21 November Ask an expert: Deducting a PI insurance excess from an employee's wages November 21, 2018 By Reef Admin General 0 What if an employee's conduct results in a claim against the agency's professional indemnity insurance policy? Can the amount of the excess be deducted from the employee's wages? QUESTION We recently had a claim against our professional indemnity insurance policy arising from the conduct of one of our property managers. The insurer applied the standard excess of $5,000. Our company policy requires an employee to reimburse the agency for any excess applied under an insurance policy where a claim arises due the employee’s conduct. Can we deduct this amount from the employee’s wages over time? ANSWER Such a term in a company policy may have no effect, because it could be argued that it doesn’t relate to the employment relationship. This is because the insurance policy relates to the employer in its capacity as the insured and the employee is not a party to the policy. Also, such a term contravenes section 325 of the Fair Work Act 2009, which states that: “(1) An employer must not directly or indirectly require an employee to spend, or pay to the employer or another person, an amount of the employee’s money or the whole or any part of an amount payable to the employee in relation to the performance of work, if: (a) the requirement is unreasonable in the circumstances; …” A deduction for an insurance excess would also certainly be found to be unreasonable. The bottom line is that employers are generally prohibited from making a deduction from an employee’s wages without the employee’s specific authority. Even when authority is obtained, a deduction can only be made principally for the employee’s benefit. Related Deductions from an employee's pay When it comes to deductions from an employee’s pay, what’s allowed and what’s not? What amounts can an employer take out before it hits an employee’s hand? Protecting confidential information from employee theft As agencies have come to rely more and more on technology, there's been an increase in employees taking important and confidential business information. How can I restrain an ex-employee's conduct? It’s a common misconception that a post-employment restraint in an employee’s contract of employment isn’t worth the paper it’s written on. But the absence of a restraint leaves you with very limited opportunity to restrain an ex-employee's objectionable conduct. Stronger protection from REEF and Realcover REEF has formed a strategic alliance with Realcover, which is the only real estate industry-owned professional indemnity insurer in Australia. Realcover's policy carries additional coverage in the form of Employment Practices Liability (EPL) protection. Challenging an employee's post-employment conduct Before challenging a former employee's post-employment conduct, you have to be sure your own house is in order. One employer found out the hard way. A message from the CEO: Stay up to date to stay compliant Compliance. It's a word that strikes fear into the hearts of many employers. But it goes hand in hand with running an agency – and now with the start of the new Real Estate Industry Award, it's never been more important. Comments are closed.