Employer not allowed to collect balance of loan from employee’s last paycheck

Employee had agreed to have $50 taken off each paycheck but was fired

A Saint John, N.B., employer shouldn’t have deducted the entire final paycheck of an employee who quit to pay off a loan, the New Brunswick Labour and Employment Board has ruled.

Darren McDermott was a foreman of a construction crew for City Fibreglas Insulation Ltd. In 2006, his son became ill and was sent to Halifax for treatment. However, McDermott’s car was in need of repairs and wasn’t in good enough shape to make the trip. City Fibreglas offered to pay for the repairs and McDermott agreed to have $50 deducted from his pay every week to pay down the loan of $1,955.99, beginning July 8, 2006.

On Jan. 15, 2007, McDermott quit his job. On his final paycheck, City Fibreglas deducted $837.65, which was the entire amount of the check. McDermott complained to the office of New Brunswick’s director of employment standards, which ordered City Fibreglas to pay him back the $837.65. The employer refused, claiming it had a right to deduct the remaining amount owed on the loan since he had quit his employment and not been terminated through the employer’s actions.

The board ruled deductions from an employee’s pay that have been agreed to are appropriate “but must be carefully restricted.” While McDermott had agreed to $50 deduction from each paycheck, it found he had never agreed to any amounts more than that. Without a written agreement from McDermott saying otherwise, City Fibreglas had no right to deduct more than $50. It also found leaving McDermott with nothing from his final paycheck was a contravention of the Employment Standards Act’s requirement that employees get paid for their work.

“The fact that there was no written authorization is sufficient to conclude that the employer was not justified in making this deduction,” the board said. “To allow such a deduction would contravene the general policy of the act, that being to ensure that employees receive pay for work performed.” See McDermott v. City Fibreglas Insulation Ltd., 2007 CarswellNB 347 (N.B. Lab. and Emp. Bd.).

Latest stories