Based on the title, you might think today’s reader question seems like a one-in-a-million situation. The thought crossed my mind too. But after thinking about it, overpaying employees is a serious issue.
Hi Sharlyn. I currently work as a manager at a nonprofit organization. Before this job, I worked in the government sector from 2006 to 2010. I left in 2010 because of an illness.
I recently received a letter from the finance department of my former employer stating that they overpaid my sick leave benefits during my course of employment and I owe them $18,500. I was never informed that I didn’t have enough sick leave.
What are my rights in this case? Should I contact a lawyer or human resources? I tried to contact the finance department. They just don’t want to deal with me and haven’t answered any of my emails. I really can’t add this stress to my life. Thanks in advance for your help.
It won’t surprise you that this is one of those times when you need to reach out and consult with your friendly employment attorney. I’m delighted that Kate Bischoff, JD, SPHR, with the firm of Zelle Hofmann offered to answer a few questions. She helped us with this issue recently.
Please remember that Kate’s comments should not be construed as legal advice or as pertaining to any specific factual situations. If you have detailed questions, they should be addressed with your friendly labor attorney.
First off, the employee has been gone from the company for five years. Does an organization have the right to ask for the money back after so much time has passed?
[Kate] Government employers have their own set of rules, but it is possible that a public employer could seek recovery for an overpayment after five years. Private employers may not have as much time. Each state has its own statute of limitations for breach of contract or wage claims. Generally, private employers do not have five years, but it would depend on the state where the employer does business and where the employee resides.
I know that companies do accidentally overpay employees. But $18,500?! That’s a huge overpayment. Are there measures that companies can put into place to make sure they do not end up in this position?
[Kate] You’re not kidding, $18,500 is huge! As we say here in Minnesota, “Uff da!” The employer here is a government agency that may have authority to garnish tax refunds or wages without much due process, but private organizations don’t have the same kind of recourse for overpayments.
If a private organization overpays an employee, the employer should inform the employee as soon as the problem is discovered. Documenting the mistake and working with the former employee to create a reasonable repayment plan would be wise. If that doesn’t work because the former employee won’t cooperate, the employer may have a claim against the former employee for breach of contract or unjust enrichment. In my experience, however, few employers want to sue a former employee when the employer made the mistake.
In the case of an overpayment due to leave, if an employer is going to pay an employee for time they are out due to an illness and the employee has not accrued paid time off (or sick days), the employer should also have mechanisms in place that informs the employee of the consequences of using more leave than she has. This would include a statement in the employers paid time off or sick leave policy, regular reporting to employees of the amount of paid leave they have available, and a clear and timely accounting of what the employee owes if she is paid for time she has not worked. With these mechanisms, the employer sets up safeguards to recover for overpayment, and employees will not be surprised if an employer seeks to recover an overpayment.
You’ve already touched upon this a bit in the first question. I can see some organizations just writing the overpayment off. Does the fact that this takes place in the government sector change the situation? Are certain industries, states, professions, etc. required to recover overpayments?
[Kate] You’re right. I see many private employers write off such a debt if they haven’t managed to prevent the problem in the first place. Companies in highly regulated industries and those with strict accounting requirements may be required to seek the overpayment from the employee.
Again, in the terms of the leave overpayment the reader mentions, employers can prevent such situations with clear policies, advance planning, and by requiring an employee take unpaid time off or allowing coworkers to donate paid leave to employees in need.
Speaking of the leave, this does bring into question the employee’s obligation to understand their sick balance. Do employees have an obligation to know how much vacation/sick/discretionary time they have coming? That way they’re not placed in this position.
[Kate] Employees may not be legally obligated to know how much leave time they have available, but it’s just common sense to find out before taking time off. It’s particularly important for employees to figure out how much leave time they have if an unexpected illness or injury occurs.
That said, if this situation becomes part of a lawsuit, the judge and jury are going to want to know what the employer did to inform the employee about available leave time and to avoid an overpayment situation. Paystubs, emails, employee self-service software, and/or letters from human resources or accounting should document that the employee was informed about the paid leave available. If an employer allows an employee to go into an overpayment situation, the employer should have regular communication with the employee to communicate the amount he or she may owe. Surprising an employee with an $18,500 bill is not likely to sit well with a judge or jury.
Last question, if an employee suspects they have been overpaid, what should they do?
[Kate] They should talk to their human resources or accounting department and, if they have been overpaid, figure out a way to repay the overpayment. Being upfront about the overpayment and making arrangements to correct it will put the employee in any employer’s good graces.
My thanks to Kate for sharing her knowledge with us and teaching me a new phrase – “Uff da!” Be sure to follow her on Twitter and check out the Zelle Hofmann blog, The Employment Law Navigator. This might not be a regular occurrence at your organization but knowing that there are legal aspects to consider will hopefully put you in a place to get the information needed to make a good decision.
Image courtesy of Sharlyn Lauby1