Christmas repayment plan didn't follow rules: Arbitrator

An Alberta employer should not have deducted a Christmas wage overpayment without written consent of all the affected employees, an arbitrator has ruled.

O.E.M. Remanufacturing Company is an engine and powertrain remanufacturing company in Edmonton. It pays its employees every two weeks, with employees receiving their wages on a Friday for the pay period ending the previous Saturday.

Employees were scheduled to receive their wages for the pay period ending on Dec. 19, on Dec. 25. However, because Dec. 25 was a holiday, the banks would be closed and employees wouldn’t receive their pay until Dec. 29. OEM decided to move up payday to Dec. 24 to ensure employees wouldn’t have to go without pay over Christmas, but this required a manual adjustment of the default deposit date.

On Dec. 22, the day payroll information was submitted, OEM discovered that the change had not occurred and the deposit date was still Dec. 25. It informed the union that it had decided to deposit a payroll advance of 50 per cent of the employees’ pay on Dec. 24. Later that day, the company decided to deposit a second advance of the remaining 50 per cent.

The company emailed its employees about the two advance payments on Dec. 24 and noted that because it couldn’t change the payroll process, they would also receive a second payment on Dec. 29. This would result in a double payment, so the company planned to deduct the entire amount of the advance from employees’ pay in January 2021.

On Jan. 4, OEM informed employees that it would be deducting the extra payment on Jan. 22, 2021. Many employees responded that they did not consent to the deduction, pursuant to the collective agreement — which incorporated a section of the Alberta Employment Standards Code and required an employee to return any overpayment “in a manner that is acceptable to the employer and the employee upon written consent of the employee.”

The company disagreed that the collective agreement applied because it was an advance, not an overpayment. However, it agreed to consider repayment plan proposals from employees.

Many employees didn’t submit repayment plans and repaid the payroll advance in full on Jan. 22, while others did submit plans. OEM indicated that it would accept repayment plans of four instalments or less and allow employees who proposed more than four to present their case why they needed that many. The union requested a threshold of six proposed instalments.

A few days later, OEM indicated that it would deduct 25 per cent of the payroll advance on Jan. 22 unless an employee and the company agreed upon an alternate repayment plan. The union filed a grievance alleging that OEM breached the collective agreement for those employees who had not agreed to repayment plans authorizing the deductions.

The arbitrator found that OEM’s plan to deduct 25 per cent of the payroll advance was unilateral and the deductions were effectively made on Jan. 19, when it submitted the payroll information for the Jan. 22 payday — before all the repayment plans were submitted.

The arbitrator also found that while the initial payment on Dec. 24, 2020, may have been a payroll advance, the Dec. 29 payment was an overpayment of wages that fell within the collective agreement and code’s requirement for written authorization for deduction. This requirement reflected the vulnerability of employees to deductions, the arbitrator said.

The arbitrator determined that OEM failed to obtain the necessary employee authorization for the payroll deductions, which breached the collective agreement and the code. However, given the efforts OEM made to “get pay in the hands of employees before the Christmas holiday,” the arbitrator found that the company’s actions were not harmful or egregious enough to justify a damage award.