Employment Relations Authority case is a reminder that employers must adhere to the law when trying to deduct wages from an employee.

An employer cannot make deductions from an employee’s wages unless:

  1. The employee has given written consent, or
  2. The employer has made an overpayment of wages to the employee.

In this case the employee was dismissed from his employment for causing a motor vehicle accident with one of his employer’s vehicles.  His employer tried to recoup insurance excess from the employee by withholding from his wages but the employer did not have unequivocal consent to do so.  The employee sought to have his final pay paid without any such deduction, claiming the company had no authority to make any deduction of that nature.

The Authority found that the burden for establishing the consent fell on the employer.  The employee sought an order against the employer for a penalty together with compensation for stress and hardship caused by withholding his wages.

The Authority ordered the employer to pay $300 for the unjustified action as well as the full amount of final pay.  The sums involved in a case of this nature may be small but to the employee they can obviously be very significant.  In addition to this the time and expense to the employer in preparing for the hearing and attending any appearances is a very significant cost as is potential damage to morale of the remaining staff who observe the action taken with a fellow worker.

It is important for employers to know the law in relation to deductions from wages before ending up with an expensive claim and paying damages for any breach.