Set-off is a valid defence in the Employment Tribunals

Employment Appeal Tribunal states that set-off is a valid defence in the Employment Tribunals

In what is likely to be a welcomed step forward for businesses, the Employment Appeal Tribunal has considered whether a claimant’s successful loss of pension rights claim can be set-off by a respondent’s counterclaim for an amount of overpaid wages in the case of Ridge v HM Land Registry UKEAT/0485/12.

In the first reported case of its kind, the Employment Appeal Tribunal has upheld a first instance decision that set-off is available as a defence in Employment Tribunals. Where two parties owe each other money, one party may exercise a right of set-off to reduce or eliminate its liability to the other party.

This development may be particularly welcomed by businesses as it could assist with the short limitation period which counter claims are subject to. However, this does not mean that employers simply do not need to present a valid counterclaim. Merely raising the claim as a set-off would leave the employer without a proper remedy where the employee’s contract claim fails on its own merits (leaving the employer with nothing to apply the set-off against) or where the employee’s claim is significantly less than the employer’s.

In this particular case, the employee made a claim for loss of pension rights during his notice period. The employer’s counterclaim for overpayment of wages was deemed to be out of time. In the absence of the defence of set-off, the employer would have been liable to pay the pension rights claim in full. The amount of the overpaid wages was not clear from the tribunal findings and the case has been remitted to a fresh tribunal.

For further information and advice in relation to Employment Tribunal claims, please contact Claire Brook on 01244 405575 or send an email to [email protected].