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WRC Dismisses Payment of Wages Claim – Contractual Term Allowed the Respondent to Deduct Costs Associated with Failure to Provide Notice

In Brigid Walsh v PV Generation Limited, the Complainant issued a complaint under the Payment of Wages Act, 1991 seeking reimbursement of outstanding salary that had been deferred due to the Covid-19 pandemic in circumstances where the Respondent had undertaken to reimburse any deferred salary. An express written term of the Complainant’s contract of employment permitted the deduction from her termination pay of an amount equal to the costs of covering her duties during her notice period in the event of her failing to provide the Respondent with notice of resignation.

Facts: The Complainant was employed as a Project Manager by the Respondent from 6th July 2020 until 18th March 2021.  In January 2021, the Complainant’s salary was reduced by 30% as a result of the Covid-19 pandemic. In a letter issued to the Complainant in January 2021, the Respondent made it clear that the Complainant was being placed on what was a “temporary deferred” salary reduction and that her normal salary would be reinstated on 30th April 2021 and deferred salary owed for months January to April 2021 would also be paid on 30th April 2021. The Respondent specifically undertook that it would “reimburse any outstanding salary due irrespective of its circumstances.”

The Complainant resigned with immediate effect on 18th March 2021, failing to provide the Respondent with her contractual notice or any notice at all. This resulted in a situation where the Respondent incurred significant costs in backfilling her role and resolving issues that the Complainant had caused the Respondent in the manner and circumstances of her departure, which included deliberate damage by her to the Respondent, for example in deleting customer files from the Respondent’s database.

For this reason, the Respondent did not reimburse the Complainant’s deferred salary, relying on a clause contained in its Employee Handbook which was described as an express written term of her contract of employment:

“If you terminate your employment without giving or working the required period of notice, as indicated in your individual Statement of Main Terms of Employment, you will have an amount equal to any additional cost of covering your duties during the notice period not worked deducted from any termination pay due to you.”

The Respondent provided evidence of the costs that it incurred in covering the Complainant’s duties and resolving the issues that she created in the days leading up to her departure, which came to €6,960. The Complainant was owed €3,808.20 from the Respondent.

Decision: The Adjudicator referred to section 5(1)(b) of the Payment of Wages Act which provides that

“An employer shall not make a deduction from the wages of an employee (or receive any payment from an employee) unless…

the deduction (or payment) is required or authorised to be made by virtue of a term of the employee’s contract of employment included in the contract before, and in force at the time of, the deduction or payment…”

The Adjudicator was satisfied that the express written term referred to above authorised the Respondent withholding the monies due to the Complainant. The Adjudicator found that her complaint was not well founded and dismissed it.

Takeaway for Employers: So-called “deductions clauses” are frequently included in contracts of employment, but they do not commonly make specific provision for the deduction of an amount to cover the cost of an employee leaving employment without giving notice. This case demonstrates the merits of including such specific provision. Employers will be aware of the significant cost to a business arising from the departure of a senior employee, and notice periods are designed to assist companies with the transition. While many employees adhere to their agreed notice periods, difficulties arise where employees do not, and this case illustrates some such issues. It is advisable for employers to review their deductions clauses and consider amending them to make provision for a deduction in the event that an employee fails to give their contractual notice.

Link  – https://www.workplacerelations.ie/en/cases/2022/april/adj-00033873.html

Authors – Jenny Wakely and Anne O’Connell

29th April 2022

Anne O’Connell Solicitors

19-22 Lower Baggot Street, Dublin 2

www.aocsolicitors.ie

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