[NY] What are an employee’s obligations to return wages mistakenly paid after leaving a job?

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Hello. My name is Richard and I have been a licensed attorney for over 25 years and hope to be of assistance. I understand you're dealing with a situation where your previous employer continued to pay you for 3 extra pay periods after you left your job. Could you tell me more about any steps you've considered taking regarding this situation?

Have you checked if there's any written agreement or contract with your previous employer that might address overpayments or similar situations? This could help clarify your obligations. Also, have you consulted with a tax professional about the potential tax implications of returning the overpaid wages? This might help ensure that everything is handled correctly on your tax documents.

Based on what you've shared, I do not think you can safely assume you are entitled to keep the money. Because you worked in New York, New York law is the primary law governing the wage overpayment, even though you live in New Jersey. New York Labor Law permits an employer to recover wage overpayments, although there are rules governing how they may do so if you were still employed (NY Lab L § 193). Since you've already left, the employer can simply request repayment and, if necessary, pursue a civil claim for unjust enrichment or money had and received, a common law quasi-contract theory recognized under New York case law rather than a specific statute.

That said, you do not have to simply send them a check based on their say-so. It is entirely reasonable to request a complete accounting before repaying anything. I would want to see the gross amount paid for each of the three pay periods, the net amount deposited into your account, the amount of federal, state, Social Security, and Medicare taxes withheld, whether they intend to reverse the payroll entries and issue corrected tax reporting if applicable, and exactly how they want the repayment handled.

Your concern about taxes is well founded. If the repayment occurs in the same tax year that the wages were paid, employers can often correct the payroll records and adjust certain withholdings under IRS guidance on repaid wages. (26 U.S.C. § 1341) If it crosses into a different tax year, the process becomes more complicated, and you should not repay the gross amount without understanding how they will handle the tax reporting.

I also agree with your concern about incurring expenses because of their mistake. If handling the repayment requires bank fees, wire fees, overnight delivery costs, or professional accounting expenses that would not otherwise have been necessary, it is reasonable to ask the employer to cover or reimburse those costs. While the law does not automatically require them to do so, many employers will cooperate because the error was theirs.

I hope I was able to help resolve your issue! If you have any other questions, feel free to ask. Just a friendly reminder, don't hesitate to reach out whenever you need assistance!