Wage overpayments create legal and workplace challenges for employers across the country. While the laws governing how these overpayments can be recouped vary by state, the consequences of mishandling them can be significant, according to Jonathan Crotty, a partner at Parker Poe who advises employers on labor and employment law.
Most U.S. states permit employers to recover wage overpayments without needing prior authorization from employees, classifying these errors as wage advances under state law, explained Crotty. While employers typically require written consent to deduct non-mandatory amounts from paychecks, overpayments are often exempt from this requirement.
However, Crotty emphasized that employers must still adhere to federal and state minimum wage laws, ensuring that deductions do not reduce pay below legal thresholds. Though, the legal definition of wage advances can vary from state to state.
“North Carolina, for example, characterizes overpayments as wage prepayment,” Crotty said. “Employers do not need advance authorization from employees for the deduction.”
The state includes in this definition “a miscalculation or other bona fide error, advances of wages to an employee or to a third party at the employee’s request, and the principal amount of loans made by an employer to an employee.”
At the federal level, wage deductions are constrained by minimum wage laws. “In general, the deduction cannot reduce the employee...
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