Can an Employer Demand You Repay a Bonus Received Before You Give Notice

My question involves labor and employment law for the state of: Massachusetts

I gave my two weeks recently and am still within that window. I work at a very very small company. I was so unhappy at my job and had felt that I was being underpaid and so I asked my boss for a raise in August. I asked for the raise to come as an addition to my monthly paycheck but my boss insisted that he provide the raise all at once in a lump sum of $4000+. I never signed anything ever regarding this bonus and it was basically just given to me so that I would stay at the company. I had no intentions of leaving at the time.

However, a month later I was offered a new job which doubles my salary and is exactly what I want to do. Everything has been fine at work and I felt we were on good terms until Friday afternoon where my boss claimed that I am in debt to him $3500 since I did not stay for the year and that bonus was meant for the year.

Do I owe him this money?

Also- if he thinks I am in debt to him I assume he is also not planning to pay me for the two weeks that I have worked since giving my notice. Is this legal? What are my options?

I really hate confrontation but this seems unavoidable.

Did you sign anything with regards to the bonus? If not, then tell him (politely, because you may need him for a reference someday) to pound sand.

As for not paying you, I think you're getting a bit ahead of yourself there. But IF he does not pay you for time you actually worked, you can file a complaint with the state. In MA, he also owes you for any vacation time you may have accrued but not used, also.

I disagree with cbg. This a 'very very small company' and very small companies don't exactly work like large companies where an employee has to sign a bonus agreement to receive a bonus. Very often a bonus is given in lieu of a raise for various payroll and accounting reasons. In this case, the bonus was for,

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it was basically just given to me so that I would stay at the company. I had no intentions of leaving at the time.

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And in essence, was a $76 per week raise.

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I did not stay for the year and that bonus was meant for the year.

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OP stayed only 2 weeks and the boss is asking her for $3,500 back. I suspect that the other $500 is the salary she earned in the last two weeks.

I see nothing illegal or unethical about this.

hi budwad,

are you suggesting that i owe my boss the bonus money AND i should not be paid for the past two weeks?

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hi cbg,

i am with you on this one, that is basically what i did. i never signed a contract of any kind with this company, even when starting. there is nothing i ever signed regarding payment, bonuses, two weeks notice, nothing. it was all done through conversation and negotiations were almost always made over the phone.

what should i do?

You asked for a raise and your boss gave you the bonus for the year because he wanted you to stay with the company and you are not, then I think you owe him the money. And since he is asking you for $3,500, as I said, he is using the other $500 to pay your salary for the two weeks you worked so you are being paid.

The bonus was not based on your performance but was to increase your yearly wage and keep you at the company. Divide the bonus by 52 weeks and you earned $152 of it and that is all.

hi budwad,

i make much more than $500 every two weeks.

also, in discussion with friends who work at other companies, it is commonplace for people not only to take a bonus and leave but to actually wait until their bonus has been given to them to give the two weeks notice.

again, i had no intention of leaving at the time the bonus was given to me, but i am under the belief that if an employer gives you a payment you should not have to return it, especially if i never signed anything.

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Quoting Boston75

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hi budwad,

i make much more than $500 every two weeks.

also, in discussion with friends who work at other companies, it is commonplace for people not only to take a bonus and leave but to actually wait until their bonus has been given to them to give the two weeks notice.

again, i had no intention of leaving at the time the bonus was given to me, but i am under the belief that if an employer gives you a payment you should not have to return it, especially if i never signed anything.

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If the bonus was for prior performance, then yes, I can see someone waiting for the payout before leaving the company. In your case, the bonus was looking forward not backwards.

And maybe you will also get a final paycheck and your boss is being generous.

And don't hang your hat on the fact that you did not sign any agreement. Neither did your boss. But ask yourself if there was a meeting of the minds here. OP, "I really need a raise." Boss, "OK, I will give you a lump sum of $4,000 for the year if you stay with the company." OP, "OK agreed."

Wait for others to give their opinions. I gave you mine.

I'm inclined to think along the lines as budwad is but I believe the actual statements by you and the employer during these negotiations are going to make a difference.

If if it was a payment to retain you for a year I believe you would be obligated to refund it but not just a pro rated share but the entire bonus.

Why you ask?

because it wasn't a raise where you would earn it but a single payment intending to purchase your commitment to stay a full year. You didn't stay so you would not have earned the bonus.
In other words is was a pre-payment of a bonus you would be due if you stayed a full year, which you obviously did not.

