I was erroneously overpaid by a previous employer and now they want their money back, do I have any recourse?
January 13, 2011 1:45 PM   Subscribe

I was erroneously overpaid by a previous employer and now they want their money back, do I have any recourse?

Before leaving I had accrued 14 days of vacation time and purchased an additional 5. I had taken 19 days. When my manager tallied my time to report it to payroll she did so incorrectly. Based on this and some fuzzy logic on their part I was reimbursed all of my purchased vacation time in my last check. That check also included overtime and since it bumped me into a higher tax bracket the total amount of the check appeared to me to be close enough to what I thought I should be receiving. I did not go over this checkstub with a fine toothed comb, as I received it on NYE, and I am taking full responsibility for that.

I received a letter today that I am to reimburse the employer the full amount overpaid to me, not the taxed amount. They state they are unable to have me reimburse the taxed amount since that check was for 2010 and it is now 2011.

Meanwhile my time has still not been reported correctly and they are basing the amount I owe them on the information that I took 20 days of vacation time. I will be phoning my previous manager as soon as I calm down enough to be civil to have this fixed.

How can they require me to reimburse them the full amount and not the taxed amount? Is it even legal for them to be asking for this money back- It's a stretch, I know- but what's life without hope? This is in New York State, if it matters.
posted by anonymous to Work & Money (33 answers total) 1 user marked this as a favorite
I don't know anything about the legality of this, but tax-wise won't you get the "taxed amount" back when you file your 2010 tax return? You will owe X amount, your employers payed X+Y amount, you will get Y amount back.
posted by muddgirl at 1:51 PM on January 13, 2011

Because when you reimburse them the full amount, you'll pay less money on your taxes for 2010 and you'll both be even. For instance, say you were overpaid $1,000 and you were in the 10% tax bracket so you received $900 in your paycheck. You pay back $1,000, which decreases your taxes for 2010 by $1,000, which decreases your taxes by $100. Net total is $0.

It is very legal for them to be asking for the money back. It was an error. You should never have gotten it.
posted by saeculorum at 1:52 PM on January 13, 2011 [6 favorites]

And by "decreases your taxes for 2010 by $1,000", I really meant "decreases your wages for 2010 by $1,000."
posted by saeculorum at 1:53 PM on January 13, 2011

Make sure when you talk to them that they are adjusting your 2010 wages to reflect this correction.
posted by Zophi at 1:54 PM on January 13, 2011

I think you should hold off calling or writing anyone about this until you have the full picture.

I'm not a lawyer, but it sounds like a sticky problem since so many hours are in dispute. You might not need a lawyer, but you do need all the facts straight, your own precise accounting + any supporting docs, and a clear head before you respond to this in any manner.
posted by jbenben at 1:58 PM on January 13, 2011 [1 favorite]

Does anybody care to explain to me how the employer has any standing at all to request money back? Isn't it their responsibility to make sure they keep their shit in line?
posted by thsmchnekllsfascists at 2:02 PM on January 13, 2011 [2 favorites]

I believe there is some legal ambiguity here and that likely you do owe this money but at the same time, there is little your employer can do to force you to return the money and it might not be worth it to them to escalate to a legal procedure.

However, it also may not be worth it to you to burn your bridges at this organization.
posted by serazin at 2:10 PM on January 13, 2011

Does anybody care to explain to me how the employer has any standing at all to request money back? Isn't it their responsibility to make sure they keep their shit in line?

Not to the extent of being legally obligated to eat the cost of their mistakes. Why would you think that?
posted by fatbird at 2:12 PM on January 13, 2011

Pay the money. It sucks, but now you know- check your stubs.

thsmchnekllsfascists: "Does anybody care to explain to me how the employer has any standing at all to request money back? Isn't it their responsibility to make sure they keep their shit in line?"

Legally, it's your responsibility to verify the amount. Employment is a contract, for which you are paid $X for Y.

Put another way- this is why the guy behind the counter is required to give you your change.

serazin: "there is little your employer can do to force you to return the money"

This is not true. The law is not on your side and pending judgments against you can make your life miserable.

serazin: "it might not be worth it to them to escalate to a legal procedure."

