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Accidentally Overpaid?

Have you been accidentally overpaid by your employer?  Did your most recent paycheck have an extra $50, $100, or even $1,000?  While it may seem like a surprise bonus, you shouldn’t get too excited just yet.  And I hate to break the good news, but yes, you do have to pay it back.

The Fair Labor Standards Act of 1938 (FLSA) is a United States labor law that creates a minimum wage right and an overtime pay standard for employees who work over forty hours a week.  The FLSA also introduced prohibitions on oppressive child labor and applies to employees whom are employed by, “an enterprise engaged in interstate commerce or employed by an enterprise engaged in commerce or in the production of good for commerce.” (Source)

The Fair Labor Standards Act deals with accidental compensation.  Unfortunately for most employees, an employer has a right to recoup the wages that were accidentally provided.  Even if, “it brings the employee’s wages under minimum wage for the pay period.” (Source)

In a published opinion, the Wage and Hour Division of the Department of Labor essentially states that an employer whom has accidentally overpaid an employee has made an advance on their wages.  In essence, they’ve given the employee an interest free loan.

So, if you’ve been paid extra or received additional compensation than you believe is due, you should double-check and confirm it is correct with your manager and your human resources department.  Very likely, it is an accounting error and should not have been paid out.

If you receive the additional compensation and do not go to your manager or human resources department about it, then depending on which state you reside in, it can very will be garnished from your future wages.  This means that your employer can deduct the additional amount from your future paycheck.

If you or your employer realize that you have been overpaid for an extended period of time, then things get a bit more complicated.  In either case, it is ideal for your manager and human resources manager to meet with you to discuss next steps and to find a resolution. 

Whether the additional pay was a one-time case or occurred over a long period of time, you will want to work with your manager and human resources manager to discuss a prolonged payment plan, deducted directly from your paycheck.  You will want to be honest with them on what you are comfortable with and how much of a deduction you can afford from each paycheck.

The easiest and most professional thing you can do is alert your manager and human resources department of any increase in pay IMMEDIATELY.  Doing so avoids any discomforts or large paybacks in the future and shows that you are an honest, reliable, and professional employee.  Always communicate anything odd that you see on your paycheck with your manager and together you can figure out why it occurred.

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