Can my employer deduct a previous overpayment from my paycheck?

Question:

When I got my paycheck this week, I noticed that $300 had been deducted from my normal wages. My manager told me that this was to correct an overpayment on my last check. I checked my paystub from last period, and it turns out I was overpaid by $300. But, I didn’t know it at the time, and now I’m $300 short for this pay period. Can my employer deduct this from my paycheck without telling me first?

Answer:

Federal wage laws give employers a lot of leeway to make deductions for inadvertent overpayments to employees. Under the Federal Labor Standards Act (FLSA) - the federal law governing wage and hour issues - employers can deduct the full amount of overpayments to employees, even if doing so would bring the employee’s wages below minimum wage for the pay period. What’s more, the employer can do this without getting consent from the employee and without providing notice beforehand.

Understandably, these rules can be harsh for employees who make minimum wage and live paycheck to paycheck. To protect employees from these types of unexpected wage reductions, some states have set stricter guidelines that employers must follow before making deductions.

Some states, such as New York, have a notice requirement. Before an employer can deduct an overpayment, it must notify the employee, in writing. The notice must include the following:

  • the amount of the overpayment
  • the amount of the deduction
  • the date the deduction will occur, and
  • any procedures the employee may use to challenge the deduction.

Other states, such as California, go one step further and require the employer not only to notify the employee, but also to get his or her written authorization before making the deduction.

Another common restriction is the time period during which a deduction can be made. For example, in Washington, an employer can only make a deduction if the error is detected within 90 days of the overpayment. In other states, the deduction is allowed only if it doesn’t make the employee’s wages fall below minimum wage for the pay period.

These rules only apply to inadvertent overpayments caused by mathematical or clerical errors. Different rules apply to deductions for the cost of uniforms, for the value of meals and lodging, or to cover cash shortages or damaged company property. To learn more, read Nolo’s article Paycheck Deductions for Uniforms, Cash Shortages, Tools, and More.

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