If someone has genuinely been overpaid by their employer, then that is not money to which they are legally entitled and it should be repaid. In fact the law allows an employer to deduct any overpayments from an employee’s wages without their prior consent.
However, an employee may be able to use the legal defence of ‘estoppel’ to resist an employer's recovery of an overpayment. One of the main cases dealing with this is that of County Council of Avon v Howlett. The employee was a teacher who was paid more sick pay than he was entitled to. The teacher queried the overpayments with the employer but was assured they were correct. By the time the Council had realised their mistake, the teacher had spent most of that money. The Court of Appeal held that the defence of estoppel prevented the employer from recovering the whole sum of the overpayment.
The way estoppel operates is that if the following conditions are satisfied, then an employee should be able to use it as a defence to resist the recovery of an earlier overpayment:
· The overpayments were made due to an error by the employer
· The employee genuinely believed they were entitled to the money, or did not even realise that they were being overpaid
· The employee has since 'changed their position', meaning they have spent the money in question. However, this does not mean just spending it on usual items of expenditure, such as bills, everyday spending, etc – you must have gone out of your way and changed your position, such as making additional purchases which you would not have done had you not received that money.
Only a court can grant the defence of estoppel so whilst you can raise it with the employer now to try and make them change their mind, if they still go ahead with the deductions you will have to go to court to make an application for an order for estoppel.
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