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By Susan R. Breslauer, SPHR-CA

 It happens…an employee goes on an unpaid personal leave and there is a payroll glitch.  When the employee returns, the Human Resources Manager (you) realizes that the employee continued to receive paychecks during his/her month of leave.  The employee didn’t bring it to your attention.  Now you are left with an overpayment of wages and need to recoup it.  What are your options?

Beware.  The California Labor Code is very clear that there are restrictions on deductions from wages during employment and even tighter restrictions on deductions from final wages upon termination.

You can recoup the overpayment, but you must be careful about how it is done and how you document it.  You need a voluntary, written authorization from the employee before making any paycheck deductions for the overpayment.  And, if the employee leaves the company and terminates before repaying the full amount owed, you definitely cannot make deductions from his/her final paycheck to recoup the overpayment.

Remember, this must be a voluntary arrangement.  If the employee does not agree to payroll deductions for the overpayment, you are not permitted to take deductions. 

Another approach is for the employer to give the employee an option to reimburse the company via personal checks, rather than through payroll deductions.   This would be the best way to handle it, as it would not touch the employee’s paychecks.   You would still want a written authorization with the specific reimbursement arrangement.  When possible, we recommend this option since it is clean, it does not affect wages or paychecks, and it minimizes your risk of potential wage & hour violations.

Whether you are dealing with pay deductions during employment or deductions from final paychecks, think before you deduct.  There are restrictions on all types of deductions that can be made from paychecks.  Upon termination, in most cases you are not permitted to deduct anything from a final paycheck beyond regular taxes or benefit deductions.

Additional information on pay deductions can be found at: 

https://www.dir.ca.gov/dlse/FAQ_Deductions.htm

If you have questions, please contact a Silvers HR Consultant at (916) 791-8506.

Copyright 2011 Silvers HR, LLC