s position that an overpayment had been made that it was entitled to recover.
Mr Mallon maintained that on appointment to the Agency in July 2017, the Complainant’s salary was €77,929 per annum and he was accordingly paid the extra duty allowance which applies to the Agency role and therefore he alleged that the deductions made by the Respondent were unlawful as he was rightly entitled to be paid his salary plus the allowance.
He referred to the Circular which issued to all APOs in his section on 6th February 2017 inviting applications from serving APOs who wished to be
considered for assignment to the Agency. That Circular expressly set out the remuneration and terms and conditions for those who might be successfully appointed as follows:-
- “The current value of the annual allowance for these posts is €18,653.90
(modified rate PRSI) or €19,635.68 (full PRSI). This allowance is an allowance in the nature of pay and may be reckonable for pension and starting pay on promotion purposes, following the completion of one year’s services. This allowance will cease when the officer leaves the [agency]. Staff in receipt of the allowance will be required to give full flexibility in regard to their attendance (including weekend attendance) as the requirements of the job dictate.”
- “In recognition of the special nature of the assignment you will receive an allowance in the nature of pay of €19,635.68 per annum, to include compensation for flexible attendance and any extra attendance.”
Mr Mallon said that the Complainant’s salary as an APO was determined in accordance with Clause 4(1)(a) of Circular 34/77. It is well established and set out at Clause 2 of that Circular that on promotion an Officer would enter the scale for the higher post at the minimum or at a point equivalent to the existing pay plus accrued increment, if any, plus an immediate increment on the new scale, whichever is the greater. However, he said that Clause 4 of that Circular deals with those holding an allowance in the nature of pay.
Clause 4 is in the following terms:
- “4(1) subject to (2) following, on Officer who holds an allowance in the
nature of pay, other than an allowance referred to in paragraph 5, at
the time of promotion to a higher grade will enter the scale for the
higher post.
(a) On the basis of application of the normal starting pay on
promotion rules to his scale of pay exclusive of the allowance or if
more favourable and provided he has held the allowance for at
least a year, at his existing scale of pay (exclusive of accrued
increment) plus the allowance subject to marked time by reference
to entry as at (a).
According to Mr Mallon, on the Complainant’s initial appointment as an APO in a post to which no allowance was payable, his salary was paid to him properly and in accordance with what he had been offered.
Mr Mallon said that when the Complainant was transferred to the Agency in July 2017 he became entitled to payment of the appropriate allowance and submitted that the appropriate allowance was payable on top of his appropriate salary which had been determined on his original promotion to APO. He was told in writing that he would receive an allowance but he was not informed that he was already in receipt of that allowance by reason of the application of Circular 34/77 or any other rule or Circular. The Complainant was paid that allowance for approximately eight months, not in error but by reason of his contractual entitlements, before the authorities sought to reduce his pay and recover an alleged overpayment.
Counsel for the Complainant stated that the Complainant accepted that where, as in his case, an Officer’s salary is determined having regard to a pre-existing allowance that he “marks time”. However, he submitted that “marking time” is in respect of increments and increments only.
He disputed the Respondent’s contention that where an Officer is on a marked time basis and returns to an allowanced post they return to their notional rate of pay when they take up duty in the allowanced post. Mr Mallon said that there was no authority for this proposition.
Mr Mallon also disputed the Respondent’s contention that the Complainant continued to receive the benefit of an extra duty allowance as part of his salary on promotion to the APO grade. He said that the previous allowance and associated extra duties ceased the moment he left the allowanced post on promotion to APO. He referred to the Circular inviting candidates to apply for the allowanced post in the Agency which states:-
“This allowance will cease when the officer leaves the[Agency].”
Summary of the Respondent’s Position
Mr Cathal McGreal, B.L., instructed by the Respondent’s in-house Solicitors, on behalf of the Respondent, stated that in the absence of clear and express language to the contrary, no one is entitled to be given the benefit of the same allowance twice. He said that Clause 4(l)(a) of Circular 34/77 provides that an Officer who holds an allowance and who is promoted is permitted to enter the scale for the higher post, not on normal starting pay, but “at his existing scale pay plus the allowance subject to mark-time”.
