Asking Former Employees to Return Overpaid Severance
Employees can be understandably hurt & confused when profitable companies lay off workers. Imagine how they feel when, after having been sent packing with a meagre severance package, they’re notified that the company overpaid them, and wants some of that severance back.
Here’s a story about just that, from the Globe and Mail: Microsoft asks laid-off workers for cash back
A few weeks after launching the first wide-scale layoffs in its history, Microsoft Corp. admits it screwed up a key part of the plan.
The company is asking some laid-off employees for a portion of their severance back, saying an administrative glitch caused the software maker to pay them too much.
According to this version of the story, the overpayments “ranged from hundreds of dollars to $5,000 per employee.”
This is a case where knee-jerk reactions are easy, in one of two directions. Some will say, basically, “Finders keepers, losers weepers! Tough luck, Microsoft!” Others will say “It’s Microsoft’s money. Crappy mistake, but it’s gotta be paid back.” I don’t find either of those responses fully satisfying.
Two quick points:
1) This might be a case that illustrates well the difference between having a right, on one hand, and it being right to exercise it, on the other. Microsoft has a right to ask for the money back; but that doesn’t necessarily mean it should do so.
2) This might be a case where thinking in terms of corporate character & virtue is useful. That means, don’t focus on the actual action in question, or at least don’t start there. Ask instead, “What kind of corporation does Microsoft want to be? How does it want to present itself to the world?” Then, and only then, should we ask, “And how should that kind of company behave in this kind of case?”
(To personalize this, think of an analogous case: a homeless guy asks you for a dollar. Chatting away on your cellphone, you absentmindedly reach into your pocket hand him what you think is a dollar bill. You walk a little farther, and then realize it wasn’t a dollar. It was a twenty. Oops. Honest mistake. Do you now go back & ask the destitute man for the money back? You have a right to. But maybe you shouldn’t.)
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Thanks to both Garrett & Will for suggesting this story.
The Business Ethics Blog 
Good question. I don’t know how many employees we’re talking about here, but it would have to be a lot to add up to the amount of negative press this will generate. No wonder Google’s motto is “don’t be evil” – it would appear easy to forget.I had a similar thing happen to a colleague – not a layoff, but an overpayment that was identified more than a year late (and to an employee who had been dicked around a bit.)In both cases, is there any legal requirement to repay? What if you said no?Also, I’m pretty sure your homeless example happened in a sitcom recently… it’s going to bug me now, trying to remember it.
Paul:I’m not certain, but I suspect they’re legally required to give it back.But then, I wonder how likely Microsoft is to want to spend that time in Small Claims court?The homeless-guy example certainly sounds like something George Costanza could end up in the middle of…Chris.
Yeah, that was such a funny story. As an addition, the public blow-back on this did result in Microsoft washing their hands of the matter and cancelling their request to return the overpayments.Was their accounting department simply too zealous to fix their own mistake? In any case, it’s always easier to make the “right” decision once you look like a fool in public, right? 😉
Morgan Stanley recently did this to me and I’m more disappointed in the ethical character of the company than anything else, especially since the amount is less than $5k and given that I was ‘laid off’ four months after I went to HR about my boss harassing me.