Can a Wall Street Firm Withhold Your Bonus? What New York Law Actually Says
Updated: Aug 26
By Ethan A. Brecher, New York employment attorney, August 22, 2026
In this article:
"Discretionary" is a label, not a defense
Once the firm decides, the bonus may already be yours
Fired right before payout
What the firm will cite, and why it often fails
You may have a contract even if you never signed one
Deferred equity is treated differently
The 2021 law that doubled the stakes
Commissions: the rules favor the employee
Where these disputes are decided
What to do now
For most professionals in banking, trading, asset management, and brokerage, the year-end bonus is not a gratuity. It is the bulk of your compensation. So when a firm terminates you in December and then announces that your bonus was "discretionary" and you are "not entitled to it because you were not employed on the payment date," the loss can run into six or seven figures.
After more than three decades representing financial services professionals in New York, I can tell you that the firm's position is not always the last word. Whether a bonus is recoverable turns on facts that firms would prefer you not examine closely.
Why a "Discretionary" Wall Street Bonus May Still be Owed
New York courts look past the word "discretionary" to how the bonus was actually determined. If your bonus was tied to a formula, a percentage of desk or book revenue, a guarantee in an offer letter, or a consistent course of dealing, it may be an earned wage rather than a gift. In Ryan v. Kellogg Partners Institutional Services, 19 N.Y.3d 1 (2012), the Court of Appeals held that a promised bonus that was part of an employee's compensation package was a "wage" under New York Labor Law § 193, which prohibits employers from making deductions from earned wages.
That distinction matters. A genuinely discretionary bonus can be forfeited under the rule of Truelove v. Northeast Capital & Advisory, 95 N.Y.2d 220 (2000), which allows firms to condition payment on continued employment. But a bonus that was earned through performance and then withheld is a different case, and one that firms often lose.
The First Department has drawn the line with some precision. A bonus is a wage when it is expressly linked to the employee's own labor or services, was earned or vested before departure, and was guaranteed and non-discretionary as a term of employment. In Friedman v. Arenson Office Furnishings Inc., 129 A.D.3d 525 (1st Dep't 2015), a division head's contractual bonus of 15 percent of her division's net profits was a wage, because it measured her own performance rather than the company's overall success. By contrast, compensation tied to the firm's or a department's financial health, or pegged to what peers received, falls on the other side: in Barber v. Deutsche Bank Securities, Inc., 103 A.D.3d 512 (1st Dep't 2013), a managing director's claimed bonus was not a wage because it was to be measured against the average paid to other managing directors in his group, and in Cornell University v. Patsalides, 234 A.D.3d 434 (1st Dep't 2025), incentive compensation linked to a department's net receipts failed for the same reason. The lesson for anyone negotiating an offer letter is simple: a formula tied to your own book, desk, or division is a wage; a share of a pool tied to the firm's results is not.
Once the firm decides, the bonus may already be yours
A further distinction matters. A firm's discretion is exercised at a point in time: the compensation committee meets, the number is set, the manager delivers it. After that point, the firm's argument that the bonus was "discretionary" loses much of its force, because the discretion has already been used.
The First Department established the framework in Weiner v. Diebold Group, Inc., 173 A.D.2d 166 (1st Dep't 1991), holding that New York's long-standing policy against forfeiture of earned wages limits an employer's ability to rely on its plan terms, and that if incentive compensation has been earned, the employee cannot be made to forfeit it even where the plan says otherwise. In Mirchel v. RMJ Securities Corp., 205 A.D.2d 388 (1st Dep't 1994), the court held that a financial services employee could enforce a bonus agreement made at the start of employment where the bonus was an integral part of the compensation package, and that whether unpaid incentive compensation is a discretionary bonus or an earned wage is a question of fact. A New York trial court applied that rule directly in Guggenheimer v. Bernstein Litowitz Berger & Grossmann LLP, 11 Misc. 3d 926 (Sup. Ct. N.Y. Co. 2006), holding that once a bonus that was an integral part of compensation had been earned, the employer could no longer call it discretionary, and nonpayment was a breach. Federal courts in Manhattan have reached the same result: in Sobel v. Major Energy Services, LLC (S.D.N.Y. 2020), the court refused to dismiss a claim where the employer had authorized a bonus and then paused payment when a separate negotiation with the employee stalled, finding a triable question of bad faith.
Retention-style payments deserve separate mention. When a firm promises additional compensation in exchange for an employee's agreement to stay through a period, that promise is consideration for future performance, not a gratuity. In Gruber v. J.W.E. Silk, Inc., 52 A.D.3d 339 (1st Dep't 2008), the First Department refused summary judgment to an employer that called a $75,000 payment a discretionary bonus, because the employee's account was that it was promised in exchange for remaining for the year and was an integral part of her package. That is a question for a jury, not a motion.
