Company claims for Undue Payments to Workers

Companies and consultants are often unaware of their right to claim for undue payments.

It often happens that companies or consultants firms entrusted with the management of their payrolls make mistakes when paying the amounts due to each employee. For example, when they transfer the amount of one worker to another one by mistake, or when there is an arithmetical error in the paid amount.

In this situation, many companies do not claim these amounts, either because they are small amounts or because they consider that such a claim is inadmissible.

However, companies do not have to forego these amounts, as there is a legal way to solve this issue. In Spain, articles 1895 and 1901 of the Civil Code reflect the company’s right to file a claim against the worker for undue payments.

Procedure to Claim Undue Payments

Companies usually send a communication to the employee informing of the deduction of the amounts improperly received in his/her next payroll.

This practice has been well received in Spanish case law. As an example the Judgment of the TSJ of the Basque Country, of 27th March 2018, in which a company had paid overtime compensation to its workers due to an inaccurate record of overtime.

As soon as the company had detected the mistake, it signed an agreement with the workers’ representatives for a monthly discount on the salary for the amounts unduly paid. Additionally, the company sent a written communication to the workers informing of this deduction.

In this case, one of the workers refused to sign the document, but the company proceeded to deduct the undue amount. The worker filed a complaint for those amounts and the Court issued a judgement (confirmed on appeal and now final) determining that the company’s conduct was correct.

A monthly discount with written communication to the workers is therefore feasible. Even if the worker refuses, the company can proceed with the discount.

At this point, it is worth noting that some judgements consider that in this situation the company may even proceed to the disciplinary dismissal of the worker arguing a breach of contractual good faith.

Addressing Undue Payments through Labour Legislation

In case of opposition by the employee, the company has a 1-year period since the mistake’s detection to file its claim through the judicial labour court. After this time the company will not “in principle” be able to claim the amounts. We emphasize in principle as there are judgements that consider that the claiming period should be 5 years, as states article 1964 of the Civil Code.

Given the above, we recommend companies to take a proactive stance in this type of situation and present claims for undue payments when legally appropriate.

This article is not considered as legal advice

Alejandra Sanz

A licensed attorney with a Master's degree in Commercial Law, Alejandra Sanz is specialized in the areas of company labour law and employment law in Spain. Working languages: Spanish, English, and French. For any query Contact Alejandra Sanz