Employment contract and recovering overpaid wages
WAGES are a fundamental factor in employment contracts that have to be paid to the workers within the period specified by the law or as contractually agreed by the parties.
Failure to pay within the assigned period constitutes a fundamental breach of the employment contract wherein the affected workers may, besides making a complaint to the Labour Department, resign from employment and bring a claim for constructive dismissal pursuant to the Industrial Relations Act.
Further, no employer may withhold or deduct any portion of aworker’s wages except when it is authorised by law or where the employer has written author is ati on from the employee for the deduction.
In the case of overpayment of wages by mistake, there is no automatic mechanism that allows the employer to unilaterally recover the overpaid sum, unless a deduction clause in the employment contract allows for such deduction.
A deduction clause means that the employee consents to the employer making deductions from the employee’ s future wages. But if the worker refuses consent for the refund, the employer would have to file a civil claim and recovery action to recover the overpaid amount. However, any unilateral reduction of the worker’s wages would constitute a fundamental breach of the contract of employment.
The affected worker is entitled to resign and to have his resignation treated as a constructive dismissal.
Hence, the sooner the overpayment is noticed and the worker is notified, the more likely it is for the employer to recover the overpaid sum without are course to civil claim in court.
However, where there is a long delay before the mistake is discovered, it will in most circumstances be met with resistance from the worker and chances of recovery may be remote.
In the event there’ s a failure to immediately detect the mistaken overpayment, the employer is deemed to have led the worker to believe that the overpayment was his entitlement.
In this regard, the court will have to consider whether the in justice of requiring the worker to repay the overpaid money is greater than the injustice to the employer of not receiving it.
It would also require consideration as to what was done by the worker with the overpaid sum to the extent that it would amount to a detriment if he were required to repay the overpaid monies.
DR ASHGAR ALI ALI MOHAMED
International Islamic University Malaysia