I have been writing a lot of articles recently on labor and employment-related questions. This is because I get many questions on these subjects.
It is worth repeating: California law is very strict when it comes to employee protection. A good example of this mantra is the fact that an employer is not allowed to deduct an unintentional wage overpayment on a subsequent paycheck.
Letâ€™s use an example: Employer overpays Employee $250 in a pay period. Employer discovers the error and makes a reasonable assumption: since Employee was overpaid, it is acceptable to deduct the overpayment from Employee's next pay check. This is illegal!
The $250 overpayment is considered a debt to the Employer. California law prohibits an employer from offsetting wages for debts an employee may owe the employer. A debt could include a promissory note, or in this example, a wage overpayment.
When considering this very issue, California Courts have stated that the garnishment process is the sole remedy available for the recovery of wage overpayments. Essentially, if the employee will not voluntarily return the wage overpayment, a employerâ€™s sole remedy is to sue the employee and then garnish the employeeâ€™s wages.
If you think this sounds cumbersome and unnecessary, you are right. However, California law is clear in this area. Labor Code section 221 states in full: â€œIt shall be unlawful for any employer to collect or receive from an employee any part of wages theretofore paid by said employer to said employee.â€
Employers need to be careful about this. An employer can only deduct lawful withholdings from an employeeâ€™s paycheck. Involuntary debt payments to an employer via wage deduction are illegal and should be avoided.
Not all is lost. An employer and employee can enter into a voluntary written agreement whereby the employer can deduct a certain amount from the employeeâ€™s wages for the repayment of a debt. The agreement must be voluntary and in writing.
The Labor Commissioner also states that after the voluntary deduction has been applied, the employee must still be paid no less than the minimum wage for the hours worked in that pay period.
It is best to avoid this problem altogether by carefully processing payroll so as to avoid any overpayments. Should a wage overpayment occur and the employee will not agree to repay the overpayment voluntarily, an employer in California must literally sue the employee to recover the overpaid wages.
If you are an employer and need legal advice regarding recovering an overpayment of wages, please contact my office to schedule a consultation. I can be reached at (916) 333-2222.