Alastair Purdy & Co Solicitors successfully represented Complete Lab Solutions (“Respondent“) before the Work Relations Commission (‘’WRC’’) in an action brought by a former employee (“Complainant“) claiming unlawful deduction in his wages.
In this case, the Complainant commenced employment with the Respondent in June 2018. In May 2020, the Complainant issued his resignation to the Respondent, having accepted a job offer from another company. During his employment, he engaged in training and development, the cost of which was covered by the Respondent. Having left his employment early, his contract now permitted the Respondent to make deductions to recoup the losses of the training. The Respondent made a deduction of €2,916.67 from his wages.
The Complainant brought an action before the WRC claiming unpaid wages and presented his claim under Section 6 of the Payment of Wages Act 1991 (“1991 Act”) on grounds that his employer has contravened Section 5 of the 1991 Act, which prohibits an employer from making a deduction unless the deduction falls within one of the exceptions under Section 5.
The Respondent argued that the deduction was not unlawful as Section 5 of the 1991 Act permits a deduction where it is authorised by a term of the employee’s contract of employment. In support of their argument, the Respondent referred to two clauses in particular from the Complainant’s contract of employment. The first clause presented requires the Complainant to undertake significant training and development as part of which, the Respondent would cover the costs subject to a number of conditions, the primary of which, clearly stated that if the Complainant was to leave his employment within the first 24 months, the Respondent would be entitled to recoup 50% of the costs incurred by them. The second clause referred to a general right the Respondent had to make any appropriate deductions from the Complainant’s salary. The Complainant disputed the right of the Respondent to deduct from his wages under both contractual clauses.
The WRC held the Complainant’s claim under Section 6 of the 1991 Act was not well-founded and, therefore, not upheld. The WRC found that the Respondent had complied with Section 5 (i), (ii), (iii) and (v) of the 1991 Act as the deduction was authorised by virtue of a term within his contract of employment, which he had signed upon commencement. Importantly, the Adjudicator noted that the amount deducted was reflective of the costs incurred.
Key Takeaways for Employers:
This case reaffirms that an employer may lawfully deduct training and development costs from an employee salary, provided there is a contractual provision permitting such. However it is recommend where the costs of the training and development are significant, it is prudent that an employer enter into separate and individual agreement with the employee in question so that the precise clawback mechanisms can be clearly defined. In the absence of such, an employer risks a claim being brought against them before the WRC for an unlawful deduction of wages.
Link to case: https://www.workplacerelations.ie/en/cases/2022/march/adj-00029801.html