THE INDUSTRIAL TRIBUNALS

CASE REF:    1127/16 

CLAIMANT:	Louize Neely

RESPONDENT:	Storm Xccessories Ltd

DECISION

The decision of the tribunal is that the claimant is entitled to a declaration that the respondent made unauthorized deductions of wages in the amount of £15,400.00.  The claimant is entitled to an award of £15,400.00.

Constitution of Tribunal:

Employment Judge:	Employment Judge Sheehan

Members:	Mr A Barron
	Mr D Walls

Appearances:

The claimant appeared in person and represented herself.

The respondent was represented by the Managing Director of the respondent company. 

PRELIMINARY ISSUE

1.	The claimant in advance of the hearing withdrew a claim of sex discrimination in respect of a named second respondent who was dismissed from the proceedings by order issued to the parties on 1 November 2016.  At the outset of the hearing, despite the conflicting assertions between the contents of the claim and response forms submitted to the tribunal, the parties agreed that the claimant was an employee of the respondent company and continues to be an employee of the company as neither the respondent company or the claimant have terminated that employment.  The parties agreed that the claimant’s annual salary was £16,800 gross equating monthly to £1,400 gross and £1,200 nett.  Both parties agreed that the claimant was placed by the respondent on unpaid leave with effect, week commencing 1 January 2016. 

SOURCES OF EVIDENCE

2.	The tribunal heard oral evidence from the Managing Director of the respondent company, the claimant and received a bundle of agreed relevant documents prepared by the claimant.  Additional documents regarding correspondence and claims made for Job Seeker’s Allowance in October 2015 were also produced to the tribunal on the second day of hearing.  Both claimant and respondent failed to produce to the tribunal complete copies of the documentation relating to the claimant’s application/s for Job Seeker’s Allowance.

THE CLAIM AND THE RESPONSE

3.	The claimant initially brought claims for unfair dismissal, unlawful deduction of wages, non-payment of expenses and sexual discrimination.  The record of proceedings in relation to the Case Management Discussion held on 11 August 2016 indicated that one of the causes of action at that time was a claim for debt under breach of contract arising from omission to pay the claimant all of her wages during the period 1 January 2014 until 21 December 2015, omission to pay the claimant any wages at all since the 21 December 2015 as well as the cancellation of the claimant’s private medical and dental cover.  The claim in respect of salary from 1 January 2014 to end of December 2015 was no longer an issue in light of a conciliated agreement made in respect of claim 1322/14IT.  The indication provided to the tribunal at the outset of the hearing regarding the current employment status of the claimant resulted in the law governing the jurisdiction of the tribunal in respect of contract claims being outlined by the employment judge to the parties.  The parties responded by indicating they were in agreement that the sole claim before the tribunal concerned recovery of wages for alleged unlawful deductions of wages by the respondent.  

THE FACTS

4.	The claimant was employed by the respondent with effect from 7 October 2007.  The date of commencement of employment was evidenced by the main statement of terms and conditions included in the claimant’s bundle.  

5.	The claimant is named as the Company Secretary on the Memorandum and Articles of Association of the respondent company and in the main statement of terms and conditions of employment carrying a date 15 November 2007.  The claimant’s tasks were of a generic administrative nature, focusing on duties which assisted the running of the business particularly in respect of the Managing Director within the company.  The remuneration package was £16,800 per annum gross (£1,200 per month nett) plus a mileage allowance. 

6.	There was access to the Company’s private medical and dental insurance policy as evidenced by an email in the claimant’s bundle confirming to the claimant that with effect from 1 November 2015 she had been removed from the respondent’s company policy but her three daughters retained cover under the policy.

7.	The respondent company evolved from a business run by the Managing Director with the support of his wife, the claimant.  The business became incorporated in 1 April 2008.  The claimant and the Managing Director are shareholders of the respondent company.  By 2015 the respondent employed 10 or so persons in total. 

