What are an employee’s obligation regarding an overpayment by their former employer?

UPDATED: Jul 24, 2011

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What are an employee’s obligation regarding an overpayment by their former employer?

I recently left a company voluntarily, gave a 2 weeks notice and now I find out that my management didn’t inform HR that I left the company. Consequently they paid me a full paycheck 3 weeks later. Now HR is calling me requesting that I write them a check for the gross amount of the check not the net amount that I received after they paid taxes, flex spending, insurance. What are my options?

Asked on July 24, 2011 Georgia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

1) You have to return the money--since you were not working there, you are not entitled to it, unfortunately. An error does not give someone a right to money; just as, for example, if the company had underpaid you'd have a right to receive the extra money you're owed, so, too, if you're overpaid, the company now has a right to receive the money back.

2) You do need to return the gross amount, since in one way or another, all that money benefits you (e.g. was a "payment" to you). For example, the taxes withheld were paid on your behalf, lowering slightly what you'll owed for taxes for year. Keep good records, so you can make sure you get the appropriate value out--e.g. that you're credited for the taxes.

3) The one exception to the above might be that any deductions that *don't* benefit you, you might not have to repay. For example: say that you left this job for another, so you did  not have to pay for COBRA or continue the health ins. plan--instead, you were right on the new company's plan. In that case, there is no benefit to you from their taking out the extra week of premium. Since you did not cause the error and also did not derive any benefit from it, the company should probably absorb that loss--though at the end of the day, it may stil make more sense to pay than fight.

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