Even with an automated payroll system, mistakes happen. It's not uncommon for a California employer to accidentally overpay wages or salary to an employee. Recouping the overpayment isn't as simple as taking a deduction from the paycheck. Employers must get written approval from employees to take the deduction, and must abide by minimum wage and final pay rules.
No Deductions for Overpayments
As a general rule, employers are not allowed to deduct salary overpayments from an employer's subsequent paycheck. This is governed by California Labor Code section 221, which declares that employers are prohibited from instituting monthly deductions to make up for erroneous overpayments.
Exceptions to the Rule
There's one exception to rule disallowing subsequent deductions. If an employer gets approval from the employee, the employer may recover overpayment of wages. However, this permission must be expressed in writing and the employee doesn't have to agree to it. The agreement can be made before or after the error occurs, but the agreement must be signed before the employer makes the deduction to recoup payment.
Stay Above Minimum Wage
Recovery of overpayment is allowed as long as it doesn't cause the employee's wages to drop below minimum wage based on the hours worked in the pay period. The 2015 minimum wage in California is $9 per hour. For example, say an employee earns a salary of $1,000 a week and her employer accidentally pays her an extra $700. If she works 40 hours during the next week, she must be paid a minimum of $360 --$9 multipled by 40 hours-- for that week. That means that the employer can't recoup the entire $700 from the next week's wages because it would put her below minimum wage.
Avoid Final Paychecks
Even if a voluntary agreement is made, employers can't recoup overpayment from an employee's last paycheck. This was decided in Barnhill v. Robert Saunders when an employer attempted to recoup a loan to an employee from his final paycheck. Employers that do try to deduct amounts from an employee's final paycheck can face signifigant penalties. Employees that don't receive final checks on time or in the correct amount are entitled to waiting time penalties. Waiting time penalties amount to one day's worth of employee wages for every day that final wages aren't immediatly paid.