Can an employer offset employee theft by deducting wages or other payments?

Can an employer offset employee theft by deducting wages or other payments?

An employer’s immediate response to employee theft of goods or chattels is to withhold monies owing to the employer. However, in most situations, this response would be considered illegal and place the employer at risk of prosecution.

Section 324 of the Fair Work Act 2009 restricts deductions to very limited circumstances.

Deductions are limited to situations where:

  • The deduction is authorised in writing and principally for the employee’s benefit;

  • The deduction is authorised in accordance with an enterprise agreement, a modern award, or by a Fair Work Commission order;

  • The deduction is authorised under a law or order of the court.

It is worth highlighting that neither the Building and Construction General On-site Award 2020 nor the Clerks – Private Sector Award 2020 make any reference to deductions.

Deductions that are permitted include:

  • Health insurance fees paid to a health fund;

  • Loan repayments paid to a financial institution;

  • Payments for goods and services purchased by the employee.

The legislation provides the capacity for employers to recover indirect costs incurred by the employer. This would include the cost of items incurred on a corporate credit card, personal calls made on a company mobile phone, and the cost of petrol purchased for the private use of a company vehicle by the employee.

There are several other deductions permitted, including:

  • Salary sacrifice arrangements;

  • Failure by an employee to give requisite notice on resignation;

  • Overpayment of wages (although employers are encouraged to negotiate a reasonable payback period).

It is recommended that employers do not consider deducting wages in any of the following situations:

  • Damage to a vehicle by an employee refuelling with incorrect petrol;

  • Employee uniforms;

  • Compensation for defective or unsatisfactory work;

  • Employee underperformance;

  • Loss or damage to tools and equipment;

  • Costs of training courses or course materials.

It is likely in these situations that an employer who withheld monies could be subject to prosecution, including the repayment of the whole amount of the deductions and additional financial penalties.

FAIR WORK REGULATIONS 2009 – REG 2.12 Certain terms have no effect–reasonable deductions

For queries about deductions, managing employees, or other employment questions, please contact Dean Cameron at Workforce Advisory Lawyers – We Know Employment Law on 1300 925 529, 0417 622 178 or via email to dean.cameron@workforceadvisory.com.au

Disclaimer: This information is provided as general advice on workplace relations and employment law. It does not constitute legal advice, and it is always advisable to seek further information regarding specific workplace issues. Liability limited by a scheme approved under professional standards legislation.

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