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Labour Board Says Employer Improperly Deducted Training Costs
Laser and Skin Care MEDSPA Red Deer Ltd. v Verge, 2022 CanLII 40453 (AB ESA) (Johnson, Vice Chair) is a new decision where an Alberta employer’s deduction of training costs from an employee’s final cheque was disallowed.
This decision is interesting to me. On the surface it is about when an employer is allowed to make deductions off of employee cheques (which is interesting), but it is also specifically about deducting training costs, which involves further analysis. This decision was decided by Vice Chair of the Alberta Labour Relations Board, William Johnson, QC.
Below are the pertinent facts found by the Alberta Labour Relations Board:
- The employer was a laser and skin care clinic
- The employer wanted to have its estheticians, such as the employee, to be trained as medical estheticians
- In Red Deer, there is no formal education entity for training medical estheticians, so the employer established a training process itself
- The employee did unpaid job shadowing for 1 week prior to employment
- The employee started employment on May 9, 2019. Her employment contract contained a clause stating that she was required to spend time furthering her education and would be paid for that, but if she resigned within 24 months then $500 per month would be deducted from final pay for each of the first 12 months, and $250 per month for the next 12 months of employment
- The employee did not receive any on-job training as contemplated in the employment contract
- The employee did take home some clinic manuals to study, and took some exams on paid-time at the clinic
- The employee resigned in August, 2021
- The employer deducted $1,500 from the employee’s final paycheque on the basis that this was authorized under the contract training clause
- The employee brought an Employment Standards Code complaint about the deduction and was successful. The Employment Standards Officer ordered the employer to pay the employee back the $1,500
- The employer appealed to the Labour Relations Board
Analysis / Conclusion
Section 12 of the Alberta Employment Standards Code states that an employer must not deduct sums of money from the earnings of an employee unless it is “personally authorized in writing by the employee to be deducted.”
The employer argued that the contract authorized it to deduct the training costs, within the meaning of section 12 of the Code, because: (1) the training is ongoing while work is being performed, (2) the deduction is not just for expenses incurred by the clinic but by experience provided by the clinic, (3) a stand-alone educational institution for this education would charge $7,000, and (4) the deduction is a penalty clause and not wages.
The Alberta Labour Relations Board rejected the employer’s argument, reasoning as follows:
- A pre-authorized deduction is more likely to be viewed as consensual if the employee benefits from the subject matter of the deduction by acquiring a transferrable skill. In this case, it is unclear whether the training provided to the employee would be transferrable
- The language in the training clause of the contract is not clear enough for an authorized deduction under Section 12 of the Code: the amounts to be deducted are specified, but their connection and relationship to the specific training contemplated is vague and imprecise
The Board noted that the argument about it being a “penalty” clause was not necessary for it to consider, because it had already determined the deduction was not allowed under Section 12. However, the Board did go on to say that any penalty clause must be reasonable to be enforceable, and it was questionable whether this one was reasonable.
In the result, the Board dismissed the appeal.
There are some cases where employers are entitled to be paid back for things like training costs after an employee leaves, but courts are reluctant to allow this as a rule. It is easier to enforce when an employee resigns than if their employment is terminated, but always a challenge.
The most common contexts I have seen where training costs are recoverable are where the employment contract is very carefully drafted, the training is not done in-house, and where the employee is getting some sort of bona fide transferrable credentials out of it. This makes logical sense, because the employer is effectively investing money in the employee and the employee continues to benefit after the relationship is over, so if the employee resigns right after getting trained, the employer is in some cases be entitled to full or partial reimbursement.
Bow River Law provides these regular legal blog articles for the purposes of legal education and research for the public and the legal profession. These articles should be considered general information and not legal advice. If you have a legal problem, you should speak to a lawyer directly.