Company keeps paying, although employee has departed. Any liabilities?

March 1, 2006 1:09 PM

A friend's old company has continued to direct deposit paychecks after her departure - what are the liabilities?

I have a friend who left a job 3 weeks ago to work for a new company. She gave proper notice and went through the normal exiting procedures. But she was surprised this week when a direct deposit from the old firm (on the regular payment cycle) appeared in her bank account.
The old company is a large, bureacratic corp that may take quite a while to discover this. My question: are there any legal liabilities if she does not notify the past employer? Is she under any legal obligation to do so?

posted by queue_strategy to work & money (18 comments total)

Could it just be her final paycheck or payout of unused vacation time? Maybe their pay periods and actual payment dates are several weeks apart.
posted by scody at 1:14 PM on March 1, 2006

I've seen at least one direct deposit sign-up wherein the employer reserved the right to withdraw funds that were erroneously deposited. So she shouldn't be surprised if that happens.
posted by exogenous at 1:16 PM on March 1, 2006

If it's not her money, of course she has a legal (not to mention ethical) obligation to notify her old employer and work with them to return the money. Did you really need to ask?
posted by mojohand at 1:16 PM on March 1, 2006

As scody suggests, some employers have a lagging payroll -- possibly by up to a month.

And as mojohand suggests, knowingly retaining money she has not earned would expose her to civil -- and possibly criminal -- liability.
posted by pardonyou? at 1:18 PM on March 1, 2006

If it really is past her last payment, the money is not hers. She will have a legal liability to return it. Just because someone makes a mistake doesn't mean you're legally allowed to benefit from it and not repay them after they realize their screwup.
posted by twiggy at 1:20 PM on March 1, 2006

Here's a question, tho. Does she have any rights to interest payments made on those funds while they were in her account? I'd guess not, but I wonder what the law is.
posted by mojohand at 1:22 PM on March 1, 2006

I don't know the legality of this, but I want to second what exogenous said. At my former large employer, they could direct withdraw such mistakes at a later date, if need be (although they generally chose to dock the next paycheck, but that is obviously not an option here), so she should not be spending the money. And in my experience, even the most bureaucratic and large of companies will eventually figure out this kind of error.

As for the ethicality of the situation, well that is plain as day.
posted by teece at 1:22 PM on March 1, 2006

a) she might actually be owed the money. Quite possibly it's vacation time, as above.
b) if she isn't, the firm will figure it out and it will magically disappear from her account, without a trace. No need to tell anyone, it'll happen on its own. She doesn't need to give her permission for the money to be removed, just watch. :) Don't spend the money.
posted by jellicle at 1:23 PM on March 1, 2006

Previously..... (it's related somewhat)

Otherwise, I'd third what scody said about vacation time or delayed pay periods.
posted by schnee at 1:23 PM on March 1, 2006

The sooner she calls them and asks, the better.

If she's entitled to the money, she can stop worrying.

If not, she'll have to pay it back sooner or later, and the less she has to pay back, the less pain she'll feel.
posted by AmbroseChapel at 1:40 PM on March 1, 2006

If they unexpectedly withdraw the money and she's already spent some of it, she'll probably be hit with overdraft charges, which can get quite painful. FYI
posted by blue_beetle at 2:32 PM on March 1, 2006

Does she have any rights to interest payments made on those funds while they were in her account?

The amount of interest is likely to be minor. While the argument might be made that technically she doesn't have a right to this, the reality is that the company won't ask for the interest to be paid to them, so it's hers.

(Why not? Because they'd have to get the bank to tell them how much it was, which the bank may be unwilling to do; if there are tiered interest rates, that affects calculation; in short, way too much work for a few bucks, which then would have to be accounted for as some sort of revenue, which is yet more work ... )

Qualification: if it were a small company - which it's not - and a lot of money were involved (which would mean a long time before the company was told, or noticed), then yes, they might want some sort of interest back.
posted by WestCoaster at 2:50 PM on March 1, 2006

I would just leave the money there and don't touch it, as the company might go "Whoops!" and withdrawl it later. Leave it. Don't spend one penny of it. You'll lose nothing by just letting it sit there.

Then give the old place a call and ask them about it. Does she get pay stubs? There should be a pay stub following in the mail, and that might explain some of it.
posted by drstein at 4:31 PM on March 1, 2006

Let me ask, if it were a cellphone company that kept repeating an automatic draft out of her account after she'd ended the contract, would she feel impelled to contact them and get her money back?

Just because the money belongs to a big faceless company and not a poor widow doesn't make keeping it right. If it doesn't belong to you, return it.

Is she under a legal obligation to notify them? I don't know, but I doubt it. I'm not a lawyer, but I do know she has an ethical obligation. But that aside, there is no amount of time that she can keep that money after which it will be safely hers. The company could internally audit their books five years from now, find the mistake, and go knocking on her door. At that point, she is both legally and ethically obligated to return it. If she's willing to face that possibility, then by all means, spend away.
posted by middleclasstool at 7:17 PM on March 1, 2006

So many people here attacking this woman for daring to keep what isn't rightfully hers.

Paychecks lag. Money deposited on this Friday, March 3, will be for the two-week period ending either Feb 24, or Feb 17.

So let's say I quit three weeks ago, on February 17. And let's say the paycheck I received then was for work done up through Feb 3rd.

This means that, this Friday, March 3, I should expect a deposit for the work I did between the 3rd and the 17th.

Even if the lag is only one week and not two, unusued vacation time or other benefits might make up that difference.

I'd say it's pretty likely that this money is rightfully hers. But you can all jump to conclusions if you like. We'll get you one of those mats for it.
posted by CrayDrygu at 9:19 PM on March 1, 2006

So many people here attacking this woman for daring to keep what isn't rightfully hers.

Unless the moderators have been busy, I have seen no attacks. The money may not be hers, and she would be well advised -- if uncertain -- to treat it as if it is not hers.

But this is simple to clear up, with a call to HR.
posted by dhartung at 12:25 AM on March 2, 2006

All direct deposit agreements include an agreement that the depositing firm can withdraw money at any time, for any reason, if in their judgment a mistake has been made. They'll eventually figure it out and do this. They may withdraw more than you feel they're entitled to do, also. You gave them permission to do this when you gave them permission for DD.

Changing your bank account number (closing the old account, opening an identical new one) can prevent this, or at least prevent it from happening automatically. But you (your friend) will probably have to give the money back eventually.
posted by ikkyu2 at 8:11 AM on March 2, 2006

I don't think there are any attacks here. At least, my comment wasn't intended as such, and I apologize if it came off that way. It was intended really only as a common-sense injection.

The tone of the post indicates that the subject doesn't believe the money is rightfully hers, but wants to keep it anyway and wants to know how likely it is that she can get away with it. While we don't know if the money is rightfully hers or not (and I for one hope it is), I think we do know (without jumping to conclusions) that she doesn't think so, but wants to keep it anyway.

Wanting that of course doesn't make her a horrible person. I think most people would be likewise tempted. But is it out of bounds to address this, to address the ethical issue along with the legal?

queue_strategy, your friend likely won't be sued or anything. Worst thing that will happen is that they'll draft the money back out at the least opportune time for her.
posted by middleclasstool at 1:08 PM on March 2, 2006