Ontario Severance

Employee Liability — Ontario Employment Law

8 casesDecisions from 1977–2017

About Employee Liability

When a mistake is made on the job in Ontario, workers often worry about whether they will have to open their own wallets to pay for it. The concept of employee liability deals with the financial and legal exposure an individual worker faces for errors, negligence, or misconduct committed during their employment. In most typical workplace situations, ordinary mistakes or accidental losses are considered a cost of doing business. Under the legal principle of vicarious liability, the employer is generally responsible for the negligent acts of its employees when those acts occur within the normal scope of their duties.

However, employee liability can become a serious reality in specific circumstances. While an employer cannot simply pass everyday business losses onto a worker, employees who engage in intentional wrongdoing, such as fraud, bribery, or intellectual property theft, can be sued personally by their employer. High-level executives and key personnel may also be held personally liable directly to the company if they breach their fiduciary duties by putting personal interests ahead of the business.

Employers sometimes attempt to recoup financial losses—such as trading deficits or damaged property—through employment contracts. Ontario courts closely scrutinize these attempts. Unless an employment contract features explicitly clear, legally valid language addressing repayment obligations for such losses, courts generally refuse to imply a term that makes the employee liable. Furthermore, the Employment Standards Act, 2000 (ESA) strictly prohibits employers from deducting wages for faulty work, or for cash shortages or lost property if someone other than the employee had access to the items.

Employees can also face lawsuits from third parties, such as customers or clients. It is not uncommon for a plaintiff to sue both the company and the individual worker in a negligence claim. The Court of Appeal for Ontario has indicated that naming an employee in a lawsuit merely to pressure the employer or gain an advantage in the discovery process can be an abuse of process. If the allegations against the worker are identical to the allegations against the employer, courts will frequently strike the claim against the individual employee.

Because the line between a protected workplace accident and personal legal exposure can be complicated, any threat of financial recovery against you should be assessed by an Ontario employment lawyer to determine your precise legal standing based on your unique circumstances.

Frequently Asked Questions

Can my employer sue me for making a costly mistake on the job?

Generally, no. Ordinary mistakes and accidental negligence are considered normal hazards of doing business, which the employer must absorb. However, if your actions involved gross negligence, intentional sabotage, or deliberate fraud, your employer could pursue a lawsuit against you.

Is it legal for my manager to deduct money from my pay for a broken machine?

No. Under the Employment Standards Act, 2000 (ESA), employers are firmly prohibited from deducting wages to cover the cost of faulty work, damaged equipment, or poor performance. Any such deduction is illegal in Ontario, even if you accidentally caused the damage.

If a customer is injured at my workplace, can they sue me personally?

While a third party can technically name you in a lawsuit, your employer is usually legally responsible for your actions under vicarious liability. Ontario courts will often strike down legal claims against individual employees if the lawsuit fails to show why the employee should be held personally liable apart from the employer.

Do I have to repay my employer if my work projects lose the company money?

Unless there is a highly specific and legally enforceable repayment clause in your employment contract, you usually do not have to absorb business losses out of your own pocket. Ontario courts have ruled that they will not presume or automatically imply a term forcing employees to cover trading or business deficits.

What happens if I am accused of taking bribes or stealing from the company?

Theft, fraud, and accepting bribes are intentional wrongs that breach your duty to the employer. In these scenarios, you can face a civil lawsuit for breach of fiduciary duty or fraud to recover the stolen amounts, alongside potential criminal charges.

When is the right time to contact legal representation regarding a workplace error?

You should seek counseling from an employment lawyer immediately if your employer threatens legal action, demotes you, or tries to force you to sign an agreement acknowledging personal debt for a workplace mistake or financial loss.

Common Scenarios

  • A financial services employee executes a trade that results in a massive portfolio loss, prompting the firm to withhold their final commission check claiming the employee is personally liable for the deficit.
  • A delivery driver accidentally backs a company van into a client's fence, and the employer demands that the driver pay the insurance deductible out of their next bi-weekly pay envelope.
  • A customer slips on a wet floor in a grocery store and files a negligence lawsuit naming both the corporate supermarket chain and the 19-year-old clerk who was on duty at the time.
  • A senior operations manager resigns to start a competing business, and the former employer discovers they had been taking secret kickbacks from a supplier, leading the company to file a lawsuit for breach of fiduciary duty.
  • An employer experiences a cash register shortage at the end of a retail shift and tells all three employees who used the till that a portion of the missing cash will be deducted from each of their paychecks.