8.	The claimant is married to the Managing Director of the respondent company but the parties are estranged since in or about December 2013.  The claimant and the Managing Director initially agreed, upon the breakdown of their marital relationship, that the claimant would not attend the business premises of the company but would still receive her monthly salary.  The claimant had an earlier claim to the tribunal in respect of arrears of wages and travel allowances from 1 January 2014 concluded by a compromise agreement dated 28 November 2014 ref 1322/14IT.  Following the resolution of claim 1322/14IT, the claimant from November 2014 received monthly payments equivalent to her agreed salary until the claimant was notified by the respondent by letter dated 28 September 2015 that the payments would be terminated from 1 October 2015. 

9.     	The claimant took action to seek alternative sources of money, by applying for Job Seeker’s Allowance pending resolution of her matrimonial financial affairs or her employment situation with the respondent.  There was correspondence between solicitors included within the bundle presented to the tribunal.  Both parties confirmed legal privilege was waived in respect of the documents included in the bundle.  A letter dated 19 November 2015 notified the claimant the Managing Director of the respondent company had persuaded the management team to reinstitute the monthly salary payments until 31 December 2015 on the basis that the claimant would then be placed on unpaid leave with effect from 1 January 2016.  The letter dated 19 November 2015 made clear that the suspension of salary payments was initiated as a result of objections to the payments from a major creditor of the company as well as other members of the management team.  No prior agreement, verbal or in writing, was sought or obtained from the claimant to her being placed on unpaid leave. 

10.	The claimant made efforts to seek alternative paid employment from mid October 2015 but without success.  On 22 February 2016 the claimant had her matrimonial solicitors write to the Managing Director’s matrimonial solicitors indicating that she would wish to report to work with the company rather than remain on unpaid leave.  There were extracts from matrimonial documents included in the bundle of documents including extracts from sworn affidavits dated 11 February 2016 averring that the claimant could return to work with the respondent but had refused to do so.  The firm of solicitors acting for the Managing Director refused to participate in correspondence on the issue of the claimant’s return to the respondent’s place of business claiming they were not instructed to act for the respondent.  This was the same firm who had issued to the claimant, via her matrimonial solicitors, notice of the company’s intention to reinstate the claimant’s salary for a set period with cessation from 1 January 2016.  The claimant then communicated directly with the respondent by letter and email in March 2016 of her willingness to return to work for the respondent and seeking a date for that return.  At the dates of hearing the claimant had received no response from the respondent in respect of the request to return from unpaid leave to work in the respondent’s business premises. 

11.	The parties produced in the bundle of documents a number of company procedures including an absence procedure and a grievance procedure.  The absence procedure made no reference to placing an employee on unpaid leave in situations outside disciplinary action.  The policy did set out a procedure for addressing unacceptable levels of absence but no steps were taken by the respondent in accordance with that policy.  The claimant was in possession of these documents from 2014 when they were provided during the resolution of claim ref 1322/14IT.  The claimant did not indicate she wished to initiate a grievance under the procedure either when placed on unpaid leave with effect from January 2016 or when no response was received to her request to return from unpaid leave.  The respondent referred to that request in their response to the claim in section 6.2 of the form but only to indicate that “in advance of a reply by the respondent the claimant … commenced proceedings on 30 March 2016”.  The claimant’s explanation for submission of the claim before the end of March 2016 was that she believed time for submission of her claim would expire on or before that date.

12.	The respondent produced no evidence that the respondent was entitled under the contract of employment to place the claimant on unpaid leave, in particular for any substantial period.  No evidence was placed before the tribunal in support of the grounds asserted in their response filed that the claimant was in breach of the employment contract and had repudiated her contract of employment.  It appeared to the tribunal that at all times the respondent company in advance of the 1 January 2016 was aware of the reason for the claimant’s absence.  The response filed in May 2016 on behalf of the respondent to the claimant’s ET1 indicated that, as of that date, the respondent considered the claimant was still in their employment.  The respondent failed to take any action subsequent to the claimant’s initial request to return to work in February 2016 or following submission of the ET1 in May 2016 to address the request to return to work.  The claimant at no time provided the respondent with any notice that she was terminating her employment or treating their failure to pay her wages or to retain her on unpaid leave as a fundamental breach of the contract of employment.  