Mr McGreal surmised that the Complainant must have known that there was something wrong with the payments he was receiving and he should have realised that he was being credited twice with the allowance as his renumeration increased by €41,772.00 i.e. 74% from May 2013 to July 2017 - from €56,314.00 to €98,086.68 per annum.He should have known that it was an extraordinary and an erroneous windfall. He said that he had received an overpayment €8,898.64 by the time the error was addressed by the Respondent. He submitted that it is he who must prove that he is the exception to the obvious rule against double payment and must prove that it was the contractual agreement intended by the parties, as per section 5(5) of the Act.
Mr McGreal made reference to Section 5(5) of the Act which provides for recoupment of overpayment and does not require a term of the contract at all. He said that it is permissible by virtue of a statutory provision and is not to be confused with statutory authority under Section 5(1) of the Act to make a deduction subject to certain conditions. He also referred to Circular 10/2017 and Circular 07/2018 on theRecovery of Salary, Allowances, Expenses Overpayments made to Staff Members/Former Staff Members/Pensions. These mandate the recovery of overpayments from staff members and are issued pursuant to Section 17 of the Civil Service Regulations Act 1956 as amended. These Circulars permit the recovery of overpayments which are described as“money is paid in excess of what is due in the appropriate salary, allowance, or expenses payment and is recoverable in principle”. It is also clearly prescribed that staff members have an obligation to repay overpayments and these must be paid as soon as possible. The recoupment is also necessary to ensure that the Respondent’s pay policy-and that of DPER is applied.
Mr McGreal said that when a person who is in receipt of an allowance is promoted to a position without an allowance, a calculation of their notional pay is carried out i.e. where they would be placed on the higher pay scale if they had not been in receipt of the allowance and the person is then placed on the higher pay scale at a point which takes account of their previous salary plus the allowance. The person is then placed on marked time and does not receive annual increments until their notional pay matches their actual pay. In cases where an Officer is on a mark-time basis and returns to an allowanced post, they return to their notional pay when they take up duty in the allowanced role and separately also receive the allowance to the extent that the scale allows.
The fact that the Complainant had already had his allowance factored into his pay when he took up the role in the Agency which attracted an extra duty allowance was erroneously overlooked and accordingly an error in his remuneration occurred until July 2017.
Therefore, by way of overpayment from July 2017 to April 2018, the Complainant received the extra duty allowance payment on a double basis - as (i) a separate duty allowance and (ii) the value of the same extra duty allowance in his salary point on the scale.
Mr McGreal said that from July 2017 the Complainant should correctly have been placed on point 1 of the salary scale for the grade of Assistant Principal, which was €65,093 per annum, and have received the extra allowance payment as a separate payment. Instead, for the period of July 2017-April 2018, the Complainant received the extra duty allowance payment incorporated into his salary point and also received it by way of separate payment.
Mr McGreal referred to Circular 34/1977“Starting Pay on Promotion or Establishment”issued pursuant to Section 17 of the Civil Service Regulations Act 1956 as amended. He said that the provisions of this Circular were known to the Complainant in October 2016. They provide as follows:-
- “4(l) Subject to (2) following, an officer who holds an allowance in the nature of pay, other than an allowance referred to in paragraph 5, at the time of promotion to a higher grade will enter the scale for the higher post
(a) on the basis of application of the normal starting pay on promotion rules to his scale pay exclusive of the allowance or if more favourable and provided he has held the allowance for at least a year, at his existing scale pay (exclusive of accrued increment) plus the allowance subject to mark-time by reference to entry as at (a).”
Mr McGreal contended that once it is established that the purpose of the deduction is to recover an overpayment and the amount recovered does not exceed the amount of the overpayment, as is the case in the instant proceedings, then, in accordance with Section 5(5) of the Act, the Court has no jurisdiction to determine the legality of any deductions made. He said that no consent or authorisation from the Complainant was required under Section 5(5) of the Act.
This was an overpayment by way of the established practice within the Respondent, as confirmed by DPER. The purpose of the deductions from the Complainant’s wages was the recovery of the overpayment and the precise amount of the overpayment is what is being recouped. It is submitted, therefore, that no jurisdiction exists for this claim to be considered by the Court.
However, he made the point that the Court is entitled to adjudicate on the question of whether or not a mistake was made in this case and whether or not the payment sought to be recouped was an overpayment. Nonetheless, the Complainant seeks to retain the overpayments recouped by the Respondent for the period of 26th March 2018 to 8th June 2018 on the premise that an “unlawful deduction” was made within the meaning of Section 5 of the Act.
