Where an ex-employee owes money for personal calls made from a company mobile phone can the amount owing be deducted from their final salary payment?
An employer cannot deduct money owed by an employee from their final salary unless the contract of employment contains an appropriately worded deductions clause. Section 13 of the Employment Rights Act 1996 provides that an employee has a right not to suffer unauthorised deductions from their wages. A deduction is authorised only if either there is a relevant provision in the employee's contract of employment permitting the deduction to be made or the employee has previously signified in writing their consent to the deduction. If the deduction is made pursuant to a contractual provision, the term of the contract must have been shown to the employee or its effect notified in writing to the employee before the deduction is made. It is not possible at this point to ask the ex-employee to give their written agreement to the deduction being made. This is because consent must precede not only the deduction itself, but also the event or conduct giving rise to the deduction, in this case the personal calls.
Even if there is an appropriate contractual provision or written agreement, it must have been drafted in such a way that it represents a genuine pre-estimate of the loss or damage that the employer could suffer as a result of the employee's misuse of the company mobile phone and must not act as a penalty on the employee. Penalty clauses are unenforceable.
It is important that deductions are not made in breach of the statutory provisions. Not only may the employer be ordered to repay sums wrongfully deducted, but it may lose the right to recover the sums that it was seeking to deduct. In the absence of a contractual provision or written agreement, if the ex-employee refuses to repay the cost of the personal calls voluntarily, the employer's recourse is to make a claim in the small claims court. The employer can claim damages for actual financial loss only, and not for inconvenience.