No company worth its salt is going to back down from letting an employee keep an overpayment.
posted by mkultra at 2:17 PM on January 13, 2011 [5 favorites]

If the math works out that you received more than you were supposed to then I don't understand what the problem is. Give it back. If the math works such that they're full of crap, then pursue it. I guess my point is to carefully do the math before even having a discussion about it.
posted by thorny at 2:19 PM on January 13, 2011

If you refund as requested, I'm not sure it's going to be easy to cut your 2010 taxes, because they will have to issue you a W2 for the gross amounts. Your repayment in 2011 might have to be a deduction on your 2011 return, which means you wait a year and your marginal rate might be different. It's not a very common situation, because basically, it's not supposed to happen.

My position would be that since the employer screwed up, it's their responsibility to make it right without requiring you to jump through extra hoops on either your 2010 or 2011 returns. Just dealing with that part of it could cost you money to a tax preparer. So all of that is grounds for them accepting a deal of some kind.

I would propose to them that you will refund them whatever the net difference is between the check you got and the check you should have gotten, adjusted also for the actual increased taxes you will have to pay because of the bracket problem. Basically, that makes you whole, and you're entitled to be made whole, not to have to deal with tax consequences resulting from their mistake.
posted by beagle at 2:20 PM on January 13, 2011 [8 favorites]

They can ask politely or they can ask with a lawyer. Politely, your out $1000, which you initially acknowledged wasn't yours to begin with. With a lawyer, you'll be out way more.
posted by Nanukthedog at 2:22 PM on January 13, 2011

Since it was their mistake, the least they can do is let you pay back the after-tax amount now, and wait until you get your tax return for the rest.
posted by gjc at 2:32 PM on January 13, 2011

You would do well not to talk to anyone at the company. Do not give them any more information that they might already believe they possess. The same can be said in any conflict situation where you're being accused of something, company, police, whatever. Do not give them rope with which to hang YOU.

Beagle's comment about being made whole is the most reasonable. It was their mistake. Companies make mistakes all the time, and there's certainly no reason for YOU to have to be out of pocket even one thin dime due to their screwups. It's THEIR mistake and unless they can propose a way to correct it to your satisfaction then it would be foolish to cooperate. At least not without your own legal counsel. THEY screwed up, not you. They would like YOU to help them fix their mistake. Do not be bullied into thinking otherwise.
posted by wkearney99 at 2:34 PM on January 13, 2011

You are lucky they are even asking. Direct depositing your pay implicitly gives your employer the right to direct withdraw anything they think was paid to you in error. They made a mistake, the money is not yours. Be glad you didn't have direct deposit, or if you did, they are asking nicely instead of just taking what is theirs.
posted by COD at 2:41 PM on January 13, 2011

Companies make mistakes all the time, and there's certainly no reason for YOU to have to be out of pocket even one thin dime due to their screwups.

This is ridiculously wrong advice. Pay the money back.
posted by Stynxno at 2:45 PM on January 13, 2011

OP doesn't state how much money this actually is. If it's more than a nominal amount, you should consider talking to an attorney who practices labor/employment/wage & hour law in your area. That person may know whether there are laws in that area to protect you from the hardship you might incur if you have to pay it back, or if you even have to pay it back at all. If you depend on or want a letter of recommendation from them, I wouldn't even bother with that unless it's a fantastic amount of money.

Alternatively, if you decide to just pay it back, I'd consider doing an accounting for all of your time & vacation so you can state your own position as to what the correct amount should have been. Track the time spent on that. (If the company is dick-ish, consider trying to deduct your wage equivalent for time spent fixing their mistake; sounds like "work" to me.) Then make an offer as to a payment plan for the full amount, or some lesser lump-sum payment if they just want some money back all at once.

I am not qualified to give a legal opinion in your jurisdiction, but from a practical standpoint if you're dealing with someone sensitive to this issue you shouldn't have to defend making an offer that mitigates the financial hardship you might suffer because of their mistake. You might also negotiate for some other consideration, like an actual letter of recommendation or reference if you parted on reasonable terms.
posted by Hylas at 2:47 PM on January 13, 2011

Since it was their mistake, the least they can do is let you pay back the after-tax amount now, and wait until you get your tax return for the rest.

