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Tribunals have jurisdiction to interpret contracts in unlawful deduction from wages claims

22 October 2018

The Court of Appeal in Agarwal v Cardiff University and others [2018] EWCA Civ 2084 has clarified that employment tribunals are able to consider how contractual terms are interpreted when considering whether there has been an unlawful deduction from wages.

Ms Agarwal was employed by the University on an academic basis, but also undertook work as a consultant urological surgeon for Cardiff and Vale University Health Board. The Board reimbursed the University for 50% of Ms Agarwal’s salary. However, following a dispute about Ms Agarwal’s sickness absence, the Board were of the view that her salary was not payable and so did not pay the University. The University then withheld that payment from Ms Agarwal. The tribunal was therefore being asked to interpret Ms Agarwal’s contract of employment to consider whether the payments were due to her. The University and the Board said they were not, Ms Agarwal said there was an unlawful deduction from wages.

The Employment Appeal Tribunal held that the tribunal did not have jurisdiction to interpret the contractual terms. The EAT relied upon the previous Court of Appeal case of Southern Cross Healthcare Co Ltd v Perkins [2010] EWCA Civ 1442 which found that tribunals did not have jurisdiction to interpret contracts where complaints are for a failure to provide written particulars under Part I of the Employment Rights Act 1996.

The Court of Appeal disagreed. It found that whilst Southern Cross applied to claims under Part I of the ERA, it did not apply to claims for unlawful deductions from wages which are drawn from Part II of the Employment Rights Act 1996. In doing so, it relied upon the case of Delaney v Staples [1991] ICR 331 which stated that tribunals should consider whether the sums in question in an unlawful deductions from wages claim were “properly payable” which “necessarily means that it will need, in a case where this is the issue to resolve any dispute as to the meaning of the contract relied on”.

This finding seems common sense – if the EAT was right, individuals who interpreted their contracts differently to their employers and argued that they were entitled to payments which were withheld from them would only have recourse in the civil courts. Consideration of whether an individual has suffered an unlawful deduction from wages necessarily needs an assessment as to whether the contract of employment provides for the payments to be made. It is now clear that tribunals have jurisdiction to consider such claims even where there is a dispute as to the interpretation of the contract.

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