Tax owed back to US employer?

I am posting for my sister who currently works in South Korea, and works for a US based company and according to her employer makes no Canadian based income.

The issue is, on her T4 it states that her income tax decucted is about $20,000.00. Her employer has stated that she has to send her refund check of $20,000.oo to the company, as they have paid the taxes on her behalf.

I am wondering:
1. Is her employer allowed to do this?
2. Are there or will there be any legal/tax related issues for her latter on because of this, Since revenue Canada is issuing the check to her and not her employer?

This is the response she got from her company;

"XXX equalizes your earnings so that you do not pay any more tax than you would have paid had you remained working in Canada – essentially they pay any excess taxes you owe because of your foreign assignment. Because they have paid the tax on your behalf, you have earned a taxable benefit which in turn creates additional tax liability for you. The number shown on your T4 slip includes not only your actual earnings but the taxable benefits you have earned because of this. The inflated numbers are used to ensure the proper amount of tax is remitted.

As we had discussed before, as a nonresident of Canada, your foreign earnings are not taxable in Canada which is what generates the refund on filing the tax return. Because this tax was in actuality paid by ABS, the refund must be returned to them. Were you to receive the refund yourself, that would create additional taxable benefits in Canada which would then incur additional taxes owing. Because the refund is going back to ABS, there is no additional impact to you because of the refund."

The other problem she has is that for example with her salary and taxable income she makes 150,000$ however on her t4 it shows an income of 170,000$ even though she was never paid that 20,000$ in tax. Is this just a normal practice or something else?

Thanks

Dave