Employment rights at the Post Office have taken second place. The Post Office’s contract with its postmasters has made them personally responsible for financial losses whatever the cause.
Employers need to be careful.
It seems that Postmasters were not considered employees of the Post Office but are instead operated under a contractual agreement, effectively running their own small business under the Post Office brand.
It means they were not protected under the usual employment rights such as protection against unfair dismissal.
However, employers must not assume they have the freedom to act in the manner in which the Post Office did with its Postmasters.
In an employment context, if a contract needs to explicitly state that an employee is responsible for financial losses caused by their actions. But such clauses must be reasonable and clearly communicated to the employee.
Generally, employees might be held responsible for losses if they result from their negligence or misconduct. There is a long-established test for reasonableness in this context. An appropriate investigation, before any disciplinary action, is crucial.
Any attempt to recover losses from an employee must be fair and reasonable. The amount of money sought should be proportionate to the employee’s pay and role, and you must consider the employee’s ability to pay. Expectations to repay £36,000 would clearly exceed most employees such ability.
In some sectors, such as retail, deductions for stock losses may be permissible if they are allowed under the employee’s contract and your employee has given prior written consent to the deduction. Even so, deductions cannot reduce an employee’s pay below the National Minimum Wage. The test of reasonableness will also apply. Making an employee personally responsible for financial losses, whatever the cause, is not likely to pass muster in an employment context.
As an employer you must also be careful to ensure that you have a robust contract entitling you to make any deductions from pay. Unlawful deductions not only have to be repaid but employment rights debar you from making any further attempt to recover losses once you have made such a deduction.
So the key takeaway for employers is to ensure you have clear, reasonable, and legally compliant employment contracts and practices, particularly regarding financial responsibilities and deductions.
Malcolm Martin FCIPD
Author Human Resource Practice
Blogs are for general guidance and are not an authoritative statement of the law.