Is it legal for a company to withhold a bonus that was supposed to be paid to me?

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Is it legal for a company to withhold a bonus that was supposed to be paid to me?

Also, the bonus amount shows as income that I received on my W-2 along with taxes paid.

Asked on January 4, 2012 under Employment Labor Law, North Carolina

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If you had a bonus letter, bonus plan, employment agreement mentioning the bonus, etc. which functioned as a contract to receive the bonus, then, as long as you fulfilled your obligations, you would have to be paid as per the agreement. So, if you had an actual written bonus plan, for example, which stated  that you would receive a 10% bonus if the company hit its financial numbers for the year, and the company did hit its numbers, then you should have received the bonus.

But if either there was no agreement as to the bonus (and note: a unilateral promise made by management that you would get a bonus, where you did not have to do anything to earn it, is not an enforceable contract or agreement; its a mere promise, which the company may disclaim), or to the extent that the bonus was specifically stated to be "discretionary," then the company could withhold it if it chose. Only bonuses that are part of enforceable agreements and which have quantitative criteria (like sales, revenue, etc.) which you can demonstrate you met have to be paid. Note in this regard that the traditional Christmas or holiday bonus is a discretionary one; companies choose when and to whom to give them, and may elect to withhold them.

Whatever you did receive is what should be reported on your taxes--they can't report income you did not receive.


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