Employment Law Advocates

The Employment Appeal Tribunal decision in Yorkshire Maintenance Company v Farr concerned penalty clauses in employment contracts, an area of law in which there are surprisingly few authorities. The respondent had attempted to rely upon a clause stating that wages could be deducted in the event that timesheets were not signed by the client. The tribunal did not accept this, not expressly because the clause was a penalty, but because it was held to require timely deductions and so the right to do so had lapsed. Judge Pugsley rejected this approach and felt that more exploration of the facts was necessary.

The argument was that a deduction was justified due to the frequency with which clients refuse to pay if a timesheet has not been authorised by them. This seems a surprising claim on the facts, the claimant having stated that he had never previously had worksheets signed, and the tribunal having appeared to find in his favour on this point. It is hard to deny that it is reasonable to make such a deduction if a client does not, in fact, pay, and I would be willing to accept that a clause which realistically reflects the chance of a client failing to pay would also be justified. However, an automatic deduction of wages for the entire period covered by a timesheet surely does not constitute a genuine pre-estimate of the loss.