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Nickling and diming and constructing a dismissal

Employers aren’t legally allowed to make deductions from employees’ pay – but does doing so constitute a fundamental change to the employment contract?

By Jeffrey R. Smith

Should a careless or irresponsible employee who causes damage to equipment be on the hook for the extra cost she creates for the employer?

According to most employment standards legislation, the answer is no. Employers generally can’t recoup any kind of financial cost from their employees — they have to be absorbed. The heart of all employment contracts is that employees perform work and employers provide compensation for that work. Money can’t flow the other way without the employee’s consent.

So, if an employer tries to make unauthorized deductions from an employee’s pay, that’s a legal no-no. That includes the employee’s final paycheque if there are outstanding monies owed to the employer. If that happens, the employee can file an employment standards complaint and recover whatever has been deducted.

But that may not be the end of it. Making deductions from an employee’s paycheque can also raise the spectre of constructive dismissal, which could mean the employer may have to shell out a bit more money than what it has taken from the employee.

Consider a British Columbia construction worker who was involved in multiple incidents that caused damage to an excavator he was operating — and subsequent lost time due to shutdowns following the damage. After three such incidents, the exasperated employer put a note on the employee’s paycheque saying the cost of any future damage caused by the employee’s errors would be deducted from his pay. The employee did some digging and learned this wasn’t allowed under the province’s employment standards act, so he informed the employer of this. He received an angry email in reply that said the employer was ready with documentation of his screw-ups if he pursued legal action.

The worker walked off the job and sued for constructive dismissal, which a court upheld. The court found that not only was the employer’s notice of deduction illegal under employment standards legislation, it fundamentally changed the terms of the employment contract and struck at the heart of the employment relationship — which was the employee should get paid for work he has done. In addition, the employer’s threats breached its duty to treat the employee fairly and civilly, said the court in finding there was constructive dismissal: see Rothberger v. Concord Excavating & Contracting Ltd., 2015 CarswellBC 1191 (B.C. S.C.).

The above case shows that an employer who tries to deduct money from an employee’s paycheque may not just be in trouble for breaching employment standards and have to repay what it’s deducted, but may be on the hook to pay more to the employee if it’s crossed the line into constructive dismissal territory.

But while illegal, should making such deductions be considered a change in the employment contract? If an employee files an employment standards complaint and gets her money back, has her job ultimately changed to the point where she can’t perform it anymore and can simply walk away?


© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.

Jeffrey R. Smith

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective.
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