Can a company withhold monies due them from an employee’s last paycheck?

Situation: employee willfully caused a bank account under his control to be seriously overdrawn which resulted in his termination. The company policy as explained to the employee several times over several years, required the employee reimburse the company for overdraft charges, although two instances of overdrawn charges were waived (with additional review of the policy). Employee signed a statement at termination meeting agreeing to their vacation pay compensation owed them and amount owed back to company. Now employee disagrees with overdraft reimbursement. Can company retain this money?

Asked on July 23, 2010 under Employment Labor Law, Virginia


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If the employee had notice of a longstanding policy requiring repayment of overdrafts, and furthermore, signed an agreement or statement at termination indicating that he would reimburse the company for the overdraft, the employee would indeed seem to be liable. (The fact of prior overdraft penalties or charges being waived does not preclude the company from instituting them now). Whether the company can offset other money owed the employee, such as vacation pay, aginst the overdraft charges depends on what the policy and the statement the employee signed say. If the state that the company may do so, it may. However, unless the policy and statment allow that sort of offset, it's not clear that the company can do this. It may have to honor its obligation to the employee, then sue him for money owed, since the two obligations are separate.

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