Why don't either of you show me the wage and hour law that permits the OP's employer to require for the money back, barring an agreement that it will be returned if he does not stay for a specified period of time?

Yes, please provide any kind of actual law which says I am obligated to return that money. Can you also show me any laws regarding payment for the "two weeks notice" period?

Thank you! I appreciate all the help.

The would certainly be enlightening. If the employer wanted to sue to get "his" money back, what legal authority would he cite?

OP, please confirm just for security's sake; it is my understanding that you did not at any time sign anything that indicated this bonus was predicated on your remaining a year with the company. Is that the case? Because if it is not the case, and you did sign something, my answer will be the same as the other two.

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Quoting Boston75

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I was so unhappy at my job and had felt that I was being underpaid and so I asked my boss for a raise in August. I asked for the raise to come as an addition to my monthly paycheck but my boss insisted that he provide the raise all at once in a lump sum of $4000+. I never signed anything ever regarding this bonus and it was basically just given to me so that I would stay at the company. I had no intentions of leaving at the time.

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One type of bonus rewards past performance. Another kind of bonus is a "retention bonus", paid as part of an agreement that the employee will not quit for a defined period. You seem to be conceding that this bonus was forward-looking, essentially a raise paid in advance, but that you should be able to keep it upon resignation. Your employer pretty clearly regards it as a retention bonus which you must repay because you didn't stay as agreed. One other possibility is that your lawyer is characterizing the payment as an advance on your wages, and not as a bonus at all. You may be able to find out how your employer characterized the money by examining your paystub or electronic records of the paycheck for the pay period in which you received the bonus.

As nothing is in writing, you are at something of an advantage because it is very difficult to determine what the understanding is between the parties when the agreement is entirely oral, and also because your employer would have the burden of proof. Absent his reaching an agreement with you, your employer appears to have the options of suing you, of quietly accepting his losses, or of accepting his losses and potentially explain to anybody who asks him about it in the future that you quit weeks after taking a retention bonus (or large advance) and wouldn't return the money.

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Quoting Boston75

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Also- if he thinks I am in debt to him I assume he is also not planning to pay me for the two weeks that I have worked since giving my notice. Is this legal? What are my options?

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If you're not paid, you may file a wage complaint.

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Quoting cbg

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Why don't either of you show me the wage and hour law that permits the OP's employer to require for the money back, barring an agreement that it will be returned if he does not stay for a specified period of time?

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Is the question whether there is such a law, or whether the employer might try to sue (despite poor odds of success) in the absence of such a law? If the employer sues, the employer will have the burden of proving an agreement pursuant to which part of the money is to be repaid. There may or may not be some documentary evidence of an obligation to repay in the form of payroll records, emails and the like.

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Quoting Bubba Jimmy

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The would certainly be enlightening. If the employer wanted to sue to get "his" money back, what legal authority would he cite?

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Possibilities include breach of contract and unjust enrichment, depending on what legal theory the employer chooses to pursue.

Ya, what K said.


And as as we all know many verbal contracts are fully enforceable so I go back to my original statement;

it it depends on the purpose and intent of the payment and how it was treated.

A lot depends on exactly what was said regarding the bonus and we don’t know that. However, in the states where I practice, the employer (even if it is a very small one) would be at distinct disadvantage here in not having a written agreement that says you are obligated to repay if you leave before you’ve worked some additional period of time. Moreover, the employer could not deduct anything from the salary you are now due for the work you’ve done in order to recoup the $3,500 unless the employer had an agreement in writing from you allowing the employer to do that. Very likely, if the employer wants the $3,500, it will have to sue for it, not deduct anything from the pay you are due.

Yeah, what Tax said.

Hi Cbg,

I did not sign anything, at any time. I never signed a contract to start working at this company and never signed one for any bonus.

Is your answer still that I should keep the bonus and that I am also entitled to my two weeks pay since giving my notice?

You would be due the two weeks if you worked the two weeks but not otherwise.


Signing or or not signing a contract in itself is not the determining factor here. While it makes it more difficult for the employer to successfully sue you by no means does it mean they won't be successful.

Hi Jk,

So, if I go in Tuesday morning I will have to ask "Are you planning to pay me for the past two weeks?"

IF he says no, should I say ok and just walk out or should I say that I am owed that money by law?

This situation is complex. Ugh.

