Casual Legal: (Un) Authorized Deductions from Earnings

By Andrew Skeith
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider

Employers often provide additional or advance payments to employees for the employee’s benefit, with the expectation that the employer will later be repaid through a deduction from the employee’s regularly scheduled payroll. Common examples are salary advances, accidental overpayments, and payments to an employee for additional job-related training.

Unfortunately, where the employment relationship is suddenly severed, the employer can often be left without effective recourse to recover these funds. A simple solution is usually to deduct these amounts owing from the employee’s final pay. However, the provincial government has imposed restrictions on how and when such deductions are permitted.

Section 12(2) of the Employment Standards Code allows an employer to deduct amounts owing to the employer from an employee’s earnings when:

• The employer is authorized to deduct such amounts by an Act or regulation, or a judgment or order of a court;
• The amount owing is a result of an accidental overpayment of earnings paid to the employee, and the deduction occurs within six (6) months of the accidental overpayment;
• The amount owing is vacation pay paid to an employee in advance of the employee being entitled to it;
• The amount owing is authorized to be deducted by a collective agreement by which the employee is bound; or
• The amount owing is authorized to be deducted from the employee’s earnings in writing by the employee.

To ensure that any accidental overpayments or advance payments owing by an employee are recoverable and able to be deducted from the employee’s final pay, all employees should have a signed employment agreement containing a clause allowing the employer to deduct any amounts owing from an employee’s pay.

To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1-800-661-7673 or casuallegal [at] abmunis.ca (email) and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please call 310-MUNI (6864) or riskcontrol [at] abmunis.ca (email) Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.