When an employer overpays an employee

When an employer overpays an employee

By Amien Hoosain

Brenda Sekhute & 6 Others v Ekhuruleni Housing Company, a judgment of the Johannesburg Labour Court on 5 September 2017, dealt with overpayments of remuneration.

During 2016, the employer granted salary increases of 18% (total cost to company) to six employees, based on a re-grading of their posts.  Due to an administrative error, the employees’ monthly pay slips reflected Medical Aid and Provident Fund contributions both as part of basic salary and as fringe benefits.  In effect, the employees received the Medical Aid and Provident Fund contributions twice.  The result was a 40% ‘increase’.

The employees did not complain, and the employer discovered the error only in July 2017.  The employer requested the employees to consent to the deduction of the overpaid amounts over a period of seven months.  The employees refused, but the employer nonetheless made deductions from the employees’ July 2017 salaries.  The employees brought an urgent application for an order interdicting further deductions, and the reversal of the deductions already made.

The employees argued that the 40% ‘increase’ was not in error, but the Court rejected this argument outright.

The employees also resisted the deductions without their consent.  The parties relied on ostensibly conflicting subsections in section 34 of the Basic Conditions of Employment Act:

Party Subsection Content
Employees (1)(a) Subject to exceptions not relevant to this case, an employer may only make deductions from an employee’s remuneration with the latter’s written consent.
Employer (5)(a) An employer may not require or permit an employee to repay any remuneration except for overpayments previously made by the employer resulting from an error in calculating the employee’s remuneration.

After evaluating the relevant case law, the Court concluded that section 34(5)(a) constituted specific authority for the employer to deduct overpayments of remuneration.  The employees lost.  In addition, the Court held as follows regarding legal costs:

I am not satisfied that this is a case where the [employees] should not bear the costs of this application, notwithstanding the fact that there is an ongoing relationship.  They were disingenuous in trying to retain the undue benefit they had received and the terms on which repayments were to be made were not onerous.”

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