Employment: Contractual clause was not a penalty
A solicitor ordered to repay her firm the cost of recruiting her after she left within a year has failed in a bid to have the decision reconsidered.
Employment Judge Burge held there was “no reasonable prospect” of the original decision being varied or revoked.
This was because the claimant, Ms K Kaur, was seeking to reargue facts already found in her application for a reconsideration. The decision, from February, has only just been published.
Last year, the tribunal held that Kent firm Hatten Wyatt was entitled to exercise its contractual right to recoup the cost of recruiting Ms Kaur, who worked as a family law solicitor from 5 May 2018 on a salary of £30,000 but left on 29 March 2019.
Under the terms of her contract, she expressly agreed that, in the event of giving notice within a year, she would refund the £5,100 fee the firm paid to recruiter Hunter’s Legal.
The judge expressed sympathy with the circumstances which led to her leaving – as a lone parent, she found the journey time, problems with childcare and working hours difficult to juggle – but found the clause was not a ‘penalty’ clause which would have fallen foul of a 2016 Supreme Court ruling.
Ms Kaur had pushed back against the clause but was reassured by a member of Hatten Wyatt’s staff that it was hardly ever enforced. The tribunal said this was not the same as being told the firm would not enforce it.
Evidence indicated that some potential employees had pulled out of the process when the firm would not remove the clause. “It was open to the claimant to do also,” Judge Burge observed.
In the event, the firm withheld her final salary payment of £1,793 – £1,578 as part payment of the fee and £215 to reimburse the firm for some of the cost of her practising certificate.
Hatten Wyatt said the clause made sure that people were “committed”. The judge said: “In my view this shows that, in addition to recouping the fee, it also puts pressure on employees not to leave within the year.
“[Counsel for the firm] submitted that £5,100 was the tip of the iceberg in relation to the costs of recruiting, training, client care and similar issues.
“I would find it surprising if the claimant, working as a solicitor in a busy family law department, had not generated fees substantially above £5,100 during the 11 months she worked there.”
The full deduction equated to 21% of Ms Kaur’s annual salary. “The respondent had not considered the fact that the claimant had nearly completed a year’s service and had not done any calculation as to whether or not she had earned the respondent the £5,100 in that year,” the judge went on.
“It is my view that the effect of the clause is extravagant, exorbitant or unconscionable – it is an attempt to pass on normal recruitment costs to employees, it substantially restricts an employee’s ability to leave their employment within the first year and the fee itself is out of all proportion when compared to the net annual salary/income generated for the firm.”
But the judge said this would “be of little comfort” to Ms Kaur given the primary finding, and ruled that the £1,579 was a permitted deduction as allowed by section 13(1)(a) of the Employment Rights Act 1996.
However, Judge Burge found that the terms of the contract did not allow Hatten Wyatt to recoup the cost of the practising certificate.
It was paid by the firm “without condition” and could not be described as an ‘advance’ or a payment to a third party or a service misused/misapplied, payments which were covered by the contract.
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