Court Opinion

ID: 9730005
Source: CourtListenerOpinion
Date Created: 2023-08-26 14:56:50.704648+00
Date Added: 2024-06-11T18:26:03.199846
License: Public Domain

TAYLOR, P. J.
I respectfully dissent. Admittedly, the payment of the bonus was tied to the company’s financial fortunes and was not guaranteed by the employer. However, in the year in question, the bonus was paid regardless of the length of tenure to those in employment on December 15, two weeks after the assignors-employees’ blameless termination. Viewed in a light most favorable to the employer, the record here indicates at least some uncertainty in the explanations given to each of the employees on the nature of the bonus, i.e., when it was to vest and whether it was in the nature of compensation for services.
It is to be noted in this latter respect that the employer subjected the bonus to federal withholding tax and social security payments and was, therefore, eligible to deduct these payments in arriving at its own taxable net income. This has been held to indicate intent to pay compensation rather than make a gift (Willkie v. Commissioner of Internal Revenue (6th Cir. 1942) 127 F.2d 953).1
it seems anomalous that an employer would adopt a policy denying this bonus to those, terminated through no fault of their own, who had *280been employed continuously for almost the entire year to within two weeks of the bonus’ declaration and at the same time allow the bonus to those not terminated, who may have worked only a few months before its declaration.
We should not discourage the salutary practice of paying employees bonuses that do not constitute payment for services. However, when this is done, it.should be incumbent upon the employer to clarify the precise status and terms of eligibility for these payments. This is particularly demanded where the employer refers to the bonus in urging people to accept or continue employment, as in this case (Chinn v. China Nat. Aviation Corp.,. 138 Cal.App.2d 98, 99-100 [291 P.2d 91]).

 An employer is required to withhold income and social security tax only from wages (26 C.F.R. §§ 31.3102-3, 3l.3401(a)-l); the name used by the employer Is immaterial, as bonuses are wages if paid as compensation for services performed. In determining whether a bonus is compensation or a gift, in addition to the tax statutes, the federal courts consider the consistency or regularity of payments, the uniformity in the amount of the payments, the relationship between the amount of the bonus and the remuneration of the recipient, and the financial condition of the employer (Radio Television Technical School, Inc. v. N.L.R.B. (3d Cir. 1973) 488 F.2d 457, 460).