Can my employer force me to pay back sales commissions which were overpaid?
Get Legal Help Today
Secured with SHA-256 Encryption
UPDATED: Jul 14, 2021
It’s all about you. We want to help you make the right legal decisions.
We strive to help you make confident insurance and legal decisions. Finding trusted and reliable insurance quotes and legal advice should be easy. This doesn’t influence our content. Our opinions are our own.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.
A mistake (e.g. an overpayment) does not give you the right to keep the money; rather, money mistakenly sent to you must be returned or repaid. While they can’t take deductions from your pay, they can sue you for the money. It is not a defense to repayment that you were unaware of the overpayment–the issue is solely whether you received something to which you were not entitled.
Let us assume that the employer is correct: you were being mistakenly paid at a higher commission rate than you were supposed to be paid—for example, say you were at a 10% commission rate, but were incorrectly paid at 12%. The reason we will assume this is that if that was not the case—if you were in fact paid at the correct, agreed-upon rate—then you are clearly entitled to the money you received. That is why the first thing you should do is independently double-check their calculations, and confirm whether you received a too-high level or rate of commissions.
If you were overpaid, then yes, you have to repay the money. The law is very clear that a mistake or error does not let someone keep money to which they are not otherwise entitled. If, for example, the agreement (whether written or oral) pursuant to which you worked was that you receive 10% of the sales you made, and you made, say, $200,000 of sales, you are entitled to $20,000 (0.10 x $200,000)—no more and no less. If you turn the situation around, you can readily see that the employer is entitled to their overpayment back—that is, assume for the moment that they had underpaid you, and paid you only $16,000 instead of $20,000. Do you believe that the employer could refuse to pay you the extra $4,000, saying that it was an innocent underpayment which they had been unaware of while making it, and so therefore, they do not have to pay you the full $20,000 to which you were entitled? Of course not—you would correctly expect that they would have to pay you the extra $4,000 to bring you up to the $20,000 you’d earned in commissions, and if they failed to pay you, you could sue them for the money and win.
Your employer has the same rights as you do: so just as you could force them to correct an underpayment and pay you the balance owed you, they can require you to correct an overpayment and return a surplus payment—and if you don’t, they could sue you for the money and win. So if, for example, they had accidently paid you $24,000 when you were only entitled to $20,000, you must repay the surplus $4,000.
Your knowledge of the overpayment is irrelevant: either you have the right to a payment or not. Thinking you were paid the correct amount or that there was no overpayment does not change the facts of the situation—either you were not overpaid, or you were. And if you were overpaid, you must repay the excess.
Your financial situation—that is, if repaying is burdensome or difficult for you—is also irrelevant. Just because you need money or can’t afford to repay it does not let you keep another’s money. Again, turn it around: if you were underpaid by mistake, do you think the employer could get away with not paying you the correct amount just because sales are slow and they need the extra money?
There are limits on their ability to simply recover the money without paying you: that’s what the law you cite refers to. The employer cannot at this point simply deduct money from your next or future paychecks or commission checks to make up the overpayment. Such payroll deductions must be by consent—that is, you would have to agree to them. If you don’t consent, they cannot deduct money from your pay to recover the overpayment. But that doesn’t change the fact that you owe them the money: they could sue you and expect to win, and if they did, you’d then owe all the money immediately. Therefore, if you have the ability to settle the matter for less money, or with an agreement to pay over time, you would be well-advised to take it.