There's no need to assume that he's not going to pay you. If he does not pay you for work you've actually done, you have legal recourse. There are NO circumstances whatsoever under which he can legally not pay you for work you've done, and presumably he knows that.

Sometimes my fellow members are very myopic in their view of the law as written in statutes and regulations as opposed to an examination through the case law of the State.

Some keep speaking of agreements and contracts that will control the situation of the employment and the bonus but in this case there are none. But it is not that clear cut and I suggest that a reading of the Massachusetts case law on employee and bonus contracts may change your mind.

An employment contract can be terminated "at will" by either the employer or employee at any time. There may be a time frame for the notification of termination (30 days, 2 weeks or whatever, or no stipulation at all), depending on if it is a written contract or a verbal contract. But the fact remains, that either can terminate the contract. And from what I have read now in the Massachusetts case law, the employer has the upper hand in this situation.

But the more important doctrine here is that of "bad faith". I disagree with those of you who have said that the employer has the burden of proof to establish that the "bonus" is not a retention bonus looking forward. And that OP is entitled to it whether she stays with the company or not just because it was paid, agreement or not.

OP is going to have to prove that the bonus was not taken in bad faith knowing that she will be leaving the company.

Budwad, which one of us works in Human Resources in Massachusetts? You or me?

You may be the smartest person on the planet when it comes to Human Resources in Massachusetts, I am just telling what I found in my research on the issue. Human Resources is not the practice of employment law, is it? You may be correct and I may be wrong or maybe not. :friendly_wink:

Human Resources professionals have to be very much aware of employment law, thank you, and I have direct experience on this point. Since 49 out of 50 states are at-will states (and the 50th recognizes the at-will doctrine in some situations) the fact that Massachusetts is an at-will state is irrelevant. There is no evidence whatsoever in what the OP has posted that any contract existed; it appears to be a case of the employer deciding after the fact that there was a one-year stay provision. There cannot be a bad-faith issue if the poster had no idea that he was expected to stay a full year to get the bonus.

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Quoting budwad

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Sometimes my fellow members are very myopic in their view of the law as written in statutes and regulations as opposed to an examination through the case law of the State.

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I think most of the people in the forum have only passing familiarity with state regulations, although they're rarely going to provide much insight into the issues raised in most forums. Statutes, quite obviously, can be important. Case law can shed light on how courts interpret statutes. If somebody has case law that suggests that another person has misinterpreted a statute, they should share it.

What statute or regulation do you believe has been misinterpreted, and what case law have you found that clarifies the issue?

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Quoting budwad

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Some keep speaking of agreements and contracts that will control the situation of the employment and the bonus but in this case there are none.

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You mean that there are no written contracts. There certainly is a contract, even if it boils down to a simple exchange of services for compensation.

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Quoting budwad

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But it is not that clear cut and I suggest that a reading of the Massachusetts case law on employee and bonus contracts may change your mind.

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What is not clear cut, and what case law are you looking at?

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Quoting budwad

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An employment contract can be terminated "at will" by either the employer or employee at any time.

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That's implicit to an at-will employment relationship. Nobody appears to have any confusion on that point.

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Quoting budwad

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But the more important doctrine here is that of "bad faith".

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You mean, in the sense that case law holds that "every contract implies good faith and fair dealing between the parties to it." As good faith is presumed, bad faith must be proved. Also, an allegation of bad faith is not a magic bullet -- if the plaintiff cannot prove that there was an agreement for the defendant to remain employed, there's no "bad faith" in the employee's accepting a paycheck or bonus. If the plaintiff cannot establish the terms of a contract pursuant to which the defendant agreed to remain employed for a period of time following the bonus, then the plaintiff cannot establish any contractual violation, let alone any basis to allege "bad faith" as a basis to recover the bonus. If the plaintiff can establish such an agreement, then "bad faith" is irrelevant to its right to recover.

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Quoting budwad

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I disagree with those of you who have said that the employer has the burden of proof to establish that the "bonus" is not a retention bonus looking forward.

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If you check Massachusetts case law, or for that matter any state's case law, you will find that a plaintiff alleging a breach of contract has the initial burden of proof. As part of its prima facie case, the plaintiff must establish that a contract exists, must establish its terms, must establish the breach, and must prove damages. If the plaintiff fails to meet its initial burden on any of those elements, the plaintiff loses.

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Quoting budwad

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And that OP is entitled to it whether she stays with the company or not just because it was paid, agreement or not.