13.	The respondent’s failure to pay the claimant wages since 1 January 2016 has continued to the dates of hearing.  The respondent company with effect from 1 November 2015 removed the claimant from the company policy for private medical and dental care.  The children of the claimant and the Managing Director remained named persons to benefit under the company policy.  The claimant complained to the tribunal this was a further unlawful deduction and obtained details of the cost for alternative private medical and dental insurance which amounted to £688.37.  There was no mention in the letter dated 19 November 2015 that the claimant was to be removed from the company medical and dental plan.  There was no mention in the main statement of terms and conditions of employment or letter of offer of employment that access to a company private medical and dental insurance policy was to be provided as part of the claimant’s remuneration package.

THE LAW

14.	Unauthorised Deduction from Wages

	Article 45(1) of the Employment Rights (Northern Ireland) Order 1996 (“the 1996 Order”) provides as follows:

		"An employer shall not make a deduction from wages of a worker employed by him unless – (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". 

	Article 45(3) of the 1996 Order provides as follows:

		"Where the total amount of wages paid on any occasion by an employer to a worker employed by him is less than the total amount of the wages properly payable by him to the worker on that occasion (after deductions), the amount of the deficiency shall be treated for the purposes of this Part as a deduction made by the employer from the worker’s wages on that occasion".

15.	Meaning of “wages” is detailed in Article 59 of the 1996 Order.

	“Article 59.—(1) In this Part “wages”, in relation to a worker, means any sums payable to the worker in connection with his employment, including —
(a)	any fee, bonus, commission, holiday pay or other emolument referable to his employment, whether payable under his contract or otherwise, ...”

16.	Breach of Contract

	The Industrial Tribunals Extension of Jurisdiction Order (Northern Ireland) 1994 confers jurisdiction on industrial tribunals to hear claims for breach of contract and Article 3(c) provides as follows:-

		"Proceedings may be brought before an industrial tribunal in respect of a claim of an employee for the recovery of damages or any other sum (other than a claim for damages, or for sum due in respect of personal injuries) if –

		(c) the claim arises or is outstanding on the termination of the employee's employment."

17.	Notice Pay

	Article 118 of the Employment Rights (Northern Ireland) Order 1995 makes provision in relation to notice periods as follows:-

		“118.—	(1)	The notice required to be given by an employer to terminate the contract of employment of a person who has been continuously employed for one month or more— 

				(a)	is not less than one week's notice if his period of continuous employment is less than two years, 

				(b)	is not less than one week's notice for each year of continuous employment if his period of continuous employment is two years or more but less than twelve years, and 

				(c)	is not less than twelve weeks' notice if his period of continuous employment is twelve years or more. 

			(2)	The notice required to be given by an employee who has been continuously employed for one month or more to terminate his contract of employment is not less than one week.”

18.	Non-completion of statutory procedure: adjustment of awards by industrial tribunals

	Article 17 of the Employment Northern Ireland Order 2003 makes provision as follows:-

		17.—(1) This Article applies to proceedings before an industrial tribunal relating to a claim under any of the jurisdictions listed in Schedule 2 by an employee.

		(2) 	If, in the case of proceedings to which this Article applies, it appears to the industrial tribunal that —
		 
				(a)	the claim to which the proceedings relate concerns 	a matter to which one of the statutory procedures 	applies,

				(b) 	the statutory procedure was not completed before 	the proceedings were begun, and

				(c) 	the non-completion of the statutory procedure was 	wholly or mainly attributable to failure by the 	employee — 

(i)	to comply with a requirement of the 	procedure, or

(ii) 	to exercise a right of appeal under it, 

			it shall, subject to paragraph (4), reduce any award which it makes to the employee by 10 per cent, and may, if it considers it just and equitable in all the circumstances to do so, reduce it by a further amount, but not so as to make a total reduction of more than 50 per cent.

