Deducting wages to cover a debt doesn’t warrant punitive damages, rules Ontario court

An Ontario employer did nothing wrong when it deducted more than $2,000 from one of its worker’s paycheques for an outstanding debt, a small claims court has ruled.

Debt Control Agency hired Dennis Cloutier in April 2021. The company discovered that Cloutier had an outstanding debt in the company’s system.

As a term of his employment, he had to either pay off the debt in full or negotiate a payment plan.

Worker, company disagree over amount deducted

Cloutier claimed that Debt Control Agency improperly deducted a total of $2,969.27 from his pay. But the court said he did not explain how he calculated that amount.

Debt Control Agency said it actually deducted $2,195.60, including $1,830.89 for the outstanding debt and $347 for licensing fees, the court said.

Cloutier agreed to pay $100 per paycheque, plus 50 per cent of any monthly commissions towards the outstanding debt, by a signed agreement on April 28, 2021. But he didn’t make those payments.

On June 30, 2021, Cloutier and his employer amended the agreement so the payments would be automatically deducted from his pay.

Cloutier said his employer was supposed to give him a “grace period” and not deduct anything from June, but it went ahead and did so.

“So, although he does not dispute owing the debt, he says (his employer) collected it improperly,” the court said.

In support of that claim, he produced a July 30, 2021, paycheque that showed a 50 per cent deduction in his commission. But the court said the agreement stated that automatic payroll deductions would restart on July 16, 2021.

No deductions were made in June, the court said. And therefore the deductions were not improper.

The $347 licensing fee was also covered by the agreement, it ruled.

Punitive damages

Cloutier also sought $2,029.73 in punitive damages. While the court wrote that Cloutier was terminated, neither the date nor the reason for the termination were covered in the ruling.

“The applicant argues the respondent’s improper payroll deductions and termination of his employment while he was struggling with medical issues caused him financial hardship, potential eviction, lack of medical supplies and food, and negatively impacted his abilities as a caregiver,” the court said.

But it also pointed out that punitive damages are designed to punish a “morally culpable” employer and are reserved for malicious and outrageous acts.

“I have found above that (Debt Control Agency) made the payroll deductions according to the parties’ agreement, and were not improper. I also find (it) terminated (Cloutier’s) employment within the probationary period,” the court said.

“Additionally, I find the (employer) granted the applicant extensions and grace periods, though it was not obligated to do so. I find (it) acted reasonably in its dealings with (the employee). I find there is no evidence to support a punitive damages claim. I dismiss this claim.”

For more information see Cloutier v. Debt Control Agency Inc, 2022 BCCRT 724.