Wage Deductions: Ontario Law Explained

Nobody wants to receive a paycheque that’s smaller than they were expecting, but sometimes, wage deductions are necessary. So, when can an employer make deductions from an employee’s wages? In Ontario, the Employment Standards Act, 2000 (ESA) provides guidelines regarding what deductions are permissible, in order to protect employees and their earnings. 

Employers are generally not allowed to withhold wages that an employee has earned, make a deduction from an employee’s wages, or cause an employee to return their wages to the employer. However, this general prohibition is subject to a few key exceptions. 

When can an employer make deductions from an employee’s wages?

Employers can generally make deductions from employees’ wages in three circumstances: 

  1. Deductions authorized by statute or court order 

The ESA permits certain deductions from employees’ wages, such as income tax, CPP and EI contributions, and court-ordered garnishments. Employers must ensure that deductions fall within the authorized categories stipulated by the ESA or other relevant legislation.

  1. Deductions for overpayments

When an employee is overpaid because of a true administrative error, i.e. the payroll department accidentally pays them twice for the same pay period etc. then these are amounts that an employee was not entitled to in the first place, and therefore are not considered “wages” under the ESA and are not subject to the same strict rules regarding deductions from wages. 

However, employers should not apply this principle too broadly. For an amount to be considered an overpayment, it must have been truly made in error. For instance, if an employer decides to pay an employee for a leave of absence when they are not required to do so by contract or statute, and then the employer later changes their mind and wants to deduct this amount from an employee’s wages, this would not be permitted as it is not a true overpayment. If an employer voluntarily provides an employee with a greater right or benefit, they cannot later characterize it as an “overpayment” in an attempt to get it back from an employee. 

  1. Deductions with written authorization 

Employers can make deductions from an employee’s wages when the employee provides a written statement authorizing the deduction. The written authorization must either specify the amount of money to be deducted or, provide a method of calculating the specific amount of money to be deducted. 

An oral authorization or a general statement or “blanket authorization”, for example in an employment contract, that purports to allow an employer to make deductions from an employee’s wages, will not be sufficient to permit a deduction from wages. 

When can an employer not make deductions from an employee’s wages?

Even where an employee provides written authorization, there are certain instances where employers are prohibited from making deductions from an employee’s wages. 

Employers are not allowed to make deductions from an employee’s wages for “faulty work” i.e. an employee’s mistake in processing a cash transaction or an employee accidentally damaging a piece of equipment. 

Employers cannot make a deduction from wages if the employer has a cash shortage or has had property lost or stolen when an employee did not have sole access and total control over the cash or property that was lost or stolen. 

Employers also cannot make deductions that would bring an employee’s wages below the minimum wage rate.

Employers should tread carefully when considering deductions from employee wages. Even when technically allowed, deductions can significantly impact morale and strain employee relations. Deductions, particularly if unexpected or unusual, are very unlikely to be well received by employees. Compliance with the ESA is crucial to avoid employment standards complaints and ensure fairness to employees. Clear communication, detailed record-keeping, and understanding of the rules are essential. Employers should prioritize transparency and fairness to cultivate a positive work environment. 

Contact us today to ensure compliance with the law while fostering a harmonious workplace environment.

As lawyers who practice for both employers and employees, we know that terminations are rarely pleasant for anyone involved.

After all, as the Courts have acknowledged, employment is an essential component of identity, self-worth and emotional well-being. More recent Court rulings have reminded us that the manner in which employment can be terminated is equally important and impactful to the employee as the employment once was.

With the importance of employment and the impact of termination well established, what can employers do to ensure the termination process is as smooth as possible? One step that may come as a surprise to some employers is the importance of issuing a termination letter that is clearly written and easy to understand. This will help your employee grasp what happens next. Additionally, if they decide to retain a lawyer, a clear letter will likely help reduce the number of back and forths (and therefore fees) your legal counsel incurs merely addressing the details of the termination. 

