Complainant

Respondent

Anonymised Parties

A Beauty Therapist

A Beauty Salon

Representatives

Act

Complaint/Dispute Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act, 1991

CA-00026215-001

11/02/2019

The complainant worked for the respondent as a beauty therapist from April 2018 until she resigned in January 2019 to move to a new job. Her complaint is that her former employer withheld her final wages and holiday pay to cover the cost of training she attended during her employment.

Three documents were submitted by the complainant at the hearing with the title, “Training Agreement.”   These were signed by the complainant on various dates in May and June 2018. They relate to training courses provided by three beauty product suppliers. The documents show that the cost of the training was as follows:

Course A, May 18th 2018: €165

Course B, June 1st 2018: €500

Course C, June 29th 2018: €350

The dates shown above are the dates that the Agreements were signed. Each Agreement has the same wording as follows:

“In consideration of the (name of the product provider) training which I will be receiving from (the respondent), I agree to remain employed by (the respondent) for a minimum period of 12 months after completion of the training.

“This training will end on 01/06/2018 and if I leave my employment at any time before the end of 01/06/19 I undertake to refund my employer €165 or a proportion based on the following scale.”

Repayments were based on a sliding scale, depending on the date of leaving relative to the date that the training took place. The complainant also confirmed that,

“In the event of my failure to pay I agree that my employer has the right as an express term of my Contract of Employment to deduct any outstanding amount due under this agreement from my salary or any other payments due to me on the termination of my employment in accordance with the legislation currently in force.”

Following her departure from the company, and, when she was not paid the wages and holiday pay that she expected, the complainant investigated the cost of the training and she discovered that, for Course A and B, the respondent was not charged by the supplier. She said that she did Course A online at home, in her own time. She had no information regarding the cost of Course C.   Her complaint is that, because the company was not charged for at least two of the three training courses, her former employer has made an illegal deduction from her wages. She claims that she is owed €423.50 in outstanding wages and holiday pay.

The owner and salon manager both gave evidence at the hearing and they said that, with the advice of a human resources consultant, in 2013, they drew up training agreements for their staff. The objective is to deter employees from joining the company and then leaving when they have been trained on certain products and treatments. When she was leaving, the respondents said that the complainant owed the following residual amounts for the training she had received:

Course A, June 1st 2018: €82.50

Course B, May 31st 2018: €250

Course C, July 4th 2018: €175

The dates above are the dates that the training took place. As she had been employed for more and six months but less than nine months since signing the training agreements, 50% of the cost of each course was withheld from the complainant’s final wages. She was due to be paid €423.17, but 50% of the cost of the training amounted to €507.50. As a result, she received no wages when she finished up. Her payslip shows that she received a tax refund of €56.36.

In a written submission in advance of the hearing of this complaint, the salon manager explained what occurred in the run-up to the complainant’s departure from the company.   While she was getting on well in the job, the complainant informed the manager that she wasn’t physically able to do massage treatments, so she was not booked for any further massages. On January 9th, the complainant was scheduled to attend a training day as part of Course B, a skin care programme. The day before, she told the salon manager that she had a hospital appointment and the manager cancelled the training. The complainant wasn’t well on January 10th and she was allowed to go home early.   On Monday, January 14th, she asked the receptionist how much notice she was required to give of her resignation. The receptionist told her that a week’s notice was required and she also explained that, if she intended to leave, the complainant would have to repay the cost of her training, in accordance with the sliding scale schedule in the Agreements that she had signed. She was informed that €507.50 was would have to be repaid. The complainant called in sick for the rest of the week and she sent in a letter of resignation on Thursday, January 19th.

The owner of the salon also gave evidence at the hearing. She said that while the company may not be charged directly by the training provider, they incur the cost of the employee’s wages while they are out of work on training courses. For example, Course B took place over four days and the complainant was paid her wages for the four days. The owner said that the cost of four days’ wages plus follow-up training in the salon is €500. Detailed information about payroll costs for the duration of each of the three courses was submitted in evidence. The documents also showed that the cost of wages for other employees who acted as practice models for the complainant was also taken into account.

Course A required a staff member to be a model for two two-hour sessions and two other sessions at which a friend and an employee acted as models at no cost. Including the complainant’s time, plus an additional 15 minutes for “calculations,” labour costs were for nine hours and 15 minutes.

Course B took place in the supplier’s training centre over four days in May. The complainant was paid her wages for these four days. On completion of the training, she spent seven hours and 15 minutes training on the product in the salon.

Course C was delivered in the salon over one and a half days by a representative from the product manufacturer. Further training in the salon took six hours and 45 minutes.

The respondent’s case is that the cost of training comprises the cost of labour and that employees sign up to this when they commit to the Training Agreement. While the company may not be charged directly for the cost of the training, they have to cover the cost of wages while no treatments are being provided and no income is being earned.

The Facts

At the hearing, there was no dispute about the fact that the final wages due to the complainant in respect of pay and holiday pay, a gross amount of €423.17, was not paid because, as submitted by the respondent, the complainant owed €507.50 to cover the cost of training in the nine months before she left her job.

