February 14, 2012
You don't have to pay for your employer's mistake
Recovery of over-payments made in error can be grieved
With deep cuts underway in the federal public service and departments looking for ways to save dollars, we can count on payroll taking a deeper look into employee accounts. What rights do workers have in situations where the employer tries to recover an overpayment or over crediting that was made in error?
Overpayment/crediting recovery can be a tricky issue because it's not immediately obvious from the collective agreement that it can be grieved. However, PSAC has had some recent success in these types of cases.
In Prosper v. Treasury Board (Canada Border Services Agency) a member contested his employer's decision to recover vacation leave that had been granted to him in error.
The member had asked the employer about the status of his vacation leave credits. He was advised that he was entitled to have his vacation leave adjusted to account for his prior service and his account was credited with additional leave. Based on this confirmation, the member used the additional leave. On return from vacation, he was advised that the leave had been given to him in error and the employer would be proceeding to recover the leave.
The Public Service Labour Relations Board (PSLRB) ruled that the employer's actions and representations had the effect of a promise to the member, and he acted to his detriment on the basis of those representations (he used vacation leave that he was made to believe he had). The employer was right to reset the date on which to start calculating his vacation leave entitlement, but the Board held that the employer could not recover the portion of the leave that the member had used based on his employer's initial assurance. The Board also noted that the employer's obligation to the member ceased when it informed him of the error.
In Lapointe v. Treasury Board (Department of Human Resources and Skills Development), a member was paid according to an incorrect pay scale for four years because of an administrative error. He was unaware of the overpayment until he learned from his supervisor that the employer intended to recover the money.
The PSLRB found that the four-year span misled the member about his compensation and had the effect of a promise to him. The member had entered into a financial commitment based on the incorrect salary that he was receiving, which he would not have otherwise done. Furthermore, the employer had discretion over whether to exercise its power of recovery in the member's specific situation. Given the scope of the employer's discretionary power and how long it waited to exercise its claim, the Board decided that the employer had unreasonably exercised its discretion. The overpayment amount recovered was orderd to be repaid to the member.
Recovering annual leave
The case of Murchison v. Treasury Board (Department of Human Resources and Skills Development) involved another situation where an employer credited a member excess annual leave. The member felt that there might be an error, and she approached her supervisor with her suspicions. The employer assured the member that she had received her proper entitlement. Five years later, the employer, upon discovering the error, began recovering the equivalent monetary amount.
The PSLRB held that the doctrine of “promissory estoppel” did not apply to this case as there was no proof of detrimental reliance by the member. Although the employer was able to use its management rights to effect the recovery, the Board held that those rights were subject to reasonableness and under the circumstances, the recovery was unreasonable.
Accounting for errors
Bolduc v. Canada Revenue Agency 2009 involved a situation where payroll had
found some irregularities in the accumulation of vacation credits by certain employees. Some employees had kept their vacation credits even though they had received severance pay or had a break in their service. The errors occurred between 1981 and 1991, but the CRA did not learn of them until 2001-2002. It began recovering the overpaid vacation credits shortly afterward. In this case, the PSLRB ruled that the 11-year delay was all the more unreasonable because it put members in the position of not being able to dispute the claims since they had not kept adequate proof. Furthermore, because of the scope of the employer's discretion and its delay in asserting its claim, the Board ruled that the employer had exercised its discretion to recover the overpayment in an unreasonable manner.
The argument used in some of these cases has been the equitable remedy of “promissory estoppel.” Briefly stated, this requires demonstrating that representations (promises) were made to the employee and that the employee relied on the representations to their detriment. Once this is established, the employer cannot recover the overpayment/crediting. However, the obligation to the employee ends once the employer informs the employee of the error.
What these cases also demonstrate is that although management rights may be used by an employer to recover overpayments/crediting, such rights must be used reasonably. Although, not necessarily obvious from the collective agreement, stewards should be aware of these situations and ready to file grievances if needed.
- Prosper v. Treasury Board (Canada Border Services Agency) 2011 PSLRB 140
- Lapointe v. Treasury Board (Department of Human Resources and Skills Development) 2011 PSLRB 57 (An application for judicial review before the Federal Court is pending (Court file: T-884-11).
- Murchison v. Treasury Board (Department of Human Resources and Skills Development) 2010 PSLRB 93
- Bolduc v. Canada Revenue Agency 2009 PSLRB 168 (expedited arbitration – does not constitute a precedent)
Date Modified : 2012/02/14