Reimburse company for tuition benefit after resigning Washington

[raspyripple]

I recently resigned from a position with a company that had a tuition benefit. On the benefit form, which was signed by all parties for each quarter there was reimbursement, it stated "Should my employment with (company) terminate within one year following tuition reimbursement payment, I understand (company) will reduce my final paycheck by the outstanding balance(s) due as permitted by law."

I was not surprised to learn that the outstanding balances exceeded the amount of my final paycheck, and I have been asked to reimburse the company out of pocket.

First, I want to verify that the final paycheck reduction (to zero in my case) is legal. Second, I would like to know if I am legally obliged to reimburse the difference. Honestly, it sucks for me, but seems fair if I am. In this case, I would be reimbursing income to my employer that was declared taxable for 2007, and any advice on how this could be accounted for would be very welcome.

Thanks a ton!

[DAW]

This is going to be a soft answer. I do not know WA law, assuming that they actually have any on this subject, which they probably do not. The problem is that we are talking about something called "conditional wage payments", which is not a concept well supported in federal (and probably state) law. The employer makes a wage payment. They considered the payment valid when they made it. They considered the payment valid when they issued the 2007 W-2. They considered the payment valid the day before you terminated. However, the day you terminated they suddenly decided that they made a "payment error" (or at least that is the legal principal they will probably use).

WA may or may not have rules on recoveries of "payment errors". Federal law mostly does not restrict recoveries of payments errors, which is why employers like to argue "payment error". The problem is that there is mostly no actual regulations or case law supporting this action - just employers arguing that they made a payment error.

Worse, if the employer actually knew what they were doing, they would have just issued you a loan supported by a formal loan agreement, and conditionally forgiven it after a year. No 2007 W2 and the loan recovery rules are well understood under both labor and contract law. Instead by floating out this "conditional wage payment" structure, the employer has managed to put this issue into a pretty grey area.

Past that you presumably signed something, which unless your employer is really dumb should be what they think is an enforcable contract in WA. If so, the employer could try a court recovery for the balance, even if labor law does not permit the recovery via payroll deductions. Assuming that the contract part is well written, the possible court recovery is often much less "grey" then the proposed payroll deduction is.

I cannot give you a harder answer. You can try talking to a local attorney, but it would not surprise me if they were not sure either.

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You probably do not want to hear this, but the time to have taken a hard look at this was before you signed the agreement.

[Pattymd]

DAW, didn't we see on another site that Washington has a 90-day limit for recovery of "overpayments"? Not sure if this would apply in this particular situation, though.

[DAW]

"We", no. "You" maybe. WA is not my state and I would not have paid any attention to that type of rule if I had seen it. The other problem is that if the employer sort of knows what they are doing, they would have had the employee sign a recovery agreement enforcable in court. That would not help the employer with a wage deduction assuming WA has the type of rules that you mentioned, but would help the employer with a possible subsequent court action. Also, the question comes down to what penalties (if any) that exist in the possible WA law. If the penalty remedies are not material, the employer might just take the deduction anyhow.

You know me well enough to know that I have a pretty low opinion of employers dumb enough to go the "conditional wage payment" route in the first place. If the employer was on their game, they would have structured the payment as a loan and gotten around the possible WA rule that you mention. The chances that the employer in this case is paying attention possible WA rules on wage recoveries is maybe not good.

[raspyripple]

Thanks for your prompt feedback! I've sent emails to a couple of lawyers. Hopefully I'll hear back from one of them.