Select Benefit Overpayment Services. The key is to ensure you have a voluntary agreement in writing with the employee before any deductions are taken.When an employer discovers an overpayment of wages, it is best to first approach the employee and explain it. There is a 3year limit of recovery for payroll errors. The law does allow for an employee to voluntarily agree to repayment of any overpaid wages as long as the employee's wages are not reduced below minimum wage. The First Notice shall be sent through regular mail to the employee's last known address on file with the agency, or in the case of an active. This chapter deals with state law provisions identifying, establishing, and collecting overpayments. All states have provisions addressing these matters.