Restrictions on Withholding Pay

The Employment Standards Act (British Columbia) prohibits an employer from withholding or deducting any part of wages unless the employee has consented in writing. Problems frequently arise when employment terminates and the employer seeks to recover loans, advance payments (of wages or vacation pay) or other debts from the employee by way of deductions from the final pay.

Watch out for

  • poorly documented loan agreements or advances;
  • employees taking vacation before it is fully earned;
  • adjustments to commission earnings where the amount drawn exceeds the amount earned; and
  • accidental overpayments.

Possible Solutions

For any loan or advance, obtain a signed consent from the employee which

  • sets out the amount and purpose of the loan or advance, and refers to any overpayment as an advance;
  • sets out the amount of the deduction and its frequency, or any triggering event for repayment;
  • includes an acceleration provision by which the balance comes due upon termination of employment for any reason; and
  • contains an authorization to deduct the balance from any wages (including any vacation pay and pay in lieu of notice of termination).

If an employer permits vacation to be taken in advance of being earned, the employee should provide a written acknowledgement and authorization for deduction of such amounts from wages.

Note that even with consent, employers may not deduct money from wages to offset “business costs”, such as costs to repair or replace equipment or inventory that an employee damages or loses, as well as samples, sales kits or demonstration products.

advances compensation Employment Standards loan agreement overpayment pay deductions vacation vacation pay wages

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