EAT holds that there is no limitation on the recovery of historic unlawful deductions from wages

In a recent appeal case, Coletta v Bath Hill Court (Bournemouth) Property Management Ltd, a worker has successfully appealed that arrears awarded following a successful claim for unlawful deduction from wages should not be subject to a six-year limit.

Background

Mr Coletta, the claimant, worked for the respondent, Bath Hill Court (Bournemouth) Property Management Ltd, as a porter from 2000. Mr Coletta began Tribunal proceedings against his employer in 2014, claiming that he has been underpaid in accordance with the National Minimum Wage.

Both the Employment Tribunal (“ET”) and the Employment Appeal Tribunal (“EAT”) upheld the claim and, the ET reconvened on the 11 November 2016 to determine a resolution which resulted in Mr Coletta being awarded £44,603.05 (this was the amount of the underpayment for six years prior to the commencement of proceedings).

Mr Coletta appealed the decision that he was only entitled to compensation limited to six years and contends that the ET erred in limiting the period for which he could recover the unauthorised deductions from wages to six years prior to the presentation of his claim.

In Mr Coletta’s appeal to the EAT, he submitted that the ET made an error in concluding that section 23 of the Employment Rights Act (“ERA”) did not constitute a period of limitation within the meaning of section 39 of the Limitation Act 1980 (“LA”).  His view was that the LA should not have been used because section 23 ERA provided an alternative period of limitation. Provided the claim was brought within three months of the last in the series of deductions, a worker could thus recover compensation in respect of the whole series (in this case it was a period of 15 years).

Relevant Legislation

The appeal in question gives rise to a distinct question relating to the jurisdiction of the ET to award compensation in respect of a series of deductions from wages.

• Does section 9 LA apply to a claim of unauthorised deduction of wages, and if so, does the six-year limitation to the recovery of compensation?
• Alternatively, does section 23 ERA prescribe an alternative period of limitation for the purposes of section 39 LA?

Relevant sections of legislation;

The Limitations Act 1980

(9) Time limit for actions for sums recoverable by statute

(1) An action to recover any sum recoverable by virtue of any enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued.

(2) Subsection (1) above shall not affect any action to which section 10 of this Act applies.

(39) Saving for other limitation enactments.

This Act shall not apply to any action or arbitration for which a period of limitation is prescribed by or under any other enactment (whether passed before or after the passing of this Act) or to any action or arbitration to which the Crown is a party and for which, if it were between subjects, a period of limitation would be prescribed by or under any such other enactment.

The Employment Rights Act 1996

Section 23, subsection 2

Subject to subsection (4), an employment tribunal shall not consider a complaint under this section unless it is presented before the end of the period of three months beginning with—

1. in the case of a complaint relating to a deduction by the employer, the date of payment of the wages from which the deduction was made, or
2. in the case of a complaint relating to a payment received by the employer, the date when the payment was received.

(3) Where a complaint is brought under this section in respect of—

1. a series of deductions or payments, or
2. a number of payments falling within subsection (1)(d) and made in pursuance of demands for payment subject to the same limit under section 21(1) but received by the employer on different dates,

the references in subsection (2) to the deduction or payment are to the last deduction or payment in the series or to the last of the payments so received.

Conclusion

The EAT found that, in this case, section 39 LA disapplied section 9, and its limitation of six years, due to the provisions in section 23 ERA.  This identified that the unauthorised deductions were subject to a period of limitation prescribed by another statute (and so, section 9 LA did not apply).  In such circumstances, section 23 ERA prescribes that a tribunal claim must be presented within 3 months of the deduction being made and so, provided that this is done, the restriction applied by the LA will not apply.

The EAT also overturned the ETs finding that section 23 ERA only provided a period of limitation for the last deduction in the series and therefore made no provision for a period of limitation for each of the deductions in the series.

The EAT referred to the implementation of the Deduction from Wages (Limitation) Regulations 2014 which impose a 2 year back-stop on the recovery of compensation for claims of unauthorised deductions from wages presented since 1 July 2015, noting that prior to the addition of these regulations, there was no such limitation.

The EAT was ultimately satisfied that section 23 ERA prescribed a period of limitation which took precedence over the provisions of the LA and so, allowed Mr Coletta’s appeal.  The parties were given time to submit their calculations of the amount due.   

Aspire Comment

This judgement raises serious consideration for those who have historical claims for unlawful deduction of earnings, as in cases of claims for underpaid holiday pay or National Minimum Wage, with claims which pre-date July 2015 potentially having no limitation to the period of arrears. 

If you would like to discuss this case, or a current situation which could expose your business to financial risk, then please get in touch with Aspire to discuss how we can help.