LongChill Limited, a trucking company, sued one of its former drivers for more than $27,000 claiming the truck driver continued to be paid his wages for eight months after he had left. In addition, it had overlooked paying him his accrued holiday pay of just under $900 net.
Should LongChill be able to recover the money? Would it matter if the driver thought he was entitled to the money and if he had already spent it and changed his life accordingly?
In this case, LongChill wrote to the driver, told him of the payroll error and apologised for the mistake. LongChill told him it wanted to recover the money and was willing to negotiate a payment plan. If a repayment plan could not be agreed LongChill proposed going to mediation in a subsequent letter. Finally, LongChill said it would file an application to the Employment Relations Authority to recover the money “as a last resort”.
Nothing was settled. A claim was filed in the authority. The driver was served with a claim. He was obliged to file a defence.
Nothing was heard from the driver. A notice of direction was sent by the authority to the driver urging him to provide a response to the claim. Several methods by which the authority’s investigation might be undertaken were mentioned in the direction including a face-to-face meeting.
The only communication the authority received from the driver was a single email. In the email he “expressed his dissatisfaction with LongChill as an employer” but he did not address the substance of the company’s claim.
The authority sought such a response but got none. Accordingly, the authority told the driver that if a response on the issue was not received within 24 hours the investigation meeting would be cancelled, and a determination would be made based on the material before the authority. Again, the driver did not communicate further with the authority.
This case serves as a stark warning to anybody served with legal proceedings that it is crucial to get legal advice and put forward your defence.
Here, the worker’s failure to engage made it almost inevitable that judgment would be entered against him for the $27,000 he received in error.
The authority summarised the position before it in its determination. The overpayments were a consequence of a genuine error. The driver was not entitled to the money and had been unjustly enriched by the error.
The employer had taken reasonable steps to resolve the matter, but the driver had not engaged and made no plan to repay. He had not put forward any reasons as to why he had not repaid the overpayment.
Accordingly, judgment was entered against him for the amount of the overpayment.
There are occasions when a person who is overpaid money by their employer can successfully argue the employer should not get the money back. The problem has arisen many times over the years and there are many cases going back over the decades dealing with these issues.
An 1841 English case held that an insurance company which paid out on a life insurance policy that had lapsed could recover the money, although the widow of the deceased was unaware the policy had lapsed and received the payment in good faith. The balance has shifted in favour of the recipient of mistaken payments as the years have passed.
Much more recently a case involving Air New Zealand gave the opposite answer.
Air New Zealand overpaid one of its staff by $70,000 and sought to recover the net amount of the overpayment. It won in the Employment Relations Authority but lost in the Employment Court.
The worker did not dispute the overpayment but maintained he received his wages in good faith. He altered his position in reliance on the validity of the wages he was paid. The worker relied on the defence of change of position and on a statutory defence that was then available under the old Judicature Act.
The onus of proof to establish a change of position was on the worker. He had to establish that he changed his position and that in all the circumstances it would be inequitable to require him to make restitution. The court accepted that the worker lived beyond his real means for about 16 months, spending the overpayment on various new expenditure.
The worker said he was “living the dream” before being brought down to earth rather spectacularly by being dismissed on accusations which included the allegation that he had not been proactive enough in querying the overpayments.
The judge was satisfied “that the injustice that would result from compelling [the worker] to repay the money in question would significantly outweigh the potential injustice to Air New Zealand if it is denied recovery and for that reason I reject Air New Zealand’s reinstatement claim”.
It is possible that LongChills’ former truck driver may have had a defence. It is unfortunate he did not seek legal advice. The only communication he had with the authority confirmed that he was aware of the claim and suggested his attitude towards his former employer may have played a role in his decision-making.
Doing nothing and hoping the claim might go away is never going to work. The truck driver may well regret his failure to participate.