			 (3) 	If, in the case of proceedings to which this Article applies, it appears to the industrial tribunal that—
 		
(a)	the claim to which the proceedings relate concerns 	a matter to which one of the statutory procedures 	applies,

(b)	the statutory procedure was not completed before 	the proceedings were begun, and 

(c)	the non-completion of the statutory procedure was 	wholly or mainly attributable to failure by the 	employer to comply with a requirement of the 	procedure, 

	it shall, subject to paragraph (4), increase any award which it makes to the employee by 10 per cent and may, if it considers it just and equitable in all the circumstances to do so increase it by a further amount, but not so as to make a total increase of more than 50 per cent.
 
		(4) 	The duty under paragraph (2) or (3) to make a reduction or increase of 10 per cent does not apply if there are exceptional circumstances which would make a reduction or increase of that percentage unjust or inequitable, in which case the tribunal may make no reduction or increase or a reduction or increase of such lesser percentage as it considers just and equitable in all the circumstances”.

	Schedule 2 includes claims for unlawful deduction from wages under the 1996 Order.

CONCLUSIONS

19.	The tribunal in determining whether the claimant’s claim is made out had to consider what is “properly payable” in wages to the claimant.  In Kent City Council v Knowles [UKEAT/0547/11/MMA] the Employment Appeal Tribunal (EAT) confirmed that, where there is no contractual entitlement to suspend without pay, a worker’s wages during a period of suspension remain “properly payable”, providing the worker is available and ready to work.  The placing by the employer of the employee on suspension cannot provide grounds for the employer to claim that the employee was not available or ready to work for the employer.  The claimant in indicating in February and March 2016 her readiness and willingness to return to work was giving as much consideration as was open to her to give in return for salary.  Delaney v Staples (t/a De Montfort Recruitment) [1991] 2 QB 47 is authority that a “deduction” may arise where there has been a complete failure to pay, as well as where there has been a reduction in pay. 

20.	While a week’s pay is defined within the 1996 Order at Articles 16 to 20, the legislative provisions essentially seek to identify the gross contractual remuneration an employee is entitled to be paid when working their normal hours each week.  Wages, as defined within Article 59 of the 1996 Order, is broadly interpreted but the basic requirement is that the “emolument” (profit, salary, or fees from office or employment; compensation for services) is paid or provided due to the employment of the employee with the employer.  The letter dated 19 November 2015 communicating the respondent’s intention to cease to make any payment for salary to the claimant after December 2015 made no reference to removing the claimant from the private medical and dental policy.  The respondent’s witness gave two differing answers at hearing regarding the claimant’s removal from the company private medical and dental policy.  Firstly the company saw it as part of the remuneration package and as the claimant was on unpaid leave the cover was also cancelled.  The alternative explanation was that the placement of the claimant and the children of their marriage on the company private medical and dental plan was due to the employment of her husband, the Managing Director for the respondent, rather than the claimant’s own employment status.  The respondent’s witness advised the tribunal that the respondent did not purchase individual policies but had a “generic” company plan with named persons covered under the policy.  The claimant produced no evidence to contradict the evidence of the respondent’s witness or to establish that her inclusion on the company policy plan was in relation to her status as an employee of the respondent.  No reference to entitlement to private medical and dental cover was included in the main statement of terms and conditions of employment.  The tribunal concluded, on the balance of probabilities, that the provision of private medical and dental insurance was not a contractual entitlement of the claimant as an employee of the respondent.  It is clear the children of the Managing Director of the respondent company remain entitled to cover under the company policy and have no employment relationship with the respondent.  The tribunal was satisfied on the evidence placed before it that the inclusion or removal from the respondent company private medical and dental insurance policy was dependent not on the claimant’s status as an employee.  

