Employer struggles to recover $27K of overpaid wages

In a recent case, the New Zealand Employment Relations Authority considered an ex-employee who was overpaid 35 weeks’ worth of wages, totalling over $27,000. The company made several attempts to recover the sum without any success. The case provides an important reminder for employers to complete all relevant paperwork at the time of an employee’s resignation.

The employee worked as a truck driver for a family owned and operated transport company for almost 11 months, resigning in November 2018. Eight months’ later, the company realised the paperwork necessary to finalise the worker’s resignation was never completed, and the employee had continued to receive weekly wages up until July 2019. Accounting for accrued holiday pay, the company submitted the worker erroneously received an additional $27,115.30 over the course of 35 weeks.

In January 2020, the company notified the employee of the payroll error and apologised for the mistake. It further advised of its intention to recover the sum and noted it could negotiate a payment plan if needed. The company sent a second letter three weeks later, stating that it would file an application with the Employment Relations Authority “as a last resort”. The employee did not reply to either of the company’s letters.

The Hearing

In November 2020, the employee was called to attend a case management conference call with the Employment Relations Authority, which he did not attend. The Authority subsequently sent a Notice of Direction to the employee, urging him to respond to the company’s claim.

In February 2021, the Authority received a reply from the employee. The employee expressed his dissatisfaction with the company but failed to address its claim of repayment. Later that month, the Authority advised that, having received no further response from the employee, it would make a determination based on existing documents. 

Judgment

Based on a statement recording the chronology of events, as well as payroll information detailing the overpayment, the Authority was satisfied that the company had erroneously paid $27,115.30 to the employee. It found that the employee was “unjustly enriched” as a result of the administrative error, and that the employee had not shown that it would be unfair to require him to repay the sum.

With this, the Authority ordered that the worker repay the full sum to the company within one month.

Key Takeaways

• Employers must ensure that all necessary paperwork is completed at the time of an employee’s termination
• Failure to do so may see an ex-employee accidentally continue to receive wages
• However, this case shows the general legal principle of mistaken payments, which provides that mistaken sums are generally recoverable