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Tina, Attorney
Category: California Employment Law
Satisfied Customers: 33167
Experience:  JD, 17 years experience & recognized by ABA for excellence in employment law.
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My former employer has contracted with a collection agency

Customer Question

My former employer has contracted with a collection agency to ask me to repay the relocation charges of $4000. Per the written agreement I had with my former employer, If I leave before 2 years, the employer will communicate to me during my notice period the prorated relocation charges computed and then deduct the relocation amount from my final paycheck.
Although I served notice of resignation, no such communication came from my employer during my notice period. To the contrary, on the last day of employment I was handed a full and final check with statement paying me for vacation accrued and final salary. A month later I get a notice from collection agency asking me to payback the amount!!
So the employer is at fault for not honoring the agreement. Although I served notice, they failed to compute and communicate the amount I owed and then deduct it from my final pay during my notice period or my last day.
I asked the collection agency to give me details of when my repayment computation ( In other words was it done after I left the company in which case, the company is at fault) was done by the company and the agency on my 3 follow up says they have asked for this info form my ex employer . Finally the employer got back through the collection agency that they computed my relocation charges on July 23, 2012 six weeks after I left the company ( my last working day with the company was June 18, 2012)
I wrote to the collection agency that I would request my ex employer to waive the monies off as they did not honor the contract and inform me of the monies. The collection agency got back (of course) that the e x employer is not willing to do so an expects the entire amount to be paid. Please note that my ex employer is a very large company and $4000 is really nothing for them.
Do I owe my former employer money? There is an arbitration clause in the agreement in case of dispute. What are my options? I am running out of time. Can I get it to a point where I only pay some portion of the $4000? What are my chances if this goes to arbitration. Meanshile how can I protect myself so that my credit rating history is not dinged while I am sorting this out? I have excellent credit score and wish to maintian it.
Many Thanks for any suggestions you may have.
Submitted: 4 years ago.
Category: California Employment Law
Expert:  Tina replied 4 years ago.
Hello and welcome,

Did the employer breach your employment contract in any other manner besides failing to deduct the relocation costs from your final paycheck?

Customer: replied 4 years ago.

No, not in any other way. However, during my course of employment, I did report many ethical and harassment issues to HR and the Senior Leadership. Nothing came of it. I do not want to rake those up now.

Expert:  Tina replied 4 years ago.

I see. Thank you for the additional information, Sendil.

I'm afraid I do not have good news for you. The employer's failure to deduct the pro-rated amount of the relocation expenses from your final paycheck would not typically constitute a material breach of the contract, releasing you from your obligation to pay the amount due pursuant to that agreement.

I would make arrangements promptly to pay the amount agreed in order to avoid your credit report being damaged. In fact, I would request that the collection agency/employer agree in writing that they will not provide any negative information to the credit reporting agencies if you promptly pay the amount since it was the employer's error that led to this situation in the first place.

They should be willing to agree to that limited term in order to settle the matter.

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