In two recent employment decisions, employees were overpaid sums of money by their employer which subsequently went about recovering the overpaid amount.

In the first case an employee was overpaid a little over $1,000.  In the second case an employee was overpaid $70,000 (of which the employer sought to recover $43,000).

The first employee was found liable to repay the employer along with interest, penalties, and costs, taking the total amount owing over $2,750.  The second employee was not required to pay back the overpayment and the employer had to pay him costs.  We discuss the difference between the two cases below.

$1,000 overpayment ($2,750 debt)

In this case the employee had signed a Record of Settlement with her employer which acknowledged a debt of $1,052.22.  The Record of Settlement recorded a method for repayment over a period of 10 months.  The employee made one late payment and then defaulted.

The employer made an application to the Employment Relations Authority which summonsed the employee to attend an investigation meeting.  When there was no response, the employee was personally served with a notice requiring her attendance at the meeting.  Despite this, she failed to attend.

The Authority, after conducting the investigation without the employee and because the Record of Agreement was certified by a mediator under the Employment Relations Act, made orders requiring the employee to:

  • Repay the overdue amounts within six days of the meeting;
  • Pay 5% interest on all amounts overdue from the date at which they became due;
  • Repay the outstanding amounts in accordance with the original Record of Settlement;
  • Pay 5% interest on any subsequently overdue amounts;
  • Pay a penalty of $1,000;
  • Pay costs of the employer of $671.56.

$70,000 overpayment

In this case the employer discovered that the employee had been overpaid and withheld the employee’s final pay to off-set the debt.  The claim went through the Employment Relations Authority, then the Employment Court, before ending up in the Court of Appeal.

The Court of Appeal ultimately upheld the decision that the employee had acted in good faith and reasonably believed that he was entitled to the payments he had received.

The key was that the employee had regularly approached his manager, HR, and payroll administration, as he believed that he was being overpaid.  Some investigation was undertaken, but for a year and a half he was led to believe that he was not being overpaid.

The difference

There is a very simple distinction between these two cases.  If the second employer had undertaken a thorough investigation when the employee had continually raised concerns that he was overpaid (which any astute employer would likely do), then the overpayment would have been noted at that stage.

In this case the employer could have sought to enter a repayment agreement with the employee as in the first case.  What eventuated, however, was a situation where the employee was led to reasonably believe that he was entitled to the payments that he was receiving, thus leaving limited avenues for remedy to the employer.

If you have overpaid someone, whether it be an employment matter or otherwise, it is important that the situation is remedied quickly so that they don’t believe they are entitled to the money.

We provide advice on all employment and debt collection matters – feel free to call us on (04) 473 6850.