ADJ-00032552

Complainant

Respondent

Parties

Eoin Quinn

Michael Meagher & Michael Kilfoyle trading as Sterval

Representatives

Barry Kenny, Kenny Sullivan Solicitors

Jason Murray, BL

Act

Complaint Reference No.

Date of Receipt

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

CA-00043164-001

22/03/2021

The respondent company employs nine people and provides decontamination solutions to the healthcare sector and other industries.  The complainant is a service and validation engineer and he commenced employment on September 1st 2016.  He resigned on February 9th 2021 and finished up on February 19th.  At the time of his resignation, his annual salary was €51,200.    

In February 2020, the complainant attended a training course in Denmark and the following month, he attended a training course in the UK.  Part of the cost of this training was deducted from his final salary, with the result that he received no wages in February 2021.  He complains that the deduction of the cost of the training is an illegal deduction and a breach of section 5 of the Payment of Wages Act 1991.

Having left the company on February 19th 2021, the complainant’s final wages were due on February 25th.  He didn’t receive a final payslip and instead, received an email with the subject header, “Statement of Account.”  In the email, a copy of which was produced in evidence at the hearing, the complainant was due a net amount in wages of €3,602.39 on February 25th.  From this, his employer made the following deductions:

€951.44     Equivalent to 50% of the cost of training in Denmark from February 2nd to 7th 2020

€3,938.29  Equivalent to 100% of the cost of training in the UK from March 9th to 13th 2020

As the total due was greater than the net pay due to the complainant, the email shows that there is a “balance owing” of €1,287.34.

Breach of Section 5 of the Payment of Wages Act 1991

In his submission on behalf of the complainant, Mr Kenny made the following legal argument:

1.               The complainant did not give his consent for the deduction.

Mr Kenny referred to section 5(1) of the Payment of Wages Act (“the Act”) which provides that,

“(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.”

In the decision of the former Employment Appeals Tribunal in Ryanair Limited v Downey[1], the Tribunal held that the fact that an employee’s contract provides for a deduction does not, of itself, justify the deduction.  For a deduction to be lawful, the employer must comply with the relevant provisions of section 5(2) of the Act, by providing one week’s notice of the deduction and also complying with the requirement that the amount of the deduction is fair and reasonable.

The complainant did not give his prior consent to the deduction and, on this basis, Mr Kenny submitted that the respondent is in breach of sub-section 1(c) above.

2.               The complainant did not receive written notice of the deduction.

Section 5(2)(iv) of the Act provides that an employer shall not make a deduction from an employee’s wages in respect of any act or omission unless,

“(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…”

As the complainant received no written notice of his employer’s intention to make a deduction from his wages, Mr Kenny submitted that the deduction is in breach of section 5(2)(iv) above.

3.               The deduction was unfair and unreasonable.

Section 5(2)(ii) of the Act provides that an employer shall not make a deduction from an employee’s wages in respect of any act or omission on the employee’s part, or in respect of the provision of goods or services by the employer to the employee, unless,

“(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)…”

As the amount deducted from the complainant’s wages in February 2021 was 100% of his final wages, Mr Kenny submitted that the respondent acted “wholly unfairly and unreasonably” and in breach of section 5(2)(ii) and left the complainant “destitute without any salary.”

Evidence of the Complainant

In his direct evidence, the complainant said that he was required to give two months’ notice of his intention to resign from his job with the respondent.  By the time he was resigning however, he said that relations between him and the directors “had gone sour” and when he notified them of his resignation on February 9th 2021, he was informed that he could finish up at the end of the week.  He said that he first he realised that he was not getting his wages at the end of February when he received the “Statement of Account” email on February 26th.  He said that he got no notice and that he did not give his consent to the payment.

Cross-examining of the Complainant

In cross-examining, Mr Murray referred to clause 10 of the complainant’s contract which provides that, in the event of his departure from the company within a certain timeframe of having attended a training course, the cost of training will be reimbursed.  The complainant said that he wasn’t aware of this clause, although he accepted that he signed the contract.  He said that he was in negotiations for two months about the contract and that he was not fully aware of the contents.

The complainant agreed that he was sent on two training courses, but he disagreed with Mr Murray when he suggested that the training would be of benefit to him in the future.  He said that he was sent on the training course because of pressure from the supplier of the equipment on which he was trained.

It is the respondent’s case that the “payments” from the complainant’s wages were deducted in a lawful manner and in accordance with his contract of employment.  For training within a period of two years prior to his resignation, the complainant was contractually obliged to reimburse the respondent for the costs or part of the costs of the training.