21.	The reason proffered by the respondent for the nonpayment of the claimant’s salary does not meet with the statutory requirements or fall within the statutory exclusions provided in Articles 45 and 46 of the 1996 Order.  No evidence was produced to the tribunal that the respondent was authorised, as required by Article 45 (1), to make any deduction from the claimant’s salary while the claimant remained in the respondent’s employment.  The respondent’s witness at hearing vacillated between differing explanations for the respondent’s actions.  This included an assertion that the respondent assumed the claimant had resigned when they were notified in October 2015 that she had applied for Job Seeker’s Allowance.  This assertion is at odds with the response they filed to the claim before the tribunal.  There was evidence produced at the hearing that a P60 was issued to the claimant throughout the relevant period including the tax year 2015/2016.  No P45 had been issued to the claimant by the last date of hearing.  The respondent’s witness blamed the lack of response to the claimant’s request to return to active employment with the company on the “acrimonious nature of the relationship between us”.  This martial estrangement between the claimant and the Managing Director of the respondent company may have some relevance as to how the respondent company chose to handle the employment relationship but it is irrelevant to the matters which fall to be determined by this tribunal.  The tribunal had little difficulty in accepting that the return of the claimant to the premises of the respondent, which is a relatively small company employing 10 to 12 people during the relevant period, may have given rise to difficulties of a personal nature.  However it is very clear to the tribunal that neither the claimant nor the respondent communicated further with each other about the request of the claimant to return to work from unpaid leave once papers were lodged with the Office of the Industrial Tribunal and Fair Employment Tribunal.  Neither claimant nor respondent sought to utilise company policies or procedures to resolve or finalise matters between the parties.  There is no evidence either party considered the employment relationship had irretrievably broken down or there was no trust or confidence between employer and employee other than an assertion in the respondent’s response filed 13 May 2016 which is based on an alleged breach of the employment contract by the claimant.  No such breach occurred as the response filed clearly contains incorrect assertions that the claimant’s absence from work was unauthorised by the respondent.  The tribunal is satisfied that the respondent was aware of the claimant’s absence and indeed prevented the claimant’s return by failing to provide a date for that return.  The tribunal noted the various attempts by the claimant to obtain paid employment elsewhere as evidenced in the documents contained in the bundle produced to the tribunal.  The tribunal cannot construe those attempts as anything other than evidence of the claimant attempting to mitigate her loss.  The documentation cannot be construed as evidence that she had chosen to resign from her position with the respondent.  

22.	The tribunal is driven to conclude, on the balance of probabilities, that the claimant as an employee of the respondent has suffered unlawful deductions of wages from 1 January 2016 to the dates of hearing.  This is a loss of salary for 11 months at £1,400 gross.  The tribunal in all the circumstances, particularly the correspondence between the solicitors acting in the matrimonial affairs of the claimant and the Managing Director of the respondent company, did not consider the failure of the claimant to initiate the statutory grievance procedure any more blameworthy than the failure of the respondent to respond to her request to return to work at the business premises or treat that request as a letter notifying them of a grievance. The tribunal concluded that it would be unjust or inequitable to make any adjustment in respect of either party in this case. 

23.	The claimant is therefore, in accordance with Article 56 (1) of the 1996 Order, entitled to a declaration that her claim under Article 55 (1) is well founded.  The respondent is ordered to pay to the claimant the sum of £15,400.00.  The tribunal did not consider it appropriate to make any award under Article 56 (2) as there was no evidence that in fact the claimant had incurred any financial loss attributable to the matters which were the subject of this claim. 

AWARD

24.	Non Payment of Wages (1/1/16 to 29/11/16)  -  £15,400.00.

25.	This is a relevant decision for the purposes of the Industrial Tribunals (Interest) Order (Northern Ireland) 1990.

Employment Judge:

Date and place of hearing:    15 and 29 November 2016, Belfast.

Date decision recorded in register and issued to parties: