Withholding Wages to Pay Employee Debts

A court rules that other methods should be used.

Hennessey v. Board of Education, 642 N.Y.S.2d 958 (1996)

Background. Here is a question that many church treasurers have asked—can a church ever withhold an additional portion of an employee's wages to collect a debt owed by the employee? This question can arise in a number of ways. Consider the following:

Example. A church provides an employee with a travel advance of $1,000. The employee's actual expenses are only $600, but he fails to return the difference to the church as required by the church's travel policy. The church treasurer would like to collect the difference through additional wage withholdings.

Example. An employee buys $200 of products from a church bookstore, but fails to pay for them. The church treasurer would like to collect the difference through additional wage withholdings.

Example. For several weeks a teacher at a church-operated preschool is accidentally paid an amount in excess of her hourly wage. The church treasurer discovers the mistake and would like to collect the overpayments through additional wage withholdings.

Unfortunately, few courts have addressed this issue.

A recent case. For several years, a school board erroneously paid a teacher an amount in excess of her stated salary. When the board discovered its error, it informed the teacher that she had been overpaid and that the full amount of the overpayments would be "recouped" through additional wage withholdings. When the school board began withholding an additional amount from the teacher's wages to cover the debt, she sued. Her lawsuit demanded that the school board immediately quit withholding any portion of her wages to cover the salary overpayments. She also insisted that the school board return all of the additional withholdings it had made. A New York court ruled that the school acted improperly by attempting to recoup the teacher's debt through additional withholdings. It ordered the school board to discontinue this practice immediately.

Key point. The court acknowledged that the school board could recover the salary overpayments by suing the teacher directly. But it could not do so through unilateral and involuntary withholdings.

What this means for churches

The lesson of this case is clear—church treasurers should never attempt to unilaterally recover an employee's debts through additional withholdings—without first obtaining legal counsel. While the employee may be legally indebted to the church, unilateral and involuntary wage withholdings may not be a legally appropriate way to recover the debt.

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