Deductions from wages or other amounts – IPG-060

Effective date: November 5, 1998

Revised date: February 21, 2023

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This Interpretation, Policy and Guideline (IPG) explains the application of section 254.1 of Part III of the Canada Labour Code (Code) which covers deduction from wages and clarifies when an employer may deduct "amounts authorized in writing by the employee" from wages or other amounts due to an employee.

Subsections 254.1(1) and (2) of the Code state that:

Note: “employees” also includes “interns”. Student interns are not subject to the interpretation of this IPG.


There is a need to clarify:


When a deduction is found to have been authorized in writing pursuant to paragraph 254.1(2)(c) of the Code

Subsection 254.1(1) prohibits an employer from making deductions from wages or other amounts except under specific circumstances as set out in subsection 254.1(2). One of these specific circumstances [paragraph 254.1(2)(c)] is when the deductions are "amounts authorized in writing by the employee".

Paragraph 254.1(2)(c), "amounts authorized in writing by the employee", requires a written authorization by the employee consenting to the deduction of a specific amount. For every deduction made, the authorization must be in writing, specify a particular amount, and be given in a way that is truly consensual.

Where it is found that the deduction of a particular amount has been authorized in writing by the employee, it must also be confirmed whether the authorization was truly consented to by the employee.

Whether the timing of the authorization has an impact on the validity of the deduction

General blanket authorizations in employment contracts, with or without specific amounts, may operate to assign responsibility or liability to the employee. However, the corresponding deduction requires a specific authorization.

Whether the authorization for deduction is signed before, at the time of, or after the deduction is made is not a relevant factor on its own. A consent for wage deduction made at the time of or after an occurrence is more likely to be accepted than one which is made a considerable period before the deduction. The more specific and timely the authorization is to the actual occurrence the more likely it would be considered valid.

What are the permitted deductions

It should be noted that subsection 254.1(2) of the Code covers when an employer may make a deduction from wages or other amounts. It does not seek to regulate the items or costs for which an employee may be held responsible.

Note: this applies even in cases where the employee has specifically authorized the deduction in writing.

Where a deduction is not permitted, the employer may:

One must differentiate between the employment contract, which spells out the responsibilities of the parties, and an authorization allowing a specific deduction. Whether the employee is responsible for an item or costs, and whether the amount thereof may be deducted from wages, are two separate issues.


In summary, an employer cannot deduct money, alleged to be owed by an employee to the employer, from an employee's wages without the employee agreeing to the deduction, in writing. The appendix provides examples of authorized and unauthorized deductions.

The employee and employer can resolve any further dispute between them by requesting a review of the Head of Compliance and Enforcement’s decision to issue a:

The review request can be transmitted to the Canada Industrial Relations Board.


Section 254.1 does not intend to preclude normal payroll deductions, sponsored by the employer and/or union, for example:

The employer must use the funds deducted for the purposes authorized by the employee.


This IPG took the following examples of authorizations from referee and court decisions. These examples provide additional guidance on applying the concepts stated in this IPG. They do not directly reflect the specific details of the cases they are extracted from. Following these examples does not guarantee the same result.

Examples of authorized deductions

Deductions for training

An individual receives an employment offer as a cable technician. The offer includes a signing bonus of $2,000, payable if the individual is still employed after 1 year.

The employer provides several cable technician training courses in the first year of employment. The individual, when accepting the offer of employment, must agree to reimburse the cost of each course at a rate of $300 per course. This bonus offsets the cost of the training courses.

At the time the employee signs the offer of employment they also sign separate agreements for each course to have the amount paid through payroll deduction. This is either from:

The prohibition under subsection 254.1(3) of the Code does not apply, as the issue does not relate to damage or loss. The written authorizations identified specific amounts the employer could take as payroll deductions and are associated with the actual deductions. The employer gave the employee enough opportunity to review the authorization documents and seek legal counsel if so desired. Even though the authorizations were signed as much as 1 year in advance, they are specific and benefit both the employer and employee.

See: Intek Communications Inc. v. Mohibur Rahman, [2015] YM2727-3561

Property not returned

An employer requires the employee to sign a written authorization requiring deduction of wages in the event of non-return of property. In this case, it is a “Key Agreement”, which sets a reasonable amount for return of the keys. If the employee does not return the keys, the employer will have to replace the keys and change the locks and other keys. In this instance, the referee made the statement “where the requirement of a deduction is reasonable, the circumstances of signing may not require close scrutiny since consent may be reasonably inferred.”

See: MG Lund Trucking Inc. v. Daryl A. Petersen, [2008] FC 1093

Examples of unauthorized deductions

Property not returned

An employer requires the employee to sign a written authorization for deduction of wages in the event of non-return of property. In this case, it is a “Key Agreement”, which sets a reasonable amount for return of the keys. If the employee does not return the keys, the employer will have to replace the keys and change the locks and other keys.

In this example, however, the agreement reads, “failure to do so will automatically mean a $300.00 deduction from my pay cheque and my final pay will not be received until the keys have been handed in and signed off”. Withholding the final pay cheque is a drastic additional penalty. The requirement of withholding the final pay negates the fundamental benefit of payment of wages in an employment contract.

See: MG Lund Trucking Inc. v. Daryl A. Petersen, [2008] FC 1093

Safe driving bonus

An employer sets out in a signed employment contract that truck drivers will receive a bonus of 4 cents per mile. This is known as a “safe driving bonus”. The contract lists a series of infractions along with associated bonus reductions, such as

The terms of the bonus agreement give the employer discretion as to whether to apply the infraction. It does not require the employer to consult with the employee.

The employee will only know whether they are receiving the monthly bonus, and how much, at the time they are paid. There is no benefit to the employee in authorizing these wage deductions.

Although the contract identifies specific amounts for each “infraction”, this sort of infraction listing is in the form of a blanket authorization. It is considered an unauthorized deduction. The employer’s discretionary application of the bonus system is the type of issue section 254.1 of the Code intends to address. The employee should have the opportunity to dispute or agree to the decisions before authorizing wage deduction. The employer is able to pursue civil remedies to recover monies they feel they are owed when the employee does not authorize wage deduction in any specific case. The authorization for deduction of wage issue is not with the list of infractions itself. Instead, it is with the means of payment and timing of the authorization when the infraction is said to have occurred.

See: Employment Management & Services, Dowling, Ontario v. Alex Geauvreau, [2001] YM2727-1014

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