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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Employment Law
Satisfied Customers: 116817
Experience:  20+ Years of Employment Law Experience
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My son's former employer gave him several bonuses over the

Customer Question

My son's former employer gave him several bonuses over the course of a year, saying they were very pleased with his work. Later, they said they had used the wrong formula to calculate his bonuses, &that that formula was for people in higher level of authority than he was, so he had been grossly overpaid. By this time it was thousands of dollars in "excess" bonuses that were at stake. He soon found a better job and left the company, but they made him sign a paper saying that he would work off all of that extra bonus they claim to have paid. He is young and signed it, simply believing them. Since then he has found out that this has happened with several other people and was not a rare exception by this company. He is afraid to spend the legal costs pursuing it, because he is sure he would lose. Any thoughts?
Submitted: 1 year ago.
Category: Employment Law
Customer: replied 1 year ago.
They're treating his work this year as erasing the monies paid in 2014 & tell him they will re-issue a lower W-2 for 2014, for him to file an amended return. This seems wrong, too. I assume they will then issue w-2s for these two calendar years he's working off his "debt" since those bonuses WERE given and must be on some W-2 or another. We've challenged them on this retroactive changing of W-2s, stating that it must be declared in the year paid/received. But they insist this is how their tax advisors & legal department say to handle it. What a mess. We need help.
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
Bonuses are gifts from the employer when not part of his actual pay plan for work (not a guaranteed bonus part of his payment plan, but given by the employer solely at the employer's discretion). A gift is permanent and irrevocable when accepted by the recipient. Unfortunately, he should have sought information before signing that document. Once he signed the agreement with the employer saying he agreed to work off the extra bonus, he was bound to that agreement. Had he refused to sign that agreement, he likely would have won his case and they would not have been entitled to repayment, but when parties sign a written document saying they agree to something, the court is bound to uphold that agreement.
HOWEVER, he could seek to challenge the agreement in court claiming it was coerced by them threatening illegal action of suing him to recover money they had no right to recover, but this type of suit is going to cost him for an attorney and while there is a good possibility he could win, it is not a guarantee. When someone threatens an employee to sign an agreement based on the employer claiming they will sue to recover money they do not have a legal right to recover, this could be deemed coercion by the court and grounds to void the contract he signed. This all depends on the evidence your son can present to the court of course and this is why it is not a guarantee win, but certainly one where the law would be more on his side than the employer's side.
If the bonus is tied to his actual pay plan and is part of his pay plan, not merely at the employer's discretion, then if they overpaid him using the wrong formula, because it is part of a pay plan, the employer can seek to recover if they can prove a mistake was made.
IF they are right in recovering the bonus, then the way they are handling the tax issue is a correct method of doing so. However, this all depends on whether the bonus is classified as a true bonus or part of his regular pay plan.

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