SALARY OVERPAYMENTS AND DEDUCTIONS – THE LIMITS OF THE LAW

This month John Wilson, Managing Legal Director at Bradley Allen Love, spoke about recovering overpayments from employees.

John Wilson is Canberra’s leading employment lawyer. He is the Managing Legal Director at Bradley Allen Love and has been a NSW Law Society accredited specialist in Industrial Relations and Employment Law for over a decade. In 2017, John became a member of the NSW Specialist Accreditation Employment and Industrial Law Advisory Committee

How do you recover overpayments?

Some enterprise agreements will allow employers to make deductions from wages to offset overpayments. In absence of any enterprise agreement, an employer should come to an agreement with the employee (in writing) about any future deductions from their wages.

What can you do if the employee does not agree to pay back an overpayment?

This can happen in two ways, (1) the employee can refuse to pay back the money or (2) the employee can withdraw their consent to have deductions made from their wages.

In these circumstances the employer can seek to recover the overpayments by applying to the courts for an order of restitution. This is not a desirable outcome – it is much easier to come to an agreement with your employee in the first instance.

Are there some circumstances where you cannot recover overpayments?

You can only recover an overpayment for up to years. If a person has been overpaid for 10 years you will only be able to seek repayment for the last 6 (equally, an employee can only seek to be reimbursed for underpayments for up to six years).

Generally employers are not able to recover overpayments that arise out of a contract. If the employer accidentally gave the employee a contract with a larger bonus than intended the employer is most likely contractually bound to provide this bonus – even if it was not what they had had in mind.

Q & A Corner

Q: What if an overpayment happened 10 years ago but you only just discovered it today? Do you have 6 years from today to reclaim the overpayment?

A: No, you can only recover overpayments from the last 6 years regardless of whether the parties did or did not know about it.

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