What should the employer do where an employee agrees to repay an overpayment of wages but subsequently fails to repay the money?
Where an employer has accidentally overpaid an employee and the employee fails to repay the overpayment as agreed, the employer should contact him or her to demand payment, explaining that it can deduct the money from the employee's wages without his or her consent if he or she does not keep to the repayment agreement. Deductions from the employee's wages will not be unlawful under the Employment Rights Act 1996 in these circumstances, although the employee may bring a claim in the civil courts arguing that the employer was not entitled to recover the money.
If the employer decides to proceed with recovering the overpayment by making deductions, it must not do so unreasonably, for example by deducting the employee's entire wages until the overpayment has been recovered. Unreasonable conduct may constitute a fundamental breach of the implied term of trust and confidence between the employer and employee, entitling the employee to resign and claim unfair constructive dismissal, provided that he or she has the required continuous service.