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What if We Accidentally Overpaid an Employee?

What if We Accidentally Overpaid an Employee?
Consider this hypothetical scenario: when I was just starting out as a city employee, I was joined in my office by the city accountant. She informed me that I had been overpaid. (What?! How can that be? If anything, I must have been underpaid!) Sadly, it was true. Due to a mathematical error, my paycheck for the first three months of the year was for an amount greater than it should have been. My first thought likely was “Finders keepers, losers weepers.” Unfortunately for me, that wasn’t the accountant’s first thought; I was expected to repay the amount I was overpaid. Here's why that's the case and how the overpayment should be repaid.

The state constitution at article 8, section 7 prohibits gifts of public funds, and, if I was paid more than my salary provided for, the extra pay would be considered a gift of public funds, if not recovered. So, if an employee is accidently overpaid, what should happen?

RCW 49.48.200 provides that a debt due to the state, a county, or a city because of overpayment of wages can be recovered by a civil action of by the process set out in RCW 49.48.210. Under that process, the government employer must first provide the employee with written notice that includes the amount of the overpayment, the basis for the claim, a demand for repayment within 20 days of the receipt of the notice, and the employee's rights under the statute. The statute also sets out a detailed procedure for the employee to challenge the overpayment claim. If the employee is covered by a collective bargaining agreement, any overpayment is to be handled through the grievance procedures set out in the collective bargaining agreement.

RCW 49.48.200 also provides that, if recovery of the overpayment is by deduction from future wages, the deductions cannot exceed five percent of the employee's disposable earnings in any pay period, other than for the final pay period. For the final pay period, the employer may withhold the amount then still outstanding from the employee's disposable earnings. The deductions from wages continue until the overpayment is fully recovered. Alternatively, the employee can make payments in excess of five percent or the employer and employee may agree to a different amount or to a method other than deduction from wages.

The city recovered the overpayment from me and all was well again.  But, c’mon, overpaid?  I don’t think so.

If you have questions regarding the overpayment of wages or other similar issues, contact MRSC and/or discuss your issue with your agency’s legal counsel.

Image courtesy of Refracted Moments.

MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

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About Paul Sullivan

Paul worked with many local governments and authored numerous MRSC publications on local elections, ordinances, and general local government operations in his many years at MRSC. He is now retired.