Pub managers awarded £35k after brewery deducted stock losses without proper investigation
Two pub managers who resigned after Samuel Smith Old Brewery deducted £4,361 from their wages for alleged stock losses have won their claims for unauthorised deductions and constructive unfair dismissal, receiving £35,791 in compensation.
1 min read · Last updated 18 May 2026
Case details
- #constructive-dismissal
- #unauthorised-deduction
- #free-flow-policy
- #stock-surplus
- #breach-of-trust-and-confidence
- #failure-to-investigate
Key facts
- The claimants were joint managers of the Brunton Arms pub from 7 May 2019.
- The respondent deducted £166.66 from each claimant's July 2021 salary and claimed a further £2,014.11 each under clause 7.2 of the contract and the free flow policy.
- The free flow policy required a 6% surplus on draught beer sales, but the respondent did not carry out any analysis of individual product lines as required by the policy.
- The tribunal found that the deductions were unauthorised because the respondent failed to establish any breach of contract, company rules, or failure in good management.
- The claimants resigned on 17 August 2021 after receiving the payslip showing the deductions, which the tribunal held was a constructive unfair dismissal.
- The respondent was ordered to repay the deducted sums and pay compensation for unfair dismissal.
Timeline
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Contract of employment signed
The claimants signed a contract of employment including clause 7.2, which purported to allow deductions for stock losses.
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Pre-employment stock deficiency demand
The stock taker demanded £480 from Mrs Groom for an alleged stock deficiency, paid in cash, which was not properly accounted for.
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Claimants started as joint managers
The Grooms commenced work as joint managers of the Brunton Arms.
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Meeting with Mr Smith
Mr Smith attended the pub and accused Mr Groom of drinking too much without proper basis, indicative of the company's culture.
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Stock check and payslip deduction
A stock check covering 18 November 2020 to 22 July 2021 showed a surplus of 1.39%, leading to a claimed deficit of £4,361.54. The July payslip deducted £166.66 from each claimant and claimed the balance.
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Resignation letter sent
The claimants sent a letter of resignation citing constructive dismissal due to the unauthorised deduction.
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Resignation with immediate effect
After a conversation with Mr Capon about cider stock liability, the claimants withdrew their notice and resigned with immediate effect.
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Liability hearing
The tribunal heard the case on 14 and 15 July 2022, finding the deductions unauthorised and the dismissal constructive and unfair.
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Judgment on liability
Employment Judge Lancaster issued the judgment finding the respondent liable for unauthorised deductions and unfair dismissal.
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Remedy hearing
The tribunal determined the amounts of compensation and ordered repayment of deductions.
The legal issue
The tribunal had to decide whether the brewery's deduction from wages for an alleged stock deficit was authorised by the contract, and whether the deduction (and the way it was handled) amounted to a fundamental breach entitling the managers to resign and claim constructive unfair dismissal.
The outcome
The tribunal upheld the claims for unauthorised deductions and constructive unfair dismissal. The brewery's reliance on clause 7.2 of the contract and the free flow policy failed because it had not conducted the necessary product-line analysis to establish a deficit. The deduction was therefore unlawful, and the manner in which it was imposed—without proper investigation and against a background of a culture where managers were expected to comply without question—destroyed the trust and confidence needed to maintain the employment relationship.
Compensation:
- Basic award: £2,214.42
- Compensatory award: £33,577.02
- Total: £35,791.45
Lessons & takeaways
- If your employer deducts money from your wages without your written agreement or a clear contractual right, you may have a claim for unauthorised deduction.
- A contractual clause allowing deductions for stock losses will only be enforceable if the employer follows its own policy and procedures properly.
- Resigning in response to a serious breach of contract (like an unlawful deduction) can amount to constructive dismissal, but you must act promptly and clearly state the breach.
- Keep records of all communications and payslips—they are essential evidence in showing what deductions were made and why.
- A culture of 'my way or the highway' can be evidence that the employer has breached the implied term of trust and confidence.
A deduction that went too far
Two joint managers of a Yorkshire pub resigned after their employer, Samuel Smith Old Brewery, deducted £166.66 from each of their July 2021 payslips and claimed a further £2,014.11 each for an alleged stock deficit. The brewery relied on a clause in their contracts and a 'free flow' policy that allowed deductions for stock losses. But the tribunal found that the brewery had not actually followed its own policy—it had not analysed individual product lines to establish a deficit, and the deduction was therefore unauthorised.
The managers had been in post since May 2019. The tribunal heard evidence of a culture where managers were expected to comply with demands from senior management without question. This included an incident before they started, when a stocktaker demanded £480 in cash from Mrs Groom for an alleged deficiency, paid under threat of losing the job. The tribunal described this as putting the managers 'over a barrel'.
What the brewery could have done differently
The brewery could have avoided liability by properly investigating the alleged stock loss and following its own free flow policy. It also could have engaged with the managers before making deductions, rather than presenting them with a fait accompli. The tribunal noted that the brewery's attitude—epitomised by a senior figure saying 'it's my way or the highway'—was a significant factor in the breakdown of trust.
Why this case matters
This case is a reminder that employers cannot simply rely on contractual clauses to make deductions from wages. They must follow their own procedures and act reasonably. For employees, it shows that an unlawful deduction—especially one that is part of a pattern of unreasonable behaviour—can be a fundamental breach of contract justifying resignation and a claim for constructive unfair dismissal. The total compensation of £35,791 reflects both the financial loss and the seriousness of the breach.
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