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In some instances, you may not know the exact number of hours that an employee worked in a pay period; for example, if an employee failed to turn in a time record, the time record was lost or misplaced or the employee is absent or on leave.
In that situation, employers will often pay an employee for the hours the employee was scheduled to work and address any overpayment at a later date.
Historically, employers may have made deductions in the next payroll period, either with or without the employee’s written authorization to do so. Because of the Labor Commissioner’s strict adherence to case law, as well as the Labor Code, this action involves risk.
The Labor Commissioner’s office issued an opinion letter about frequent overpayment and immediate deductions from the next payroll. The employer had a 75-hour payroll period and payment was made prior to the end of the pay period. The employer paid for time that was scheduled to be worked, but might not have actually been worked.
The opinion letter noted that the overpayment was a result of the employer’s policy of paying wages before the end of the pay period. The DLSE couldn’t find anything in the law that prohibits an employer from making deductions if they are “predictable and expected wage overpayments made in the immediately prior paycheck that resulted from the employer’s payroll system, if the employee provides voluntary, written authorization.”1 However, the DLSE also noted that employers cannot make deductions from the employee's final paycheck for overpayments, because that would trigger penalties under Labor Code section 203.
1. DLSE Opinion Letter, 2008.11.25-1