Recovering an overpayment

26 June 2019

David Browne2An overpayment of wages or an overpayment reimbursing expenses to an employee may accidently occur from time to time especially in a busy workplace.  Sometimes the overpayment is the result of lax processes relating to receipts and paperwork used to identify and pay back things which the employee has paid for themselves out of their own pocket.  Other times it is the result of human error in handling the more and more sophisticated payroll software programs used by employers these days.

Whatever the cause an employer should be able to rely on the notion of good faith that the employee will return the money without an unreasonable delay.  If the repayment isn’t voluntarily made the employer can propose to the employee that a deduction will be made to their wages.  The reasonable employee would normally be expected to confirm the proposed deduction, and everyone moves forward.  On the other hand an unreasonable employee may take the unhelpful step of withdrawing their agreement to deduct.

However, things can be made even more complicated when the employee is on their way out or the overpayment isn’t realised until after the employee has left employment and all wages and leave owing have already been paid.

If the overpayment is small the employer may decide to not follow up on it as the effort involved to retrieve the money may not be worth the time and expense to get it back.  When the overpayment is significant the employer will understandably want to pursue it especially if a few kind letters to the former employee bear no results.

This is essentially what happened in a recent Employment Relations Authority matter of Allied Asphalt v Boyle out of Auckland decided in March.  The employee was overpaid $8,000.00 and the employer sought to have the money returned.

The background to the problem is interesting and involved a signed record of settlement between the employer and the employee dated 17 August 2018.  The specified compensation was paid to the departing employee and then a second payment was made in error.  The former employee was contacted by payroll asking for its return.  From Member Larmer’s decision it is clear the advocate who had supported the employee through the employment relations problem even tried to get the money back to no avail.  By September 2018 the employee requested bank details to make re-payment, but no such payment was made.

The employer filed an application with the ERA seeking return of the overpayment and parties were directed to mediation in an effort to find a solution.  Unfortunately, the former employee did not attend mediation.  With the aid of a third party the relevant Authority documents were then served on the ex-staff member.  These included the employer’s statement of problem and a form for the employee to fill out stating his version of events.  Having failed to engage with the mediation service the employee also failed to engage with the ERA.

The employee was a no show at the ERA Investigation meeting and Member Larmer was satisfied the money was owing and the employer had made every reasonable attempt to have the overpayment returned.  The employee was ordered to pay the $8,000.00, plus $2,800 towards the employer’s legal costs of $4,000.00 and the $71.56 filing fee.  This was to be done within 28 days.

If you have a difficult recovery problem, then we encourage you to seek advice of the legal team.  As this matter demonstrates recovering an overpayment may not always be easy.  The above case took seven months to sort and the employer was not awarded their full legal fees.  Perhaps the takeaway being that if the sum is significant the time, effort and expense of recovering the overpayment could make good business sense.


David Browne | Senior Solicitor


Legal Team


Diana Hudson | Managing Solicitor | 03 456 1804 | 021 816 469 |

David Browne | Senior Solicitor | 03 456 1812 | 021 225 6938 |

Adam Siwerski | Solicitor | 03 456 1809 | 021328809 |

Stu Adamson | Solicitor | 021 197 4603 |

Roger Gudsell | Advocate | 03 455 5165 |

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