Deducting money from employees’ wages is a contentious issue, and one which often provokes a negative response from staff involved.
We spoke to Matthew E. McCarthy, an associate at Ogletree Deakins, who explained how and when an employer can dock a worker’s salary – and when they legally cannot.
“In Ontario, generally speaking, the legislation and the case law tell us there are three big headings under which deductions are legally permissible,” explained McCarthy.
“The first is statutory deduction; anything required by law such as income tax, employment insurance tax and pension plans.
“The second concerns deductions ordered by a court, such a garnishment order. However, it’s important to note that garnishment orders should specifically state the deduction is to come from the employee’s wages in order for an employer to use it as a basis. Garnishments also can’t exceed the amounts proscribed by the Wages Act. ”
The third deduction concerns ones authorized by the employee themselves, McCarthy tells HRD Canada.
“This can include deductions for staff benefits, training programs or payment plans. These deductions have to include the overall amount which will be deducted and how frequently it will be docked.
That being said, there are certain situations in which employers expressly cannot deduct wages – even if written consent has been given.
“Employers cannot legally make deductions for the production of faulty work,” added McCarthy. “This applies to mistakes in construction as well as errors in retails. For example, if a bank employee makes a mistake processing card payments, they’re not liable for any loss (although they are still subject to the ordinary disciplinary process relating to their job performance).
“Employers can’t deduct wages for any cash shortages. A cashier with an unbalanced till won’t have to make up any discrepancies out of their wages. That being said, in the event that it can be demonstrated the employee was the only one who had access to the cash in a given time period, there are exceptions where this can be deducted.
“In any case, we would probably recommend that an employer have a clear policy to that effect, if they decided they wanted to make any kind of deductions.”
Docked wages, in other senses, could include overpayments. If an employee is mistakenly overpaid, in Ontario that can be deducted without authorization; as long as the employer acts in a reasonably expeditious manner, so they act as soon as they find out.
The thinking behind this is that it’s not technically a deduction, because the employee was never entitled to the amount in the first place.
“There are exceptions to this,” added McCarthy, “such as being over paid in vacation pay – where the employer would need authorization.
“Similarly, if there’s evidence that the employer intended to overpay the employee, then they cannot then dock the wages if they change their mind.
“The Protecting Employee’s Tips Act came into play in 2016. Previously, in Ontario, there was uncertainly around whether employers could deduct an individual’s tips. For instance, you can’t deduct tips for spillage or broken plates, but you can withhold tips for the purposes of pooling as long as you have a policy to that effect.”