Human Resources: Overcompensation

Under the Fair Labor Standards Act (FLSA), that is the case. Because the Department of Labor views overpayment as a “loan or advance of wages,” nothing in the FLSA prevents an employer from recouping an overpayment from an employee’s paycheck, even if the employee has not expressly authorized it and the recoupment cuts into the minimum wage due to the employee.1 But whether such a recoupment is permissible under state law varies from state to state.

Nebraska

Under the Nebraska statute, a company may only “deduct, withhold, or divert a portion of an employee’s wages” when the company is required to do so by state or federal law, by order of the court or if the company “has a written agreement with the employee to deduct, withhold, or divert.” Neb.Rev.Stat. § 48-1230. Even in cases of theft, a company is not authorized to make deductions under Nebraska law without a written authorization from the employee.

Nebraska companies do not have an unlimited right to make deductions from the employee’s paycheck to satisfy the debt. If deductions are improperly made, a company can be liable for penalties under state law equal to the amount of the deduction or even double that amount if the violation is found to be willful. These penalties along with court costs and attorneys fees may be awarded under the Nebraska Wage Payment and Collection Act.

Resources

Davis, Wright, Tremaine LLP: Wage Overpayment Recoupment: State Laws Vary

DOL.gov: Does the FLSA prohibit an employer from deducting compensation from an employee’s paycheck?

DOLeta.gov: Overpayments

McGrath|North: Three Things You Need to Know About Wage Deductions in Nebraska