My boss told me I’ve been overpaid by $7K, and I can either pay it all back or work without pay — is that even legal?

Luckily for Natalie, she lives in New York, where there are additional provisions that protect workers when employers make garnishments for overpayment.

The law in New York states that the employer must give the employee a notice of intent to make garnishments for overpayment. The notice must also:

• Be given at least three weeks before the deductions start (unless the amount can be recouped in one wage payment, and other procedures are followed).

• State the amount overpaid in total and per pay period

• State the total amount to be deducted and the date of each deduction

• Include information about when and how the employee can contest the overpayment

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Perhaps most importantly, in New York, deductions for overpayments can only be made for the eight weeks of overpayment prior to the delivery of the notice of intent to the employee.

In New York state, if the overpayment is less than or equal to your next paycheck, the entire amount can be deducted from that check. However, if it’s more than the next paycheck, the maximum amount that can be deducted is no more than 12.5% of your gross earnings, and the amount cannot make your effective hourly wage less than the state minimum wage (3).

Natalie’s boss’s suggestion that she work for free to pay off the wage overpayment is illegal. Because she lives in New York state, her employer can only deduct the overpayments in the eight weeks prior to her receiving notice. The meeting with her boss also doesn’t count as official notice; her employer needs to provide her with a document that meets the above parameters.

Natalie should let her employer know that asking her to work without pay is a violation of labor laws. It is her employer’s responsibility to serve her proper notice about the overpayment and upcoming garnishment.

Since her state offers more protection around this issue, Natalie most likely won’t face a wage deduction that would leave her unable to pay her bills. Still, her wages will be impacted, and she needs to budget accordingly. She may need to cut back on discretionary spending until her paychecks are back to the normal amount.

In the future, checking both her pay stubs and her bank statements will go a long way in preventing this kind of unexpected loss of income — which will also help you catch if your employer is underpaying you. An Ernst & Young report from 2022 found that the average company’s payroll accuracy is only 80.15%, which means you could be missing out on wages you’re owed if you’re not watching your bank balance (4).

If you believe your employer has made deductions from your pay illegally, you can file an administrative claim with your state’s department of labor, and depending on your state, you may be able to file a lawsuit (2).

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U.S. Department of Labor (1); Thomson Reuters (2); New York Department of Labor (3); Ernst & Young (4)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.