Revenue and Customs Comrs v Lorne Stewart plc

The phrase "any other event" in regulation 33(a) of the National Minimum Wage Regulations 1999 must bear some relationship to conduct for which the worker is responsible. It need not be misconduct in the strict sense. A voluntary resignation by a worker is an "other event" that can permit an employer to make a contractual deduction from final pay for training repayment for the purposes of the national minimum wage calculation.

The appeal concerned whether contractual deductions for repayment of training costs could be excluded from the National Minimum Wage calculation under regulation 33(a) of the National Minimum Wage Regulations 1999. The employer required employees to reimburse course costs if they left within two years. Deductions from final pay produced prima facie underpayments and HMRC issued a Notice of Underpayment. The Employment Tribunal (Judge Heal) allowed the employer's appeal. HMRC appealed to the Employment Appeal Tribunal on a pure point of statutory construction. The central question was the meaning and scope of "any other event" in regulation 33(a).

(1) The appeal is dismissed. The Employment Tribunal's decision is upheld.

(2) Regulation 33(a) is to be construed purposively in light of the regulatory scheme. The court adopts the protective purpose identified in [2006] ICR 1094 and applies a narrow, contextual reading of exceptions to regulation 32.

(3) The phrase "conduct of the worker, or any other event, in respect of which he . . . is contractually liable" requires that an "other event" bear some relationship to the worker's conduct. That relationship means the worker must in some way be responsible for the event. The court rejects a reading that would allow any contractual liability to qualify as an "other event".

(4) The court holds that "conduct" will commonly amount to misconduct, but "any other event" is not limited to misconduct. It covers events for which the worker is responsible, such as voluntary resignation or culpable damage, but not events for which the worker is not responsible, such as dismissal for redundancy or ill-health related occupational-health referral.

(5) Applying that test, voluntary resignation by the claimant and others in the same position qualified as "any other event". The employer was therefore entitled to deduct the contractual repayment from final pay without infringing the national minimum wage rules in the final pay reference period (see paras [12]–[13]).

(6) The judgment notes that a different factual trigger in the same contractual form, such as a redundancy dismissal, would not attract the same result and the national minimum wage protections would remain effective in that scenario (see para [14]).

Order: HMRC's appeal is rejected. The Employment Tribunal decision in favour of the employer is affirmed.

• Employment Tribunal – decision by Employment Judge Heal allowing Lorne Stewart's appeal against HMRC's Notice of Underpayment (sent 4 April 2014).
• Employment Appeal Tribunal – appeal by HMRC dismissed; EAT judgment upholds the Employment Tribunal's decision (13 November 2014).