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Repayment Clauses and Clawbacks

Employers often put repayment clauses in employment contracts, to try to recover the training or other costs they lose when an employee leaves. The case of Cleeve Link Ltd –v- Bryla is a helpful reminder for employers to consider these clauses at the time the employment contract is formed and to ensure that the amount of repayment sought genuinely reflects the amount of loss the employer will suffer. 

In this case, Ms Bryla was a Polish national who was recruited to work as a live-in carer in the UK through a recruitment agency.  The employer, Cleeve Link Ltd, paid a candidate fee of £400 to the recruitment agency in addition to the cost of flights from Poland and training fees once Ms Bryla arrived in the UK.  Ms Bryla’s contract of employment stated that if she was dismissed for misconduct or if she chose to leave within the first six months, she would have to repay these costs.  If she stayed for more than six months, the sum to be repaid would reduce by one sixth for each further month of employment so that no repayment was due if Ms Bryla continued to work for one year. 

Unfortunately Ms Bryla was dismissed for misconduct after just twelve weeks.  Cleeve Link accordingly relied upon the repayment clause and deducted the candidate fee, travel costs and training costs from her final salary payment.  This resulted in a nil payment to Ms Bryla and she raised a claim of unlawful deduction from wages.  The employment tribunal agreed that the deduction was unlawful because the repayment clause took the form of a ‘penalty’ and not a genuine pre-estimate of Cleeve Link’s loss, and so Ms Bryla was awarded compensation. 

Cleeve Link appealed to the EAT and was successful. Although Ms Bryla had agreed to the deduction of the costs from her wages, this was not enough to make the deduction a lawful one. The repayment clause itself had to be enforceable, which meant it could not amount to the imposition of a penalty which aimed to dissuade the employee from breaching the contract. This question had to be considered objectively at the time the contract was formed. 

The EAT concluded that the clause in Ms Bryla’s contract did represent a genuine pre-estimate of loss and ruled that the clause was enforceable.  Cleeve Link was entitled to set the costs against her wages and leave her with no final salary payment.

For more information please contact Martin Sinclair or Nicola Gray or call on 01224 632 464.

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