• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

Wage clawback

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.


Junior Member
What is the name of your state (only U.S. law)? New Jersey

I have a twist on the common questions I have found regarding employee overpayment and subsequent salary reductions by employers to recover such overpayment's. In my case I work for a company which issues cost of living raises once a year in addition to general raises. This time period was a month after I started. I got the raise as part of the cost of living increase in 2008. Now, almost a year later I'm told that this was a mistake and that the fine print in some document I have never seen tells me that as a new employee I must be with the company for a year before getting such an increase. My questions is simple: Since it was completely reasonable for me to believe that this raise was valid - since everyone else got it - I was a happy employee and adjusted my lifestyle and budget accordingly. Now I'm asked to pay it all back including taking the tax hit until I get that money back when I file my taxes at the end of 2009.

Do I have rights? Even if I have to pay this back, I have incurred costs. I'm a happy employee and want to remain with the company - but it strikes me as most unfair.



Senior Member
The employer is allowed to correct a mistake. It doesn't have to be in a policy that you have seen and honestly, not giving a brand new employee a COL increase is not that unreasonable or uncommon. The portion of the overpayment that occurred in 2008, since you didn't repay in 2009 (no matter the reason), does require under IRS regulations that you pay back the gross. I suggest trying to work out a repayment plan with the employer.


Junior Member
Thanks, but..

Thanks for your quick response. So by that token an employer can setup a mechanism of acting like they are giving a raise and then demand it back in bad times? It would seem unfair if there is a general understanding that the raise was genuine. Sure, perhaps it was a mistake,.. or perhaps it is a method to retrospectivly find a "legal" way to balance the books in bad times. Do you see the grey area here? Was it really a mistake? I was happy with the money, the employer benefited from my gratitude of the increased pay. Am I to take the employers word for it that this really was a mistake?


Senior Member
While I think there are greater problems than pattytx acknowleges, the scenario envisioned by the OP is not on point. That's not what happened, so why bother diferentiating when we can easily point out different issues? (Like, the intent of the employer.)

Often the guideline is what the employee knew or should have known. That's not the legal standard, but it is the reality of how the decisions seem to come out. If all the surrounding facts would make it seem the OP felt the money was his and all the facts and circumstances would make a reasonable person believe the money was theirs, the company will have a hard time *proving* in court that the OP owes them money for overpayment. Facts do matter and this is a closer call than most which come to the list.

I still think the OP probably will owe the money back to the employer. But, the practical realities of that will make the employer not want to take this to court. If the OP walks, then the employer needs to make a real-world decision of the cost and probability of success of litigation against the benefits. I bet the calcualtion will come down on not filing suit against the OP.

But, the OP is a happy employee who wants to stay. While this is great, it does tend to piss off the employer. If the OP denies repayment, he/she will be fired. I would, you would too, so the OP should just accept that. Maybe it won't happen that way. But, as a person who employs others, that's the way I'd go. Which gets to the bottom line.

Pay them back. It may or may not be their money, but what are you going to do if you want to stay employed?
Last edited:

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential