Query about salary overpayment

[Dispirited]

My daughter's former employer (county council) overpaid her by about £1,500 over a period of about 5 months. She didn't even realise she was being overpaid as at that time she had 2 jobs in the care sector and worked incredibly long hours, often 7 days a week, 15 hours a day. Hence her salary was always high. She adored her work, for her it was a vocation. She lived, ate and breathed her job, the money was secondary. She never checked her time sheet or wage slip. (Silly girl!) Anyway, it took the council EIGHT months to discover the error, then they wrote and asked for the full remittance saying 'I apologise for any inconvenience caused...'

Sadly I didn't find out until recently and now I'm helping her with this and her other problems, thanks to the existance of this most excellent site. As far as I know they didn't pass it on to a DCA, but I think she now has a CCJ against her (we're just waiting for her credit report.)

Any advice on what to do about this will be gratefully received.

[patdavies]

They are entitled to have the overpayment back.

However, they must reach agreement as to how it is to be repaid; they cannot simply demand a lump sum.

You also need to check the tax position. If she has received an overpayment, she has no doubt paid tax and NI on the money.

[Dispirited]

Hi pat, thanks for reply. She's not disputing the amount, just the repayment method. Will also check about tax & NI.

[jet_black]

I work for my Local Council payroll section, when informing your daughter of the overpayment they should give her a point of contact to arrange salary deductions that would be affordable to her, if she is no longer employed by them it is usually deducted from the final salary and any outstanding amount passed onto the debtors department to arrange payment.
I dealt with a similar case where an employee had been put onto the wrong rate of pay, there was no way they could have been able to detect this, Unison stepped in and the debt was written off. If your daughter is not a union member, it may be wise for her to join and get some advice as overpayments are not always clear cut and there MAY be the possibility of getting the amount reduced depending on the circumstances. Either way they will accept payment by installments from her salary, even if it takes years to repay.

[shywazz]

Hi chances are the friend won't have a CCJ as the council would have had to take your friend to court to obtain this, hence she/he would have got paperwork from the courts to put there side forward or even attend.
It might be useful if their wrote to the former employee and offered a small repayment plan or even let there union deal with the matter, as jet black recommended. Did your friend keep the wage slips from the past employers, this will show the Tax and Ni paid during that period, which the past employers would have to reclaim from the relevant depts. your friend only repays the net not the gross balance. which could also be renegotiated with there last employers. If a payment plan is offered and accepted then the company can-not seek a CCJ or involve a DCA unless this is broken, make sure there get the acceptance in writing and keep all payment copies for any furture referance.

[Dispirited]

Hi, thanks Jet, thanks shywazz for your replies. Much appreciated.

[cal37]

It is wholly illegal for your employer to make any deduction from your wages which is not either required by law or has been agreed by you.


So, income tax deductions and national insurance contributions can (and indeed must) be deducted from your wages before you are paid. These are statutory deductions. Deductions ordered by a court, such as maintenance payments or payments for a fine are also legitimate.
Where employers pay a hefty sum of money for training, many of them will require that the employee pay all or part of this sum back if they leave within a certain period of time. Some of these agreements will include a clause allowing the employer to deduct the sum from the final payment made to the employee.
Relatively few employers will include a clause within the employment contract that gives them permission to deduct overpayments but if such a clause is included within the contract then the employer is entitled to take back any overpayment by deducting it from your wages. (Though it could be argued that if the overpayment was their mistake and then the deduction left you short, the employer might be liable for ‘damages’ such as bank charges incurred, etc).


So, in most cases, employers are not allowed to take money directly from your wages. But can they demand that you give the money back?
Well, this is where common sense and the law part company. Many people would think that the money belongs to the employer and the employee must return it but it’s just not that simple.
First it depends why the overpayment was made – was the overpayment made as a result of a ‘mistake in law’ or a ‘mistake in fact’?
A mistake in law is where the employer incorrectly interprets statutory regulations or legal instruments – no clearer? – well, suppose an employer had to decide whether a particular regulation applied to you, and suppose this regulation regarded whether or not a particular allowance applied to you – so the employer decides that the allowance does apply to you, makes the relevant payment to you, and then later finds out that they were wrong and you shouldn’t have had the money – that’s a mistake in law.
And a mistake in fact? You submit an overtime sheet that says you’ve done 2 hours overtime and someone enters the figure as 20. Simple errors of one kind or another. A mistake in fact.


If the overpayment is due to a mistake of law then tough – the employer can’t demand their money back. They can ask, and you might decide it is wise to give it back to keep your employer sweet, but they cannot demand you pay it, and if they took you to court they would lose (so long as your solicitor is up on this aspect of the law).
But, if it is a mistake in fact, then the employer may be entitled to demand the money back.
May? Why only ‘may’?


