Can wages be legally withheld from an employee?
Under the Employment Standards Act an employer may withhold wages only if:
1. the court orders the employer to withhold the wages;2
2. a law allows the employer to do so;2 or
3. the employee gives his or her permission in writing to the employer.1 & 3
The permission is legal if:
a. the amount being withheld is for a specific dollar amount;4
b. it is not because of the employee’s error;4
c. where there is a cash shortage or lost property, only the employee had access to the cash or property;4
d. the employee gives his or her permission freely and willingly;6
Below are examples and how the Ontario Labour Relations Board (“Board”) has ruled:
Example No. 1
An employee allegedly stole company property. The employer withheld his wages because he was charged with theft and was being sued by the company for the missing property. The Board ruled that wages could not be withheld because the employer’s reasons are not on the list of allowable withholding.5
Example No. 2
An employee admitted to stealing cash from the cash float. The employer presented the employee with a cheque in the amount of wages owing to her. The employer paid the employee the wages owed to her with a cheque. The employer wanted the employee to sign the cheque back to the employer by writing her permission on the back of the cheque, which she did. The Board ruled that the employee’s permission was not legal because it was not freely and willingly given.6
Employment Standards Act, 2000, S.O. 2000, c 41, s. 13
1. (1) An employer shall not withhold wages payable to an employee, make a deduction from an employee’s wages or cause the employee to return his or her wages to the employer unless authorized to do so under this section.
Statute or court order
2. (2) An employer may withhold or make a deduction from an employee’s wages or cause the employee to return them if a statute of Ontario or Canada or a court order authorizes it.
3. (3) An employer may withhold or make a deduction from an employee’s wages or cause the employee to return them with the employee’s written authorization.
4. (5) Subsection (3) does not apply if,
a. the employee’s authorization does not refer to a specific amount or provide a formula from which a specific amount may be calculated;
b. the employee’s wages were withheld, deducted or required to be returned,
i. because of faulty work,
ii. because the employer had a cash shortage, lost property or had property stolen and a person other than the employee had access to the cash or property, or
iii. under any prescribed conditions; or
c. the employee’s wages were required to be returned and those wages were the subject of an order under this Act.
5. MenuPalace.com Corporation v. Saladino, 2008 CanLII 26628 (ON LRB)
Section 13(1) of the Act, sets out the limited circumstances in which an employer is authorized to make a deduction from an employee’s wages. Nothing in section 13 of the Act permits the company to withhold Saladino’s final pay because he has been charged with the theft of company property. Nor does the fact that the company intends to sue the employee in civil court to recover the value of the items provide a basis for the company to withhold earned wages. Accordingly, subject to the following, the company is obligated to pay Saladino the wages he earned during his final pay period …
6. Phillips v. Linis Sales Inc. (Canadian Tire), 2007 CanLII 49745 (ON LRB)
As for the cheque constituting written authorization, there is no suggestion that anyone other than the applicant had access to the cash. Indeed, the applicant takes responsibility for the cash shortage. Moreover, if the signed letter of authorization is the cheque itself, then the authorization refers to a specific amount (i.e the amount of the cheque). Since none of the other exceptions contained in s. 13(5) could apply, it would appear that s. 13(5) does not act as a bar to the employer’s position.
The real issue with respect to the cheque constituting written authorization is coercion. As noted, the Act is legislation which is designed to protect employees. Specifically, s. 13 of the Act is designed to protect employees from an employer making deductions from an employee’s wages except in narrow circumstances, particularly where the wages are being intended to cover cash shortages. The Act contemplates that deductions from wages can be made where there is an agreement to do so, freely entered into. Agreements entered into as a result of coercion will not be enforced. …
Even assuming that such an agreement is the type of written agreement contemplated by the Act – the agreement was not freely entered into and this does not constitute written authorization under the Act.