I own a small business and loaned an employee $800 but they are now quitting, can I take her last paycheck as partial payment?

UPDATED: Sep 29, 2022

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I own a small business and loaned an employee $800 but they are now quitting, can I take her last paycheck as partial payment?

We drafted an agreement for the loan and set up a payment plan. Unfortunately we never got around to signing the agreement and she till date has not made any payments. A few months passed and she sent me a note few days ago she was quitting the job. She is due to receive a paycheck. How can I ensure I get my $800 back I loaned her?

Asked on August 19, 2015 under Employment Labor Law, District of Columbia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

You would have to sue her for the money. Even if there was no signed written agreement, an oral or verbal loan agreement is enforceable, so if she does not repay when she was supposed to, you could sue her for the money. The unsigned loan agreement can help show or demonstrate the terms of the loan. Note if the money was loaned by the business, not you personally, and the business was a LLC or corporation, you can't represent the company in court--LLCs or corporations must be represented by attorneys.
You may not withhold anything from her paychecks, unless she agrees get the agreemement in writing, even if only in an email or text message to let you do so. Otherwise, if you withhold any money without her consent, she will be able to sue you for the money.

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