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Ask Employment Law |
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Remember: There is no substitute for legal advice on the actual
situation you find yourself in. The information posted on this site is for
general information only, is based on |
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Question: |
Can Employers Recoup
Overpayments of Salary from Employee’s Wages? |
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Answer: |
Nowadays,
most employees get paid directly into their bank account, and don’t notice
very often what goes in, and assume that the employer can correctly calculate
what they should receive per month. Employers however often get it wrong, and
overpayments can go unnoticed, sometimes for years. What happens when the
employer suddenly realises the mistake? Section
13 of the Employment Rights Act 1996 states that no deductions may be made
from an employees salary without his or her express
written consent, or in the employment contract. However section 13 does not
apply to deductions from a workers wages to recover
an overpayment of wages or an overpayment of expenses. Therefore if the
employee is still in employment, the employer can start making deductions to
recoup the overpayment, though this should be done subject to consultation
with the employee on the amount to be repaid monthly. In Home Office v Ayres [1992] EAT Mr Ayres
received an over payment of sick pay which his employer then sought to recoup.
The
Employment Appeals Tribunal held that it is possible to defend such a
deduction on the grounds of ‘estoppel’ or change of
position for the worse which, in accordance with the decision in Lipkin Gorman v Karpnale Ltd
[1991]., In
Lipkin the House of Lords stated that the argument
of estoppel ‘is available to a
person whose position has so changed that it would be inequitable in all the
circumstances to require him to make restitution, or alternatively to make
restitution in full’. In
Home Office v Ayres,
Mr Ayres had spent the money having received it in good faith
and without knowledge that there was an overpayment. It could not lawfully be
deducted. Although
this decision has subsequently been criticised, if an employer seeks to
recoup the money from the employee, it may be possible for the employee to
argue that s/he spent the money in good faith and without knowledge of there
being an overpayment, and that in the circumstances the employer may not then
lawfully recoup it from salary. However
Courts will not be impressed by an employee who knows he is receiving an
overpayment, but spends it anyway. Employees may find that the ‘estoppel’ argument is not the get out of jail card that
they were hoping for. Last
reviewed: July 2010. |
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Employment
Solicitor Reculver Solicitors Tel
0207 324 6271 Regulated
by the Solicitors Regulation Authority ©
Reculver Solicitors. 2005- |
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