In California, a group of recently laid off Microsoft employees received a letter in the mail from their former employer, stating that due to an “inadvertent administrative error” there was an overpayment made in the employee’s severance check. Microsoft initially requested that the ex-employee’s return the overpayment amount to the company (they’ve since changed their mind). While it’s not clear if employees are bound by the law to return the overpayment, Microsoft does include some information about tax consequences relating to overpayments in the letter. You can see a partially scanned copy of the Microsoft letter on TechCrunch. (They are also reporting now that Microsoft has backed off their demand for return of the overpayment, and will allow employees who were overcompensated to keep the amount. Only about 25 were overpaid.)
So if you were laid off and received a severance package, and your former employer turned around claiming an overpayment error, would you willingly give back the overpayment amount? Do you think companies should absorb accounting errors such as these in order to save their public reputation, like Microsoft did?