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View Full Version : Overpayment of Wages (from previous employer) - Houston, Texas


texas_dude
02-27-2009, 09:27 PM
Hi all,

My previous employer continued to pay me after I voluntarily terminated my employment. They said their payroll department "messed up" and didn't process my termination paperwork. They hired a collection agency.

I've requested (still waiting) that they send me details regarding the amount supposedly paid to me, paycheck stubs, and my employment contract.

Can they come after me for that money if I don't work for them anymore and there is no such signed agreement that I will repay overpayment of wages after termination of my employment?

P.S.
I'm considering paying my previous employer directly if they can show me detailed documents regarding this issue, but I want to know where I stand in this situation LEGALLY.

Thanks in advance.

Betty3
02-28-2009, 12:33 AM
You should not have accepted any money not due you after termination of employment. You should have notified the co. of this error & returned the overpayment.

Yes, they can sue you for this overpayment. You can't keep money not due you. You might want to pay back the co. before they do sue.

Pattymd
02-28-2009, 05:41 AM
Why is the amount in question?

Did any of this overpayment occur in 2008? That would complicate matters somewhat.

cbg
02-28-2009, 05:58 AM
LEGALLY, you are entitled to see how the amount they claim was arrived at but LEGALLY you have no legal justification whatsoever to refuse to pay.

texas_dude
02-28-2009, 08:15 AM
Betty3,
Thank you for the moral support and a lesson on right and wrong. But, I'm not here for that. I don't track my banking account (direct deposit) close enough to know EXACTLY how much they overpaid me or to know when to "not accept" a direct deposit, if there is such a way deny a direct deposit. I was expecting "some" extra pay due to unused Paid Time Off, so I didn't notice that they overpaid me until close retro-investigation of my bank account. P.S. like I said, if they show detailed proof, I will probably pay them back.

texas_dude
02-28-2009, 08:16 AM
Pattymd,

The overpayment is in question because they claim 80 hours of overpay, but upon conclusion to MY investigation it appears to be closer to 65 hours. Also, even if it were 80 hours, then they must have given me a pay raise by about 30% to add up to the amount they claim.

Plus, I was due 40 hours of unused Paid Time Off, so I would then expect the amount to be very much less.

Yes, the amount was all paid to me in 2008, so I've already paid taxes on that income. This is becoming to be a huge inconvenience to me.

texas_dude
02-28-2009, 08:23 AM
Cbg,
>> LEGALLY, you are entitled to see how the amount they claim was arrived
When the Collection Agency contacted me, I asked them for verification of debt, some kind of statement or bill showing the details of my debt. They were unable to produce any such documentation and said they would inform my previous employer to pursue me "legally", whatever that means. I then contacted my previous employer and they said that they would "have payroll put something together" for me. So, I'm currently (as of 2/26/09) waiting for those documents.

>>LEGALLY you have no legal justification whatsoever to refuse to pay
Do you think I should just pay them whatever they say I owe them? Should I just go ahead and pay them in one lump sum?

cbg
02-28-2009, 10:57 AM
Given that it was paid in a previous tax year, I think it's a bit more complicated than that. But you are ultimately going to have to pay them whatever was overpaid. They have all the legalities on their side; you have none on yours. If they sue you, they will win.

If I were in your shoes, I would contact the employer directly. I would not be too demanding since failure to monitor your direct deposit is not a defense. If the amount sounded anywhere justifiable, I would pay it without demanding back up. (If the amount sounded completely off the wall, I would ask politely for verification.) I would verify with my tax accountant how to manage the amended return.

But "probably going to pay them" is not a good legal position. "I AM GOING to pay them as soon as we agree on an amount" is a defensible position. To even suggest that you might not pay is not a good place to be in.

Pattymd
02-28-2009, 12:46 PM
The collection agent is not required by law to provide the details (they don't normally have the details), but I don't know why the employer wouldn't. You need to ask the company directly.

BTW, here are the rules for federal taxes regarding overpayments repaid in a subsequent year.


Federal income tax withheld. If the employee repays the advance or overpayment in a later year, the amount of the repayment cannot be excluded from the employee’s income for that year or any year. The employee may be able to take a deduction from income or a tax credit on his or her personal tax return for the repayment, subject to certain restrictions. While the employee’s Form W-2 for the year of the repayment would be unaffected by the repayment, the employer should give the employee a separate receipt showing the repayment.

