COLLECTING EMPLOYEE ACCOUNTS RECEIVABLE - 8293.2
Government Code (GC) section 19838 requires reimbursement to the state for overpayments made to employees. Employee overpayments can arise from revolving fund salary and travel advances issued by agencies/departments and payroll warrants issued by the State Controller’s Office (SCO). For procedures on the recovery of outstanding travel advances, see SAM Section 8116.1.
For the purposes of this section, an amount owed to the state by an employee (i.e., an accounts receivable [AR]) is the equivalent of an overpayment. Agencies/Departments should use the following collection procedures, when applicable, to collect ARs due from employees.
Agencies/Departments shall initiate collection efforts (e.g., written notification of overpayment to the employee, withholding amounts owed to the state from an employee’s final separation pay) within three years from the date of overpayment to collect, as provided in these procedures.
Employee Overpayment Notification: Agencies/Departments shall provide written notification to employees of overpayments. The overpayment notification should include the following items:
- Amount due
- Pay period affected if the overpayment relates to salary
- Reason for overpayment
- Response time afforded to the employee prior to collection action
- Agencies/Departments will give the employee 15 calendar days to respond, orally or in writing. If the employee cannot be reached (e.g., vacation, sick leave, out-of-town assignments), the time afforded to the employee to respond should be adjusted accordingly.
- Agencies/Departments will document and maintain the employee’s response.
- Optional: proposed repayment plan and method of collection
Employee Repayment: Agencies/Departments shall negotiate a repayment plan acceptable to both parties. Repayments may be made by the following:
- Cash or check
- Payroll deduction installments to cover at least the same number of pay periods in which the overpayment occurred. When overpayments have continued for more than one year, agencies/departments may require full payment over the period of one year.
- Payroll deduction to repay overpayments shall not exceed 25 percent of the employee’s net disposable (i.e., gross minus mandatory deductions) monthly or semi-monthly salary, except from separating employees, as provided below. Mandatory deductions include taxes and garnishment/levy. For a complete listing of mandatory deductions, see the SCO Payroll Procedures Manual.
- The adjustment of appropriate leave credits or compensating time off, provided that the overpayment involves the accrual or crediting of leave credits (e.g., vacation, annual leave, or holiday) or compensating time off.
An agreed repayment plan must be in writing and signed by the employee. The signature block will include a statement similar to the following:
“I agree to the repayment schedule described above and acknowledge the gross amount set forth as a legitimate debt owed by me to the state.”
If the employee does not agree to repay an overpayment or does not respond to the written overpayment notification by the afforded time, agencies/departments will collect overpayments in the manner set forth in the SCO Payroll Procedures Manual.
Collective Bargaining Unit contracts (e.g., Memorandums of Understanding) for represented employees may contain overpayment collection provisions. The provisions of these contracts supersede any other collection procedures. Agencies/Departments should review contracts carefully to identify overpayment collection provisions. For a listing of the contracts, see the California Department of Human Resources website.
Separating Employees: For separating employees, it may not be possible to provide written notification regarding overpayments. GC section 19838 authorizes the state to withhold an amount sufficient to provide full repayment to the state from an employee’s final separation pay. For information on separating employee salary warrants, see SAM Section 8580.4.
Revolving Fund Salary Advance in Lieu of an SCO Warrant: These collection procedures do not affect procedures for the collection of revolving fund salary advances in lieu of an SCO warrant when the advance and warrant are in the same pay period. However, if the revolving fund advance is from a different pay period than the SCO warrant, the agency/department must follow the procedures outlined above. For information on salary advances, see SAM Sections 8118 and 8595.
Replenishment of Revolving Fund for Salary and Travel Advances: If an employee separates from state service and collection efforts are unsuccessful, agencies/departments must replenish their revolving fund for the uncollected advances. To request replenishment, agencies/departments must complete a Claim for Reimbursement form, STD 27A. For information on revolving fund replenishment, see SAM Section 8150.2.
These collection procedures do not apply to separated employees (for information on collecting non-employee ARs, see SAM Section 8293.1) or collection procedures for Industrial Disability Leave overpayments.