Can an employer lay off employees to avoid paying out bonuses?

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Can an employer lay off employees to avoid paying out bonuses?

We were told the amount of our bonuses last month and checks were supposed to be mailed the first week of this month. However, the company delayed mailing the checks and laid off some employees a few weeks later. The employees that were laid off are now being asked to sign separation contracts stating that they are not entitled to the bonus, or any unpaid vacation, overtime, expenses, etc. Because the checks were supposed to be mailed prior to the layoffs, are these employees legally entitled to the bonuses?

Asked on February 21, 2012 under Employment Labor Law, North Carolina

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

The issue depends on the terms of your bonus agreement (if any; see below): are you entitled to your bonuses at the end of the calendar year? Or at some other time, which has already passed? Or do you have to be employed as of when bonuses are actually paid to receive them? Any of the above is legal; again, the issue is what is the actual agreement, if any, in regards to bonuses? In the same vein, are you guaranteed bonuses in any way, through some bonus agreement or plan--such as for hitting certain financial or other performance targets--or are bonuses purely discretionary on the part of the employer. If the former, and you did in fact hit those targets, you may be entitled to the bonus, whereas if they are purely discretionary, your employer should be able to simply decline to pay them.

Thus, there is no single answer to your question: it depends on the nature of the bonus and of any agreement(s) governing it. (Note: an agreement does not have to a single written document; it can be found in several documents, such as emails, memos, etc.; it can be oral; it can even be implied from a demonstrated past practice of the parties, or how bonuses have been paid and handled before). Since the question is so fact specific, you need to discuss the situation at length with an employment attorney, bringing with all writing or correspondence on bonuses, to understand your rights.


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