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Overpayment of Wages in CA California?

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  • Overpayment of Wages in CA California?

    I'm an MBA candidate and was hired by a large company to work last summer as a paid intern. About 2 weeks after completing my 3 month internship, I was notified by phone from my superior that due to a discrepancy in my payroll exit date, I had been overpaid a week in wages - in the amount of $1300. I was mailed a notice by the company's claims department to re-pay the amount in full to avoid having my debt transferred to a collections agency. I spoke with a rep from the department and worked out a monthly payment plan which I have been paying for the past 9 months. Yesterday I was contacted by a collections agency rep who notified me that my account has been transferred over to her company and that I have 30 days to pay the remaining $550 otherwise my credit will show that I am paying off debt to a collections agency. I have since contacted my former employer to dispute its transfer of my debt over to the collections agency- seeing as how I was making monthly payments as agreed upon. I am awaiting a call from an account Supervisor at my former employer. My question is: Do (Did) I legally need to repay the extra wages that I was overpaid? If not, can any of the re-payment I've made so far be returned to me?

  • #2
    You're in an MBA program and you don't know it's unethical to keep an overpayment that was made to you in error? Yes, you have to repay it. You're lucky it wasn't a direct deposit, because in some states they can get the bank to reverse the deposit and take the money straight from your account.

    I hope you're not planning on using them for a job reference.
    I am not an attorney, and don't play one on TV. Any information given is a description only and should be verified by your attorney.


    • #3
      Legality and ethics are two seperate issues. And it was direct deposit. I was under the assumption that ca law prohibits employers from forcing repayment of overcompensation in certain cases...


      • #4
        Legality and ethics are two seperate issues.
        Oh brother. And we wonder how the economy got where it is.
        I am not an attorney, and don't play one on TV. Any information given is a description only and should be verified by your attorney.


        • #5
          Sorry to hear that this situation has spiraled out of your control. It is ironic that many large companies will spend huge amounts of time and effort to collect tiny amounts of overpaid wages, but waste inordinant amounts on poor management decisions! That is one of the real-world lessons I learned from B-school...

          I am not an attorney so please take the following as friendly advice. However, I have been doing a bunch of research on this same topic because my wife is facing a similar issue. Here is a brief summary:

          Yes, you are probably liable for repayment unless the following criteria are both true:
          1. You did not receive the overpayments through your own doing or fraud
          2. Collection of the overpayment would "be against equity or good conscience." (e.g. cause you severe financial hardship or the company was non-responsive when you told them)

          Since you have already been paying, it is going to be difficult for you to argue that this is suddenly difficult for you to pay. However, as a full-time student, you may have a greater chance of making that case, if you wanted to go to small-claims court to have a judge settle the matter.

          With this said, the employer in California UNDER NO CIRCUMSTANCE can withdraw or attempt to withdraw the funds directly from your bank account. (see the CA Dept of Industrial Relations website at for more information). In addition, if you have not violated the terms of the written repayment agreement, then you can go after the company for breach of contract if their agent attempts to suddenly change the terms of the contract.

          The collections agency is going to sound scary and intimidating because that is their job. Your best counter is to continue to ask for a copy of the original agreement and for them to tell you where you have violated that agreement. When the guy on the phone can not/will not tell you, ask for his/her supervisor. They will eventually realize that you are not just going to roll-over and will stop the harassment.

          Hope this helps and good luck!


          • #6
            Originally posted by Daniel111 View Post
            I was under the assumption that ca law prohibits employers from forcing repayment of overcompensation in certain cases...
            Not exactly. CA law has restrictions on employer "self help" remedies. Employers in CA have certain limitations on unilateral deductions from paychecks. Employers however can take a current/former employee to court (just like anyone else), get a judgment and try to collect the judgment. Employers are not legally worse off then non-employers in collecting a judgment, they just have certain restrictions on putting their hands directly into their employee's pockets.

            The specific law is California Labor Code section 221.
            "Reality is that which, when you stop believing in it, doesn't go away".
            Philip K. **** (1928-1982)


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