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The OP's right to retain the bonus depends upon the terms of any agreement reached with the employer.

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Quoting budwad

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OP is going to have to prove that the bonus was not taken in bad faith knowing that she will be leaving the company.

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That is simply not correct. The defendant does not even have to say a word or offer a shred of evidence until the plaintiff's prima facie case is established.

i think my boss and i had two different ideas about what the bonus was about. i asked and wrote in emails back in august that i wanted a pay raise to $XXX and i was only being paid @XXX at the time. he said he could provide an educational bonus since i am in school for my masters and i continuously said i do not want or need an educational bonus, i would rather have this money spread out on my paycheck on a per month basis so that it is a part of my salary.

we had different ideas about the bonus and what it meant. i wanted that money as part of my salary, it was paid as a bonus, and now it is being claimed that since i didnt stay while i was in school (i just started in september) that i owe the money back.

again, i never wanted it to be for school. on my paycheck it does not say school bonus. it just is a bonus.

Boston, I have some experience with bonuses and deferred comp in Massachusetts. In the absence of a signed agreement that upon receipt of the bonus you will stay with the employer for a year AND that the bonus is forfeit if you don't, the chances that the Commonwealth of Massachusetts will require that you repay the bonus are very slim indeed, and the only reason I don't say non-existent is that I don't do superlatives.

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again, i never wanted it to be for school. on my paycheck it does not say school bonus. it just is a bonus.

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You do not get to set the terms of the payment nor do you get to determine how the payment is characterized. As long as you are receiving minimum wage, the employer can call the "bonus" anything he wants. Your option, if it is not money you wish to accept under the terms stated is to refuse the money.




given this latest statement I believe there was no meeting of the minds regarding the contract underlying the payment. As such, the employer would have a right to rescind the contract and demand repayment of the money.


now, to your benefit, the employer can make a demand for the money but if you refuse, the employer is relegated to suing you and proving his argument in court. If he refuses to sue, you keep the money. If he loses in court, you keep the money.

If he wins, obviously you will be repaying him the money

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Quoting cbg

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Human Resources professionals have to be very much aware of employment law, thank you, and I have direct experience on this point. Since 49 out of 50 states are at-will states (and the 50th recognizes the at-will doctrine in some situations) the fact that Massachusetts is an at-will state is irrelevant. There is no evidence whatsoever in what the OP has posted that any contract existed; it appears to be a case of the employer deciding after the fact that there was a one-year stay provision. There cannot be a bad-faith issue if the poster had no idea that he was expected to stay a full year to get the bonus.

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First, I am not speaking of at-will states here. I am speaking of at-will termination of an employment contract.

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There is no evidence whatsoever in what the OP has posted that any contract existed;

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Agreed.

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it appears to be a case of the employer deciding after the fact that there was a one-year stay provision

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Where do you get that presumption when OP wrote this?

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it was basically just given to me so that I would stay at the company.

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Because if we take the OP's word, and there is no reason not to, the one-year provision was neither discussed nor agreed to until after the poster had given notice.

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Quoting Boston75

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i think my boss and i had two different ideas about what the bonus was about. i asked and wrote in emails back in august that i wanted a pay raise to $XXX and i was only being paid @XXX at the time. he said he could provide an educational bonus since i am in school for my masters and i continuously said i do not want or need an educational bonus, i would rather have this money spread out on my paycheck on a per month basis so that it is a part of my salary.

we had different ideas about the bonus and what it meant. i wanted that money as part of my salary, it was paid as a bonus, and now it is being claimed that since i didnt stay while i was in school (i just started in september) that i owe the money back.

again, i never wanted it to be for school. on my paycheck it does not say school bonus. it just is a bonus.

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Now the story is changing. I just don't believe it. And if this was about education, you would not be entitled to the bonus if you let the company.

what is there not to believe?

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Quoting Boston75

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what is there not to believe?

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we don't have the employers perspective here and your statements are ambiguous. It is not that anything is believable or not but simply that there are not enough facts to give you much of an answer.

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Quoting cbg

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Because if we take the OP's word, and there is no reason not to, the one-year provision was neither discussed nor agreed to until after the poster had given notice.

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Are you a revisionist? Read the original post of the OP.

Once again she wrote:

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it was basically just given to me so that I would stay at the company

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How ambiguous is that?

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Quoting cbg

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Because if we take the OP's word, and there is no reason not to, the one-year provision was neither discussed nor agreed to until after the poster had given notice.