Social security and Medicare taxes. If the employee repays the advance or overpayment after the employer has filed its Form 941 for the quarter during which the overpayment was made (whether during the
same or a later year), the employer must refund any overwithheld social security and Medicare taxes to the employee. The employer must keep a receipt noting the date and amount of the employee’s repayment, as well
as written evidence of the refund paid to the employee. A written statement should also be obtained from the employee to the effect that the employee will not seek a refund of the social security and Medicare taxes directly from the IRS. If the repayment is made in a year after the advance or overpayment was made, the repayment will not reduce the employee’s social security or Medicare wages for the year of repayment. If the repayment results in an overpayment of social security or Medicare taxes for the earlier year (i.e., the employee’s wages for the earlier year did not reach the social security wage base even after considering the repayment), the employee must be issued a Form W-2c, Corrected Wage and Tax Statement, for that year.

texas_dude
02-28-2009, 04:49 PM
CBG,
Thanks for your help. I'm hearing from you that I am ultimately at the mercy of my previous employer and that I have to pay them whatever they say I owe, and there is nothing I can do about it. Consider that the amount they say I owe is provably incorrect, thus I have a little bit of "legality" on my side.

Pattymd,
Thank you as well. However, at the time of the incident I was no longer their "employee" and they were no longer my "employer", so I don't how usefull those federal taxes regarding overpayments are.

cbg
02-28-2009, 05:15 PM
What I am saying is that if you legitimately were overpaid, you have no legal standing to refuse to pay.

Pattymd
03-01-2009, 06:23 AM
You have the right to get the accounting from the company and to dispute it if you think it is wrong. However, once you come to an agreement on the amount, you can either pay it or the company can sue you for it.

I was addressing the federal tax treatment on repayments that occur in a subsequent year to the overpayment itself. The fact that the employment relationship was severed at the time of the overpayments is irrelevant to the tax treatment.

DAW
03-01-2009, 08:20 AM
Agreed. This is a not-obvious point, but there is nothing in the Internal Revenue Code that mentions terminating or hiring employees. Instead it talks about the handling of wages and payments that occur as a result of the employment relationship. A fairly huge number of employers over the years have tried going to court using the argument that termination of employment somehow alters the taxation and reporting rules associated with employees. Other then a few very narrowly defined exceptions, employers have consistently lost big time in court using that argument.

The OP can and should certainly argue that the amount of the overpayment was mis-calculated, but they will also certainly lose in court if they try to claim that they should be allowed to keep overpayments. Having said that, not all employers take employees to court. Sometimes it ends with nasty letters. But sometimes it ends with court action. Sort of Wheel of Fortune time.

Pattymd
03-01-2009, 09:26 AM
Sort of Wheel of Fortune time.

I was thinking more like Deal or No Deal.

texas_dude
03-01-2009, 05:51 PM
This just in...

1) I was able to 'procure' the paycheck stubs for the claimed overpayments.

2) The paycheck stubs match exactly what my bank account shows I was paid during the time in which I was overpaid.

3) The paycheck stubs show that I was overpaid by an amount much less than the amount that the collection agency (and previous employer) claimed that I was paid. Thus, I have a case for refusing to pay the amount claimed. Sorry to all who told me I have no justification for refusing to pay.

4) I was told, by an employer of the company close to the matter, that the company will not pursue me for the overpayment (which is odd because they submitted it to the collection agency, maybe they were bluffing).

5) I'm still waiting for the company (which by the way, is a fortune 500 company) to provide me with the documentation they said they would provide me (even though I already have my paycheck stubs I want to have the documented details that they agreed to provide me).

6) I'm thinking it more as a game of Texas Hold'em...I think they're bluffing and I'm gonna call.

;)

cbg
03-01-2009, 05:57 PM
Okay, you asked where you stand legally.

If you can show that you were not overpaid by as much as they claim, fine. Then you don't owe back the higher amount. But if you were overpaid by ANY amount at all, legally you owe that amount back. If they choose not to pursue it, that's their choice. You have NO legal justification to refuse to pay back the amount you agree you were overpaid.

Pattymd
03-02-2009, 01:02 AM
We said you had no obligation to pay what you didn't owe. We didn't say you had a legal right to refuse to pay what you do owe. We said you would have to rectify the discrepancy with the employer and come to an agreement on the amount.

And I'm done here.

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