October 2025

 

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Oregon Enacts Employee Overpayment Legislation

10/02/25

Author: ADP Admin/Tuesday, September 30, 2025/Categories: Compliance Corner , State Compliance Update, Oregon

The Details:

Oregon has enacted SB 968, effective Jan. 1, 2026, which provides specific guidance to employers regarding the collection of wage overpayments from employees.   

Background:

Current Oregon law (ORS 652.610) provides that an employer may not withhold, deduct or divert any portion of an employee’s wages unless one of the following applies:

·       The employer is required to do so by law.

·       The deductions are voluntarily authorized in writing by the employee.

·       Deductions are for the employee’s benefit and are recorded in the employer’s books.

·       The employee has voluntarily signed an authorization for a deduction for any other item, provided that the ultimate recipient of the money withheld is not the employer and the deduction is recorded in the employer’s books.

·       The deduction is authorized by a collective bargaining agreement to which the employer is a party.

·       The deduction is authorized under ORS 18.736.

·       The deduction is made from the payment of wages upon termination of employment and is authorized pursuant to a written agreement between the employee and employer for the repayment of a loan made to the employee by the employer.

Effective Jan.  1, 2026, for employees not covered by a collective bargaining agreement, employers may make deductions from wages to recover erroneous overpayments under the following conditions: 

·       The overpayment must have occurred within the 90 days preceding the deduction. 

·       The employer must give at least 14 days for the employee to acknowledge the overpayment in writing. 

·       The employer must provide a written statement with details of the overpayment and the deduction plan, specifying that the deduction will not exceed 10% of the employee’s gross pay per pay period unless the employee agrees to a higher percentage. 

·       The employee must acknowledge receipt of this information in writing. For employees covered by a collective bargaining agreement, deductions for overpayments are permitted under the terms of the agreement.

Note:  The amendments made pursuant to  SB 968 apply to collective bargaining agreements entered into, renewed, or extended on or after Jan. 1, 2026.

Next Steps:

Effective Jan. 1, 2026, Oregon employers may begin to utilize the steps provided in SB 968 to collect overpaid wages from their employees.

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