Under the Employment Rights Act (which covers claims for unlawful deductions from wages) expenses are specifically excluded from its jurisdiction. In Mears Ltd v Salt and ors, the Employment Appeal Tribunal (EAT) said that an historical allowance paid to electricians was a contractual payment for work which clearly fell within the Act.

The claimants’ union, Unite, instructed Thompsons to act on their behalf.

Basic facts

The five claimants were electricians working for a service team which had been the subject of a number of transfers to which the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) applied between 2000 and 2008.

When employed by Birmingham City Council they were entitled to receive a payment known as an 'electrician's travel time allowance' (ETTA), introduced to compensate them for the loss of productivity bonuses when they had to travel to a depot other than their original base before starting work.

Although negotiations took place in 2000 to remove a plethora of allowances to which employees were entitled, the ETTA continued to be paid until April 2008 when Mears Ltd became the claimants’ employer, following a TUPE transfer.

The company stopped paying the ETTA allowance and the electricians claimed unlawful deductions from wages. The company said that the allowance was, in fact, an expense and did not therefore fall within the Employment Rights Act.

Tribunal decision

The Tribunal said that although the allowance no longer compensated the claimants for lost productivity, it had become at some point a fixed daily premium payment in respect of each day worked.

That being so, it concluded that it was not a payment in respect of expenses, but was a form of payment for work and therefore fell within the scope of the unlawful deduction from wages regime.

Basis of appeal

Relying on the case of Lucy v British Airways (in which the employees lost a flying allowance after a reorganisation because they no longer flew), the company argued that the allowance was a payment made to compensate electricians (at least historically) for the "loss of an opportunity to earn as much by way of productivity bonus”.

It also argued that the claimants were asking the Tribunal “to do something which was beyond their jurisdiction, namely to construe or interpret contractual language, or to invent a term”.

EAT decision

However, the EAT disagreed saying that the comparison with Lucy was not appropriate as, contractually, the employees in that case could no longer earn the allowance.

In addition, it said that it was “wrong to suggest that what the Tribunal was doing was in any way interpreting, or inventing, a contract; it was simply finding what the agreement was in circumstances where the Claimant provided the information to the employer and the employer, acting on that information, and applying (as was obviously the case) the standard hourly rate to that information, made the ETTA payment as a matter of express contractual agreement”.

With one minor exception, the EAT dismissed the appeal.