Several times a year, we get questions from employers involving payroll errors. In some situations, the company or its payroll service double pays an employee for a pay period.  In others, the wrong employee receives a direct deposit intended for another worker. In both cases, the employers ask whether they can recoup the payroll error when the recipient of the overpayment refuses requests to refund the money. Unlike the popular board game Monopoly and fortunately for employers, employees are not entitled to retain bank errors in their favor.

The North Carolina Wage and Hour Act typically requires employers to obtain employee consent for non-mandatory deductions made from their pay. However, chapter 95 of the North Carolina statute on withholding wages states that employers may recoup "an overpayment of wages to an employee as a result of a miscalculation or other bona fide error…" without advance authorization. Typically, this would be done through deductions from future wages. In some circumstances, the employer deducts the full amount from the next pay period, while in others it prorates the amount across several pay periods to help avoid hardship to the employee in question.

Of course, the first reaction of the employer should be to attempt to reverse the error through the payroll service or bank. If these measures are unsuccessful, the employer can recover the overpayment. Although unusual, employers could also consider disciplinary action against an employee who once confronted with the error, refuses to cooperate with recovery efforts. Wage laws may differ in other states, and employers should consult with local counsel to determine their options in overpayment situations.

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