What You Should Know

  • Never agree in writing to repay your employer for a mistake, damaged equipment, or lost revenue before having an Ontario employment lawyer review the document.
  • If you notice an unauthorized deduction on your pay stub for a business loss or cash shortage, point out to your employer that this violates section 13 of the Employment Standards Act.
  • If you are personally served with a lawsuit by a customer or third party related to your job duties, immediately notify your employer in writing, as their insurance policy will typically cover your legal defense.
  • Be aware that deliberately ignoring workplace safety rules or intentionally stealing data strips away the protections of vicarious liability, exposing you to personal lawsuits.

Featured Cases

S. v. Starbucks Coffee Canada Inc.

2017 ONCA 1017 (CanLII) · 2017-12-22

Employee Personal Liability for Negligence in Employment

This is a procedural and substantive ruling regarding the personal liability of employees for negligence committed within the scope of their employment. The Court of Appeal for Ontario addressed whether employees can be held personally liable for their own negligence and whether naming them as defendants for discovery purposes constitutes an abuse of process.

abuse of process discovery employee liability negligence scope of employment

Hampton Securities Limited v. T.

2017 ONCA 69 (CanLII) · 2017-01-25

Employment Contract: Employee Liability for Trading Losses

This is an appeal from a motion judge's decision in an employment contract dispute where the employer sought to recover trading losses from a former employee. The Court of Appeal for Ontario upheld the motion judge's finding that there was no express or implied term making the employee personally liable for such losses, nor was there evidence supporting an industry practice to that effect.

contract interpretation employee liability employment contract implied terms trading losses

S. v Bmo Nesbitt Burns et al.

2015 ONSC 1760 (CanLII) · 2015-03-31

Costs in Vicarious Liability: Employee Liability

This is a procedural costs ruling in a negligence action where individual employees were sued alongside their corporate employer. The court addressed whether employees should bear personal liability for costs when the employer is vicariously liable, finding they were not necessary parties, and determined costs based on proportionality and fairness.

costs employee liability negligence proportionality vicarious liability

Enbridge Gas Distribution Inc. v. M.

2012 ONCA 650 (CanLII) · 2012-10-01

Employee Fiduciary Duty & Knowing Assistance Appeal

This is an appeal regarding a judgment against a former employee of a regulated utility and third-party contractors for breach of fiduciary duty, fraud, and bribery. The Court of Appeal addressed whether the employee owed a fiduciary duty to the employer and whether the defendants were liable for knowing assistance and bribery. The appeal also concerned the calculation of the judgment amount, specifically regarding compound interest and the deduction of costs.

breach of fiduciary duty bribery employee liability fiduciary duties knowing assistance

Man Financial Canada Co. v. K.

2008 ONCA 592 (CanLII) · 2008-08-19

This is an appeal from a trial decision regarding an employee's liability for fraud and breach of contract in the context of forex trading. The Court of Appeal reviewed whether the trial judge erred in finding the employee liable, in providing adequate reasons, and in calculating damages for the employer's losses.

breach of contract damages employee liability forex trading fraud

D. v. K.

2008 ONCA 452 (CanLII) · 2008-06-09

Employee Liability for Negligence: D. v. K.

This is an appeal to the Court of Appeal from a trial decision dismissing an employer's claim against an employee. The cottage owner appellant hired the 13-year-old respondent as a "boat boy". The respondent negligently caused a fire that destroyed a boathouse, and the appellant's insurer sought to recover the $285,000 loss through a subrogated claim. The trial judge dismissed the action, finding no duty of care. The Court of Appeal dismissed the appeal, holding that ordinary employees are generally not liable to indemnify their employers for ordinary negligence absent intentional wrongdoing or gross negligence.

damages duty of care employee liability employer liability independent contractor negligence tort claims

D. v. Regional Group of Companies Inc.

2005 CanLII 22133 (ON SC) · 2005-06-23

Employee Duties and Liability Case

This is a labour law case concerning the duties and liability of an employee. The dispute arises from the employment relationship between the individual and the employer.

employee duties employee liability employment contract labour law

Martin TV and Radio Ltd. v. D.

1977 CanLII 1351 (ON SC) · 1977-01-18

Employment Contract: Advances Against Commissions Treated as Loan

An employment contract dispute involving an employer who advanced weekly payments to an employee against future commissions, with the employee earning less in commissions than the advances received. The court examined whether the excess advances should be treated as a loan in the absence of a contrary agreement, applying English law principles.

advances against commissions employee liability employment contract loan characterization repayment obligations