Robertson v Blackstone Franks Investment Management Limited 1998, IRLR 376 Court of Appeal
A refusal to pay commission arising from work done before the termination of a contract constitutes unlawful deduction of wages, the Court of Appeal has held. The decision is important to all those paid or part paid on a commission basis. But the Court of Appeal also held that an advance payment against future commissions can properly be deducted from future commission earned.
Mr Robertson was engaged by Blackstone Franks Investment Management Ltd as a self employed consultant in their investment advice and assistance business. His contract provided that he would be paid on a 'commission only' basis. The company's procedures stated that 'commission will only be payable during the continuation of this agreement when the business has been completed and commission received by the company. Any business introduced but not completed at the date of termination will be completed on your behalf'.
When Mr Robertson's employment began the company agreed to make an advance against future commissions. But after the termination of his contract nine months later, Blackstone Franks failed to pay him commissions for business he had introduced, but which had been completed after his contract terminated. Mr Robertson applied to the Industrial Tribunal, alleging that refusing to pay him amounted to unauthorised deductions from wages, under Part II of the Employment Rights Act (formerly the Wages Act 1986).
The issue was whether commissions payable after the termination of the contract were 'wages' within the definition of s27 Employment Rights Act and whether the advances could be set off against unpaid commission.
The Industrial Tribunal decided that Mr Robertson was entitled to the commissions arising after the termination of his contract, which amounted to £14,126.50; that those commissions were wages within the meaning of the Act and that, in refusing to pay them, Blackstone Franks had made unauthorised deductions from his wages. The Tribunal decided that the Blackstone Franks could not offset the commissions owed against the £10,000 advance payment.
The employer appealed. The EAT agreed that commissions payable after a contract has terminated are wages.
However, it held that Blackstone Franks could take into account the £10,000 paid in advance, and therefore they only had to pay the balance between the advance commission and the total commissions owed - £4,126.50.
The Court of Appeal has upheld the EAT's judgment. The definition of 'wages' under s27 refers to any sums and any commission payable to a worker, whether they become payable or are paid before or after the termination of the contract; however, the sum must be payable 'in connection with his employment'.
The appeal court also agreed that Blackstone Franks could take into account the sum which they had already paid to him as an advance against future commissions.
Therefore, in future, Tribunals must consider whether an employer has already made a payment 'in respect of a deduction', and the question of whether that payment was made before or after the deduction is not relevant.
Commission based pay is increasingly used by employers, particularly for sales staff. Overall this ruling is helpful in confirming the protection of commission earnings in the wages section of the Employment Rights Act.