Air Canada rouge faces criticism for payroll deductions
Air Canada’s new airline, rouge, encountered some turbulence after its launch when word spread its flight attendants were being asked to contribute to one week of customer service training at the Disney Institute in Orlando, Fla.
As part of their letter of employment, about 130 people agreed to monthly payroll deductions of about $50 for three years — and if they leave the company early, they are required to repay the full amount.
The reimbursement covers incidentals, such as travel, meals and accommodation, not the actual training, said Renée Smith-Valade, vice-president of customer experience at Air Canada rouge in Vancouver.
“What we are covering, which is significantly more than they are paying for, is the actual training, instruction and all the materials that support the training,” she said. “If we had done the reverse, they would have been paying significantly more.”
The total cost for employees is about $1,750 and they can pay it upfront if they wish, said Michael Friisdahl, CEO and president of the airline and the Air Canada Leisure Group in Toronto.
“This was really designed to be mindful of their ability to comfortably pay it on a monthly basis,” he said.
“We also looked at the significant investment that we obviously had to make — which was clearly an investment we wanted to make both in time as well as costs for the actual program — so we felt it was an appropriate request of the flight attendants, given the long-term benefits that they would receive from this program.”
Air Canada did a competitive analysis of the other carriers in Canada to look at what they asked flight attendants to pay for, such as uniforms or per diem during training, said Smith-Valade.
“By asking our flight attendants to cover the incidentals for their training program, we weren’t putting ourselves in an uncompetitive position with the other carriers who are also hiring, and we felt comfortable doing that.”
Often employers use training agreements such as these to ensure their investment is not wasted if an employee leaves unexpectedly.
“That’s part of the problem — you don’t want to train up an employee and then have a competitor scoop them and have the benefit of this trained employee without having to incur any of the costs,” said Frank Molnar, chair of the Calgary labour and employment group at Field Law.
In looking at the Air Canada rouge situation, it’s unusual to see training costs recovered through deductions from pay while a person remains employed, he said.
“Usually, these training agreements are used as retention agreements to keep the employee with the employer for a certain amount of time, so there is no obligation, there is no deduction while the person remains employed — there is only this obligation that crystallizes if the employee doesn’t fulfill her commitment to stay a certain amount of time.”
But that approach can be questionable as people aren’t necessarily staying for the right reason, said Laura Frangella, principal at HR consulting firm FocusedHR in Toronto.
“You want them to stay because they’re happy and that’s where they want to be.”
Most commonly, the agreements lay out what will be paid for, such as tuition costs and expenses or a salary continuance for a certain period of time.
“It’s more of a formula that says, ‘If you leave before the end of this period, this is the amount that you will owe based on this formula.’ So you don’t lose anything off your cheque,” said Adrian Frost, labour and employment law lawyer at Thompson Dorfman Sweatman in Winnipeg.
Promissory notes can also be used to say the full amount will be fully forgiven only after a certain period, such as four years, so even if an employee leaves at 3.8 years, she still owes the whole amount.
“It’s more of a hammer in that last part of the agreement because it’s still a huge amount the employee might have to pay,” he said, adding that’s less common as “employers recognize over time they should be forgiving that amount.”
What’s allowed when it comes to wage deductions?
Air Canada is federally regulated, so it falls under the Canada Labour Code which states there must be an agreement in writing when it comes to wage deductions.
If an employee was going to challenge such deductions, she could either sue the employer in small claims court or, more likely, complain to Human Resources and Skills Development Canada saying the deductions from her pay were not properly authorized, said Molnar.
“Ultimately, they’ll look at the fairness factor also, in terms of whether the agreement is unconscionable, so there’s a whole series of factors that they would look at in assessing the authorization.”
But when it comes to provincial employment standards and wage deductions, they largely look at who benefits — the employee or employer.
In Manitoba, for example, employers can’t charge an employee for a course that has no value to her outside of the workplace, but can charge for a course or training that directly benefits employees if they voluntarily agree to attend and to pay, said Frost.
Employers also have to make sure, in making the deductions, they don’t ever dip below the minimum wage or other payment of wages issues that exist with employment standards. And it’s a good idea to make sure the reimbursement amount is relative to the person’s salary, he said.
“It’s got to be proportionate to the overall compensation and the nature of the position.”
A declining scale for reimbursement is also recommended because that looks more reasonable and the employer has had the benefit of the employee’s service, which is the purpose of a training agreement, said Molnar.
What makes the deductions more enforceable is if the training provides the employee with qualifications and skills that increase his broader marketability, such as a pilot learning to fly a larger plane, he said.
“In those circumstances, the scales are really tipped in the employer’s favour because the court will see the unfairness of the employee taking advantage of the employer to benefit themselves without cost, and not giving to the employer the benefit of that training.”
The investment in the Disney training benefits both Air Canada and the flight attendants, said Friisdahl, as they will gain “not just in terms of being able to do their job with Air Canada rouge but also be able to really create an experience for them that they can take with them in anything they might do in the future and add value to their own careers as they look ahead.”
However, the airline will benefit more than the employees, said Frangella, because the Disney training, while helpful, is not like an official designation.
“How beneficial it’s going to be for the employee? I don’t know.”