Employment Update: Whistleblowing and Unlawful Deduction Points for Employers and Employees

Posted on April 16, 2021

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In an employment climate where the focus has very much been on the Covid19 acronym trinity of MERA (Manx Earnings Replacement Allowance), SSS (Salary Support Scheme) and WFH (Working From Home), it is perhaps understandable that some rights and requirements are being somewhat overlooked. In this article, we wish to highlight the importance of vigilance, and remind you that employment rights are more significant than ever, during this uncertain time.

Employees – Protected Disclosures: Direct vs Indirect

Any employee who raises concerns that their employer may be breaching the law can be granted protection through the Employment Act 2006. By making a Protected Disclosure, an employee can inform the correct body without fear of suffering repercussions from their employer. The correct body differs depending on the regulations breached, and can be found contained within the new Public Interest Disclosure (Prescribed Persons) Order 2021.

For example, an employee who has repeatedly asked their employer to rectify a clear breach of health & safety regulation can make a Protected Disclosure to their employer or to the body responsible for enforcing said regulations. The employer cannot then lawfully punish the employee for making that disclosure by dismissing them, docking wages or otherwise bullying them. They are protected by virtue of the 2006 Act.

Another pertinent example is one of money laundering. Regulated businesses must have an MLRO (Money Laundering Reporting Officer) to whom employees can make disclosures if there is concern about the origin of client funds or similar compliance matters. An employee who makes a disclosure is generally protected in the event that money laundering has taken place, if such a disclosure is made promptly.

The above examples are all clear and evident - an employee has intentionally made a disclosure to the body prescribed by the legislation, and they should not therefore be made to suffer any detriment because of that disclosure. This in turn begs the question of the level of protection employees receive over inadvertent disclosures.

Can an employee who did not know they were making a disclosure be afforded the same protection as one who intentionally did so? Can an employee who did not directly disclose to a prescribed person, but perhaps did so inadvertently through a third party, be classed as protected? The Manx position in this area is somewhat untested.

On the one hand, the legislation indicates a procedure employees are to undertake when making a disclosure. Many businesses also have their own in-house whistleblowing policies. It is often the case that employees are not aware of their firm’s whistleblowing policy, if one even exists, much less statutory procedure. Is an employee who makes a disclosure initially to the wrong body still protected in law? This same line of reasoning can be made in respect of accidental disclosures, where employees did not know their complaint constituted a disclosure.

Employees who find themselves targeted or punished at work due to an accidental or inadvertent Protected Disclosure should feel that the Employment Act 2006 as a whole can offer them security.

Employers – How to protect yourselves from Unlawful Deductions claims

Unlawful Deductions claims are a very familiar sight in the Employment & Equality Tribunal forum. As suggested, the claim involves employees feeling that they have had wages deducted without justification, and they are seeking to reclaim the underpayment. As well as making an order for the deducted amount to be returned to the employee, the Tribunal also has the discretion to award up to four weeks’ wages as compensation, if it is considered just and equitable to do so. As a result, this can potentially be a very expensive mistake for employers to make.

There are two instances where it is acceptable to deduct from an employee’s wages, according to the legislation, although it is important to note that this section does not apply to an overpayment of wages (which is not generally considered an unlawful deduction).

Firstly, where the deduction is required or authorised by statute or any relevant provision of the employee’s contract. An example of a deduction authorised by statute is one of taxation, with employers being authorised to pay directly to the taxation authority elements in respect of National Insurance and Income Tax. Employers must ensure that they keep an accurate record of how much tax is paid, as a clear audit trail will go some way to ensuring compliance with the relevant provisions.

In terms of any contractual provision allowing the deduction of wages, the key concern is clarity. The clause must clearly stipulate the circumstances in which wages can be deducted, and how much the deduction will be. For example, a contractual provision might state that any employee who works part of their notice period will not be entitled to those wages for the full notice if they do not complete said notice period.

However, there are many pitfalls that employers should be wary of, particularly as the clause must comply with general contract law principles. The clause must be considered reasonable, which may see employers needing to temper any deductions they intend to make. The more important or controversial a contractual term, the greater lengths it must be shown that an employer took to highlight said term. Any contract clause allowing deductions from wages would be classed as important, meaning that it must be clearly pointed out and explained before the employee signs. Any unclear or unreasonable terms may be grounds for the deduction to be found unlawful.

The second instance in which a deduction will be considered acceptable is where the worker has previously signified in writing agreement to the deduction. Although each case will turn on its own facts, employers should be wary of this method for the reasons set out above. Any agreement to deduct wages should be clearly explained and documented, and the reasons for doing so expressly included in the agreement. The wording of the relevant provision of the 2006 Act indicates that the agreement must be made prior to any deduction, implying that any agreement reached subsequent to a wage deduction may not necessarily extinguish an employee’s right to bring a complaint to the Tribunal.

Any clause or agreement that claims to give an employer the right to reduce/deduct from an employee’s income will be closely scrutinised, and as such must be drafted as reasonably and clearly as possible.

Joe Burrows
Trainee Advocate

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