The complainant said that two of the training courses that she attended were free to the respondent, and no evidence was submitted at the hearing that the respondent was charged for the third course. The respondent’s case is that the cost of the training includes the cost of wages while the complainant was taking the training and practising with the products in the salon.

Aside from any consideration of the status of the Agreements signed by the complainant in May and June 2018, it is important to consider the legal framework governing this matter.

The Relevant Law

Section 5 of the Payment of Wages Act 1991 (“the Act”) provides for the regulation of the deduction of wages from employees and it is worthwhile referencing here:

(1) An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless—

(a) the deduction (or payment) is required or authorised to be made by virtue of any statute or any instrument made under statute,

(b) the deduction (or payment) is required or authorised to be made by virtue of a term of the employee's contract of employment included in the contract before, and in force at the time of, the deduction or payment, or

(c) in the case of a deduction, the employee has given his prior consent in writing to it.

A copy of the Agreements signed by the complainant were submitted in evidence. There is no breakdown on these documents about the cost of training and no reference to the cost of labour or the intention to deduct the cost of labour. The Agreement in respect of Course A simply states:

“This training will end on 01/06/2018 and if I leave my employment at any time before the end of 01/06/19 I undertake to refund my employer €165 or a proportion based on the following scale.”

The sliding scale over 12 months is then set out. Each Agreement is similarly worded, apart from the name of the training course and the end date.

Sub-section (2) of section 5 of the Act sets out the conditions according to which an employer may make a deduction from an employee’s wages:

(2) An employer shall not make a deduction from the wages of an employee in respect of—

(a) any act or omission of the employee, or

(b) any goods or services supplied to or provided for the employee by the employer the supply or provision of which is necessary to the employment,

unless—

(i) the deduction is required or authorised to be made by virtue of a term (whether express or implied and, if express, whether oral or in writing) of the contract of employment made between the employer and the employee, and

(ii) the deduction is of an amount that is fair and reasonable having regard to all the circumstances (including the amount of the wages of the employee), and

(iii) before the time of the act or omission or the provision of the goods or services, the employee has been furnished with—

(I) in case the term referred to in subparagraph (i) is in writing, a copy thereof,

(II) in any other case, notice in writing of the existence and effect of the term,

and

(iv) in case the deduction is in respect of an act or omission of the employee, the employee has been furnished, at least one week before the making of the deduction, with particulars in writing of the act or omission and the amount of the deduction, and

The remaining sub-sections, (v), (vi) and (vii) are not relevant to this complaint.

The Employment Appeals Tribunal (EAT) case of Ryanair Limited v Alan Downey, [2006] 17, ELR 347, established that training undertaken by an employee in the course of employment enhances their qualifications and remuneration and, on this basis, may be considered as the provision by an employer to an employee of a “service” within the meaning of sub-section 2(b) above. I find therefore that the respondent’s policy of deducting the cost of training from an employee’s wages is permitted by the Act.

This permission is qualified by sub-section (2)(b)(ii), which requires that “the deduction is of an amount that is fair and reasonable having regard to all the circumstances (including the amount of the wages of the employee).” In the instant case, the complainant was an employee on an hourly rate of €10.50.   The deduction meant that her wages for the final three days of her employment, plus €186.67 for 17 hours’ holidays not used up in 2018 was not paid.

More than six months before her resignation, the complainant signed three documents in which she agreed to refund the company for the cost of training, subject to a sliding scale. She understood that this cost related to a payment by her employer to a training provider and there was no information on the Agreements that contradicted this assertion. When she agreed to refund three payments of €165, €500 and €350 in respect of training, it was reasonable, in my view, for her to assume that these costs related to the provision of training and not the cost of her wages. If the respondent meant to recoup the cost of labour, then this should have been stated on the Agreement. The cost of the labour for the duration of each training course was provided at the hearing of this complaint and there is no reason that the same information could not have been provided on the Agreements before the complainant attended the training. If this information had been provided, the complainant would have been clear about what she was signing up to.

In the case of Ryanair v Downey, referred to earlier, finding that the deduction of wages was a breach of the Act, the chairman noted that the deduction “had the effect of paying the respondent no wages in respect of his final period of service and the appellant failed to give the respondent any notice in writing of the deduction.”

Before she went out sick, the complainant was informed by the receptionist that money would be deducted from her wages in respect of the three training courses. While the notice was not in writing, she was aware that this was the intention of her employer.

I find however that the deduction of €423.17 from this employee’s final wages, leaving her with no wages at all, is not the intention of the Act. The legislation clearly stipulates that a deduction must be “fair and reasonable having regard to all the circumstances (including the amount of the wages of the employee).” In the circumstances where it was not clear to the complainant that the deduction for training was actually a deduction of wages for the duration of training and, for an employee earning€10.50 an hour, this treatment was neither fair or reasonable.

I find that this deduction was unfair and a breach of section 5(2)(b)(ii) and (iv) of the Payment of Wages Act, and therefore, an illegal deduction.

I have concluded that this complaint is well founded and I decide therefore that the respondent is to pay the complaint €423.17 gross in respect of wages and holiday pay not paid to her at the termination of her employment.

Deduction from wages, cost of training