COMPLIANCE
Lauren Handley LLB(Hons), MCIPPdip, CIPP course material author, explains the confusing principle of estoppel and how it can impact the work of payroll professionals
E stoppel is a principle in common law which prevents a party from going back on their word or their actions where another party has relied on this position and understood it to be one of truth. Common law is essentially unwritten law that’s based on the binding decisions of courts (also known as ‘precedents’). Common law is different from statutory law, which is written down and contained in statutory instruments such as Acts and Regulations. The earliest recorded use of the principle of estoppel dates back to the latter part of the 1800s. Estoppel isn’t a new principle, but it’s certainly one that can be confusing and is often misunderstood. To add to its complexity, estoppel is not only limited to words and actions, but also extends to a party’s inaction. Spencer Bower’s definition of estoppel in Halsbury’s Laws of England Volume 16(2) (2003) clarifies that estoppel by representation can be made by “words or by acts or conduct, or (being under a duty to the representee to speak or act) by silence or inaction”. You might be wondering how a party can lead another to a position of truth by silence or inaction. To demonstrate this point, let’s take the example of a gift given to the wrong person. The donor might feel embarrassed to admit their mistake, so they say nothing and the individual who received the gift believes this is for them. Weeks go by and the donor gains the courage to tell the recipient that the gift wasn’t intended for them. The recipient would surely be confused by the lack of
action when the mistake happened and the time taken to change the position, which led them to believe that the gift was theirs to keep. The recipient may also be reluctant to give the gift back. This is where estoppel by representation comes in, as the donor’s inaction led the recipient to a position they believed to be true and then went back on it at a later date. This isn’t to say that a case like this would go all the way to court, but if it did, then there would be a chance that the recipient could rely on the defence of estoppel by representation. So, what’s the relevance of estoppel in the world of payroll? Well, in an ideal world, overpayments wouldn’t exist, and mistakes wouldn’t happen. But, as we all know, overpayments are extremely difficult to avoid and occur
due to many different factors which can often be out of the control of a
payroll department, from late receipt of information to genuine mistakes. Jim Hawkins (2015) highlights the position on overpayments when they point out that “mistaken overpayments to employees are everywhere”. Overpayments are inevitable, but how a payroll department reacts to an overpayment is where estoppel becomes relevant. For estoppel to be relied on as a defence, two questions should be asked: l was the recipient aware of the error? l was the recipient in any way responsible for the error? For the first question, considerations
| Professional in Payroll, Pensions and Reward | May 2024 | Issue 100 22
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