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This case concerns contractual penalty clauses in an employment context. If the sum concerned is a penalty an employment tribunal can properly find that it is an unlawful deduction from wages. Guidance for Employment Tribunals dealing with these issues is provided in the Judgment of His Honour Judge Hand.
In this case the Employment Judge had found that a recoupment of expenses provision in a contract with the employee was a penalty but had not correctly applied the law. He did not consider the position at the time the contract was entered into but at the time of breach of contract. Further, he did not consider whether there was an extravagant or unconscionable gulf between the maximum amount that could be recovered in a common-law action for damages for breach of contract as opposed to the sum stipulated in the agreement.
Ian Scott, instructed by Charles Russell LLP, acted for the Appellants in the Employment Appeal Tribunal.