Am I required to reimburse my employer for my gross pay if they paid me by accident while on leave?

UPDATED: Sep 30, 2022

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Am I required to reimburse my employer for my gross pay if they paid me by accident while on leave?

I don’t understand why I’m required to reimburse for
gross pay and not net pay received while on
maternity leave. I was supposed to only receive short
term disability pay but instead received 3 regular pay
checks and now I’m required to pay back the gross
amount when I only received the net pay.

Asked on June 15, 2017 under Employment Labor Law, Ohio


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

Your reimburse for gross pay because you received gross pay, or at least, the benefit of it: part of the pay went to the IRS to satisfy your tax liabilities (e.g. the various forms of withholding) and unless you repay it, you have the windfall of having your employer pay part of your taxes for you. A simple example: let's say that you pay 20% of your income in taxes. Say that you should have received $50,000 in gross pay and had the 20% you expect to owe withheld, which means that you would have $10,000 in taxes paid to the IRS for you and received $40,000 in net pay.
Now let us assume that you were accidentally paid an extra $5,000 gross: $1,000 to the IRS, $4,000 net to you. Say you return only the net ($4,000 of the $5,000): in this case, your gross pay is $51,000 (the $50k you should have received, and the $1k accidental overpayment of withholding, which you did not return). That means that at a 20% tax rate, you would owe $10,200 in taxes. But a total of $11,000 was paid for you: the $10,000 withholding on your correct wages or salary, and the $1,000 withholding on the overpayment, which you did not return. If you owed $10,200, but $11,000 was paid for you, you will get an $800 refund due to the ovepayment of taxes--so you will get $800 to which you are not entitled. 
This is  an simplified example, but it shows why you have to return the gross, not net.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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