Legal Question in Business Law in California

Re: Decrease in hourly pay retro?

The governing rules of law are as follows:

When an overpayment on a contract occurs because of a mistake of fact (as opposed to a mistake of law), the party making the mistaken overpayment is entitled to recover the overpayment, UNLESS the party receiving the overpayment has changed his position so substantially, in reliance upon the correctness of the payment, that forcing him to refund the overpayment would be unjust.

The overpaid party's reliance on the correctness of the overpayment must be innocent and reasonable. If someone is paid three times what he expects, it would be unreasonable to rely upon the payment as correct, and such a party would be ordered by the court to make refund.

In your case, you are perfectly aware that you're being overpaid, so you can't claim reliance upon the correctness of the payment, even if you do "materially change" your position by spending the money.

There is one other factor to consider: The law addresses "mistaken" overpayments, i.e. those occurring due to a mistake of fact. What if the operative word is "negligent" rather than "mistaken"? I haven't researched this, but as I recall, if the overpayment is due to negligence, or a mixture of negligence and non-negligent mistake, the overpaid party's position may be somewhat stronger.

Even so, I think you're going to have to give the money back.....and as a practical matter, you probably should if you want to keep you job or get good references if you leave.