Is it legal for an employer in Virginia to keep an employee’s last paychecks to settle a ‘debt’?

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Is it legal for an employer in Virginia to keep an employee’s last paychecks to settle a ‘debt’?

The mid-level employee had signed a retention bonus agreement, accepting a lump sum payment conditioned upon remaining with the company throughout the rest of this year. Now, the employee has another job offer and wants to go to work for a new firm. However, upon putting in the two weeks’ notice, she was told that her final two paychecks were going to be withheld to reimburse them for the retention bonus they had given her. That can’t be legal, can it? I assume that a mutually-agreed upon payment plan could be worked out? She doesn’t have the money to immediately give them back their retention bonus. Thanks.

Asked on May 10, 2018 under Employment Labor Law, Virginia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 2 years ago | Contributor

Employee pay may only be withheld with employee consent or pursuant to a court order (e.g. court ordered wage garnishment). Even if an employee owes the company money, such as to repay a retention bonus not fully earned out, the employer may not withhold the pay without consent. Such consent could have been given in advance, such as if the employee signed an agreement stating that in the event she left early, any unearned part of the bonus could be taken out of final pay.
Without some agrement or consent by the employee, however, as stated, even if she owes the employer money, the employer could not simply withhold her pay. In theory, the employee could sue for her pay. But if she does, the employer could, in the lawsuit, either counterclaim for the money the employee owes it or at least raise the amount owed by the employee as a "set off" against what the court might find it owes the employee. (To oversimplify: if A owes B money and B also owes A, then if B sues A for the money A owes it, A may raise B's debt as a defense and will only end up paying the difference between what it owes B and what B owes it. So if A owed B $1,000 and B owed A $800, at the end of the day, B will only get $200 from the lawsuit.) Therefore, as a practical matter, if you owe the employer more or less as much as they owe you, there may be no point in suing for the money: they will be able to hold up your debt to them in lawsuit and offset it vs. what they owe you.


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