Updated: Nov 21, 2019
If an employee has stolen equipment, money or failed to return outstanding items from your business, can you deduct the amount from his/hers final pay and/or termination entitlements?
An employer does not have a unilateral right to withhold or deduct any monies due on termination of employment where the employee has allegedly stolen from, or defrauded, the employer.
After the person has been convicted, an employer may take civil action for the recovery of the amount stolen. This could also involve an application to a court for an order by which the court, while convicting the person, can also order compensation to be paid to the employer.
The Fair Work Act (s324(1)(d)) provides that an employer may deduct an amount from an amount payable if the deduction is authorised by an order of a court.
Leave entitlements – misconduct
Annual leave Under the National Employment Standards, an employee does not forfeit his/her entitlement to pro rata annual leave on termination if the reason for the dismissal was due to the employee’s serious misconduct. Long service leave An employee’s entitlement to long service leave on termination is usually regulated by the relevant state or territory long service leave legislation. Generally, if an employee has qualified for long service leave (usually 10 years' service), there is an entitlement to payment of accrued long service leave even if the reason for dismissal is serious misconduct.
However, an entitlement to pro rata long service leave on termination may be jeopardised if the reason for dismissal is due to the employee’s serious and wilful misconduct.
Reference should be made to the relevant long service leave legislation to determine an employee’s entitlement in this circumstance. The bottom line: If an employee is dismissed for theft or fraud, an employer cannot deduct the amount stolen from the employee’s termination pay unless authorised to do so by the employee.