An employment tribunal recently held that an employer was bound to continue paying a part-time worker the full time salary she had been receiving by mistake.
Employment Solicitor Tina Maxey comments:
The Employment Rights Act 1996 protects workers from unauthorised deductions being made from their wages. However, there are a number of exceptions to this general rule, including provision for an employer to lawfully deduct an overpayment of wages. In the recent case of Keenan v Barclays Bank Plc, a mistake had been made by the employer in the amount paid in respect of an individual’s salary.
Mrs Keenan was a part-time complaints adviser employed by Barclays Bank (“Barclays”). She had previously been working for Woolwich Building Society (“Woolwich”), but when Woolwich was taken over by Barclays Mrs Keenan was informed that she would receive a significant pay rise.
Mrs Keenan, who was previously paid £9,500 a year, received new particulars of employment from Barclays stating that her salary would be £17,000 a year. Ms Keenan assumed this was the pay rise she had been promised. However, this was an administration error by Barclays and Mrs Keenan was receiving a full time salary instead of a pro-rata part time salary. Barclays never questioned the overpayment even though it did have several opportunities to do so. This included Barclays providing a reference for Mrs Keenan’s mortgage application and approving a staff loan confirming the salary amount. Barclays did not pick up the error until a considerable time later and demanded Mrs Keenan repaid the overpayment, which was in the region of £20,000. It subsequently agreed she could keep the overpayment but sought to reduce her salary to the pro-rata amount.
Mrs Keenan presented a claim to the employment tribunal, which rejected the bank’s argument that the term of her contract relating to salary was void and should be replaced by the correct salary terms. The judge was confident that if Mrs Keenan had known of the mistake she would have informed her employer. Since the employee had no actual knowledge of the mistake and could not be expected to have known, she was entitled to remain on the current salary and to keep the amount of the overpayment.
Comment
This case does not prevent an employer recovering for an overpayment of wages in normal circumstances and should be treated with caution due to the very specific facts. However, it does highlight that employers are potentially liable for a mistake made in relation to an employee’s terms and conditions. Employers should be extra vigilant to ensure employees receive the correct terms and conditions, to avoid being bound by the wrong terms.