Be sure you know how to recoup overpayment of wages

Q           Is there a statute of limitations regarding when employers must inform employees of an overpayment of wages, and can employees be held legally accountable for paying the overpayment back?

The Federal Labor Standards Act (FLSA) doesn’t address how long an employer has to recover overpaid wages. In the absence of federal law, state law governs the statute of limitations for collecting overpayment of wages (if such limitations even exist) and how an employer must go about recovering such overpayments.

Idaho law doesn’t provide a deadline for when an employer may recover overpaid wages from an employee. However, you should initiate recovery as soon as possible. Idaho law doesn’t require you to inform the employee that you are seeking to recoup the overpayment. But, as a best practice, you should still inform employees of such paycheck deductions.

As for recovering the overpayment, the U.S. Department of Labor (DOL), which oversees enforcement of the FLSA, views overpayments as “loans or advanced wages” that an employer may recoup by reducing the overpaid employee’s subsequent paychecks. Under this “loans or advanced wages” interpretation, the FLSA allows paycheck deductions to occur even if doing so would put the employee’s wage below the minimum wage.