Deductions for damage or loss

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Deductions for damage or loss

Jan du Toit

 

The other day I stumbled across the Department of Labour’s (DoL) guide to deductions from employees’ remuneration with the following explanation:

 

“Deductions for Damage or Loss

Deductions for damage or loss caused by the worker may only be made if

  • the employer has followed a fair procedure and given the worker a chance to show why the deduction should not be made,
  • the worker agrees in writing, and
  • the total deduction is not more than 25% of the worker’s net pay.”

 

Based on the DoL’s interpretation of the Basic Conditions of Employment Act it seems as if employers are not allowed to make deductions form the remuneration of employees for damage or loss, unless the employee agreed in writing.

 

This is a very interesting interpretation of the Act since it would effectively mean that employers will almost never be in position to recover from employees remuneration damage suffered as a result of the employee’s negligence. Very few employees will agree to reimburse their employer for damage suffered, especially if the employee is in addition issued with a final written warning for the act of negligence.

 

Deductions forms the remuneration of employees are addressed in section 34 of the Basic Conditions of employment Act.

“Deductions and other acts concerning remunerations.-

(1) An employer may not make any deduction from an employee’s remuneration unless-

(a) subject to subsection (2), the employee in writing agrees to the deduction in respect of a debt specified in the agreement; or

(b) the deduction is required or permitted in terms of a law, collective agreement, court order or arbitration award.

(2) A deduction in terms of subsection (1) (a) may be made to reimburse an employer for loss or damage only if-

(a) the loss or damage occurred in the course of employment and was due to the fault of the employee;

(b) the employer has followed a fair procedure and has given the employee a

reasonable opportunity to show why the deductions should not be made;

(c) the total amount of the debt does not exceed the actual amount of the loss or

damage; and

(d) the total deductions from the employee’s remuneration in terms of this subsection do not exceed one-quarter of the employee’s remunerations in money.”

 

I have underlined certain words used in section 34 which I believe would assist us in establishing the correct interpretation of the Act.

 

34(1) “An employer may not make any deduction from an employee’s remuneration unless”

 

This means that a deduction in terms of section 34(1) may not be made unless the requirements set out in 34(1)(a) and (b) are met. A deduction from an employee’s remuneration would therefore only be possible if the employee agreed to such a deduction in writing or the deduction is allowed in terms of legislation, a court order or an arbitration award.

 

34(1) and 34(1)(a) states - “An employer may not make any deduction from an employee’s remuneration unless, subject to subsection (2), the employee in writing agrees to the deduction..”

 

In terms of subsection 2 an employer may deduct from an employee’s remuneration an amount equal to the damage suffered or a loss incurred as a result of the negligent or deliberate behaviour of an employee. There are however certain requirements that must be fulfilled before such a deduction may be made. Section 34(2) clearly states “..only if-“, meaning that all of the requirements of subsection 2 must be satisfied. This is amplified by the use of the word “and” at the end of 34(2)(c).The requirements of subsection 2 are:

  1. The loss or damage must have occurred in the course of employment.
  2. The loss or damage must have been as a result of the fault of the employee.
  3. The employer must follow a fair procedure and give the employee a reasonable opportunity to show why the deductions should not be made.
  4. The total amount of the debt may not exceed the actual amount of the loss or damage.
  5. The total deductions from the employee’s remuneration may not exceed one-quarter of the employee’s remunerations in money.

 

In terms of schedule 8 of the Labour Relations Act a fair procedure means that:

  • The employer should notify the employee of the allegations using a form and language that the employee can reasonably understand.
  • The employee should be allowed the opportunity to state a case in response to the allegations.
  • The employee should be entitled to a reasonable time to prepare the response (48 hours) and to the assistance of a trade union representative or fellow employee.

 

Must there be a written agreement in terms of section 34(2)?

Section 34(1)(a) states “subject to subsection (2), the employee in writing agrees to the deduction in respect of a debt specified in the agreement”. The DoL’s interpretation of this is that the two sections cross reference each other. In other words, in addition to the requirements of subsection 2 an agreement in writing must be obtained from the employee in terms of 34(1)(a). This would mean that an employer will not be able to deduct without the employee’s permission even if all the requirements of subsection 2 have been met.

 

My interpretation of “subject to subsection (2)” is that 34(2) is excluded from the requirements of 34(1)(a). Nowhere in subsection 2 does it require that after a fair procedure has been complied with, that an agreement in writing must in addition be obtained from the employee. If this was the case then there would have been a clause (e) in terms of which the employee must agree in writing.

 

A provision that the employee must agree to a deduction for damages, after (a) – (d) have been complied with, was omitted with reason. Subsection 2 gives employers the option to deduct from the remuneration of an employee without having to obtain permission from the employee, limited to damage or loss as result of the actions of the employee. Subsection 2 would serve no purpose whatsoever if, after an enquiry where guilt was established, the individual still refuses to give permission for the deduction to be made.

 

Is it double jeopardy if the employee is issued with a final written warning and ordered to pay back the damages suffered by the employer?

It would be unfair to punish an employee twice for the very same offence (i.e. for the same incident). However, as a warning is not, in my view, a punishment it can be argued that a warning could fairly accompany another corrective measure. For example, where a driver is guilty of damaging the employer's vehicle it may be appropriate for the employer to give the driver a refresher driving course. He could, however, also warn him/her that, should he/she again damage employer property, stronger action will be taken.

 

The above mentioned was confirmed in Solidarity obo Mohammed / Air Traffic and Navigation Services Ltd (2011) 20 CCMA 7.22.2. A senior financial manager transferred R4m to an incorrect account and the company had to subsequently pay R7000 in interest charges as a result of this mistake. The manager was issued with a final written warning and ordered to pay the company R7000. The employee referred the matter to the CCMA claiming that the aforementioned constituted double jeopardy. the arbitrator disagreed, stating that the recovery of the money from the employee is not part of the sanction. It is a right to reclaim fruitless spending of other people’s money. The principle is that the applicant should be given the opportunity to comment on the deduction before it is made and the deduction can only be to the extent of the loss or damage suffered by the company.

 

Employers are advised to upfront agree with employees in their contracts of employment under which circumstances deductions may be made and the procedures that will be followed prior to making such a deduction. By doing this the DoL’s interpretation of section 34(2) will be irrelevant since the employee upfront agreed to the deduction after a fair procedure has been complied with.

 

Jan can assist employers with IR and HR related services and can be contacted for a consultation at This email address is being protected from spambots. You need JavaScript enabled to view it.  

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