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and it comes down to what I said a few minutes ago:

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now, to your benefit, the employer can make a demand for the money but if you refuse, the employer is relegated to suing you and proving his argument in court. If he refuses to sue, you keep the money. If he loses in court, you keep the money.

If he wins, obviously you will be repaying him the money

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it matters not who is believable or not.

my apologies if the original post was unclear, i didnt know how much detail was needed. i could write pages about this and tried to keep it brief. i wasn't expecting to get so many replies!

the second posting is more clear, i agree. but it still remains true that no agreement was signed and i said several times that the bonus should not be for education that it should be an increase in my monthly salary.

whatever it was for, if you had NO intentions of leaving a company at a certain timepoint and your boss gave you $4000 direct deposit, it would probably not be turned down.

Okay, let's get to the bottom of this.

OP, when was the FIRST time that your employer indicated in ANY way that the bonus was predicated on your staying with the company for ANY length of time?

If different, when was the FIRST time that your employer indicated to you that it was predicated on your staying with the company for a year?

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Quoting jk

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given this latest statement I believe there was no meeting of the minds regarding the contract underlying the payment. As such, the employer would have a right to rescind the contract and demand repayment of the money.

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I think that would be easier if the money were not paid out, and the employee were claiming that the money was still due. Jumping the gun and issuing a bonus, then trying to argue, "I thought it was contingent on his staying longer, but he didn't have the same understanding", puts you in a bad position -- as an employer, the sophisticated party in the transaction and the party that defines the terms, you're likely to be the party held responsible for any ambiguity in the agreement.

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Quoting jk

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now, to your benefit, the employer can make a demand for the money but if you refuse, the employer is relegated to suing you and proving his argument in court. If he refuses to sue, you keep the money. If he loses in court, you keep the money.

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And if this is an incorporated business, save for in small claims court (where other issues arise, including giving up the opportunity to appeal) he will need to hire a lawyer.

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Quoting budwad

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First, I am not speaking of at-will states here. I am speaking of at-will termination of an employment contract.

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The concept of at-will employment is the same, whether we're speaking of the notion in an individual case or if we're speaking more broadly of the default nature of the employment relationship under state law.

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Quoting Boston75

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my apologies if the original post was unclear, i didnt know how much detail was needed. i could write pages about this and tried to keep it brief. i wasn't expecting to get so many replies!

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We don't need pages, although sometimes small details can make a huge difference. The most you can ever get from a forum of this type is a strong sense of what might happen, because we typically only have one side of the story and don't have any way to investigate or verify facts.

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Quoting Boston75

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the second posting is more clear, i agree. but it still remains true that no agreement was signed and i said several times that the bonus should not be for education that it should be an increase in my monthly salary.

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You didn't initially mention anything about education. I'm wondering if the employer was trying to structure this as some sort of educational reimbursement for possible tax advantage. When you looked at your payroll records from the check in which you received the money, how was the money described? (e.g., as wages, as a bonus, as an advance, or in some other manner.)

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the second posting is more clear, i agree. but it still remains true that no agreement was signed

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while it becomes harder to prove a verbal agreement, unless the law requires a written agreement, whether you signed anything or not is irrelevant.

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and i said several times that the bonus should not be for education that it should be an increase in my monthly salary.

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and as I said; you do not get to determine what the payment was for nor the rules imposed on recieving it. If you did not like the terms, you had the right to refuse it.

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whatever it was for, if you had NO intentions of leaving a company at a certain timepoint and your boss gave you $6000 direct deposit, it would probably not be turned down.

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ah, so now you are arguing that you accepted it merely because you thought you would not be leaving. That gives me reason to suspect you are fully aware of the purpose of the bonus and are simply trying to find a way to keep it.

so, you can either repay it or keep it. If you return it, it's done. If you keep it, the boss can either go. Ok fine and let it go or he can sue you. If he sues you, he has to prove his claim. You would then attempt to defend your position. The judge decides.

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And if this is an incorporated business, save for in small claims court (where other issues arise, including giving up the opportunity to appeal) he will need to hire a lawyer.

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accepted but that doesn't change anything I said. It simply means there would be an additional cost in fighting for the money. Who knows, maybe he is the kind of guy that would spend $10,000 to try to win $100 simply because that is the kind of guy he is.

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Quoting jk

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accepted but that doesn't change anything I said.

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Right. It's supplemental information.