My company has accidentally overpaid our workers for about a year. We want to recoup the amount of money that we overpaid them. How can we do this? The workers are part of a union and we are in NY. The CBA doesn't say anything about recouping overpayments from salaries. I know that we can't deduct from their salary under NY law for the over payment - so I think the best thing to do is sue them. 1) What theories can I sue under? I'm thinking unjust enrichment but are there others? 2) Also, can I sue them as a defendant class (there are over 500 of them that got overpaid)?
State/Country: New York
The first thing that I would do is send out a letter informing them of the overpayment and requesting that they pay back the overpayment voluntarily. I would even go so far as offering to allow them to pay it back in installments if the overpaid amount is significant. In the letter, you should state the specific amount that was overpaid, what caused the overpayment to happen, and lay out the terms under which they can pay it back. If they consent, then you can deduct it from their paychecks, but only if they consent and if the amount is significant, again, you would want to allow them to have a payment schedule.
For those employees that do not pay the overpayment back, you can hire a law firm to send them official letters to recover the money. You can also sue them in court but I would consider that as a last resort only. You will have to make the decision of whether it is worth it financially to you to hire a law firm/debt collector to do this.
To make things even more complicated, the recovery methods available to you will depend on whether the employees were exempt or nonexempt because of FLSA law. Many courts have ruled that if you overpay exempt employees, you are basically out of luck.
The other thing that you need to be aware of is that you will need to correct payroll records for IRS purposes for these employees and, depending on the tax year that the repayments are made, you should also notify your employees of the tax implications.
Thanks for your response but it doesn't answer my questions 1) What theories can I sue under? I'm thinking unjust enrichment but are there others? 2) Also, can I sue them as a defendant class (there are over 500 of them that got overpaid)? Please let me know if you can answer these specific questions.
You would simply sue as a debt owed. As for as your second question, it is unlikely that you would be able to sue them as one class. You would have to sue them individually but you could have the case be done as one case against all of the defendants. However, as I noted, suing should be a last resort because you need to give them notice anyway before suing and because, depending on their exemption status, you might not be able to sue them at all due to the FLSA regulations.
Also, as I stated, NY courts tend to hold the employer responsible for overpayments and so if you combine that with the expense of hiring an attorney, you really need to balance out whether it's worth it.
Experienced attorney representing companies and individuals in employment law matters and litigation
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