Shawnee Love   •  
October 13, 2011

I often get the question:

“Can I charge my employee for being stupid?”

Although most of the time my clients are half joking, there is a grain of truth in the question.

My answer is typically “No” but exceptions can occur.

First, the exceptions:

Employers can and do charge employees if they warn them beforehand that they will have to pay for the error and the employee willingly signs the relevant policy document thereby confirming their agreement to pay if the mistake is made. I see this a lot in companies with very valuable identification/ access cards. In these organizations, when the ID is issued, it is typically exchanged for the employee’s written agreement to reimburse the company if the ID is lost. The employee loses the ID and $50 or so comes out of the employee’s pocket before a new one gets issued.

I have also on occasion seen companies use this same method if they issue company property (e.g., a mechanic’s tools, and occasionally even laptops). In these situations, lost tools or equipment are specified as the responsibility of the employee, but tools broken, worn out on the job or upgraded are typically be replaced by the employer.  It works in theory unless the employee can’t afford the tool/ laptop replacement but can’t work without them.  This failing is probably why this type of charge for error is so rare.

Of course in commission sales, there’s no commission on lost sales, which effectively charges sales people for their own errors (as well as the whims of purchasing groups, the economy, and sometimes even the weather).

Outside of these exceptions, the norm is that mistakes happen and when they do, they are typically the responsibility of the company and not the employee (even in cases of intentional misconduct and negligence by employees). In Canada, this responsibility for employees’ mistakes is confirmed by the Canada Revenue Agency‘s tests of contractor (i.e., company) vs. employee.  According to Revenue Canada, an employee is typically not held responsible for not fulfilling the terms of the contract which could include committing a doozie of a mistake.  Companies/contractors  are liable for the mistakes and risks including those committed by their employees.

That is a test, not a rule, so it is arguable that you could charge your employees for their mistakes if you wanted to.  However,  I would be very careful about the potential repercussions of that decision.

1. Punishing (which would include charging back) people for honest mistakes is a surefire way to kill innovation and creativity because innovation and creativity require taking risks. People won’t take risks at work if they are punished for them.
2. Oscar Wilde said that Experience is the name we give to our mistakes. Experience is valued because with it usually comes greater knowledge and skill, so if you punish for mistakes, you are putting limits on the learning and skill development in your company.  Limit learning and you limit improvement leaving yourself open to be surpassed by your competitors.
3. Punishing people is far less effective at behaviour modification  than offering praise and rewarding good behaviour.

I am not saying you shouldn’t call out mistakes and discuss ways to prevent them in the future. My message is simply that focusing on the opportunity to improve is more productive than charging for the failure that occurred.

If you are still with me, let me know what you think.