Tribunals can interpret contracts in unauthorised deductions claims

Agarwal v Cardiff University

Faced with deciding whether a sum is ‘properly payable’ for the purposes of an unauthorised deduction claim, a tribunal does have jurisdiction to interpret contractual terms.

Where the total amount of wages paid to a worker is less than the amount ‘properly payable’ to him or her, that qualifies as a ‘deduction’ and the worker can bring a claim in the employment tribunal to recover the shortfall (s. 13 of the Employment Rights Act). But what happens where there’s a dispute as to what is ‘properly payable’?

Employment tribunals do have jurisdiction to hear a variety of breach of contract claims – but these must be ones outstanding on termination. Does this mean that tribunals cannot therefore hear unlawful deductions from wages claims if they depend on construing the worker’s contract? Recent years have given rise to some conflicting decisions on this issue and this decision now provides some clarity.

Background

Ms Agarwal, a surgeon, was employed under a ‘clinical academic contract’ which involved carrying out lecturing duties for the university as well as clinical duties for the local health board. The university paid her salary for both sets of duties.

Following a period of sickness absence in October 2014 because of stress resulting from difficult relationships with her clinical colleagues, Ms Agarwal returned to perform her academic duties. Due to concerns about patient safety, however, the local health board asked her to agree to mediation with her colleagues and to consent to an OH assessment before allowing her to return to her clinical duties. She refused, insisting that she was fit and able to carry them out. The board did not agree, and she was subsequently paid only half her salary.

Ms Agarwal brought a claim under s. 13 saying that she had suffered unauthorised deductions from her wages in respect of clinical sessions since October 2014.

The tribunal declined to hear her complaint on grounds of jurisdiction. To determine whether there had been an unlawful deduction, it would have been obliged to carry out a detailed interpretative exercise to decide whether Ms Argawal’s entitlement to payment for clinical work depended on her actually performing such work or at least co-operating with the employer in any assessment of her fitness or attempts to resolve the issues regarding her relationships with colleagues. The unlawful deduction from wages regime was not intended to be a forum for resolving disputes as to the interpretation of a contract and it had no jurisdiction to undertake that exercise. The EAT upheld the tribunal’s decision, albeit on different grounds, and concluded that the venue for pursuing her claim for the alleged shortfall in her wages was in the civil courts. It accepted that this ‘may be regrettable’, but said it was ‘established law and policy’. Ms Agarwal appealed.

Court of Appeal decision

The appeal was allowed.

An old and well-known Wages Act case (Delaney v Staples) is binding authority that an employment tribunal has jurisdiction to resolve any issue necessary to determine whether a sum is ‘properly payable,’ including an issue as to the meaning of the contract of employment.

There is, said the Court of Appeal, ‘no good – or even, frankly, comprehensible – policy reason for carving out from the jurisdiction of the tribunal one particular kind of dispute necessary in order to resolve a deduction of wages claim. On the contrary, to do so would be incoherent and would lead to highly unsatisfactory procedural demarcation disputes. Tribunals are well capable of construing the terms of employment contracts governing remuneration and have to do so in many other contexts’.

Link to judgment: https://www.bailii.org/ew/cases/EWCA/Civ/2018/2084.html

Comment

There has long been an artificial barrier on what an employment tribunal can and cannot hear, which may have historically gone back to the fact that in the early days, employment judges were called ‘tribunal chairmen’ and did not have the same rigorous selection or training as they do now.

This decision by the Court of Appeal is common sense – how can a tribunal consider unlawful deductions without considering the contract? It also comes as the Law Commission launches a consultation into a number of elements of the employment tribunal and its jurisdiction, one of which is whether employment tribunals should be able to hear breach of contract claims brought whilst employees are employed (and raising the current cap on breach of contract claims from £25,000).