Fired right before payout
The most common fact pattern in this practice is a termination in November, December, or January, just ahead of the bonus payment date. Firms rely on plan language requiring employment on the payment date. The Second Circuit addressed that tactic in Wakefield v. Northern Telecom, Inc., 769 F.2d 109 (2d Cir. 1985), holding that even where a commission plan conditions payment on continued employment, that provision cannot be read to let the employer terminate an employee for the purpose of avoiding compensation that was virtually certain to vest. The covenant of good faith implicit in the compensation agreement survives the end of the at-will employment relationship. Federal courts in New York continue to apply Wakefield; the Southern District reaffirmed it in Dreni v. PrinterOn America Corp., 486 F. Supp. 3d 712 (S.D.N.Y. 2020).
The limits are real.Wakefield requires proof that avoiding the payment was a substantial motivating factor in the termination, and it reaches compensation that was earned or virtually certain, not a bonus the firm had never determined. Some New York state courts have read it narrowly. But a termination that follows the compensation committee's decision and precedes the payment date, with no documented performance problem, is precisely the case Wakefield*was written for.
There is a second protection. If you complain to the firm that your earned bonus is being withheld and are terminated shortly afterward, Labor Law § 215 prohibits that retaliation. In Neu v. Amelia U.S. LLC, 226 A.D.3d 515 (1st Dep't 2024), an executive with a formula bonus of 35 percent of salary gave notice that he would resign unless the firm cured its failure to pay it; he was terminated less than a month later, and the First Department held that the notice was protected activity and the timing supported an inference of retaliation. The complaint does not need to cite the statute. It needs only to state, reasonably and in good faith, that the firm is unlawfully withholding earned compensation.
What the firm will cite, and why it often fails
Firms defending bonus claims rely on two cases. In Hall v. United Parcel Service of America, 76 N.Y.2d 27 (1990), the Court of Appeals held that an employee's entitlement to a bonus is governed by the terms of the employer's bonus plan. Hall had been approved for a bonus before he was forced out, but the written plan said no right accrued until the employee received a formal participation notice, and the notices went out two days after he left. The court enforced the plan as written. In Kaplan v. Capital Co. of America LLC, 298 A.D.2d 110 (1st Dep't 2002), a First Department panel threw out a financial services employee's bonus claim based on oral promises from company officers, because the handbook stated that bonuses were purely discretionary and that only specified individuals could alter employment terms in writing, and the employee had signed an acknowledgment of those terms. The First Department has followed Kaplan repeatedly, including in *De Madariaga v. Union Bancaire Privée, 103 A.D.3d 591 (1st Dep't 2013), where the discretionary policy appeared in the offer letter, the handbook, and a memo confirming the prior year's bonus, and in Newmark & Co. Real Estate, Inc. v. Frischer, 145 A.D.3d 421 (1st Dep't 2016), where a signed acknowledgment that no manager had authority to make binding oral promises defeated a claimed $100,000 oral bonus commitment. And in Barber, an oral promise of a non-discretionary bonus made to induce a move to Hong Kong was superseded by a later written assignment letter reserving sole discretion over incentive compensation.
Those cases have real limits. Hall turns on a plan with an express, specific vesting trigger. Many Wall Street plans have no such language, or have language the firm has not followed in practice. Kaplan itself acknowledges that whether unpaid compensation is a discretionary bonus or an earned wage is ordinarily a question of fact; the employee lost only because the written policy was unambiguous and he had signed it. Even Newmark recognized that a promised payment for staying through an acquisition was not a "bonus" within the discretionary policy at all, and Gruber sends that kind of promise to a jury. Where the firm's compensation documents are vague, contradictory, or routinely disregarded, or where a supervisor with authority committed to a number in writing, the firm does not get the benefit of Hall or Kaplan. It gets a trial, or a settlement.
You may have a contract even if you never signed one
Firms frequently defend bonus claims by pointing out that the employee never signed a formal agreement. Under New York law, that is not the end of the inquiry. A compensation agreement can be formed through an exchange of emails, and in the right circumstances, text messages.
The Court of Appeals settled this in Kolchins v. Evolution Markets, Inc., 31 N.Y.3d 100 (2018). A senior broker's three-year contract was expiring. The firm's CEO sent him an email with the subject line "In writing," stating that the terms of the renewal offer were the same as his existing contract: a three-year term, $200,000 base, a $750,000 sign-on bonus, and a $750,000 annual minimum. The broker replied, "I accept, pls send contract." The CEO responded, "Mazel. Looking forward to another great run." The formal contract was never finalized, and the firm later claimed no agreement existed. The Court of Appeals disagreed, holding that an offer, an acceptance, and a congratulatory, forward-looking reply were enough to show an objective intent to be bound. Continued haggling over the formal document afterward did not undo the deal.
The Appellate Division has applied the same principle to employment terms for years. In Stevens v. Publicis, S.A., 50 A.D.3d 253 (1st Dep't 2008), an executive's emails accepting a change to his employment agreement were held to be signed writings that satisfied the statute of frauds because his name appeared at the end of each message. New York's Electronic Signatures and Records Act gives a typed name at the bottom of an email the same legal effect as a handwritten signature.
