Can An Employer Deduct Wages For Overpayment?

California does not allow employers to correct overpayments of wages to employees through self-help by deducting wages from future paychecks without employees’ consent.  The law is clear that it is unlawful for employer to collect wages already paid to the employer.  However, employers who mistakenly overpaid wages may still have equitable claims, such as the equitable defense of offset, if employees bring claims for unpaid wages against employers who engage in self-help deductions to recoup overpayments.   

Employers can recoup wage overpayments if employees voluntarily agree in writing to those deductions.  But should those deductions from paychecks for a pay period cause employees’ paychecks for that pay period to fall below minimum wage for all hours worked in that pay period, then the employees may have valid claims against employers for failure to pay minimum wage.  As a result, it may be difficult for employers to over recover overpayments to minimum wage employees because any recoupment deductions in a future pay period would necessarily cause the paycheck to fall below minimum wage. 

(See Link(s): Labor Code Sections 221 and 224; DLSE Op. Ltrs. 1999.98.22-1 and 2008.11.25-1)