Here are some key tips and takeaways to consider when drafting a termination letter:

  1. Understand the moment: The chances that the employee will remember the details of the termination delivered during the termination meeting are slim to none. For most employees, this news is shocking, difficult to digest and very overwhelming. Those emotions are typically not conducive to understanding, accepting and remembering the details of what will follow. This makes the termination letter all that more important. 
  2. Understand who is reading the letter: When drafting the letter, keep your audience in mind. You’re speaking to your recently terminated employee, not a lawyer. Writing a dense letter or one littered with legal jargon will add further confusion and overwhelm an already very stressed-out individual. Write in plain language and short sentences, don’t be afraid to use spaces, new paragraphs or numbers/bullet points to make it easier to read and understand. In case it wasn’t already obvious, don’t include latin terms in your letter that even lawyers will have to look up. 
  3. Be detailed: At the very least, address each of the employee’s entitlements upon termination, even if the best information you can provide is a promise that the applicable plan provider will follow up. For example, you may not be able to tell your employee what will happen with their pension following termination but you should explain who will be in touch to provide those details. 
  4. Ensure those details comply with applicable legislation: Before drafting your termination letter, make sure you understand what your employee is legally entitled to. For example, ensure you understand the basic entitlements owed to employees under minimum standards legislation like the Employment Standards Act. These entitlements range from monetary entitlements, ongoing vacation pay entitlements post-termination and timelines for payment. 
  5. Post-termination obligations: The termination letter may be your last opportunity to remind the employee of their post-termination obligations. These sorts of obligations can range from requirements regarding confidentiality to promises made in the original employment contract regarding solicitation. Don’t forget to remind the employee to return all company property. 
  6. When in doubt, consult a lawyer: beyond knowing what legal points should be addressed in the termination letter, striking the right tone, and addressing the right points in the termination letter can truly be an art. Termination letters are just some of the bread and butter of our work; chances are getting in touch and chatting will help you set things off on the right foot. Need some assistance? Find us here

Important update for all federal employers! Amendments to the Canada Labour Code are now in force as of February 1, 2024. Do you fall into this category? And if so, what does this mean for you? 

Federal Employers

As we’ve discussed in a previous blog, the Canada Labour Code is a federal law which sets out minimum employment standards for sectors that fall under federal power.

Continue Reading Update for Federal Employers: Canada Labour Code Amendments – Now in Force, as of February 1, 2024

Each year, our law firm goes out of town and spends a couple of days together in a big AirBnB planning the year, iterating and optimizing our systems, identifying pain points and ways to improve our client service delivery, and developing our legal skills.

Continue Reading Building Our Team: Why I Love Our Annual Retreat

During 2023, we saw the Ontario Court of Appeal uphold two decisions awarding notice periods beyond what was believed to be the “24-month cap” at 27 and 30 months respectively.

In another recent Ontario decision, the Court awarded 5.5 months of pay in lieu of notice to an employee with only 5 months of service prior to dismissal, which is significantly higher than the “one month per year” rule of thumb. These decisions create uncertainty for employers given the wide range of potential liability arising from wrongful dismissal claims. Fortunately, there are proactive measures employers can take to avoid this liability. 

Continue Reading Uncertainty on Both Ends of the Common Law Notice Spectrum

Woohoo!  Mandatory policies, postings, training, legally enforceable contracts… Actually, no client has ever told us they LOVE thinking through legal compliance for their workplace. Rather, it’s the thing you have to do on top of the other revenue-generating tasks to keep the lights on. 

For owner-operator employers, there is often no one to delegate this to. The internet is full of best practices and comprehensive lists of what to do, but it all eats up your time to figure out.

How to cut through the noise? What HR law compliance tasks must get done today to be legally compliant, and the nice-to-haves when you can in a quarter or two?

We advise our employer clients frequently on how to sort through the mandatory essentials, the things that will get you in trouble with the Ministry of Labour if you fail to comply. As you grow your business and bring on more people to do the additional layers, you can build on that foundation of compliance.

Where To Start?

  • Policies: There are a collection of workplace-related statutes that set out certain policies every Ontario employer must have. Examples include anti-harassment and violence policies, accessibility policies, and certain Employment Standards Act policies.
  • Postings: Ontario employers are required to post certain materials from the government in their physical and/or virtual workplace.
  • Training: Depending on your size and industry, employers have mandatory training obligations
  • Reporting: Also depending on the size of your workplace, there may be certain reporting obligations around accessibility.

In addition to the legal compliance mandated by the government, there are two highly recommended areas to frontload when getting your compliance house in order:

  • Anti-Discrimination: Rolling out an anti-discrimination policy is a critical due diligence step should you receive a claim of discrimination from an employee, as well as a tool of communication to your workplace about your standards of practice to hopefully minimize discrimination claims in the first place.
  • Contracts: Drafting and implementing employment contracts with an enforceable termination clause will not only set out clear job expectations with your candidates and team, but will also be the primary document you lean on in the rising wrongful dismissal cases. A good termination clause can manage expectations and contain the broad packages that many owner-operators find very difficult to afford. 

