Wage overpayment errors can and will occur
Wage overpayment errors happen for many reasons — from clerical mistakes to payroll s
Regardless of the reason, employees are not necessarily entitled to keep the extra money, and employers need to know their obligations for
Under the federal Fair Labor Standards Act (FLSA), employers don’t need an employee’s permission to recoup wage overpayments. The extra money is seen as a loan or a wage advancement to
Because of this, employers are generally free to recoup the overpayment from the next paycheck — even if such a deduction cuts into the minimum wage or overtime pay due the employee u
nder the FLSA.
State laws, however, may have greater restrictions. For example, New York employers may only make deductions from an employee’s wages for
“an overpayment of wages where such overpayment is due to a mathematical or other clerical error by t he employer.”
There are also limitations on the timing and duration, frequency, and method and amoun
t of recovery.
The bottom line is, employers should try to avoid getting themselves into an overpayment situation in the first place. Supervisors should closely review their direct reports’ timesheets to catch errors before paycheck
s are issued.
Also, employees should be encouraged to review their pay stubs for accuracy to help catch mistakes sooner rathe
r than later.
If a mistake happens, employers should do their due diligence to communicate with the affected employees and make a reasonable plan to recoup the funds (provided it’s allowed under state law) so as not to cause any unnecessary financial harm t
Key to remember: Wage overpayment errors can and will occur. Employers need to know their obligations under both federal and state laws before re couping money.
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