Ah, well, here’s another thing. Even if the overpayment was due to a mistake in fact the employer cannot recover the money if the following three conditions are met - if the employer has lead the employee to believe the money was theirs (one suspects that the provision of a wage slip including the amount would suffice); if the mistake was primarily not the fault of the employee (so you can’t mislead the employer); and if the employee has subsequently spent the money or used the money to change their lifestyle in some way (e.g. bought a car on HP).


It is not completely clear cut, however, and, if the sum is large enough and the employer is determined, they may take the matter to court and look for an order demanding that the money is returned. Generally the courts will seek to do what is just in the circumstances. In order to do this the courts will take into consideration the amount of the overpayment, the level of negligence and whether or not the recipient knew or should have known about the overpayment.
These then are the legalities surrounding the matter. In general it is very difficult for an employer to recover an overpayment but there are limits. If an individual who was normally paid £500 per month by an employer – this month, however, they had been paid £50,000 and wanted to know if they could keep it!! It is hard to imagine any court accepting this individual had not realised that they had been overpaid.............




Need something to impress your employer? Or even prompt your solicitor? Here’s the case law -
"Mistake of law" : the Court of Appeal in Holt v Markham 1923 1 KB 504.
"Mistake of fact" : County Council of Avon v Howlett (1983 IRLR 171).

[BlueSmartie]

Originally Posted by cal37

If the overpayment is due to a mistake of law then tough – the employer can’t demand their money back. They can ask, and you might decide it is wise to give it back to keep your employer sweet, but they cannot demand you pay it, and if they took you to court they would lose (so long as your solicitor is up on this aspect of the law).

Hi, If you are saying that there is no right of action generally where the mistake is one of law then I'm afraid you're wrong. The case of Kleinwort Benson v Lincoln City Council overturned this bar to recovery in 1998:

House of Lords - Kleinwort Benson LTD. v. Lincoln City Council <br>Kleinwort Benson LTD. v. Mayor etc. of the London Borough of Southwark and Others <br>Kleinwort Benson LTD. v. Birmingham City Council<br>Kleinwort Benson LTD. v. Mayor etc. of the Lo

There are however, a range of defences, including the one you mention (change of position) where the defendant has spent the money genuinely believing it to be his and in circumstances where it would be unfair to demand repayment. This defence is subject to various qualifications and does not apply in all instances where the money has been spent. The judgment gives some information on this.

[weegirl]

Did your daughter buy anything on HP whilst in their employment? This is a very important point, as she can argue that to repay this money would leave her in a worse financial position.

[navyblue]

a similar thing has just happenned to me since I started a new Job a few months ago - they have been paying me a full-time wage; even though I only work part-time & signed the contract for part-time hrs. I reported this error to my manager as soon as I realised ie after the 2nd month/wage (as I started mid month - I did not notice the overpayment in the first month/wage). However 3 months later I am still being over paid (though I have been informing my manager, HR & payroll each month!) I think someone in HR have finally taken responsibility; and I am expecting a 'deduction agreement letter any day now. However, the 'over-payments' have gone staight into my overdraft - does that count? do I still have to pay it back??

[elche]

Originally Posted by navyblue

However, the 'over-payments' have gone staight into my overdraft - does that count? do I still have to pay it back??

The following helpfully posted by Sidewinder on another overpayment thread:

Employment Rights Act 1996

S 13 Right not to suffer unauthorised deductions
(1) An employer shall not make a deduction from wages of a worker employed by him unless—
(a) the deduction is required or authorised to be made by virtue of a statutory provision or a relevant provision of the worker’s contract, or
(b) the worker has previously signified in writing his agreement or consent to the making of the deduction.

S 14 Excepted deductions
(1) Section 13 does not apply to a deduction from a worker’s wages made by his employer where the purpose of the deduction is the reimbursement of the employer in respect of—
(a) an overpayment of wages, or
(b) an overpayment in respect of expenses incurred by the worker in carrying out his employment,
made (for any reason) by the employer to the worker.

You don't have to be legally trained to interpret the meaning of the words in red. Baring the exceptions for retail workers or workers that handle cash an employer can (subject to the defence of estoppel) recoup overpaid wages from your salary in amounts and rates that they see fit.

Obvioulsy good practice would be to negotiate a repayment plan with the employee and you should try and negotaite this with your employer.

Hope this helps.

[JonCris]

& if your either no longer in their employ or about to leave they CAN insist on payment in full although it's doubtful that if the took you to court they would achieve that end...........best for both parties to agree to pay it back over time & at an affordable rate