Agreeing to the Plan

• Deducting the overpayment from an employee's future wages is easier if she has a collective bargaining agreement. This establishes the employee's wage income and allows a paycheck deduction. The employer may try to negotiate with the employee to convince her that she received more wages than she earned, and set up a repayment plan. The employer may have to notify the employee in writing about the suspected wage overpayment.
  
  

Allowing Deductions

• State law may prohibit paycheck deductions if an employee has not signed a collective bargaining agreement. In Oregon, an employer may not deduct money from a non-covered employee's paycheck, even if the employer overpays the employee and the worker admits to the overpayment. The employer can garnish paychecks from an employee's other job if a court rules that the employee received an overpayment.
  
  

Deduction Limits

• When state law allows paycheck deductions, it may set limits on the amount that the employer can deduct each period. Typical limits are a percentage of the employee's disposable income, or income that the employee earns which is greater than the federal minimum wage. Indiana allows an employer who makes a decimal point error on a paycheck, such as paying the employee $10,000 instead of $1,000, to collect the entire amount from the employee without these restrictions.
  
  

Deduction Conditions

• State law may establish additional conditions that apply to a wage overpayment. In Washington State, for example, an employer may not deduct overpaid wages solely because of the employee's work performance. The employer must prove that the employee worked fewer hours than those for which he received payment, or received a higher wage than his contract provides. If an employer pays an employee more money per hour than the employment contract requires for more than 90 days in Washington, the employer loses the right to collect on the overpayment.