Human Resource Blog

Overpaid Vacation Time

We had an employee who put vacation down on his time card and was then paid for that vacation. We discovered the next week that the vacation day given on the previous check should not have been given because the employee had used all of their vacation time prior to that week. Are we allowed to deduct that overpayment on this weeks check to offset the vacation day that should not have been paid?

This will depend partly on what state you are in. Some states (such as California) never allow employers to recoup overpayments to workers. It’s simply the employer’s loss, because it’s the employer’s mistake. Other states do permit employers to deduct overpayments from the employee’s check. However, if the deduction results in the employee being paid less than the state (or federal) minimum wage for the hours worked in a particular pay period, then it would be illegal under state (or federal) law.

Some companies have the policy of allowing employees to use vacation time in advance. Usually in these cases, the employee has signed a written authorization that permits the company to deduct any outstanding balance from their final paycheck. However, again, in a few states those agreements are illegal.