According to the Fair Labor Standards Act, an employer can recover overpaid wages from employees' future paychecks. The Department of Labor recognizes an overpayment as a loan or wage advance to an employee. Nothing in the FLSA prohibits an employer from recovering overpaid wages from an employees' paycheck, however state law on wage overpayment recovery varies from state to state. Some states allow an employer to recover overpayments without notifying the employee, however good business practice dictates that you notify the employee.
Instructions
1. Ensure that the overpayments are discovered promptly. The earlier the overpayments are discovered, the easier it is to recover them. If the overpayment is due to an error on your part as the employer, you should notify the employee before making any deductions from his wages. If the employee feels that he was entitled to the money and disputes the intended deductions, you can seek legal action or mediation to recover the overpayment.
2. A written notice should include terms and conditions under which the recovery will be made. It is important to involve the employee in designing and implementing a recovery plan for the overpaid wages.
3. Provide all the necessary documentation concerning the overpayment to the affected employee since it is your duty as an employer to prove that the employee was overpaid. Once you have settle on a repayment plan, ensure that you clearly identify and record all deductions concerning the overpayment in the employee's payroll records. This acts as a reference point for any disputes that may arise in the future.
4. Check the provisions of any collective bargaining agreements concerning overpaid wages for those employees covered by one. In such situations, provide a written notice to the employee containing the amount overpaid; date when the overpayment was done and the rights of the employee under the collective bargaining agreement. Any disagreement relating to the overpayment can only be resolved using the grievance process identified in the collective bargaining agreement.
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