Is there any limitation on the recovery of compensation for deductions from wages in respect of claims pre July 2015? No, holds the EAT in Coletta v Bath Hill Court (Bournemouth) Property Management Ltd.
Mr Coletta pursued a successful claim in the ET that he had not been paid the national minimum wage for sleeping in duties at work. As he had worked on the same pattern of work for a 15 year period, deductions had been made from his wages every month for 15 years.
At a remedy hearing, the issue was the extent of the ET’s jurisdiction to order that Mr Coletta’s employer pay him the deductions made from his wages. The Respondent contended that he could only recover sums for the period of six years prior to the date of presentation of his claim. Section 9 Limitation Act (‘LA’) 1980 provides that an action to recover any sum recoverable by virtue of an enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued. A claim for unauthorised deductions was such a claim and therefore no compensation could be awarded in respect of a period earlier than six years before the presentation of the claim. The ET agreed and awarded compensation limited to six years.
Mr Coletta appealed to the EAT. Section 39 LA 1980 disapplies the provisions of the Act in the case of any action for which a period of limitation is prescribed by or under any other enactment. He argued that the time limit in s.23 Employment Rights Act (‘ERA’) was an alternative period of limitation and so s.39 LA 1980 was engaged. Otherwise, there would in effect be a double limitation for unauthorised deduction of wages claims: that they had to be presented within 3 months of the date of the last deduction and relate to deductions made in the six years prior to presentation of the claim.
Ruling of EAT
In her judgment allowing the appeal, HHJ Eady QC found that “on its face, s.9 LA should indeed apply to unauthorised deduction of wages claims”, but that s.39 LA disapplied section 9 and its backstop. It was disapplied because s.23 ERA meant that an ET can “only consider a complaint presented before the end of a period of three months beginning with the deduction” and therefore a claim for unauthorised deductions was subject “to a period of limitation … prescribed by or under any other enactment” as s.39 stipulates.
The EAT rejected the Respondent’s argument that s.23 ERA 1996 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 other deductions in the series. If the ET is satisfied that there has been a series of deductions, that series is subject to a period of limitation as prescribed by section 23(3) ERA, since a claim must be brought within 3 months of the final deduction in the series.
HHJ Eady QC further held that it was “open to Parliament to provide greater prescription in terms of the relevant period of limitation”, which it has since done by way of the Deduction from Wages (Limitation) Regulations 2014 which impose a 2 year back-stop on the recovery of compensation for claims of unauthorised deduction from wages presented since 1 July 2015. However, before the passing of the Regulations, s.23 ERA prescribed no such limitation on the arrears that an ET could award.
The Respondent also contended that Mr Coletta’s case was inconsistent with public policy. HHJ Eady QC considered that there was no easy answer to this, acknowledging the “real world difficulties” for employers facing unauthorised deduction claims going back many years. However “Part II ERA is intended to provide an important statutory protection for workers; in this context, they are simply claiming those sums that were properly due to them.” The EAT also drew an analogy between the limitation provision in s.123(3) of the Equality Act 2010 and section 23 ERA, acknowledging that with respect to limitation in claims of discriminatory conduct extending over a number of years, “it has not been suggested that the answer might simply be provided by the imposition of a time limit pursuant to section 9 LA.”
This judgment resolves a long standing issue as to the extent of the ET’s jurisdiction to award compensation for unauthorised deduction from wages. In Alabaster v Barclays Bank  ICR 1246, the Court of Appeal assumed, without hearing argument on the point, that the jurisdiction was limited to six years pre presentation of the claim. The authors of Harvey on Industrial Relations and Employment Law considered that view to be wrong. Further, of course, the Government passed the Deduction from Wages (Limitation) Regulations 2014 on the basis that it could be saving employers from historical holiday pay claims dating back to the passing of the Working Time Regulations 1998 because there was no compensation ‘back-stop’.
This judgment has no application to claims presented since 1 July 2015 – or at least for as long as there is no challenge to the Regulations – but will be of considerable interest to those advising employees and employers particularly in respect of historical holiday pay claims and sleeping in cases.
Betsan Criddle of Old Square Chambers successfully represented Mr Coletta in the EAT. She was instructed by the Bar Pro Bono Unit with assistance from Clive Dobbin and Andrew Willshire of Paris Smith LLP.
This note was written by Conor Kennedy, pupil at Old Square Chambers.
Please click here to view the full judgment.
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