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Deducting Wages Re: LTD

February 16, 2005
by Israel Foulon LLP

Question: Where a long-term disability program has been implemented, can deductions be made from the employees’ wages to cover the costs of the premium? Furthermore, where such action is protested as per s. 13 of the Employment Standards Act, 2000 of Ontario , what options are available to the company?

Answer: Under the applicable Ontario employment legislation, deductions can only be made from an employee’s wages if they are statutorily allowed, ordered by a court, or if the employee has authorized the deduction in writing.

Although other jurisdictions in Canada allow for deductions from wages for insurance or pension premiums, Ontario has no legislative provision which would allow for such a deduction. As such, without either an employee’s written authorization or a court order, no deduction could be made for a longterm disability program.

In order to ensure a long-term disability program can be established, any future employment contracts to which the company is party should include a clause which either expressly or implicitly refers to a long-term disability program into which the employee is to pay.

If the employment contract, employer’s policy manual or benefits plan reference such a program and the corresponding deduction from wages which is to pay for coverage, then the applicability of s. 13 of the ESA would be avoided; once the employee agrees to the terms of employment, a deduction for the program would also be authorized.

This authority would ensure that the employee would not be able to raise any objections to the deduction through the application of s. 13. Any other deductions, however, which were not covered by the employment contract could still be subject to s. 13 objections. Although any future employment contract could cover the deduction, for employees who are already employed at the time when the employer wants to begin the long-term disability program, different consideration must obviously be applied.

Under most new benefit programs, an employee will be given an option to opt-into the program. In so doing, they are authorizing any premium deductions from their wages. Where an employee chooses not to opt-in to the program, an employer can either retain that person’s employment, relying on the remainder of the employees to meet the benefit provider’s minimum enrolment percentage, or terminate the employee’s services.

If the employer chooses to terminate the employee’s employment, all statutory and common law entitlements would be owed to the employee with respect to a termination without cause. It should also be noted that because a deduction of this nature would unlikely be found by the courts to constitute a material change to the employment agreement, the employee would probably not have a viable cause of action against the employer.

Given these alternatives, most employees would chose to opt-into any long-term disability program.

Peter Israel is the senior partner in the Toronto law firm of Israel Foulon LLP – Employment and Labour Lawyers. He can be reached at 416-640-1550 or pi@qtw38575.mywhc.ca. A version of this article originally appeared in the Carswell publication, Canadian Employment Law Today



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This article is for informational purposes only and is not intended to provide legal advice, which in all circumstances must be tailored to the specific facts of any problem. You should obtain a proper legal consultation in order to determine how this article applies to your specific situation. Please feel free to contact Israel Foulon LLP to learn more at 416-640-1550.