What happens when an employer mistakenly overpays an employee?

What happens when an employer mistakenly overpays an employee? A recent decision of the Employment Relations Authority has considered this point (Hardaker v LongChill Limited [2021] NZERA 409).

Here, the employee resigned from his employment, however, the employer failed to complete the relevant exit paperwork. This meant that the employee continued to receive his ordinary weekly wages for 35 weeks after leaving his employment. This amounted to a total overpayment to the employee of $27,115.30.

Once the mistake was identified, the employer attempted to contact the employee to arrange repayment. The employee failed to engage, and the Authority has now ordered that the sum be paid back to the employer within one month.

This decision is consistent with the general principles of mistaken payments (also known as unjust enrichment), where monies paid by mistake are generally recoverable.