A leaving-notice deduction that ignores your employer’s real loss can be an unlawful penalty.
“EATStands for Employment Appeal Tribunal. It hears appeals from employment tribunal decisions on points of law, not on the facts. It is not a way of simply asking for a second opinion on the outcome. ruled the notice-deduction clause an unlawful penalty, not fair compensation.”
A clause deducting a fixed sum from your pay for not working full notice is an unlawful penalty, not a valid liquidated damagesA fixed sum written into a contract as a genuine, honest estimate of the loss one side would suffer if the other broke the agreement. Unlike a penalty clause, it is designed to compensate, not to puni... clause, if it doesn't limit what your employer can otherwise claim for its actual loss.
- Check whether your contract's notice-deduction clause caps your employer's total claim, or lets it charge you the fixed sum and still sue for more.
- If your employer withholds pay under a clause like this, you can challenge it as an unlawful deduction from wagesAn unlawful deduction from wages happens when your employer takes money out of your pay without a proper legal basis, whether that's the law itself, your contract, or your prior written consent. If no....
- A clause designed to deter you from leaving, rather than to cover a real cost, is vulnerable whatever it's called in your contract.
The situation
Mr Smith drove for Giraud UK Ltd, a transport company, from November 1996. His contract said that failing to give and work full notice would mean losing pay equivalent to the days short.
He resigned in February 1999 after a dispute over a bonus, and Giraud withheld pay under the notice clause.
What the tribunal found
The Employment TribunalAn independent court that hears disputes between employees and employers. It is free to bring a claim as a claimant, and most hearings take place in public. found the deduction unlawful because the clause wasn't a genuine estimate of Giraud's likely loss, it was designed to deter Smith from leaving at all. Giraud appealed, and the Employment Appeal Tribunal agreed with the tribunal and dismissed the appeal.
The clause didn't cap what Giraud could claim. Smith could be liable for the full sum even if Giraud's actual loss was nothing, while Giraud could still separately sue for more if its real loss was higher. The tribunal called this heads I win, tails you lose, and found it oppressive rather than compensatory.
The same underlying principle struck down a modern training cost clawbackA clause that requires you to repay some or all of your training costs if you leave your job within a certain time. It is only enforceable if it is fair and reasonable. in 2026. See A training cost clawback that applies no matter why you left probably isn't enforceable.
Giraud UK Ltd v Smith. [2000] UKEAT 1105_99_2606. Employment Appeal Tribunal. 26 June 2000.