Much of the content for these compliance steps is common from one workplace to another, but not all. Having the documents capture your workplace’s unique practices will strengthen your legal compliance. Practically, having the core policies, contracts and mandatory compliance steps in place will communicate expectations to your team in a clear and relevant manner.

How We Can Help You Save Time

Too busy to sort through all the details?  Lack the resources or enthusiasm to sift through the mandatory obligations and just want it done as efficiently as possible? 

The overwhelm is real for many of our clients. It’s why we built our 2024 HR Law Compliance Program

If you need a hand identifying the roadmap and setting out an efficient roadmap for your 2024 HR law compliance, we can take the weight off your plate. We will do the heavy lifting for you, stagger out the workplace throughout the year to make it manageable for you, and check in with you once a quarter with a 1:1 compliance coaching call to help you stay on track. We charge a flat fee so there are no surprises over the year of implementation. We want this easy for employers.

We are employment lawyers who actually enjoy this HR law compliance stuff and can cut through the noise for you, giving you confidence you are on track and relief that it’s getting done without eating up all your bandwidth. Come to our website or email us at welcome@springlaw.ca for more details.

When bringing people in to work with your business, the distinction between an “employee” and an “independent contractor” is not just an administrative detail; it carries significant legal implications, particularly in the realms of tax and employment law.

If a court, the Ministry of Labour, or the Canada Revenue Agency (CRA) finds a worker has been “mischaracterized” by being treated as an independent contractor when they are an employee, this can have serious and expensive implications. 

Continue Reading Navigating the Legal Distinction: Employee vs. Independent Contractor Relationships

There has been no shortage of high-profile workplace investigations and discussions surrounding the outcome of those investigations in the news over the past year. But what happens when you’re no longer reading about the investigation in the news and you’re suddenly at the center of one in your workplace? 

Whether you’re an employer who is considering whether investigating is really necessary or an employee who has asked for or been named in an investigation, read on for five basic but important tips:

  1. Employers may be required to conduct an investigation

An employer may be required to conduct an investigation based on its own internal policy or as a matter of law.

Many organizations introduce policies dealing with general complaints or more specific issues like harassment or discrimination. It may seem hard to believe but it’s easy, especially in mid-size organizations that are typically marked by harmony, for an employer to introduce a policy and be less than familiar with its content. Whether you’re an employer faced with a complaint, the person making a complaint or the person who is named in the complaint your first step should be to consult the applicable workplace policies. In your review ensure you understand how investigations are triggered and any information that the policy provides with respect to the procedure, mandate and potential outcomes of the investigation. It’s also a good step to consult workplace policies, if they exist, which define the conduct that is being complained of.

A workplace may also be required to investigate as a matter of law. The Occupational Health and Safety Act, for example, requires that employers conduct an investigation into complaints of workplace harassment, where appropriate. While Ontario’s Human Rights Code doesn’t compel an employer to conduct an investigation into a complaint of discrimination, whether one was conducted will be a primary question for Ontario’s Human Rights Tribunal. 

  1. Investigators may be internal or external to the workplace

Unless a workplace policy mandates that investigations be conducted either by an internal or external investigator, employers typically have a choice between having someone in-house conduct the investigation or hiring a third party. 

While third-party investigators can be very expensive, good investigators can also bring a great deal of expertise to a complex situation. If an employer is selecting an internal investigator, they want to be certain that the internal investigator has a thorough understanding of the investigation process. Obtaining legal advice, in which a lawyer can help guide the internal employee in conducting an investigation may assist an employer in achieving a sounder outcome. 

  1. Investigators are neutral decision-makers

Whether they are internal or external to the organization, it’s important that the employer, complainant, respondent and all witnesses understand that the investigator is not their advocate. The investigator is a neutral party who is expected to collect relevant facts, and assess those facts against the applicable workplace policy or law to determine if the conduct alleged has occurred and to render a decision. If any party needs advice, advocacy or assistance through the process they have to look elsewhere. 

  1. Complainants and Respondents may be owed representation 

Depending on the parameters of your workplace policy, parties to the investigation may 

be owed a representative. This is particularly common in unionized workplaces and unionized employees are often promised the representation of their union throughout the investigation process. 

