New Brunswick Labour and Employment Board wants province to change legislation

Employer can’t deduct wages to pay for damages to van caused by an employee who used it after hours, a decision the board said was ‘inequitable’

The New Brunswick Labour and Employment Board is calling on the province to amend the Employment Standards Act following a ruling it said was unfair to an employer.

In Allen v. Provincial Electric Inc., the board ruled in favour of an employee who got into an accident with a company vehicle on personal time, agreed to pay for the damage through payroll deduction but then left the company before the damages were paid for.

Gerard Allen started working for Provincial Electric Inc. sometime around February 2003. He was employed as an apprentice electrician. Shortly after he started work, he borrowed a van from Provincial for personal use. He had the permission of the company to use the vehicle for this purpose.

While using the van for personal use, Allen was involved in an accident and caused about $1,500 damage. Richard Kelly, the president of Provincial, could not recall the exact date of the accident but said it was a couple of weeks after Allen started. (Allen himself did not show up for the hearing, but sent in an affidavit. The board accepted the affidavit, but gave it no weight. “As Mr. Allen was not it attendance and no opportunity was given to Provincial to cross examine Mr. Allen, no weight ought to be given to the affidavit,” the board said.)

About four to six weeks after starting work with Provincial, Allen quit and returned home to Newfoundland and Labrador. Before he quit, a verbal agreement was reached between Allen and Provincial that the cost of the damage to the van would be paid by Allen by way of a deduction from his regular weekly pay. The amount of the deduction was to be determined after the insurers calculated how much it would cost.

In May 2003 it was determined the damage amount was $1,523. By that time, Allen was no longer working for Provincial.

Allen returns to the job

Sometime in July or August of 2003, Allen returned to work for Provincial.

Upon his return, Provincial did not deduct any money from his pay because the company recognized Allen did not have any money, nor did he have any place to live. Kelly said he did not want to start deducting any pay until Allen was settled in.

On his second sojourn at Provincial, Allen only worked for about four weeks. He again decided to return to Newfoundland and Labrador.

In the end, no amount was deducted from his pay prior to his quitting. When Allen told Kelly he was quitting, they had a lengthy discussion — lasting two to three hours — about paying for the damage to the van.

Kelly said Allen initially resisted the company’s proposal of keeping all of the wages due to him upon termination, but he ultimately agreed to it.

“These discussions became somewhat heated and, ultimately there was talk about calling the police,” the board said. “The ultimate agreement … was reached at the end of the long heated discussions and around the time of the talk of calling the police.”

The agreement was that Provincial would keep all the money owed to Allen for work performed and, in turn, Allen would not be required to pay any additional amount for the damage to the van. The amount owed to Allen was estimated by Kelly to be about $800, while the damage to the van was $1,523.

Was Provincial entitled to keep the wages and vacation pay?

The board said New Brunswick’s Employment Standards Act was not overly helpful in determining whether or not Provincial could withhold Allen’s compensation to pay for the damages to the van.

The legislation does contemplate that certain deductions may be made from wages otherwise due to an employee, including upon termination. But it does not set out what “lawfully made deductions” are, something the board called “unfortunate.”

It turned to other legal decisions for guidance. The board looked at one of its earlier decisions, Gerald Hutchins and Atlantic Provincial Security Guard Service Ltd. In that case, the board conducted a thorough review of cases and Ontario’s legislation, which specifically addresses the issue of what to do in a case like this.

The board summarized, as follows, the circumstances under which an employer may deduct money from an employee’s wages:

•The employer may deduct certain specific amounts from employee pay or wages where there is clear and explicit authority in writing, signing by the employee. Where there is such writing it must be voluntary on the part of the employee and any agreement will be strictly construed in keeping with the overall objective of the act to protect employees from undue exploitation. The employer, if it is alleging the right to collect for unsatisfactory work, shortages of funds or negligence on the part of the employee, must be prepared to clearly establish not only that the employee agreed to such a deduction, but that he was, in fact, responsible for the loss suffered by the employer.

