Posts Tagged ‘wages’

Shafik Bhalloo
Tuesday, October 11th, 2011    Posted by Shafik Bhalloo (posts)
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.

If you are an employer and you have made an overpayment to your employee, whether or not that overpayment was “wages” or benefits, can you unilaterally deduct that overpayment from the employee’s wages?

Section 21 of the Employment Standards Act (“ESA”) provides that “an employer must not, directly or indirectly, withhold, deduct or require payment of all or part of an employee’s wages for any purpose”, unless it is permitted or required by any enactment of British Columbia or Canada.  “Any purpose” in section 21 includes the scenario where the employer wants to deduct an employee’s wages to recoup overpayments made to an employee.

However, where the deduction is for something that is permitted by an enactment of British Columbia or Canada such as income tax; Employment Insurance premiums or Canada Pension Plan contributions then the employer is allowed to make a deduction without the employee’s consent.

Also, section 22 of the ESA identifies several instances in which the employer may, as a result of the written assignment by the employee, deduct wages from the employee’s wages. Section 22 states:

Assignments

22

(1) An employer must honour an employee’s written assignment of wages

(a) to a trade union in accordance with the Labour Relations Code,

(b) to a charitable or other organization, or a pension or superannuation or other plan, if the amounts assigned are deductible for income tax purposes under the Income Tax Act (Canada),

(c) to a person to whom the employee is required under a maintenance order, as defined in the Family Maintenance Enforcement Act, to pay maintenance, and

(d) to an insurance company for insurance or medical or dental coverage.

(3) An employer must honour an assignment of wages authorized by a collective agreement.

(4) An employer may honour an employee’s written assignment of wages to meet a credit obligation.

How is the employer then to recoup overpayment of wages to an employee? In HEABC V. B.C. Nurses’ Union[1], the Court of Appeal, in upholding an arbitrator’s award declaring that the employer in that case was prohibited from unilaterally recovering overpayment of wages from the wages of its members, stated that the employer:

“ is still able to recover overpayments from employees where that employee agrees to the deductions, or where a statute or collective agreement expressly authorizes the employer’s unilateral action. Where no such agreement or statutory authorization exists, the employer has the option of recovering overpayments in other ways such as pursuing a grievance, or bringing a claim against the employee.”

Therefore, it is advisable that an employer tries to obtain an employee’s express written authorization or consent to deduct the latter’s wages to recoup any overpayment.  If the employer is unsuccessful in obtaining the employee’s written authorization, the employer may proceed with a debt claim against the employee in the provincial (small claims) court assuming the overpayment is under $25,000. If the employer is unionized, the employer may be able to pursue the claim by lodging a grievance application.


[1] [2005] BCA 343

 

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Posted by Shafik Bhalloo (posts) | Filed under Labour & Employment | ....
Shafik Bhalloo
Tuesday, August 23rd, 2011    Posted by Shafik Bhalloo (posts)
Shafik Bhalloo
Shafik Bhalloo has been a partner of Kornfeld LLP since 2000. His practice is focused on labour and employment law, and on commercial and civil litigation. He is also an Adjudicator on the Employment Standards Tribunal and an Adjunct Professor in the Faculty of Business Administration at Simon Fraser University.

The Employment Standards Act (“the Act”) delineates the minimum standards that apply in most workplaces in British Columbia. It governs the employment of all employees -casual, probationary or temporary- within provincial jurisdiction, whether employed in a full time or part time capacity.

The Act will not apply where the employee is a person excluded from the provisions of the Act under Employment Standards Regulation (“the Regulation”) such as doctors, lawyers, architects and others whose professions are specifically regulated by provincial legislation. Also other non-professionals, under specific circumstances, are excluded from the application of the Act. These include, but are not limited to, persons engaged in government sponsored work programs, sitters, and newspaper carriers.

The Act also does not apply to employees whose work falls within federal jurisdiction such as banking, defence, interprovincial or international transportation, interprovincial and international shipping, air transport as well as employment with the federal government and crown corporations.

If you are or have been a director or officer of a corporation within provincial jurisdiction, it is important that you understand your potential exposure under section 96 of the Act. Section 96(1) states:

Corporate officer’s liability for unpaid wages

96 (1) A person who was a director or officer of a corporation at the time wages of an employee of the corporation were earned or should have been paid is personally liable for up to 2 months’ unpaid wages for each employee.

Under section 96(1) each director or officer of the corporate employer is liable personally to pay up to a maximum of two months’ wages for each employee, even where more than two months’ wages is owed.

This section only comes into play where the employee successfully lodges a complaint under the Act against her corporate employer for the latter’s failure to pay her wages and the Director of Employment Standards issues a determination against the employer which determination is not satisfied by the employer. In such case, the Director of Employment Standards will employ section 96(1) to issue a determination against one or more directors or officers of the corporate employer to obtain payment of wages owed to the employee by the corporate employer.

The director or officer, to be liable under section 96(1), must have been a director or officer of the corporate employer, at the time the wages were earned or should have been paid by the corporate employer.

It is also important to note that where there is more than one director or officer, nothing in section 96(1) or in any other section of the Act requires the Director of Employment Standards to apportion, pro-rate or divide the liability for wages owed to the employee between the directors or officers[1].

Where the employee is owed more than two months’ wages, the Director of Employment Standards may issue a determination against each director and officer of the corporate employer for two months wages. Just because one of the Director’s or officer’s pays the employee two months’ wages under a section 96 determination does not extinguish or discharge the liability of other directors and officers under their section 96 determinations, since the employee is still owed wages. In such case, since the Director of Employment Standards is not required to collect equally from all directors and officers, he may collect from the other directors or officers only that which is necessary to pay the balance of wages outstanding and no more. For example, if the employee is owed 3 months’ wages, once the director has collected from the first director 2 months’ wages, he may only collect one additional month’s wages from the second director.

What constitutes wages for the purpose of section 96? Wages, under section 96, refers to normal wages including applicable vacation pay. It does not include length of service, termination pay or money payable in relation to individual or group terminations, if the corporation is in receivership.[2]

Directors and officers are also not personally liable for (i) wages of an employee if the corporate employer is subject to action under section 427 of the Bank Act (Canada) or to a proceeding under an insolvency Act[3], (ii) vacation pay that becomes payable to an employee after they cease to hold office[4], or (iii) money that remains in an employee’s time bank after they cease to hold office[5].

Pursuant to section 45 of the Regulation, directors and officers of charities are exempt from the liability created in section 96 of the Act, if they only receive reasonable out-of-pocket expenses and no other remuneration for services performed for the charity. If you are not such a director or officer and section 96 of the Act applies to you, you may want to ask the corporate employer whose Board you are serving on if they have a directors and officers “error and omissions” insurance that sufficiently protects you from such liability.  Such enquiry is advisable in advance of getting on the Board of any corporate employer.


[1] Rajinder Brad, a Director or Officer of Skynet Travel Inc., BC EST #D056/07

[2] Section 96(2)(a) of the Act

[3] Section 96(2)(b) of the Act. Section 1 of the Act defines insolvency Act” to mean “Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada) or the Winding-up and Restructuring Act (Canada)”

[4] Section 96(2)(c) of the Act

[5] Section 96(2)(d) of the Act

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Posted by Shafik Bhalloo (posts) | Filed under Labour & Employment | ....