In a letter to employers by the Chairman of the National Response to Covid-19 task force, the Office of the Prime Minister appeals for UGX 10,000 to be deducted from all employed workers’ wages as a contribution to the fight against #Covid-19.
Sections 44 to 46 of the Employment Act 2006 ( EA 2006) set out the provisions that protect employees from unauthorized deductions (commonly known as “unlawful deductions”) being made from their wages.
It is unlawful for an employer to make a deduction from a worker’s wages unless:
- The deduction is required or authorised by law or a provision in the worker’s contract; or
- The employee has given their prior written consent to the deduction.
The law on unlawful deductions is important as it is through it that employees can use to claim unpaid (or underpaid) wages in the employment tribunal while the employment relationship subsists.
When the unlawful deductions law applies
Who is protected?
The protection against payments or unlawful deductions from wages applies to all employees:
“This includes any person who has entered into a contract of service or an apprenticeship contract, including, without limitation, any person who is employed by or for the Government of Uganda, including the Uganda Public Service, a local authority or a parastatal organisation but excludes a member of the UPDF.”
What are “wages”?
Wages are defined by section 2 of the EA 2006 as:
“Remuneration or earnings, however designated or calculated,
capable of being expressed in terms of money and fixed by mutual agreement or by national laws or regulations, which are payable under an oral or written contract of service for work done or to be done, or for services rendered or to be rendered but excluding any contributions made or to be made by the employer in respect of his or her employee’s insurance, medical care, welfare, education, training, invalidity, retirement
pension, post-service gratuity or severance allowance;”
What is a “deduction”?
Where the total wages paid by an employer to an employee is less than the net amount of the wages paid the deficit counts as a deduction. In this case where the employer without prior written consent from his or her employee deducts Shs10, 000 from wages for the response to the #Covid-19 as per the letter from the Office of the Prime Minister is unlawful deduction.
No overall reduction in pay
Where an employer makes a unilateral reduction in an employee’s wages by removing or reducing a payment to which the worker is contractually entitled, it appears that this will still amount to an unlawful deduction even if the employer increases another aspect of the employee’s wages so that there is no overall loss in pay.
In Pendragon plc v Nota EAT 0031/00, the English Employment Appeals Tribunal upheld a tribunal’s decision that an employer who had stopped paying an employee overtime pay to which he was contractually entitled had made an unlawful deduction from wages, even though the employer had unilaterally increased the premium rate of pay in order to offset the shortfall in overtime pay. The employee had never accepted the quid pro quo arrangement and had in fact protested. As a result of his protests, the contractual overtime rate was reinstated without any change being made to the new premium rate. However, he was not paid backdated overtime pay. The Appeal Tribunal ruled that it was this failure that amounted to the unlawful deduction.
The letter to employers was written on May 12, 2020 by the Office of the Prime Minister and many employees will possibly have to wait at the end of this month to find out if Shs10, 000 is actually deducted by their employers as only an actual deduction can be the subject of a complaint. In Mennell v Newell & Wright (1997) IRLR 519, the UK Court of Appeal held that for a tribunal to have jurisdiction in an unlawful deductions claim “there must be an actual deduction” and the tribunal had no jurisdiction to hear a complaint about a threatened deduction
Unilateral reductions in pay
If an employer, without contractual authority or individual, reduces an employee’s wages, this will amount to unlawful deductions of wages. In Bateman and others v Asda Stores Ltd  IRLR 370, the English Employment Appeals Tribunal held that the employer was entitled to unilaterally introduce a new pay scheme which meant that some employees suffered a reduction in pay. This was only possible because the employer’s staff handbook which had been incorporated into the employees’ contracts, and which allowed the employer to change the terms of the handbook to reflect the changing needs of the business. The Employment Appeals Tribunal considered that the changes to the pay scheme were consistent with that provision, and that there had been no unlawful deductions from the employees’ wages. If, however, there is no such applicable term and an employer unilaterally imposes a reduction in pay, an employee can:
- Accept that the employer’s repudiatory breach and resign and claim constructive dismissal;
When deductions are permitted
Section 46 (a)- (d) of the EA 2006 deals with permitted deductions and it states:
“(a) an amount in respect of any tax, rate, subscription on contribution imposed by law;
(b) where the employee has previously given his or her written consent to a deduction being made, the deduction being in respect of any amount representing a contribution to any provident or pension fund or scheme established or maintained by the employer or some other person;
(c) deduction by way of reasonable rent or other reasonable charge for accommodation provided by the employer for the employ, or the employee’s family, where the employee has agreed to the deduction; and
(d) union dues, deducted in accordance with section 50.
Written consent of employee as per section 46(b) of the EA 2006
A deduction will not be unlawful if the employer has prior written consent from the employee. Prior written consent could be given via a written contract which has been given to the employee before the deduction was made, or an express or implied term, the existence and effect of which have been notified to the employee in writing before the deduction is made.
Like many employees have shared the letter on social media, most employers would possibly think it is wise to do the same by displaying the letter on the staff notice boards. This was the case in Kerr v The Sweater Shop (Scotland) Ltd  IRLR 424, where employer displayed a notice in the factory indicating changes to the company’s rules and regulations. The Court in Kerr held that the display of a general notice on a notice-board is not sufficient. Section 46 of the EA 2006 requires that the prior consent is given individually by each affected employee. The courts will always want clear written evidence and or consent given before the event giving rise to the deduction, not just before the deduction itself.
An employee whose wages are unlawfully deducted in response to #Covid-19 letter from the Office of the Prime Minister is entitled to claim for an unlawful deduction from his or her wages or an unlawful payment to the employer via a claim to an employment tribunal. He or she can seek a declaration claim payment (or repayment) of the sum unlawfully deducted by the employer, and in some cases compensation for further financial loss.