Employment standards rules – Deductions from earnings

Basic rules

The Code allows certain legal deductions to be made from an employee’s earnings. The amount of each deduction, and the reason for the deduction, must be listed on the employee’s pay statement.

Employers can deduct from an employee’s earnings if the deduction is:

• Required by law, such as federal and provincial tax, contributions to the Canada Pension Plan, Employment Insurance premiums, or a garnishee of the court.
  • Employers don't need written authorization from the employee for this type of deduction.
• A recovery of an overpayment due to payroll calculation error (for overpayments that occurred on or after November 1, 2020).
  • Employers don’t need written authorization from the employee for this type of deduction. However, employers must provide employees with written notice before they make the deduction for the overpayment.
  • Employers can only deduct for errors that occurred within 6 months prior to the deduction.
    • For overpayments that occurred prior to November 1, 2020, deductions must include a written authorization from the employee as per the previous rules.
• Recovers vacation pay that was paid to the employee before they earned it.
  • Employers don’t need written authorization from the employee for this type of deduction. However, employers must provide employees with written notice before they make the deduction for the vacation payment.
• Authorized by a collective agreement (for example, union agreements), or
• Authorized in writing by the employee.

When they start their job, employees can agree in writing to deductions for:

• company pension plans
• dental plans
• social funds
• registered retirement savings plans

Deductions for meals and lodging

Meals and lodging

Employers can, with written authorization from the employee, reduce the employee’s wages below the minimum wage by a maximum of:

• $4.41 for each day the employer provides the employee with lodging
• $3.35 for each meal consumed by the employee; deductions can’t be made for meals not consumed

Deductions that aren’t allowed

An employer is not allowed to make some deductions under any circumstances. Deductions an employer is not allowed to make under any circumstance include those for:

Uniforms

No employer may reduce the wage of the employee to pay for uniforms. Deductions for uniforms aren’t allowed. This includes any costs associated with the purchase, use, rental or cleaning or repair of a uniform, or any other special article of wearing apparel that an employee is required to wear during the their hours of work. If an employer deducts earnings for Personal Protective Equipment (PPE), this would fall under Deductions and Earnings section 12(2)(c) and requires the written authorization of the employee

Under the Occupational Health and Safety Code, employers are required to provide respiratory protective equipment to workers when needed. For other types of PPE, employers must ensure that workers use the equipment (i.e., does not stipulate that the employer must provide). In practice, employers often pay for all PPE. In some industries such as construction where workers sometimes switch between employers frequently, workers are often expected to provide their own safety boots, hard hats and work gloves.

Faulty work

Examples of faulty work include accidental damage to an employer’s vehicle or equipment and mistakes in production.

Cash shortages or loss of property

Deductions for cash shortages or loss of property can’t be taken from the employee’s earnings if other persons have access to the cash or property. This includes access by the employer or their representative, other employees, or customers.

In cases where cash is involved, the employee must be allowed to count their float, account for their sales, and finalize their accounting of the cash. Unless these conditions are met and the employee provides written authorization, the employer can’t make deductions for cash shortages or loss of property.

Examples of cash shortages, loss of property include failure to collect payment such as walkouts in a bar or restaurant, gas-and-dash at a service station, or breakage in a restaurant.

How the law applies

Section 12 of the Employment Standards Code limits the deductions that employers are allowed to make on an employee’s pay.

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