•In certain circumstances, where there is a practice of the employer over time, or a clear and undisputed oral agreement, and evidence of real and quantifiable economic benefit flowing from the employer to the employee, the employer may be allowed to deduct for economic benefits granted directly to the employee. In such cases the highest level of proof will be demanded and only where the benefit to the employee is unequivocally demonstrated will such deductions be allowed.

•If a clear economic benefit is acknowledged before the tribunal and in all the circumstances it is appropriate to allow it to be set off against the pay, the tribunal may allow this to be done where to do so is not contrary to the provisions of the Employment Standards Act or to a specific general policy of the act.

The Atlantic case

The facts of the Atlantic case were similar to the facts in this case. In Atlantic, the employee was using a vehicle rented by his employer and while using the vehicle caused damage to it. The employee maintained he did not know how the damage occurred, but agreed to have the repair costs deducted from his wages. But the employer and the employee could not agree on how much should be deducted each week. As a result, the employee quit and the employer then withheld from his pay the amount it cost to repair the vehicle.

In that case, the board concluded that an agreement signed by the employee on hiring was not sufficiently clear to meet the test required to deduct the pay due to the employee. The employer was thus obligated to repay the amount withheld to the employee. (For more on the Atlantic decision see the related articles link below.)

The board’s decision in Allen

In this case, the board said there was no evidence of any written authority by Allen to deduct from his wages the amount due Provincial for the damages to the van.

The issue in this case was whether or not there was a “clear and undisputed oral agreement” and “evidence of real and quantifiable economic benefit flowing from the employer to the employee.”

Allen agreed, on two separate occasions, to the deduction of the damages from his pay. On the first occasion, before he quit the first time, the evidence indicates there was a clear and undisputed oral agreement but there was no real and quantifiable economic benefit flowing from the employer to the employee. As a result, the board said, such that agreement was not grounds to deduct the amount for the damage to the van.

On the second occasion, the board said there was again a verbal agreement. And this time, Provincial’s decision to accept significantly less than the amount of the damage to the van (it owed Allen $800 in pay, the damage to the van was $1,523) was a real and quantifiable benefit to the employee from the employer.

So why did the board rule in favour of Allen?

Even though the board said the employer met the test, it still ruled in favour of Allen. It did so because Allen did not initially agree that any of the amount due to Provincial would be deducted from his pay on the second occasion.

“It was only after a long, sometimes heated discussion where it reached a point that the police may have had to to have been called, that Mr. Allen agreed that the amount of his last pay would be kept by the employer in full settlement of the damage,” the board said. “This board therefore finds that the circumstances under which this agreement was reached are not sufficient to prove, to a high standard, a ‘clear and undisputed oral agreement.’ In order to find such an agreement, this board believes it must be one that was entered into by the parties voluntarily.”

It said Allen had little choice but to accept the deal, as the company could merely have told him it was not going to pay him.

Board says decision is unfair

The board said the decision does, to a certain extent, seem “inequitable.”

“Mr. Allen agreed that he was liable for the damages, yet the employer must pay the employee wages when the employer is owed money by the employee,” it said.

Based on the evidence it had, the board said it appeared Allen agreed he would pay for the damages.

“One would hope that (he) would honour such a commitment,” it said. “However, the laws of New Brunswick, while not clear, do not permit the employer to withhold the payment in this case.”

Board calls on province to amend legislation

In a post script to the Allen decision, the board called on the provincial government to change the Employment Standards Act to address the issue of the circumstances under which an employer may deduct amounts due to it from an employee.

“This would make it clearer for employers and employees alike to know the circumstances where such deductions can be made, rather than having to rely on legislation and cases in other jurisdictions where the law is not even the same as New Brunswick,” the board said. “The legislature in New Brunswick already acknowledges that deductions can be made, but now should clarify the circumstances where such deductions are ‘lawful.’”

For more information see:

Allen v. Provincial Electrical Inc., 2004 CarswellNB 680 (N.B. Labour & Employment Bd.)

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