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payroll company made error - can employees be required to pay back? New York

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  • payroll company made error - can employees be required to pay back? New York

    My husband recently started a management position at an employer that uses a payroll company . While reviewing P&L's , he noticed that over the previous year (prior to his starting) payroll costs were fluctuating and often times running significantly higher than they should and he started an investigation (because the costs were still high at the time of his hire). He finally realized (after a disabled employee who has income restrictions came and questioned his pay) that the issue was that union employees are to be paid an additional $ 1 per hour when they work after a certain time at night. The payroll company was paying the additional dollar for more than the required time, which resulted at times in an additional $ 90,000 being added to the payroll. Employees were significantly overpaid.

    He is new to his position so he inherited this problem and is trying to correct it as now he is significantly over-budget for the year. Questions:
    1) He figured out the problem, but what can be done about the overpayment?
    a) can the employees be asked to pay back the overage? It would have been an obvious error to them.
    b) if yes up to what point (what is fair vs what is legal?) .. can they go back one month- 2 months? someone mentioned in NY state you can only recoup overpayments up to one month
    c) what role does the payroll company have in this (clearly they are NO LONGER they payroll company? To me, someone on husbands co's end should have questioned this before, but trying to look at all angles...

    Thank you!

  • #2
    First of all, talk to the boss. "Can" and "should" are two very different things.

    The employer is legally required to pay minimum wage, overtime, and maybe the salary limits for Exempt employees. That is pretty much it. Can the employer reach back in time and grab whatever they feel like? No, but they can do pretty much anything legally on a go forward basis. Lets say that Bob owes us $100. We cannot reduce MW/OT or Exempt Salaried obligations realistically, but we can (at the federal level anyhow) reduce future payments without Bob's permission. Now NY is not my state and I will let someone else address those requirements.

    Having said that, this is going to stir people up. Not a payroll level decision, but one which a higher power needs to make. Yes the employees should have said something, but where was the employer? Yes there was a payroll service, but that is the employer's agent. Someone at the employer should have been reviewing their agents work and they did not.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)


    • #3
      He's got a lot of different issues playing into this -- not just an overpayment of wages. Before doing anything, he also needs to look at the Collective Bargaining Agreement and see if it has anything about wage overpayments or errors in favor of the union. I am not so sure that the employer will want to fix it backwards even if they legally can if it is going to cause major issues with the union's contract. And going forward, they might have to do some bargaining unless it is a VERY clear mistake after viewing it all.

      And it is very possible that at some point a decision by a predecessor was made because it was easier to process the same rate (Vs documenting the difference) and the cost of doing it the "right" way was more than the cost of overpayment of wages. I've known employers who do this. Or it is possible a change was approved and the documentation was never updated. ETA: you say it was a $90K mistake, but over how many employees? If it is a little bit for a lot of employees vs a mistake for a handful, that could also make a difference. He needs to look at exactly how many need to be fixed, not just the $ amount. And it is very possible to decide not to fix it at all because the cost of fixing it is cumbersome.

      That said, the payroll company should have insurance coverage to cover the mistake IF you can prove it was their mistake (which will be hard) and they should have caught it and it wasn't your predecessor's responsibility to do so. It does amaze me the number of large payroll mistakes (That could be caught pretty easily if someone internally did an audit every once in a while like your DH did) that happen because no one is checking specific things like this!
      Last edited by hr for me; 02-10-2016, 08:23 AM.


      • #4
        Not the question, but having someone be they a third party administrator or an employee being the person responsible for proofing their own work at very best sounds like an audit violation.

        My last job was for a very large company you have all heard off. My third day on the job I was told to report to a meeting with the head of the Board of Director Audit Committee. My bosses (VP Finance and Controller) were in the room but they were standing (not sitting - no chairs for them) and said nothing the entire meeting. I got the only available seat in the room (other then the BOD fellow) and was asked what I thought my job was. I basically recited the short version of my job description (Disbursement Manager). WRONG!!! I was told in no uncertain terms that my job was to keep the company's name out of the newspaper. I was told to go as far over my boss's head (who were in the room at the time) as was necessary to ensure this got done.

        No offense to anyone, but if I ever told anyone that it was some third party administrator's job to proof themselves, I would have been fired on the spot. I understand that not all payroll people have accounting/finance backgrounds, but legally these folks are still subject to the same audit rules as anyone else involved with disbursements. I was hired in my last two jobs because the person who had it before me lost track off this point.
        "Reality is that which, when you stop believing in it, doesn't go away".
        Philip K. **** (1928-1982)


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