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Cannot make deduction from employee without consent
Question
I own a small business and my employees are entitled to staff buying privileges as a condition of their employment.
One of my employees has resigned and is currently working out his notice period.
Can I deduct the amount owed on his staff account from his final pay? If not, how can I recover this money?
Answer
- The Wages Protection Act prohibits employers from deducting money from an employee's pay without the employee's written consent. This means that you must get your employee's written consent to deduct the money owed, or pursue the matter as a debt.
- Some employers include a clause in their employment agreements authorising them to deduct any money owed by an employee from that employee's final pay, but the Wages Protection Act allows an employee to withdraw from this arrangement by giving two weeks notice of withdrawal.
- There are a number of ways that you can pursue repayment if you cannot get your employee's written agreement to deduct the money from his final pay. One is to apply to the Employment Relations Authority for a compliance order ordering your employee to repay the money owed. Another is to apply for summary judgment against your employee.
- Traditionally, summary judgment applications were dealt with by the District Court. But, in a case decided a few year ago (Wright v Ocean Towing and Salvage Ltd (AC 75/99), the Employment Relations Authority held that it had jurisdiction to deal with summary judgment applications where the debt arises from an employment agreement.
- Because the Employment Relations Act provides that the Employment Relations Authority have exclusive jurisdiction to hear and determine any proceedings founded on an employment agreement, it is likely that all summary judgment applications arising from employment agreement must be now filed with the Employment Relations Authority and not the District Court.
Wages Protection Act 1983
Section 5. Deductions with worker's consent
(1) An employer may, for any lawful purpose,
(a) With the written consent of a worker; or
(b) On the written request of a worker
make deductions from wages payable to that worker.
(2) A worker may vary or withdraw a consent given or request made by that worker for the making of deductions from that worker's wages, by giving the employer written notice to that effect; and in that case, that employer shall
(a) Within 2 weeks of receiving that notice, if practicable; and
(b) As soon as is practicable, in every other case,
cease making or vary, as the case requires, the deductions concerned.
Link to the complete Wages Protection Act.
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