An Alberta arbitrator has ruled that employers can pursue wage overpayments beyond the six-month timeline set out in collective agreements and employment standards legislation, rejecting a union argument that would have allowed a worker to keep more than $27,000 paid to him in error.
The January decision provides clarity for employers navigating overpayment recovery when workers refuse to cooperate with repayment arrangements.
The Regional Municipality of Wood Buffalo overpaid a landscape architect $27,335.44 in a single paycheque during pay period 15 of 2023. The employer discovered the administrative error in January 2024 and immediately notified the worker and his union, offering repayment options and requesting a meeting.
The worker and the Canadian Union of Public Employees, Local 1505, postponed the meeting three times over six months before the employer began making deductions in August 2024—13 months after discovering the error.
The union filed a grievance arguing the employer missed its window. Both the collective agreement and the Employment Standards Code restrict employers from deducting overpayments more than six months after the error occurred.
“The Employer’s failure to do so within the six months meant that it had no recourse and an arbitrator does not have the authority to amend the Collective Agreement to extend the timelines,” the union argued.
The union sought an order stopping the deductions and returning money already collected.
Interpretation would create ‘absurdity’
Arbitrator Mia Norrie rejected that interpretation, finding it would produce an unreasonable outcome.
“This would mean that any employee who simply refuses to meet or agree to a repayment would only have to wait six months and escape their obligation to repay and be entitled to keep the money,” Norrie wrote. “This argument offends every consideration of fairness.”
The arbitrator found the six-month limitation applies only to an employer’s ability to use payroll deduction without first proving its claim through arbitration or other legal proceedings—not to the underlying debt itself.
“There is no question that the language of Article 14 of the Collective Agreement and s. 12 of the Employment Standards Code both serve to limit an Employer’s ability to deduct from an employee’s paycheque to within a six-month period,” Norrie stated. “This in no way suggests that this time limit somehow eliminates any indebtedness.”
The arbitrator noted the worker received an extra $27,335.44 on a single paycheque—nearly 20 per cent of his $141,414.40 annual salary—and would have immediately known he was not entitled to the funds.
“He did nothing to notify the Employer, and it was only discovered by the Employer months later in January 2024,” Norrie found.
Unjust enrichment principle applies
Norrie applied the legal principle of unjust enrichment, which prevents someone from unfairly benefiting at another’s expense. The worker “received monies to which he was not entitled and has no legal defence to suggest he should be able to retain it beyond a spurious argument that the Employer is barred from reclaiming it after six months.”
The arbitrator found the employer made genuine efforts to work with the worker and union on a repayment plan, but they delayed meeting “until such time as the Employer in frustration began making deductions.”
While the employer was entitled to recover the overpayment, the arbitrator found it still breached the collective agreement by making deductions outside the six-month window.
“Despite the Grievor’s refusal to cooperate and the frustrations of the Employer, this did not entitle it to improperly deduct monies from the Grievor’s paycheque,” Norrie stated.
Practical remedy balances interests
The arbitrator dismissed the grievance but crafted a remedy addressing both parties’ concerns. Any damages owed to the worker for the improper deductions are offset by the employer’s right to recover the overpayment.
The employer can continue biweekly deductions of $277.72 until the full $27,335.44 is repaid. As of October 2025, the employer had recovered $10,275.64, leaving a balance of $17,059.80.
The decision reinforces that employers retain legal options to recover overpayments even after missing procedural timelines for automatic payroll deductions. However, they must pursue those recoveries through proper channels such as arbitration rather than unilateral deductions.
The case also highlights the importance of workers cooperating with repayment discussions when overpayments occur. The arbitrator made clear that delaying tactics won’t eliminate legitimate debts.
Employment lawyers say the decision provides helpful guidance for employers dealing with payroll errors, particularly when workers refuse to engage in repayment discussions.
See more on this ruling in our sister publication HR Law Canada.