The limits matter too. The exchange must contain the essential terms: amount, timing, and conditions. And the firm's message must be authenticated, typically by a name typed at the end or a signature block. Courts have refused to enforce text exchanges with no signature at all and email chains that left key terms open. But a managing director who writes "your number this year is $1.2 million" and signs his name has likely created enforceable evidence of a compensation commitment, whatever the formal plan documents say.
Deferred equity is treated differently
A word of caution about restricted stock, options, and carried interest. In Guiry v. Goldman, Sachs & Co., 31 A.D.3d 70 (1st Dep't 2006), a divided First Department held that unvested RSUs and stock options were not wages under the Labor Law, because their ultimate value depended on the firm's stock price rather than the employee's own productivity, and the same reasoning reached a bank's carried interest plan in Gunthel v. Deutsche Bank AG, 32 A.D.3d 335 (1st Dep't 2006). The Labor Law's liquidated damages and fee-shifting are therefore generally unavailable for unvested equity.
That does not mean unvested equity is unrecoverable. Gunthel reinstated the employees' claims under the implied covenant of good faith and fair dealing, because the bank had allegedly sold the plan's assets at less than half of fair market value for its own reasons, depriving the employees of the fruits of their bargain. Deferred equity claims are contract and good-faith claims, and they are often the largest component of a senior professional's loss. They must be pleaded differently, but they are pursued in the same case.
The 2021 law that doubled the stakes
For years, firms had a technical escape hatch. Labor Law § 193 prohibits unauthorized "deductions" from wages, and New York courts held that refusing to pay a bonus at all was not a deduction. In *Perella Weinberg Partners LLC v. Kramer, 153 A.D.3d 443 (1st Dep't 2017), the First Department held that a wholesale withholding of payment was outside the statute, and it applied the same rule to a financial services production bonus in Kolchins v. Evolution Markets, Inc., 182 A.D.3d 408 (1st Dep't 2020). The practical effect was that an employee whose earned bonus was never paid could sue for breach of contract but could not reach the Labor Law's enhanced remedies.
The Legislature closed that gap in 2021. The No Wage Theft Loophole Act added subdivision 5 to § 193, providing that there is no exception to liability for the unauthorized failure to pay wages, benefits, or wage supplements. The First Department has applied it: in Neu v. Amelia U.S. LLC, 226 A.D.3d 515 (1st Dep't 2024), an executive earning $425,000 with a formula bonus adequately stated a claim for an unauthorized failure to pay wages, the court confirming that Labor Law claims may be pleaded alongside breach of contract and that highly paid executives are not excluded from the statute's protection; and in Patel v. Maybank Kim Eng Securities USA Inc., 246 A.D.3d 104 (1st Dep't 2025), the court described the Act as clarifying that all employees are entitled to the full wages, benefits, and wage supplements they have earned.
The difference is money. Under Labor Law § 198, an employee who proves a wage violation recovers the unpaid amount, prejudgment interest, reasonable attorney's fees, and liquidated damages equal to 100 percent of the wages due unless the employer proves a good-faith basis for believing it was in compliance. A $1 million earned bonus that a firm refuses to pay is now a claim for $2 million plus interest and fees, and the fee-shifting provision makes the firm, not the employee, bear the cost of the litigation it forced.
Two caveats. The bonus must still qualify as a wage under Ryan: linked to the employee's own services, non-discretionary, and earned before departure.
Commissions: the rules favor the employee
If any part of your compensation is commission-based, New York Labor Law § 191(1)(c) requires the terms to be in a writing signed by both you and the employer. If the firm never put the terms in writing, the statute creates a presumption that the terms are what *you* say they are. Under Pachter v. Bernard Hodes Group, 10 N.Y.3d 609 (2008), once a commission is earned, it is a wage, and the firm cannot reduce it after the fact.
Where these disputes are decided
If you hold a FINRA registration, your dispute will almost certainly go to FINRA arbitration rather than court. Other disputes may be governed by an employment agreement's arbitration clause or proceed in New York state or federal court. The forum affects strategy, timing, and leverage, and it should be assessed before you send a single email to the firm.
What to do now
Do not sign a separation agreement or release before having it reviewed bu counsel. Gather your offer letter, any compensation plan documents, prior bonus history, and communications about your performance. The strongest bonus cases are built on a paper trail showing that the firm treated your bonus as earned compensation until the day it became convenient not to.
I represent traders, bankers, portfolio managers, brokers, and other financial professionals in bonus, commission, deferred compensation, and wrongful termination disputes against Wall Street firms. Call 860-590-0138 or email ethan@ethanbrecherlaw.com for a confidential consultation.
Ethan A. Brecher, Esq. is the principal of the Law Office of Ethan A. Brecher, LLC, 244 Fifth Avenue, Suite B241, New York, NY 10001. This article is for general information and is not legal advice. Attorney advertising. Prior results do not guarantee a similar outcome.
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