I love the board game “Monopoly.” One of the game’s “Community Chest” cards reads,
“Bank error in your favor, collect $200.” Its wonderful when errors go your way; especially when you get more money. But errors can (and often do) cut the other
way too and lead to losses.
One such employment error is overpayment of wages. What happens if an employer
makes an error and overpays its employee? Does the employee make off with the
extra money like Rich Uncle Pennybags in Monopoly? Or can the employer recover
for the overpayment? And if so, how?
The short answer is, “yes,” employers may recover overpayments made to their employees. But how?
Start with common sense. Discuss the error with the employee and be sympathetic. More than likely the error is not their fault and its possible they knew nothing about it. If possible, try to reach some agreement on immediate repayment terms or (especially if the amount is large) incremental payment over time. If you do reach an agreement, memorialize it in some writing and have both parties sign it. Even if you don’t reach an agreement, document the meeting with a follow-up email or other record that outlines the meeting and what was said. A solid paper trail will help you avoid future errors or misunderstandings.
For payment over time, you may also discuss possible payroll deductions or withholdings. But be careful. In general, an employer can’t withhold part of its employees’ wages to recover overpayment. See Utah Code Ann. § 34-28-3(6). One exception is if the employee “expressly authorizes” the withholding “in writing.” Id. So if the employee is willing to agree to withholding wages, make sure you memorialize it in a simple, signed agreement. Never withhold wages without the employee’s signed, written consent.
If you can’t come to an agreement, then your last option for recovery is a lawsuit. Lawsuits—especially for overpayment—should be a last resort. If you find a lawsuit is needed, make sure your documents and evidence are clear that there was an overpayment and the exact amount of the overpayment.
If you have questions about overpayment, or any employment issue, let’s talk. I offer a free, no-obligation consultation. My direct number is 801-365-1024, or you can email me at firstname.lastname@example.org.