Employee claimed advances were bonuses
A Manitoba employer was not entitled to deduct money from advances from an employee’s final paycheque, the Canada Arbitration Board has ruled.
John Demelo worked for Winnipeg Motor Express, a Winnipeg-base shipping service. As part of his employment contract, Demelo had a guaranteed bonus of at least 15 per cent, and up to 30 per cent, based on profitability and sales targets. During his time with the company, Demelo often borrowed money and then repaid it. Other employees also received advances and each month the company reconciled the accounts. If an employee still had an advance outstanding when her employment ended, the company would take it out of her remaining wages. On five occasions between June 16, 2006, and March 27, 2008, the company issued cheques totalling $26,000 to Demelo for what it called advances.
When Demelo received his bonus for 2006, nothing was deducted, despite two advance payments earlier that year. However, the bonus was half of what the previous year’s bonus was worth, and when he complained, he was told it would be topped up. When Demelo asked for and received a $7,500 cheque in January 2007, he assumed it was part of the bonus payment.
In 2007, Demelo wasn’t paid a bonus, which he calculated to be $8,250 after tax. He asked for and received two advances on his bonus in January 2008 worth $6,000, so he felt he was still owed $2,250.
On April 28, 2008, Demelo resigned from his employment. The next day, he asked if his final cheque was ready and was told he wasn’t getting any more because of the money he owed from advances.
Demelo filed a complaint saying he was owed $7,322.85 in vacation pay, but the company went into bankruptcy shortly thereafter. A federal government inspector confirmed the vacation pay owning and issued a payment order to the company’s directors. The directors appealed, arguing Demelo owed the company money.
The board found the advances the company paid to Demelo were called advances and regular deductions weren’t made from the cheques, as they would for normal or bonus cheques. However, the company didn’t make any attempts to recoup the bonuses, despite its monthly reports of outstanding advances to employees.
The board also pointed out the Canada Labour Code didn’t permit deductions from wages unless they were authorized by legislation, courts, collective agreement or the employee, or were overpayments of wages. The advances paid to Demelo didn’t fall under any of these categories and as a result the company was not permitted to deduct them from his vacation pay.
