Recapture Of Inadvertent Payroll Overpayments

Occassions will inevitably occur where an employer makes inadvertent payroll errors. If a mistake results in an underpayment of wages owed, the employer is clearly required to rectify it. Although the employee wants the issue settled right away the employer can make it up on the following payroll. If the error involves an inadvertent overpayment of wages and the employee refuses to repay the sum involved, employers must be careful on how they recapture those funds.

We have seen where the Labor Board prohibited the recapture of the funds if a substantial time has passed before the employer realized that an overpayment had occurred. The employee, of course, always argues that he did not “notice” that he had received more than he was entitled to. In my opinion if the employer catches the error within a month or so I think it it safe to establish a written agreement that the monies will be deducted (depending on the amount owed) over a series of checks. Or in the alternative take it all back in one or two payments which I feel is the best thing to

If the employer makes a loan or an advance of wages, it may deduct the principal from the employee’s earnings, even if such deductions cut into minimum wage or overtime pay due to the employee. The employer has the discretion to decide what percentage of the employee’s pay to deduct to recoup the money owed. If an employee leaves before the amount is repayed the employer can recoup the entire balance from the last check.

The above represents the basics but when in doubt, as always, give us a call.

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