Reclaiming Funds from an Employee

[DanB]

I have an employee whom, since May 2010 has been paid for a 5 day week and during this time they have only worked 4 days per week as is on $130,000.

During the GFC, the company asked if anyone would like to go down to part time hours. This employee agreed. However, there was no formalization of the agreement (no confirmation letter, email from manager etc). SInce May 2010 the employee put in a leave without pay request for every friday for 2 months. Then it appears to have stopped.

I have only now discovered going through the salary report that he is still being paid for full time hours and as such has been overpaid a total of 448.40 hours. My directors have advised they want this money back.

Clearly there was a break down in the process, however, would you notice if you went part time and your pay continued to remain at full time? Further more this is an employee whom sold the car park within his package to another employee - he is not an idiot by anymeans.

My question overall is as a company can we ask for the funds to be paid back?

And if so, can it be a set amount out of his fortnightly payment or deduct a lump sum from his long service leave???

This all took place before I commenced in the role - if anyone can shead somelight on a direction to take it would be most helpful!

Thanks!!

[SuzanneC]

Firstly I recommend that you look at the instruments that cover his employment ie contract/enterprise agreement and modern award.
If this happened here, although our contracts include the employee's authority to deduct overpayments at termination, not during employment, I would still enter negotiations with the employee to get their approval for repayment based on a payment plan.

[Moz]

Wow, that's almost $30k! Let's hope he realised he was being overpaid and put the extra money aside instead of spending it.

Yes you would think that someone would notice that their pay hasn't changed when moving to a 4 day week, but you cannot make that assumption. Not everyone manages their finances well.

You would also think that you as the employer would be entitled to claw the money back and that it would be a formality, but thanks to the FWA this may not be the case.

Just to complicate things further, he will have been taxed on this extra money as well.

Good luck, it would be interesting to hear how you get on.

[DanB]

Agreed and the FW has (I believe) set us back 50 years!

Well we can ask for the money to be paid back or alternatively we can reclaim the money was a debt via a magistrate - whilst the latter is not the preferred option it may be the only way.

[HRMSydney]

In principle you can ask for it back however the way you get it back may depend on what’s in the employment contract. The fact that he hasn’t raised it is a warning sign about trust but similarly his line manager should have been across it. Our contracts have an explicit clause about overpayments and generally we recover in a similar time frame to how the overpayment was made. You can always take civil action but that is time consuming and costly (and hostile). The Fair Work Act has also beefed up protection for employee so check out Div 2 of Part 2-9.

My advice is to approach it amicably and see where that gets you before seeking legal advice on taking more drastic measures – deducting from LSL would not be allowable in my opinion.

PS – the fact that he makes money out of a staff benefit (parking) is also a worry.

[FWI]

When it comes to the recovery of wages, and in particular this matter where such a period has transpired, a company can soon face a BIG problem.

Firstly, there is the simple act of law that looks at 'Custom and Practice', and the knowledge of how the payments were origionally set up. There can be a problem recovering from something that historically has been approved by virtue of entering in the times into a sytem setting the practice, all the way to if the company was aware that the hours reduced, initated the reduction, but did nothing to change the wages as a result, particulartiy if its not in writing, then you could very well be seing good buy to the over payment.

Then if this is not the case, you will then struggle to offset any of his current wages being paid to him (or her) as under the fair work act, section 323, the worker MUST be paid for all work performed, and this is where the action gets tougher on the company.

This is loosly termed 'off setting' or to set off an overpayment against an underpayment if you dont pay wages in accord with section 323, unfortunatly, you will loose here as well. Many cases I recomend would be 'Polliti vs Ecob (1989) 91 ALR 381, Logan v Otis Elivator Co PtyLtd [1999] 94 IR 218, this later one the Court ruled 'If an employer does not designate or appropriate the excess (over payment), or any part of it, to a particular obligatin owed by the employer to the employee, it is not open to the employer to later change that situation by asking the Court to retrospectivly designate between various elements [of an award obligation]...'

Further preventing this from moccuring is the matter Foster v Faulkhead Nominees Pty Ltd [2005] SAIRC where the court provided 'An over payment made for wages due in one period of time, cannot be set-off against monies payable for wages due for a later distinct period'.

You have a tough road ahead, and its not a matter that the new FWAct has put business back 50 years, but that business has an obligation to ensure is processes and practices conform to the law.

Good luck

[DanB]

Thanks to everyone for their opinions and feedback. The matter has been resolved