Ask the Expert: When Can Employers Withhold a Sign-On Bonus?

Question: We gave a $5,000 sign-on bonus to a new hire who has been a no-show for numerous days, and we haven’t been able to contact them. Can we withhold and/or deduct from this employee’s final paycheck to recoup some of the sign-on bonus?

Answer: Most likely, no. Unless the employee signed an agreement giving you the right to do so, withholding or deducting wages for hours actually worked constitutes an involuntary deduction in violation of federal law—specifically, the Fair Labor Standards Act (FLSA)—and most (if not all) state wage and hour laws.

If you are considering sign-on bonuses, you should draft agreements for employees to sign that address this issue before you pay the bonuses. Without such an agreement, then you are left with two choices when an employee isn’t showing up or responding to you: chalk it up as a loss or pursue the money in a civil action filed in court against the employee (which, in the end, might cost more than you could even recover if you win).

Meaghan Murphy is an associate at the firm of Skoler, Abbott & Presser, P.C., in Springfield, Massachusetts, and can be reached at mmurphy@skoler-abbott.com.

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