1.                 This is an application for review pursuant to section 116 of the Employment Standards Act, 2000, S.O. 2000, c.41, as amended (the “Act”).

2.                 Toronto Smart Cars Limited o/a Carhub North York Chrysler (the “Employer”) seeks review of an Employment Standards Officer’s finding that the Employer deducted amounts from Muhammad Khan’s wages in contravention of section 13 of the Act. The Employer maintains that it was entitled to make such deductions because it alleges that Mr. Khan deliberately and repeatedly engaged in lending fraud during his employment with the Employer, which caused the Employer to suffer losses and negatively impacted its relationship with a lender. According to the Employer, Mr. Khan’s actions were in violation of:

3.                 The Employer says that, instead of terminating Mr. Khan’s employment upon learning of his “illegal scheme,” it elected to continue to employ him but to deduct amounts from his pay in order to offset the losses it suffered. It maintains that Mr. Khan gave his verbal consent to the Employer to deduct amounts from his wages between October 2018 and November 2019, as evidenced by his failure to refuse same. Consequently, the Employer asks for Order to Pay No. 0003114-OP001 (the “OTP”), which the Employment Standards Officer issued against it in the amount of $63,766.02 (plus an administrative fee), to be rescinded and the monies returned to the Employer.

4.                 At the commencement of the hearing in this matter, Mr. Khan argued that the Board should dismiss this matter on a preliminary basis. The parties agreed to have the Board deal with Mr. Khan’s preliminary objection in writing and set a schedule for filing written submissions.

5.                 Mr. Khan argues that the Employer’s admission that it deducted amounts from his wages in the absence of a written authorization from Mr. Khan, or a court order, constitutes a violation of section 13 of the Act, which provides:

6.                 Mr. Khan argues that, even if I accept the Employer’s allegations as proven and true, the application for review must fail. He relies upon the decisions of 411241 Ontario Ltd. (CCV Food Services) v. Austin, 2001 CanLII 3796 (ON LRB) (April 19, 2001) (“CCV Food”); Ashcroft Homes-Central Park Inc. v. Pitt, 2005 CanLII 47069 (ON LRB) (December 9, 2005) (“Ashcroft”); and W.O. Stinson & Company v. Akkad, 2006 CanLII 29087 (ON LRB) (August 21, 2006) in support of this position.

7.                  The Employer argues that Mr. Khan engaged in fraud on multiple occasions, which led to a breach of his fundamental employment obligations. It maintains that the circumstances of this case call for a “less strict interpretation” of the Act, including of section 13. It points out that there is an implied term of every employment contract that employees owe a duty of good faith to their employers (RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc, 2008 SCC 54). It argues that, in the past, courts have found that “employees breached the duty of good faith when they violated loan practices and wilfully provided false financial information and when they failed to faithfully conduct the employer’s business in accounting for the business’s finances” (see: Roy v. Maple Creek Credit Union Ltd., [1983] S.J. No. 347 (Sask QB) (QL) (April 25, 1983); and Genesco of Canada Co. (c.o.b. Dexter Shoes) v. Scott, [1983] N.S.J. No. 227 (NS TD) (QL) (May 27, 1983)). The Employer maintains that it would be unjust and inequitable to prevent it from deducting these amounts from Mr. Khan’s pay in the circumstances. It contends that the drafters of the Act could not have intended such a result, and that a strict interpretation would “result in a contextless condonation of serious employee fraud, which would frustrate the purpose of the statute.”

8.                 In Ashcroft, supra, the employer deducted amounts from an employee’s pay after discovering that the employee had engaged in time theft. Notwithstanding the employee’s time theft, the Board found that the employer breached section 13 of the Act by deducting the relevant amount from his pay. At paragraphs 33 to 35, the Board stated:

9.                 Similarly, in CCV Food, supra, the Board noted that an employee had stolen money from his employer and gave his verbal consent for the employer to offset from his pay some of what he had stolen. However, in the absence of written authorization to this effect, the Board found the deductions to be in contravention of the relevant provision of the Act.

10.              I agree with and adopt the above principles. Pursuant to Rule 39.1 of the Board’s Rules of Procedure, the Board may dismiss a matter without a hearing if the material facts pleaded do not make out a case for the orders or remedies requested:

11.              Even assuming that the facts that the Employer alleges are true and proven, they do not justify rescinding the OTP, as they do not support the Employer’s decision to make these deductions from Mr. Khan’s wages. The Employer has not alleged facts that would constitute exceptions to the general prohibition under section 13 of the Act against making such deductions from Mr. Khan’s wages. It admits that it has not obtained a written authorization, and there is no court order. It is not sufficient to rely upon Mr. Khan’s apparent failure to object to the Employer’s actions. The decisions that the Employer has attempted to rely upon do not support the position it is advancing in the instant case. The fact that employees owe a duty of good faith to their employers does not enable employers to avoid the plain language of section 13 of the Act. I disagree with the Employer that a strict interpretation of section 13 constitutes “condonation of serious employee fraud, which would frustrate the purpose of the statute.” As described in Ashton, supra, there are strong policy reasons for not permitting an employer to resort to this sort of self-help when it believes that an employee has engaged in wrongdoing. Further, there are avenues available to an employer to recuperate losses it suffers as a result of an employee’s allegedly fraudulent misconduct. Indeed, according to the parties, it appears that they are engaged in civil litigation respecting these same facts. What an employer cannot do is take advantage of its economic power by seizing the disputed monies in advance of (or instead) of pursuing its rights through the courts.

12.              I note that, in its application for review, the Employer raised an estoppel argument. In his written submissions, Mr. Khan responded that the doctrine of estoppel cannot override a public statute (see: Brick and Allied Craft Union of Canada v. Ontario Power Generation Inc., 2001 CanLII 6593 (May 14, 2001); 1086891 Ontario Inc. v. Barber, 2007 CanLII 18734 (ON SCDC) (May 23, 2007); Stickel v. Minister of National Revenue, 1972 CanLII 1106 (FC) (April 18, 1972); and Harzuz Holdings Ltd. v. Peel (Regional Municipality), 2006 CanLII 15140 (ON SC) (May 8, 2006)). Since the Employer ultimately did not pursue this argument in its written submissions that it was directed to file, it is not necessary for me to address it further. 

13.              In light of the foregoing, the application for review is dismissed.

14.              The Employer has asked that, in the event the Board orders the release to Mr. Khan of the monies that the Director of Employment Standards (the “DES”) is currently holding in trust, that the Board direct that the gross amount not be released to Mr. Khan. Rather, it argues that this amount ought to be subjected to “required withholdings.” I note that the DES did not attend the first hearing date of this matter during which a schedule was set for the parties to file their written submissions on the preliminary objection. Further this issue respecting the release of the trust monies was raised for the first time by the Employer in its written submissions and not in its pleadings. Under the circumstances, the DES ought to have an opportunity to respond to this assertion. If they have not done so already, the other parties are directed to deliver copies of their written submissions to the DES forthwith and the DES shall have until June 10, 2022 to deliver and file written submissions regarding the issue of whether or not the Board ought to order the release of the gross amount of the trust monies to Mr. Khan.