In response to an employee’s mistake or failure to perform one or more of his or her regular duties, employers may be inclined to withhold that employee’s wages. However, this is generally prohibited under the Ontario Employment Standards Act, 2000 (the “ESA”).
I have seen this issue arise where an employer attempts to incentivize an employee to carry out their full scope of duties. For example, consider a delivery person whose duties include completing their assigned deliveries and entering confirmation of such deliveries in their employer’s tracking system. In response to an employee failing to enter the data in the employer’s tracking system, the employee’s supervisor may decide to withhold a portion of the employee’s pay until the tracking data is entered.
While this course of action creates an incentive for the employee to carry out the full scope of their duties, it violates the ESA.
Cannot deduct/withhold without employee written authorization
Pursuant to s. 13(1) of the ESA,
“An employer shall not withhold wages payable to an employee, make a deduction from an employee’s wages or cause the employee to return his or her wages to the employer unless authorized to do so under this section.”
Two exceptions to this prohibition on deducting/withholding are:
- Deducting/withholding for the purposes of complying with Ontario or Federal statutes (e.g. deductions for taxes, CPP, EI, etc.) or court orders; and
- Obtaining the employee’s written authorization.
However, an employee’s authorization to deduct/withhold is invalid where:
- It does not refer to a specific amount or provide a formula from which a specific amount may be calculated
- The employee’s wages were withheld, deducted or required to be returned because: of faulty work; or the employer had a cash shortage, lost property or had property stolen and a person other than the employee had access to the cash or property.
Can apportion payments amongst different tasks
In the alternative to obtaining an employee’s authorization, an employer could apportion the total pay amongst the completion of specific tasks. In my earlier example, if the delivery person is paid $100 for a day’s worth of deliveries and entering said deliveries in the employer’s system, rather than withholding, say, $20 for failing to enter the data, the employer could specify a calculation that allocates $80 for completion of the deliveries and $20 for entering the data in the employer’s system. This way, rather than deducting/withholding wages, the employer is calculating the wages earned based on a set formula.
Must comply with minimum wage and overtime entitlements
Where an employer is allocating wages to different tasks, care must be taken to ensure that the employee is paid at or above the minimum wage (currently at $11.40) and in compliance with an entitlement to overtime (for many Ontario employees, overtime pay is calculated as 1.5 x wages for hours worked over 44 hours in a work week). The number of hours worked for purposes of compliance with minimum wage and overtime standards considers the actual number of hours worked by the employee regardless of the number of hours the employer scheduled for the task.
Further to the example above, if the deliveries took the employee eight hours and inputting the confirmation data only takes 30 minutes, the employee would receive:
- greater than minimum wages if he or she completed both tasks because $100 is greater than $96.90 (i.e. $11.4 (minimum wage rate) x 8.5 hours); but
- less than minimum wages if he or she only completed the deliveries because $80 is less than $91.20 (i.e. $11.4 (minimum wage rate) x 8.0 hours).
- Subject to requirements under statute or court orders, employers cannot deduct/withhold an employee’s pay without prior written authorization;
- The written authorization must provide a clear formula or specify an amount to be deducted/withheld;
- Deductions/withholdings cannot relate to faulty work, regardless of whether written authorization has been provided by the employee;
- As an alternative to deducting/withholding wages, an employer could allocate an employee’s pay to the completion of specific tasks; and
- Ensure that the pay received by the employee is compliant with minimum wages and overtime pay requirements.