The Law
The Act at Section 5 of the Act precludes an employer from making deductions from wages unless certain conditions are met and or certain conditions apply.
Section 5(5) provides that deductions may be made by an employer, the purpose of which is the reimbursement of the employer in respect of an overpayment of wages.
Section 5(5) of the Act provides as follows:
- (5) Nothing in this section applies to—
(a) a deduction made by an employer from the wages of an employee, or any payment received from an employee by an employer, where—
(i) the purpose of the deduction or payment is the reimbursement of the employer in respect of—
(ii) any overpayment of wages, or
(iii) any overpayment in respect of expenses incurred by the employee in carrying out his employment, made (for any reason) by the employer to the employee, and
(ii,) the amount of the deduction or payment does not exceed the amount of the overpayment.
Conclusions of the Court
The Respondent submitted that the deduction in the Complainant’s salary cannot, as a matter of law, be regarded as a deduction to which the Act applies. In advancing that submission the Respondent relied on the decision of the Employment Appeals Tribunal in the UK, SIP Industrial Products Ltd v Swinn[1994] IRLR 323, in which the employee had dishonestly obtained money from his employers by altering receipts for diesel fuel. The employer withheld monies due to him. The employee claimed that this was an unlawful deduction. The employer argued that it was entitled to withhold payment under the Wages Act 1986 on the basis that the deduction was in respect of an overpayment of expenses incurred by the employee in carrying out his employment. The EAT held that the determining factor is the purpose of the deduction and provided the payment was an overpayment, then no jurisdiction existed for the claim to be considered under the equivalent legislation to the Payment of Wages Act 1991.
Subsection (5)(a) of Section 5 of the Act does not prohibit deductions made in respect of an overpayment of wages where the amount deducted does not exceed the amount due to the employer.
Consequently, the Court must turn to a consideration of whether or not the purpose of the deduction made was to recover an overpayment of wages erroneously made and, if so, whether or not the amount recovered exceeded the amount of the overpayment, in which case, in accordance with Section 5(5) of the Act, the Court has no jurisdiction to determine the legality of any deductions made.
Therefore, in effect, the Court must consider whether or not the salary paid to the Complainant from July 2017 until 28thMarch 2018 was his appropriate salary or was an error on the Respondent’s part.
Having considered the submissions made by both parties, the Court notes that as an HEO the Complainant had attained sufficient service to reach the top point of the HEO scale i.e. LSI2 by the time he became entitled to an extra duty allowance at which point with his combined salary and allowance he was earning a total of €77,929.68 per annum.
In October 2016 when he was promoted to APO grade, a position which did not attract an allowance, but by virtue of his combined salary at the time, he was assimilated onto the APO scale at the top point of the scale, i.e. LSI 2, on a marked-time basis and was therefore paid €76,224 per annum. This method of assimilation was in accordance with the applicable Circulars.
In 2017 he was successful in obtaining the APO role in the Agency and assigned from the 17thJuly 2017 which role attracted an extra duty allowance. The Complainant was paid at AP LSI 2, €78,451 per annum, plus the extra duty allowance yielding him a total of €98,086 per annum.
The Court is satisfied that the enhanced assimilation described above ceased when he became entitled to an extra duty allowance on being successful in obtaining the role in the Agency and therefore he should have reverted to his notional salary, i.e. €65,093, the first point on the APO scale, which was the appropriate rate for the position and be paid the extra duty allowance in excess of that rate. Therefore, the Court finds that the rate of €98,086 per annum was not the appropriate rate for the position and an error was made on the Respondent’s part. Therefore, the Court is satisfied that the purpose of the deduction falls within Section 5 (5) of the Act.
Determination
Based on its findings above, the Court is satisfied that an overpayment was made to the Complainant and the Respondent had the right, by application of Section 5(5) of the Act, to seek the recovery of the exact amounts overpaid to the Complainant.
The Court decides that the deductions at issue in this case did not contravene Section 5(1) of the Act of 1991 and determines accordingly.
The Complainant’s appeal is not upheld. Accordingly, the Adjudication Officer’s Decision is affirmed.
The Court so Determines.
Signed on behalf of the Labour Court
Caroline Jenkinson
CH______________________
14 June 2019Deputy Chairman
NOTE
Enquiries concerning this Determination should be addressed to Carol Hennessy, Court Secretary.