An employee has damaged one of our company cars. Can I make the employee pay for any damage repayments?
Charging employees for their damage to company property will be unlawful in certain contexts. Firstly, you should check what is stated in your employee’s contract of employment – is there a clause that stipulates money can be deducted for property damage? Employers are not lawfully permitted to make any deductions from employee wages (other than those authorised by statute, e.g. tax and N.I.) unless they have the contractual right to do so. Even if your employee has caused damage to company property by carelessness or negligence, you cannot simply recover the cost of repair or replacement via deductions from their wages unless you have the contractual right. If there is no such clause in your employee’s contract and you decide to make a one-off deduction from their wages without their agreement, you may face a claim for unlawful deductions. If you are able to get your employee to agree to pay for the damage they caused, even though their contract does not require them to do so, it is important to keep a record of the agreement in signed writing, in case such evidence is required at a later date.
If there is a clause in your employee’s contract of employment that relates to their liability for damage to company property, you should be able to obtain damage repayments from your employee provided the clause is enforceable. The amount charged must be a reasonable reflection of the cost of repair. If the clause states that your employee is liable for damage up to a certain amount, this is likely to be interpreted as a specified damages clause and will be lawful. However, a clause that states your employee is liable to pay a specific amount regardless of the cost of repair is likely to be interpreted as a penalty clause and will not be enforceable. You can never claim back more money from your employee than the actual cost of the damage repayments, regardless of what has been agreed via the employment contract.
Employers are also required to act reasonably in respect of how much they deduct from their employees for property damage – the amount you deduct per pay period must be reasonable with respect to your employee’s earnings. What is reasonable will be taken on a case by case basis and will depend on your particular employee. Wages deducted for misconduct still count towards national minimum wage, so it does not matter if your employee’s net earnings after the deduction actually fall below national minimum wage. However, the amount you deduct must still be reasonable.
For any further clarification on any similar issues, please call our 24 Hour Advice Service on 0844 892 2772.