Daniel Johnston v Veritas Technologies (UK) Limited

The appeal concerned a claim under sections 13 and 23 of the Employment Rights Act 1996 that employer had unlawfully deducted commission from wages. The Employment Tribunal found that the claimant had been paid all that was properly payable on 28 February 2020. The central issue on appeal was the proper construction of the employer's FY20 Incentive Compensation Plan, in particular the scope and effect of an "approval condition" requiring express senior approval where calculated commission exceeded 250% of On Target Commission (OTC), and whether sums above that threshold had become "properly payable" for the purposes of s.13 ERA.

The Employment Appeal Tribunal held that the approval condition applies whenever calculated commission exceeds 250% of OTC (including but not limited to so‑called "windfalls") and is separate from the Plan's windfall review procedure. Because the approval condition had not been satisfied on the factual findings of the Tribunal, any commission in excess of 250% of OTC never became properly payable and therefore could not form the basis of a claim for unlawful deduction from wages. The appeal was dismissed and the respondent's cross-appeal was dismissed as unnecessary.

Background and parties: The appellant was employed as an Enterprise Customer Success Manager and was paid a basic salary plus commission under the respondent's FY20 Incentive Compensation General Terms and an Individualised Compensation Plan (the Plan). The appellant claimed that commission totalling £505,564.78 was due to him to the end of February 2020 but that only £232,015.95 had been paid, and presented a claim under sections 13 and 23 of the Employment Rights Act 1996 for unlawful deduction from wages in the amount of £273,548.83.

Procedural history: The Employment Tribunal heard evidence over four days in November 2020 and concluded that the claimant had received all that was properly due when he was paid on 28 February 2020. The claimant appealed to the Employment Appeal Tribunal and the respondent cross-appealed on reasoning points.

Issues for decision:

• What sums, if any, were "properly payable" to the appellant under the Plan for the relevant period?
• How is the Plan to be construed, in particular (a) the windfall provisions, (b) the quotas/audit provisions relied upon by the respondent, and (c) the approval condition requiring senior sign‑off for commission exceeding 250% of OTC?
• Did any failure to follow the Plan's windfall review process render a subsequent reduction in commission an unlawful deduction under s.13 ERA?

Court's reasoning and findings: The Tribunal had found that an error was made in setting the appellant's FY20 Measure 1 quota and that the respondent had not followed the windfall review process set out in the Plan. The Tribunal nevertheless accepted that the respondent had validly relied on other Plan provisions (the quota adjustment and audit/credit error provisions) to re‑calculate the quota and commission. On appeal the EAT addressed the scope of the approval condition requiring approval where calculated commission exceeded 250% of OTC. The EAT concluded that the approval condition applies to all situations in which calculated commission exceeds 250% of OTC, not merely to cases where a windfall review has been completed; it is a separate and wider control requiring express senior approval. Because the Tribunal had found that that approval condition was not met, commission above the 250% threshold never became properly payable under the Plan. The first question under s.13—whether any sum is legally due—was answered in the negative as regards sums above that threshold, so no unlawful deduction claim could succeed in respect of them.

Relief sought: The appellant sought a declaration and payment of unpaid commission as an unlawful deduction from wages. The EAT refused the appeal, upholding the view that sums exceeding 250% of OTC were not properly payable because the approval condition had not been satisfied.

The appeal is dismissed and the respondent's cross-appeal is dismissed as unnecessary. The Employment Appeal Tribunal held that the Plan's approval condition applies whenever calculated commission exceeds 250% of On Target Commission and is separate from the windfall review process; because that approval condition had not been satisfied on the Tribunal's findings, any commission above the 250% threshold never became properly payable and therefore could not give rise to a claim under section 13 ERA.

Appeal from an Employment Tribunal decision (trial heard November 2020) which found that the claimant had received the wages properly payable when paid on 28 February 2020 and dismissed his unlawful deduction claim. The Employment Appeal Tribunal ([2023] EAT 15) refused the appeal and dismissed the respondent's cross-appeal as unnecessary.