Section 21: Deductions for damage or loss

Overview

This section of the Code on Wages, 2019 deals with the specific circumstances under which an employer can legally make deductions from an employee’s wages. It focuses on situations where an employee causes damage to company property or experiences a loss of money they were responsible for.

Scope and Coverage

• Which employees and establishments are covered: This section applies to all employees covered under the Code on Wages, 2019, regardless of the type of establishment (factory, shop, or other). This includes both skilled and unskilled workers.
• Any thresholds or exclusions: There are no specific thresholds mentioned in the section itself regarding the value of the damage or loss. However, any deduction must be justified and reasonable. The employer *cannot* deduct amounts exceeding the actual loss. Also, the damage or loss must be due to the employee’s negligence or willful act.

Key Obligations and Rights

• Main duties of employers: Employers must be able to prove that the damage or loss occurred due to the employee’s fault. They must also demonstrate that the goods were ‘expressly entrusted’ to the employee for custody. The deduction must be a reasonable estimate of the actual loss.
• Important rights or protections for employees: Employees have the right to question any deduction made from their wages. The employer must provide a clear explanation and justification for the deduction. Deductions cannot be made for general wear and tear or accidental damage not caused by negligence. The employee retains the right to legal recourse if they believe the deduction is unfair or unlawful.

Compliance and Penalties

Violating this provision can lead to penalties under the Code on Wages, 2019. Inspectors can conduct inspections to ensure compliance. If an employer makes illegal deductions, they may be required to reinstate the deducted amount, and could also face fines as prescribed under the Code. Repeated violations can lead to more severe penalties.

Practical Examples

• Example 1 from a typical workplace: A warehouse employee is explicitly given responsibility for a specific shipment of goods. Due to their negligence (e.g., leaving the goods exposed to rain), the goods are damaged. The employer can deduct the cost of the damaged goods from the employee’s wages, *provided* they can prove the negligence and the value of the damage.
• Example 2 for a borderline scenario: A sales representative is given cash to make petty purchases. They lose the cash while travelling. If the loss occurred because the representative didn’t take reasonable precautions to safeguard the money (e.g., leaving it unattended in a public place), the employer may be able to deduct the amount. However, if the cash was stolen due to a robbery where the representative took reasonable safety measures, a deduction would likely be considered unlawful.