Hello. I'm a physical therapist in AZ. I signed on with a company 3 months ago with a 5K sign-on bonus, stipulating at least 12 months of service, or I'd have to pay it back, which I can understand. I'm leaving in 30 days (just gave my resignation letter) and I know I still owe the balance of my 5K bonus, after PTO hours accrued. They want to take it out the remainding paychecks that I'll have coming to me, a total of 3 I believe at a specific amount per check to make up for the difference. Is this legal? I didn't sign anything saying that they could deduct from salary for any monies owed, just that I would "reimburse them" for the bonus. I offered another way of paying it back, such as monthly installments after I leave, etc. What is your advice?

Thanks.

Don't know about the legality of it, but off-hand it seems reasonable. If you can live the smaller paychecks for the last 3 pay periods I would recommend you accept the proposal, as it could avoid a potentially nasty headache down the road. I have seen cases of people in a similar situation who have reimbursed their companies for bonuses they had to return, like you, but they did it by separate check to the company. The problem is that the original bonus is reported on your W-2, but the repayment is often not reported. Consequently you end up paying income tax on a bonus you had to return. One could deduct the repayment as an unreimbursed business expense, but that only works if you itemize and even then it usually doesn't make you whole. So check with the payroll department, and if they say that your W-2 next year will report your reduced wages for these last 3 pay checks (net of the reimbursement they are withholding), I'd say accept their proposal.

[QUOTE=bujinkan]Hello. I'm a physical therapist in AZ. I signed on with a company 3 months ago with a 5K sign-on bonus, stipulating at least 12 months of service, or I'd have to pay it back, which I can understand. I'm leaving in 30 days (just gave my resignation letter) and I know I still owe the balance of my 5K bonus, after PTO hours accrued. They want to take it out the remainding paychecks that I'll have coming to me, a total of 3 I believe at a specific amount per check to make up for the difference. Is this legal? I didn't sign anything saying that they could deduct from salary for any monies owed, just that I would "reimburse them" for the bonus. I offered another way of paying it back, such as monthly installments after I leave, etc. What is your advice?



Unless Wage and Hour in Arizona says to the contrary I would say it's totally legal for them to deduct it from your paycheck(s).

You signed on for 12 months of service; you are leaving after 3; they are not a bank; they probably are not very happy with you. They don't need to cooperate with you or make things easy.

I'm surprised they gave you the sign-on bonus so early in your employment - I've seen sign on bonuses paid in installments or in total after a certain number of months to avoid this problem.

Hello b:

Well, if you have a choice, I'd pay them back at my leisure. However, I don't think they'll give you a choice. I wouldn't.

excon