The Labour Court found that the employer unlawfully deducted €2,100 from the employee’s wages without statutory authority, contractual term, or consent, in breach of the Payment of Wages Act 1991.

The Complainant had argued that Irish Rail made unlawful deductions from his wages contrary to s.5 of the Payment of Wages Act 1991. After Supreme Court proceedings ended in 2019, the company’s legal costs had been adjudicated at €83,174. When no repayment plan was agreed, the employer had commenced payroll deductions of €200 per week from September 2022. The Complainant earned €1,200 per week and had expressly refused consent to any deduction. He maintained there was no statutory basis, no contractual term, and no collective agreement clause authorising recoupment through payroll. He had contended that every shortfall in his weekly pay amounted to a deduction under s.5(6) and that the sums “properly payable” should have been paid in full. He had sought reimbursement of the deducted amounts (pleaded at €8,200) and compensation, submitting that the Act placed the burden on the employer to show lawful authority, which he said the employer could not do.

The Respondent submitted that the Complainant had long-known he owed the company substantial legal costs arising from his unsuccessful High Court challenge concerning disciplinary representation, ultimately disposed of by the Supreme Court in November 2019. The Complainant had, in the Respondent’s view, failed to propose a realistic repayment plan over several years and had not engaged meaningfully. The company had therefore decided to commence deductions of €200 per week in September 2022 and later ceased them when the Complainant entered a formal insolvency process in 2023. The Respondent contended that collective agreements and company policies formed part of employees’ contracts and that, given the Complainant’s departure from agreed procedures, recoupment through payroll had been reasonable and contractually supportable. It had argued that the deductions were justified by the Complainant’s contractual obligations to follow company procedures and that, in the circumstances, the company was entitled to recover its adjudicated costs by deduction from wages.

The Labour Court found that the Complainant’s “properly payable” weekly wage was €1,200 and that a weekly shortfall of €200 occurred for 10.5 weeks within the cognisable period, totalling €2,100. The Respondent accepted there was no written contract of employment containing an express deduction clause, no statutory basis, and no prior written consent. Consequently, the Court held that s.5(1) was not satisfied, and the deductions were unlawful under the Payment of Wages Act 1991. The Labour Court determined the complaint was well-founded and directed payment of €2,100 by way of compensation.

Employers should:

• Never deduct wages without one of the Act’s gateways. They are clear statutory basis, a pre-existing express contractual term, or the employee’s prior written consent. Collective agreements or policies do not suffice unless they explicitly authorise deductions and are incorporated. Keep signed consent forms and issue advance written notice of any proposed deduction.   
  
• Note, where no deduction clause exists the right route is to pursue civil recovery, negotiated repayment plans, or mediated settlements. Document engagement efforts and offer reasonable instalments. Avoid unilateral payroll deductions.  
  
• Maintain a deductions policy and a pre-payment checklist requiring legal/HR sign-off. Train managers on the Payment of Wages Act 1991. Audit payroll files periodically for deduction authority, amounts, and dates. When insolvency or disputes arise, suspend deductions and seek legal advice.  
  

The full case can be found here.