The departure of the complainant on February 19th fell within the contractual timeframe for any training-associated costs incurred by the respondent for a period of two years previously.  For the respondent, Mr Murray submitted that “there was absolutely no ambiguity as to the fact that the complainant would be liable for any training costs for the relevant period” as this provision was expressly set out in his contract of employment.

In the respondent’s submission, the costs associated with the two training courses in Denmark and the UK are set out in detail.  The respondent claims that they are entitled to a payment of €4,889.73, in line with the express terms of clause 10 of the complainant’s contract.  An amount of €3,602.39, was repaid to the respondent from his February net pay.  As “a matter of fact and law” therefore, it is the respondent’s case that an amount of €1,287.34 is owed by the complainant to his former employer.  Two months after the termination of the complainant’s employment, on April 21st 2020, the respondent wrote to him regarding damage to company property, misuse of the company’s data and gross misconduct.  The respondent claims that it is entirely reasonable that the respondent deducted a part-payment which was due in circumstances where “the complainant remains indebted to the Respondent for monies which are due and owing.”

Legal Case:  The Failure to Pay Wages is not a Deduction, but a Payment to the Respondent

For the respondent, Mr Murray submitted that the complainant is in error in his reliance on section 5(1)(c) of the Act, and that he has failed to take account of the prefix, “or” between sub-sections (b) and (c).

The complainant claims that the wages not paid is a deduction to which he did not consent.  It is the respondent’s case that the amount not paid to the complainant is a payment of the cost of the training undertaken by him in the two years before his resignation.  In this regard, the respondent relies on section 5(1)(b) of the Act.  Mr Murray noted that section 5 is titled, “Regulation of certain deductions made and payments received by employers.”  Sub-section (b) provides that,

“(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…”

Section 1 of the Act provides for the interpretation of its terms and section 1(2) refers to payments from an employee:

“(2) Except in section 5(5)(f), a reference in this Act to an employer receiving a payment from an employee is a reference to his receiving such a payment in his capacity as the employee's employer.”

Clause 10 of the complainant’s contract of employment expressly states that the amounts associated with the cost of training “shall be reimbursed to the company.”  Mr Murray argued therefore, that, as a matter of  law, the respondent has shown that the payment was required.  Further, as a matter of law, the contract of employment was in effect at the relevant time and clause 10 was “included in the contract” (as provided for at section 5(1)(b) above) before the payment became “required.”

In his submission, Mr Murray suggested that my enquiry can end with a finding that the payment made to the respondent was authorised by virtue of clause 10 of the complainant’s contract.  If, however, I find that the failure to pay the complainant’s wages was not a payment, but rather, a deduction, in that case, the respondent relies on section 5(2) of the Act:

“(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

(vi) in case the deduction is in respect of goods or services supplied or provided as aforesaid, the deduction is of an amount not exceeding the cost to the employer of the goods or services, and…”

Sub-sections (iv), (v) and (vii) were not considered relevant to the respondent’s case.

Mr Murray submitted that the respondent has fully complied with the relevant sub-sections of section 5(2) of the Act.

Finally, he submitted that the amount paid by the complainant to the respondent was fair and reasonable with regard to his wages and that a further amount is still owed by him to the respondent.  The complainant was not a low-paid worker, having an annual salary of approximately €51,200.  This is important from the perspective of the requirement of section 5(2)(b)(ii) that,

“(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)…”

In conclusion, Mr Murray submitted that the payment of the costs incurred and owing to the respondent is a lawful payment in accordance with the Act.

A Deduction from the Complainant’s Wages or a Payment to the Employer?

The application of section 5 of the Payment of Wages Act to both sides of this argument was well set out in the submissions at the hearing.  In contravention of section 5(1)(c) of the Act, the complainant argues that there has been a deduction from his wages to which he did not give his prior consent.  The respondent argues that they were entitled to receive a payment from the complainant, in accordance with section 5(1)(b), and that this payment was provided for in the complainant’s contract of employment.  Alternatively, the respondent’s case is that the “payment” to the employer was in accordance with section 5(2)(b) of the Act and was in return for “services” provided to the employee in the form of training.  

The contract issued to the complainant on August 25th 2016 was signed by him on September 1st.  Clause 10 sets out the conditions attached to training:

“Sterval will, when required and at the discretion of the company, provide training for employees.  In the event of an employee ceasing employment with the company within a certain timeframe of receipt of training, the costs for such training shall be reimbursed to the company from the employee as per the terms below.

Cease employment within 1 year of receipt of Training – 100% of costs to be reimbursed.

Cease employment within 2 years of receipt of Training – 50% of costs to be reimbursed.

Cease employment post 2 years of receipt of Training – 0% of costs to be reimbursed.”

