Recovery of Overpayments from Former Employees
14 November 2024It is not uncommon for employees to be overpaid in their final pay on the termination of their employment or leave their employment still owing their employer money on their staff account or similar.
The Wages Protection Act 1983 only deals with the rights of the respective parties in terms of recovering overpayments while employees are still in employment.
In My Place Aotearoa Limited v Hollie-Lee Taitum [2024] NZERA 631, the Authority ordered Ms Taitum to repay an overpayment of $9,641.11.
The employee was due to be paid $8,054.99 into her account on her last day of employment, but in fact she was incorrectly paid $33,451.50. The employer discovered the overpayment the next day and contacted the employee to discuss repayment, only to be told she had already spent a portion of the overpayment.
The employee initially repaid a significant portion of the overpayment and much later made further payments, then went to ground.
The employer sought redress in the Authority, but the employee did not engage. The matter was decided on the papers to avoid unnecessary costs and time.
The Authority has general jurisdiction to resolve problems that arise from employment relationships. This jurisdiction was confirmed in recent years by the Supreme Court and supports the view that the Authority’s jurisdiction extends to an employer seeking reimbursement from an employee of an overpayment of wages where the employment has ended.
The Employment Court has also previously provided guidance which confirmed the Authority’s jurisdiction to determine these types of overpayments claims as restitution or unjust enrichment.
The Court confirmed the following elements were required to support an employer’s claim for reimbursement of an overpayment in these circumstances:
(a) proof of an enrichment by receipt of a benefit,
(b) a corresponding deprivation of the donor, and
(c) the absence of some legal principle justifying the enrichment.
The employer’s evidence showed the above elements were met and included evidence on how much was overpaid to the employee, together with the employee’s final payslip showing the amounts she should have been paid as part of her final pay.
Based on the available evidence, the Authority was unable to find any legal basis on which the employee should not have to pay back the outstanding overpayments.
In her statement in reply, the employee did not dispute she owed the outstanding amounts.
Accordingly, the Authority ordered the employee to pay the employer the outstanding overpayment amount of $9,641.11 within 28 days of the date of the determination. Costs of $500 were awarded against the employee, who was also required to pay the filing fee to the employer.
In summary, overpayments made to an ex-employee can be recovered relatively easily in the Authority, with the matter being determined on the papers to reduce the time and cost involved. However, it will take time to progress the matter through the Authority, possibly 6 months or more. But in the end, the money is recoverable, so it’s worth the effort.
For further information call Tony Teesdale 021 920 323, Justine O’Connell 021 920 410 or Michelle Battersby 021 993 735.