Making Deductions from Employees Wages

In a recent case, the Authority determined that a Palmerston North Café had made unauthorised deductions from an employee’s (Ms Hill) wages, even though the they had her written consent to make the deductions.

Ms Hill was asked to attend a disciplinary meeting to respond to an alleged shortfall of $1000 in the gaming machine float. It was made clear that Ms Hill wasn’t being accused of theft but that the loss was caused by her failure to follow correct procedures.   The meeting ended with a warning and an agreement that Ms Hill repay the $1000 – to be achieved by cashing up 7 days outstanding leave and paying the balance from her wages.  Ms Hill signed a document acknowledging the outcome but claims she did so under duress.  She said she felt if she didn’t sign the document the Café would deduct the money anyway and that it would place her job in jeopardy.

Ms Hill was later dismissed for other reasons, which she also claimed was unjustified.

In regards to the deduction, Member Loftus accepted Ms Hill’s claims she signed the document under duress, noting that deductions require consent.  It transpires that the document Ms Hill signed didn’t actually state ‘I consent to the deductions’, it essentially said I acknowledge the employer has decreed it is going to take the money.  Loftus confirmed that this does not constitute consent. He also voiced concerns about the use of cashing up annual leave as a means to repay the shortfall when the cashing up of annual leave must be at the employee’s request not imposed by the employer.  Loftus also questioned the propriety of holding employees responsible for risks the business should consider – referring to the reasons for the shortfall being one of procedural failure not theft.  He also found that in the absence of an employment agreement the deduction had no contractual foundation.  The Café was ordered to repay the amounts deducted.

This case highlights key points for employers:

  1. Have a general deductions clause in your employment agreements
  2. You must consult with and obtain employee consent before making any deductions - in line with recent changes to the Employment Relations Act
  3. You must consider if the request for the deduction is reasonable – i.e. are you making deductions for an error that was really the responsibility of the employer