Overpayment of Wages

Fred

I have an employee that asked me an HR question that I don’t know the answer to. His wife is having a situation at her work, so thankfully this is NOT a situation that I’m dealing with at my company. Here’s the situation:

She is a physical therapist with a company that serves several nursing homes in our community. She is paid a different rate at each facility. She just discovered that she has been paid the wrong rate at one of the facilities ever since she started working for them in late 2005. She told them of the error – it was a higher rate than she should have been paid. They are now telling her that she owes them approx. $13,000 and they will begin “taking it out of her check.” I am assuming it will be some sort of a garnishment. I would think that since it was the company’s error that they cannot come back and forcefully take her pay, especially since it crosses over tax years where the employee has already paid taxes on these wages???? I have advised them to seek legal counsel, but I would love to know what you think…….. Thank you!

NeedCoffee

Actually, I believe the company is entitled to recoup the money - there was a thread on this sometime in the last 6 months on the forum - do a search for "wage overpayment."

Good luck!

Beverlee

I agree, I believe they are entitled to recoup. I recently read a long article covering several situations, and this was mentioned. Along with bank errors, and even errors by the IRS, the consensus was you have to repay what wasn't rightfully yours. The ee in the article was a postal employee paid several thousand over a few years. He was smart enough to put aside the difference- (after telling his supervisor several times!) so when he had to repay- he got to keep the interest.

System

The company can recoup, but it's not necessarily the case that they can recoup by just taking it out of her paycheck. They may have to make some other arrangement, depending on your state's laws. Also, the tax issue isn't a factor - if the monies are being recouped out of her current wages, then she'll be paying fewer taxes on her wages this year, and it all evens out. It's as if she was advanced her wages. She doesn't lose anything by virtue of the previous tax payments.

davids

I agree with others that the employer has the right to recoup the overpayment. Whether or not they can just deduct it from future wages may depend on your state's wage and hour laws. It would not be a bad idea for your friends to consult an attorney to ensure the company is recouping the overpayment in a manner that complies with your statutes and regulations.

Rockie

Yes, the company can recoup the funds, but they will have to make some type of reasonable payment arrangements with the individual. It's unfortunate the employee did not examine her pay stub for accuracy for two years.

I remember when I worked in the banking industry, we occasionally had bank personnel put money incorrectly into customer's accounts. Some of them thought they should be able to keep the money since this was a "bank error". Sort of the same situation.

Most employers are reasonable in this sitaution in working out something with the employee.