Can an Employer Charge an Employee for past Billing Errors?

Full question:

I work as a subcontractor for a jewelry designer. My boss noticed some pricing errors I had made on production pieces listed on my most current invoice. She corrected them, which is fine as I had not yet been paid, then she went back into already paid invoices and listed the money that I now owe them for mistakes I listed in production prices. Some errors were caused by hard-to-interpret costing sheets, some by the costing sheets having no labor listed and the boss verbally informing me of what to input, and some from unknown labor that I transferred over from preexisting similar designs for which I did know the labor cost. Their lack of input, as they continually state they do not have the time, when I looked up those labor costs required me to continue billing in this manner on unknown or unclear labor on various jewelry pieces for nearly four years. I've been trying to go over my labor costing lists with them for years to no avail. I even printed off my spreadsheet that I had developed based on items I had looked up in their costing sheets and by the above manner, and gave it to them a year ago. Now they are trying to retroactively extract pay differences on those past paid invoices. I do not have a written contract with them. I told them yesterday that their having paid me on each invoice was their verification and acceptance of the terms, prices, and totals listed in each invoice. Any questions on prices listed in each invoice needed to be addressed before payment and thus acceptance of the invoice is given. I am unable to find any documentation supporting these questionable business ethics. I would appreciate any input you may have or any resources you can direct me to. Is it legal for them to charge me these questionable labor cost discrepancies on past paid invoices?

• Category: Contracts
• Subcategory: Mistake
• Date: 04/07/2025
• State: Kansas

Answer:

Mistake covers a broad set of situations, and courts often distinguish between unilateral mistake and mutual mistake. A unilateral mistake is an incorrect belief of one party that is not shared by the other party. A mutual mistake is an incorrect belief shared by both parties. Courts have traditionally held that mutual mistakes are more likely than unilateral mistakes to make a contract voidable.

Where only one of the parties is mistaken about facts relating to the contract, the mistake will not prevent formation of a contract unless the nonmistaken party is or should have been aware of the mistake made by the other party, or if the mistake was due to mathematical mistake in addition, summation, subtraction, division, or multiplication and was made inadvertently and without gross negligence.

If you wish to use the legal system to resolve your dispute, you may want to review the following general information regarding contract law and breach of contract actions:

An unjustifiable failure to perform all or some part of a contractual duty is a breach of contract. A legal action for breach of contract arises when at least one party's performance does not live up to the terms of the contract and causes the other party to suffer economic damage or other types of measurable injury. A lawsuit for breach of contract is a civil action and the remedies awarded are designed to place the injured party in the position they would be in if not for the breach. Remedies for contractual breaches are not designed to punish the breaching party. The five basic remedies for breach of contract include the following: money damages, restitution, rescission, reformation, and specific performance. A money damage award includes a sum of money that is given as compensation for financial losses caused by a breach of contract. Parties injured by a breach are entitled to the benefit of the bargain they entered, or the net gain that would have accrued but for the breach. The type of breach governs the extent of damages that may be recovered.

Restitution is a remedy designed to restore the injured party to the position occupied prior to the formation of the contract. Parties seeking restitution may not request to be compensated for lost profits or other earnings caused by a breach. Instead, restitution aims at returning to the plaintiff any money or property given to the defendant under the contract. Plaintiffs typically seek restitution when contracts they have entered are voided by courts due to a defendant's incompetence or incapacity.

Rescission is the name for the remedy that terminates the contractual duties of both parties, while reformation is the name for the remedy that allows courts to change the substance of a contract to correct inequities that were suffered. In order to have a rescission, both parties to the contract must be placed in the position they occupied before the contract was made. Courts have held that a party may rescind a contract for fraud, incapacity, duress, undue influence, material breach in performance of a promise, or mistake, among other grounds.

Specific performance is an equitable remedy that compels one party to perform, as nearly as practicable, his or her duties specified by the contract. Specific performance is available only when money damages are inadequate to compensate the plaintiff for the breach.

Promissory estoppel is a term used in contract law that applies where, although there may not otherwise be an enforceable contract, because one party has relied on the promise of the other, it would be unfair not to enforce the agreement. Promissory estoppel arises from a promise which the promisor should reasonably expect to induce action or forebearance of a definite and substantial character on the part of the promisee and which does induce such action or forebearance in binding if injustice can be avoided only by enforcement of the promise. Detrimental reliance is a term commonly used to force another to perform their obligations under a contract, using the theory of promissory estoppel. Promissory estoppel may apply when a promise was made; reliance on the promise was reasonable or foreseeable; there was actual and reasonable reliance on the promise; the reliance was detrimental; and injustice can only be prevented by enforcing the promise. Detrimental reliance must be shown to involve reliance that is reasonable, which is a determination made on an individual case-by-case basis, taking all factors into consideration. Detrimental means that some type of harm is suffered.

Reasonable reliance is usually referred to as a theory of recovery in contract law. It was what a prudent person might believe and act upon based on something told by another. Sometimes a person acts in reliance on the promise of a profit or other benefit, only to learn that the statements or promises were either incorrect or were exaggerated. The one who acted to their detriment in reasonable reliance may recover damages for the costs of his/her actions or demand performance. Reasonable reliance connotes the use of the standard of an ordinary and average person.