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Legal Memorandum: Recoupment of a Sign-on Bonus

Issue: Can a company recoup an entire sign on bonus from an employee if the employee does not complete the entire employment term as outlined in the contract?

Area of Law: Uncategorized
Keywords: Earned bonus; Employment term; Recoupment
Jurisdiction: Illinois
Cited Cases: None
Cited Statutes: 56 Ill. Admin. Code § 300.440, § 300.500, § 300.720, § 300.81; 820 ILCS 115/5
Date: 09/01/2008

The controlling Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq. (2007), mandates that “[e]very employer shall pay the final compensation of separated employees in full, at the time of separation, if possible, but in no case later than the next regular scheduled payday for such employee.”  820 ILCS 115/5 (emphasis added).  “Final compensation” is defined as

wages, salaries, earned commissions, earned bonuses, and the monetary equivalent of earned vacation and earned holidays, and any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the 2 parties.

 

Id. 115/2 (emphasis added).

Pursuant to its powers granted under the Act, the Illinois Department of Labor has promulgated regulations to aid in its enforcement.  See 56 Ill. Admin. Code § 300.440 et seq.  Significantly, one of those regulations governs “earned bonuses.”  It provides:

a)         A claim for an earned bonus arises when an employee performs the requirements for a bonus set forth in a contract or an agreement between the parties.

 

b)         A former employee shall be entitled to a proportionate share of a bonus earned by length of service, regardless of any provision in the contract or agreement conditioning payment of the bonus upon employment on a particular date, when the employment relationship was terminated by mutual consent of the parties or by an act of the employer through no fault of the former employee.

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