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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Generally, an employer is not allowed to require his employee to make deposits for the reimbursement of loss of or damage to material, equipment, tools supplied by the employer, except when the trade, occupation or businesses of the employer recognizes, or considers the practice of making deductions as determined by the Secretary of Labor. (Article 114, Labor Code)
When can an employer require his employee to make a deposit from which deduction shall be made in case of loss or damage to the employer’s property?
The Labor Code provides that:
Article 114. Deposits for Loss or Damage. – No employer shall require his worker to make deposits from which deductions shall be made for the reimbursement of loss or damage to tools, materials, or equipment supplied by the employer, except when the employer is engaged in such trades, occupations or business where the practice of making deductions or requiring deposits is a recognized one, or is necessary or desirable as determined by the Secretary of Labor and Employment in appropriate rules and regulations. (Article 114, Labor Code)
Further, a deduction on deposits on the actual amount of loss or damage cannot be made if the employee has not been heard or if his/her responsibility cannot be proven. The law says:
Article 115. Limitations. – No deductions from the deposits of an employee for the actual amount of the loss or damage shall be made unless the employee has been heard thereon, and his responsibility has been clearly shown. (Article 115, Labor Code)
The Omnibus Rules to Implement the Labor Code provides for the conditions for deductions for deposits to be considered validly made. These conditions are:
(a) The employee concerned is clearly shown to be responsible for the loss or damage;
(b) The employee is given reasonable opportunity to show cause why deductions should not be made;
(c) The amount of such deduction is fair and reasonable and shall not exceed the actual loss or damage; and
(d) The deduction from the wages of the employee does not exceed 20% of the employee’s wages in a week. (Section 14, Rule VIII, Book III, Omnibus Rules to Implement the Labor Code)
Under Labor Advisory No. 11-2014, deductions or requiring cash deposits from employees to answer for reimbursement of loss or damage on tools, materials, or equipment supplied by the employer is allowed in private security agencies as a recognized and reasonable industry practice given the nature of the service or business, subject to the same conditions as provided for under the Labor Code. (Paragraph 3, L.A. No. 11-2014)
It must be noted that the maximum amount of cash deposit shall not exceed the employee’s basic salary for one month, and the full amount of such deposits deducted from his/her salary shall be returned to him/her within ten (10) days from separation from employment. (Paragraphs 4 and 5, L.A. No. 11-2014)
Read also: Permissible Deductions from Wages under the Labor Code and Other Laws
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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