No. Your employer has a contractual relationship with you. You have a statutory relationship with the Government. In the former, you owe your employer $x. In the latter, the Government owes you $y. You can't conflate the two.
posted by doublehappy at 2:52 PM on January 13, 2011

Your recourse for getting back the difference (taxed/untaxed) is probably a tax refund from the government.
posted by J. Wilson at 2:54 PM on January 13, 2011

This opinion letter from the NY dept of labor goes into some detail about the recourse that companies have when requesting overpayments back. Since you are no longer employed there, a lot of the information doesn't apply to you- but the piece that does is that their recourse if you don't pay it back is to file a civil complaint.

If the numbers aren't correct, you will want to have your detailed records, and you'll definitely want to ask for a recalculation.
posted by Zophi at 2:59 PM on January 13, 2011

Ugh. Something very similar happened to me and I moved, and by the time the ex-employer's letters caught up with me about two months later, I was about a week away from being sent to collections. They were up to nasty certified mail. (I left a forwarding address with them, too, they were just very incompetent.) In my case, it was a few thousand dollars, but done over the course of several months in such a way that wasn't obvious and I'd already spent it. It sucked. I think I had to pay the pre-tax amount, too, and I was mightily annoyed. I am not in NY, so you could have better luck. I doubt it. Even though it's their mistake, it's still their money. Sorry.

I'd be very careful that your W-2 is right before you file your taxes, too.
posted by wending my way at 3:08 PM on January 13, 2011

Why is it that you want to only pay the taxed amount back and not the full amount back?

Once you file your taxes you'll come out even, unless there's something I'm missing from your story. In other words, you're right that you shouldn't have to come out behind (and you won't, in the end)-- and they're right that it's your job to get the tax back from the government, not theirs (in fact I doubt they legally could even if they wanted to.) If you were paid $1000 extra and you only received $650 of that in cash because $350 was paid in taxes, then your employer will ask for $1000 back because they paid $1000 too much-- the $650 extra they gave you and the $350 they gave the government, which the government's going to give to you as soon as you file your taxes with a reported 2010 income that's $1000 less than they thought. So when you pay your employer back you will be -$350 (or -$X) based on the taxes you paid, but once you get the $350/$X back you'll be even.

If this is a question of financial hardship for you between the time when you pay them back the full amount and when you get your tax refund, then you may be able to close that gap by filing your taxes as early as possible, and stalling or requesting an extension of when you pay them back until after you've gotten your refund. It's possible there are actually some legal grounds out there to force them to accomodate you like this, I don't know.

(And of course the total amount you owe them should be based on the correct information about your vacation time, so if it's still incorrect, you shouldn't need to pay them anything until that's straightened out.)
posted by EmilyClimbs at 3:10 PM on January 13, 2011

Politely reply to them that you will make sure the error is resolved, but not before any questions about your pay/reported time are resolved. The tax discrepancy is an inconvenience. If it's a really big inconvenience, tell them so, and ask them to give you 1/2 day of vaca time. But it's absolutely legit.
posted by theora55 at 3:54 PM on January 13, 2011 [2 favorites]

From the OP:
Thanks for the input so far everyone.

My main concern is the tax aspect. I knew only some crazy loophole would allow me to keep the whole lot. Considering that this is an entire week's salary the taxed amount is fairly significant.

beagle- what you outlined is what I am afraid of.

Unfortunately I did already contact the payroll dept. prior to posting here but, since everything is still based on the 20 days I did not resolve any matter with them.
posted by jessamyn at 4:34 PM on January 13, 2011

Pay the money back and insist that they issue you a correct W-2 of your real wages so that you can get the taxes back as an IRS refund when you file.

If you pay back the money and they give you an incorrect W-2, you can call the IRS and file a W-2 complaint as described here. Your employer then has 10 days to issue the correction. Your employer can't give you back the taxes directly because they have already been given to the IRS and credited to your tax account in your name. Only you can get those taxes back from the IRS, using the corrected W-2.

It's a pain, but no one guaranteed that life would be pain free. These things happen. In the end, both of you end up with the correct amount of money. If you do nothing, they can issue a collections complaint against you and they will win. You can try to take them to small claims to get back damages for the few hours spent dealing with this, but you will still owe the wages. It probably isn't worth wasting the time on.
posted by JackFlash at 5:31 PM on January 13, 2011 [1 favorite]

Let me take things in order.

First, you owe them the money. If the checker at you store mistakenly failed to charge you for an item it does not suddenly become yours. Any mistake is just that. A mistake.

Second, as has been pointed out, you owe all of the money back. If they were interested in being helpful, they could agree to take only the net amount back now and wait for you to get your refund before getting the rest back. It doesn't hurt to ask, but they are not obligated to agree.

