Hellewell & Anor v AXA Services Ltd & Anor

Section 13 of the Employment Rights Act 1996 requires a two-stage analysis. First, the worker must have a legal entitlement to the sum said to be wages properly payable under section 13(3). Only then is it necessary to ask whether the employer made a deduction from that sum and, if so, whether section 13(1) or (2) authorised it. A discretionary bonus is not necessarily payable merely because an employee satisfies a qualifying or performance condition. Separate annual bonus schemes do not, without more, constitute variations of an existing contract for section 13(5).

The claimants claimed that withholding bonuses under schemes for 2009 and 2010 was an unlawful deduction from wages under section 13 of the Employment Rights Act 1996.

The 2009 scheme made payment conditional on employment and provided that no bonus was payable after departure for gross misconduct or poor performance. The 2010 scheme permitted withholding payments during investigations or disciplinary proceedings. Both claimants were suspended and later dismissed for gross misconduct. The Employment Tribunal rejected their claims, and they appealed on the construction of section 13 and the application of section 13(5).

1. The appeals were dismissed. Neither claimant had a legal entitlement to the 2009 or 2010 bonus, so there was no deduction from wages.
2. Section 13(3) provides the preliminary question. The words wages properly payable refer to a sum to which the employee has a legal, though not necessarily contractual, entitlement. Sections 13(1) and (2) then regulate deductions from that legally payable sum. New Century Cleaning Co Ltd v Church [2000] IRLR 27 supported that construction. The use of deduction also indicates a reduction from a sum otherwise payable pursuant to a legal obligation. The same approach was supported by Delaney v Staples [1991] ICR 331.
3. The 2009 scheme’s employment requirement was a qualification, not an obligation to pay every employee who satisfied it. No contractual or implied payment date had been established. The claimants’ suspension and later gross-misconduct dismissals meant that the bonus was not legally payable. The decision not to pay it therefore did not engage section 13(1) or (2).
4. Under the 2010 scheme, payments could be withheld pending investigation and released or lost as appropriate. The claimants therefore had no legal entitlement to the bonus. Notice of the scheme to only one claimant did not alter that conclusion.
5. The 2010 scheme was a separate annual arrangement, not a variation of the existing contract. Section 13(5) did not apply.

• Employment Tribunal: rejected the claims for unlawful deduction from wages. The decision was sent to the parties on 26 November 2010.
• Employment Appeal Tribunal: dismissed both appeals.