However, it is increasingly common for non-unionized employees to be offered the opportunity to have a support person present even if this is not promised by a workplace policy. Ultimately, a support person can be very valuable to parties to an investigation, especially if the subject matter of the investigation is particularly sensitive. It is incredibly important that the support person understands that they are there to support the party and cannot provide answers or intervene on their behalf. While many complainants and respondents chose to hire a lawyer to help advise them through the complex investigation journey, a support person can also be a trusted family member or friend. 

  1. Workplace investigations can and do go wrong

Ultimately, the most well-intentioned investigations can and do go wrong. Investigation shortcomings can range from things like extreme delay to a lack of impartial decision-making and everything in between. Investigations can be extremely complex and whether you’re an employer, complainant, respondent or witness, we’d encourage you to reach out with your questions.

As we start a new year, it’s one of the most common times for an employer to review its structure, payroll, and overall organizational needs. While it’s no secret that many companies are doing mass terminations right now, a delicate trend that we are also seeing is mass terminations while simultaneously hiring new employees.

This situation is not only challenging from a legal perspective but also from an employee morale standpoint. This blog post delves into Ontario employment law considerations surrounding terminating while also hiring.

Understanding Mass Terminations under Ontario Employment Law

Ontario’s Employment Standards Act, 2000 (“ESA”) provides the minimum legal framework for mass terminations. According to the ESA, a mass termination occurs when an employer terminates 50 or more employees at a single establishment within a four-week period. Employers are required to provide written notice to the Ministry of Labour, Training and Skills Development and to each affected employee.

However, the law becomes a bit murkier when an employer is simultaneously hiring new staff. The ESA does not explicitly address this scenario, so it is technically legal for an employer to fire and hire at the same time but it can often lead to confusion and potential legal disputes.

Employee Morale Considerations

Beyond the legal implications, mass terminations coupled with hiring new staff raise questions among employees. It can be perceived as unfair, leading to negative impacts on the company’s reputation and employee morale. Employers should strive to uphold fairness and transparency when making these difficult decisions. This includes clearly communicating the reasons for the mass termination, the selection process for layoffs, and the rationale for hiring new staff.

Navigating the Legal Landscape

Employers can take several steps to navigate the legal complexities of mass terminations while hiring:

  1. Fair Selection Process: The selection process for terminations should always be based on objective criteria, such as performance or seniority, rather than personal biases or discrimination.
  2. Fair Notice and Termination/Severance Pay: Employees being terminated should be offered reasonable notice and a fair termination and severance package. What is “fair” will vary by employee depending on their contract, and specifically their termination provision. If an employee is not capped at their ESA entitlements, they will be subject to common notice which depends are various factors.  
  3. Transparent Communication: Employers should strive to communicate openly and honestly with employees about the reasons for the mass terminations and new hires. This can help to alleviate concerns and maintain trust with your current workforce.
  4. Offer Support for Displaced Employees: Employers should provide support for displaced employees, such as outplacement services or assistance with job searches. This can help to soften the blow of the termination and demonstrate the company’s commitment to its employees.
  5. Ensure Ethical Hiring Practices: When hiring new staff, employers should ensure that the process is fair and transparent. This includes clearly communicating the job requirements and selection criteria, and treating all candidates with respect and dignity.
  6. Seek Legal Advice: Most importantly, given the complexities of Ontario employment law, we always recommend consulting with an employment lawyer before proceeding with mass terminations. This can help ensure compliance with the ESA and minimize the risk of legal disputes.

Mass terminations while simultaneously hiring new staff can be a legal minefield for employers. Do you have questions about your legal obligations? Get in touch for a consultation.

As employment lawyers, we all have times when we wish our employer-side clients had come to us for advice before making certain decisions.  There’s a lot that can be done to protect an employer who seeks assistance early in the process – especially if it involves a termination.  Costs can be reduced, risks can be mitigated, and whole potential areas for future disputes can be eliminated entirely with careful consideration and planning.

The result of failing to get proper employment law advice can be catastrophic.  Not only can it be exceedingly expensive, but the reputational damage for an organization can be profound.  And if you’re an employer who has made some mistakes in the process – do not double down on those errors by adopting unreasonable and ill-supported litigation strategies.  The patience of Canadian courts has worn thin and there appears to be an increased willingness to award moral and punitive damages, as well as substantial cost awards, when finding that employers have behaved badly.  2023 has produced some truly prodigious decisions on this front.  Here are my top three 2023 cases in which employers f***ed around and found out.

Continue Reading Bad Employer Conduct – 2023’s Top 3 Most Scathing Canadian Employment Law Decisions