Third, it is foolish not to talk to them. If the situation escalates, you will end up either in collections or court. Either route will be expensive and time-consuming. Talk to them and listen. Take notes.

Fourth, make sure that, once you and they have agreed as to how best to handle this that you get something simple in writing that says once everybody does what they are supposed to do the matter is closed. DO NOT SIGN A GENERAL RELEASE SAYING THEY ARE FREE OF ANY AND ALL LIABILITY ARISING OUT OF YOUR EMPLOYMENT. If you do not understand the previous sentence, ask a lawyer.

Last, make sure they report the correct, adjusted gross wages on your W-2 form and that the inflated amount of tax that was withheld is correctly shown as well. This is how you will get the refund (or reduced tax liability) that you deserve.

Stay calm and be business-like. Everybody makes mistakes and this is your chance to be a gracious winner. That will help if you end up wanting a recommendation for a future employer.
posted by Old Geezer at 5:35 PM on January 13, 2011 [3 favorites]

I like Hylas's approach and would also note that under some scenarios, you won't file until April or even later (I don't file until April, because I am usually saving up to fully hit my IRA limits for the year), so you wouldn't get your return back for awhile. Even conservatively invested, there's interest being lost on your side. (How much negotiation to do on this depends on what you value your own time at.)
posted by salvia at 6:33 PM on January 13, 2011

Is it just me, or is this a bit weird?

> They state they are unable to have me reimburse the taxed amount since that check was for 2010 and it is now 2011.

It's financial years which matter for tax purposes, not calendar years. So they can sort it out any time until September, if this is in the US.
posted by AmbroseChapel at 8:23 PM on January 13, 2011

Old Geezer is correct. I've been the employee responsible for correcting any pay mistakes before, and as much as people feel that they're entitled to keep the results of any errors, it isn't true. You were contracted to work a certain amount and get paid a certain amount in return. The tax situation will even itself out eventually.

Your best bet is to write down all the hours/days you worked and had as leave, plus the dates money was received, so you can refer to these facts when you call them up.

Then you call and ensure that their records now accurately reflect the situation, and only when this has been resolved, get them to tell you what the exact (corrected) amount is that must be returned.

If the amount is going to cause you money stress because you've already spent it, it may be worth asking for a repayment schedule rather than doing it all at once.
posted by harriet vane at 1:15 AM on January 14, 2011

I am guessing that the amount in question is small. If this is a mom-and-pop business, perhaps small is worth pursuing. Since you 'bought' vacation time, it's probably not a mom-and-pop outfit.

They can rattle sabers. They can threaten. They can give you unflattering references. They can sue for collection. Of these (and other possible) cases, suing you involves effort, time, and money. For a small amount, it's not worth much effort, time or money. They will likely prevail, and in the event, the whole thing will cause you effort, time and money.

In reality, though... they aren't going to sue for tiny amounts. No one sane does.

The responsible and IMO ethical thing to do is to return the money. You didn't go to work there to make enemies, did you? Why complicate life for a few dollars? You've left. Leave it all behind with good feelings and no regrets. Seems simpler than playing gotcha with a tiny financial error. Someday you'll be the guy on the bad end of a financial decision. How would you want your debtor to behave?

Don't sweat the small stuff.
posted by FauxScot at 4:50 AM on January 14, 2011

It seems to me, in a very naive way, that if your 2010 W-2 does not correctly reflect your 2010 wages, then your employer is reporting incorrect information to the IRS. Insisting that your wages be correctly reported to the IRS strikes me as among the most reasonable of reasonable requests.
posted by endless_forms at 8:13 AM on January 14, 2011

This is just a technical point, but when I went through something similar (paid twice for the same work at two different rates) and ended up cutting the employer a check for the amount I was overpaid, I stated - both on the check and in an enclosed letter - that their deposit of the check constituted their agreement that the matter was closed, permanently.
posted by werkzeuger at 11:46 AM on January 14, 2011

werkzeuger: "I stated - both on the check and in an enclosed letter - that their deposit of the check constituted their agreement that the matter was closed, permanently."

That may have soothed your ego, but it carries no weight. It's their money- you can't attach stipulations to returning it.
posted by mkultra at 12:09 PM on January 14, 2011 [1 favorite]

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