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BusinessColumnistsCarrie Mason-Draffen

Help Wanted: When employers may recoup overpayments

State regulations govern how an employer can recoup

State regulations govern how an employer can recoup a payroll overpayment. Notifying the worker is key. Photo Credit: iStock

DEAR CARRIE: Our employer deducted $500 from a co-worker's wages in a single pay period, leaving her with just $300. Payroll told her it forgot to take out money for her daughter's health care premium. My co-worker hadn't noticed the problem and became aware only after she received the puny paycheck. She had signed a written authorization to have money deducted for the premium, but not to have more than half her check disappear. Is it legal for the company to deduct more than she authorized because of its error? -- Illegal Deduction?

DEAR ILLEGAL DEDUCTION: The company's failure to notify her of the larger-than-authorized deduction would raise eyebrows.

State regulations that took effect last year make it easier for employers to recoup overpayments made to employees because of a company's mathematical or clerical error. Still, those regulations also govern how the process should work. And notifying employees about a deduction change is key.

"A change in the amount of the deductions can only occur after the employer provides notice to the employee," said employment attorney Carmelo Grimaldi, a partner at Meltzer, Lippe, Goldstein & Breitstone in Mineola.

The notification periods range from three days before the deduction to three weeks, the regulations state. Besides the notification, the employer must limit the recouped overpayments to those that occurred in the eight weeks preceding the employee notification. And the employee must be allowed to challenge the proposed recovery.

"Indeed, when an employer fails to provide a procedure by which the employee may dispute the overpayment and terms of recovery, and/or seek a delay in the recovery of such overpayment," Grimaldi said, "there is a presumption that the contested deduction was impermissible."

Once your employer satisfies all the above criteria, it then has to meet other requirements regarding the size of the deductions each pay period. I believe employees may find some of the changes here shocking.

If the entire overpayment slated for recovery is less than or equal to the employee's net wages earned after other permitted deductions, the employer may recover the entire amount of such overpayment from a single check, Grimaldi said.

The new regulation "potentially permits a deduction to recover an overpayment of wages where the employee could be left with nothing provided only one paycheck is affected," he said.

On the other hand, if the overpayment to be recouped exceeds the employee's net wages after other permissible deductions, the recovered money must not exceed 12.5 percent of the gross wages earned in the wage payment and must not reduce the worker's effective hourly wage below the state minimum, which is currently $8 an hour.

But Grimaldi said, "No such limit exists when the overpayment sought is less than or equal to the wages earned after permissible deductions."

It appears the $500 deduction falls within that first category, since it was less than your co-worker's $800 wages for that payroll period, Grimaldi said.

So the employer met that test.

"Still, all requirements of the overpayment regulation must be followed before such a deduction is implemented," Grimaldi said. "It seems the employer in your co-worker's situation failed to follow some of these procedures and thus, the $500 deduction could be deemed impermissible."

For more on state regulations regarding deductions to recoup overpayments to employees, click here to go to

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