Can an employer take back money after giving it to you – Texas?

Tried to select Texas but the site wouldn’t cooperate. In February 2017 our finance department had an audit of vacation time/payout. As a result they issued pay to a lot of people, some received hundreds and some received thousands of dollars. In our department we approached management and told them about the extra check. They already knew about it. They told us ‘Merry Christmas’, that the company said it would cost more to take the money back than to let us keep it. They assured us it was ours. They said it was for past vacation time we were not paid for.

Today we started receiving letters telling us we have until the end of the year to pay it back. This is going to be devastating to a lot of people I don’t think anyone believed it was true at first but then the company told us it was. So, people used the money and now the company wants it back.

Do we have any legal rights to fight this in Texas? The company is a worldwide company and people all over the place got this vacation pay back.

Asked on April 11, 2017 under Employment Labor Law, Texas


M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Your employer cannot ask for return of the money because it merely changed its mind. A discretionary payment of this type is akin to a gift which cannot be unilaterlly taken back. If, however, the payment was made due to an administrative error of some sort on your employer's part (i.e. a miscalculation, etc.), then you must repay the money. Otherwise, you would be "unjustly enriched", which is something that the law disfavors. In other words, someone should not benefit due to the mistake of another.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

If they just changed their mind about paying it, then it is still yours and you do not have to repay it: if an employer voluntarily elects to make a payment to an employer (e.g. payout vacation, if they did not have to under a contract; pay a discretionary bonus; give him or a raise; etc.) that money belongs to the employee. Employers (or anyone, for that matter) do not have the right to change their mind about a payment or gift they voluntarily made to another. In this case, if for some reason they chose to give employees vacation payout when they were not required to do so, it's like getting a discretionary or holiday bonus: once made, even if the employer rethinks it or regrets it, it belongs to the employee.
If there was a miscalculation--so not a decision they are rethinking, but an actual, provable error--they can get back the amount of the miscalculation. Example: say that they told  everyone they were paying out for unused vacation time, but accidently paid out for more unused time than the employees had, or made a math error in calculating the payments; in those cases, they are entitled to the mistaken payment back, since the law is clear that a mistake does not entitle someone to keep money.
So the key issue is: did they change their mind (you keep the money) or did they make some obvious, provable mistake (they can get it back).

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