Although the complainant said that he wasn’t aware of this clause in his contract, as the terms are simple and clear, his evidence in this regard was unconvincing.  However, his recollection of the matter is not material to my findings here.

Reliance by the Respondent on Clause 10

While I accept that the clause is written in simple and clear terms, it fails to include adequate information to avoid misunderstandings and disputes.  It also seems to operate entirely in favour of the employer.  It is my view that the employer cannot rely on this clause for the following reasons:

1.              As the relevant clause states that training will be provided “when required and at the discretion of the company,” it is apparent that the employee has no input into the selection of the training.  No limit is specified regarding the potential cost of any training.  With the operation of the clause working in favour of the employer’s discretion to send an employee on a training course when required by them at an unspecified cost, it is unreasonable that an employee should pay for the training, even if they leave within two years.

2.              In most jobs, and particularly in sectors focused on technology and the use of equipment, training is a normal and frequent undertaking.  Employees must be continuously upskilled to support businesses to grow.  It seems to me to be entirely unfair to send an employee on a training course so that they can use their employer’s equipment or achieve necessary certification, and for the employer to be reimbursed for the cost.   

3.              The relevant clause provides no breakdown of the components included in the cost of training.  From the details provided at the hearing, the bulk of the costs associated with the February 2020 course in Denmark are related to wages, travel and accommodation.  The cost of the March 2020 training is unclear, but more than half of the cost was associated with wages, travel and accommodation.  The fact that the training took place overseas was not at the discretion of the complainant, and it is unreasonable to expect him to pay for the cost of travel and accommodation incurred at the behest of his employer.

4.              The clause in the contract gives no indication that the “costs to be reimbursed” includes wages for the time spent on the course.  This provision essentially means that, in the event of resignation within two years of attending training, an employee must forego their wages for the time spent on a training course.  The failure to make this clear and specific is deceptive and it is my view that if was clear and specific, no prospective employee would agree to it.

5.              Finally, the clause contains no provision for informing an employee in advance of attending a particular course of the total costs associated with that course.  The effect of this is that an employee is ignorant of the scope of the financial risk they incur in the event of the termination of their employment in the two years after the training.  I can see no reason why, when this information was provided to the complainant following his resignation, that it could not have been provided in advance of the training he attended in February and March 2020, so that he could make an informed decision about whether or not to attend.

From the determination of the Employment Appeals Tribunal in the Ryanair case cited by Mr Kenny (page 3 above), we know that, in accordance with section 11 of the Act, I have a responsibility to ensure that a term in a contract of employment is consistent with the provisions of the Act.  For the reasons I have set out above, it is apparent that the provisions of clause 10 of the complainant’s contract are seriously deficient.

Findings

I find that clause 10 of the complainant’s contract with regard to the repayment of training costs is inconsistent with the requirement for fairness, transparency and notice in section 5 of the Act.  As a matter of law and logic therefore, I cannot accept the respondent’s first argument that the deduction from the complainant’s wages on February 25th 2021 was, in accordance with section 5(1)(b) of the Act, and that it was authorised by virtue of a term of his contract.

Moving to the respondent’s second argument that, in accordance with section 5(2)(b), the deduction was in respect of payment for a service, in the form of training, provided for the employee by the employer, I find as follows:

In breach of section 5(2)(b)(ii), the amount of the deduction, being the complainant’s total net pay for the month of February 2021, was unfair and unreasonable.

In breach of section 5(2)(b)(iii)(II), before he was provided with the training, the complainant was not informed of the total cost being incurred by his employer, so that he would know the effect of his attendance at the training on his final salary in the event of the termination of his employment.

In breach of section 5(2)(b)(iv), one week before the deduction, the complainant was not furnished with particulars in writing of the amount to be deducted from his wages.

In breach of section 5(2)(b)(vii), the deduction was made more than six months following the complainant’s attendance at the training.

Conclusion

In the first instance, I find that the respondent cannot rely on section 5(1)(b) of the Payment of Wages Act to substantiate an argument that the failure to pay the complainant any wages in February 2021 was lawful.  I have reached this conclusion because the clause in the complainant’s contract that provides for a deduction from his wages to cover the cost of training in the two years prior to the termination of his employment is entirely flawed.

Secondly, I find that the respondent is in breach of section 5(2)(b) of the Act by failing to comply with the relevant provisions regarding reasonableness, fairness and the right to adequate notice.

I decide that this complaint is well founded.  In accordance with section 6 of the Payment of Wages Act, as amended, I am required to direct the respondent to pay compensation as a net amount.  I decide therefore, that the respondent is to pay the complainant €3,602.39, equivalent to the wages properly payable to him on February 25th 2021.

Deduction from wages, training course