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Misreported hours by employee

What penalties are legal for an employee who has over stated his/her hours and has been over paid?

This is a very serious situation, as you surely know. An employee who intentionally overstated the hours he or she worked is basically guilty of fraud. The employee has stolen payroll dollars from you. This is true whether the employee worked 30 hours and claimed to have worked 40, or worked 40 hours and claimed to have worked 60.

There are a number of actions you can legally take including recovering the money, disciplining or terminating the employee and prosecuting the employee.

You are allowed to deduct this overpayment from the employees check in every state except California. (And even in California you have options, because this was not your mistake.) From your perspective, the employee was (unintentionally) paid in advance for the work he performed this week or this month. You can deduct the full amount even if it results in the employees net check being $0 this week or this month.

Even states that restrict payroll deductions usually allow them in the case of fraud or deception by the employee. (Just to be on the safe side, an employee handbook should always include a statement that grants permission for such deductions, but in most states it is not required.)

Obviously, you can discipline the employee, suspend the employee or terminate the employee, and our recommendation is that you do so, depending upon the dollar amount stolen.

If the amount involved is over $100, contact the local police department and ask them to investigate. Lying for financial gain is the crime of fraud. Penalties will depend upon the total dollar amount involved. You should involve the police for several reasons: 1) If you have business insurance, and the losses are significant, you may be able to file a claim for this theft, but you will need a police report to do so. 2) This supports your claim of firing the employee for gross misconduct, so he or she cannot collect unemployment 3) This gives you more bargaining power to encourage the employee to return the full amount.

If the amount is in the thousands of dollars, or more than one or two paychecks, you may want to offer the employee a deal. You will not prosecute, if the employee repays the entire amount by a certain date.


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This entry was posted on Thursday, July 22nd, 2010 at 4:18 pm and is filed under
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