Is it illegal to give bonuses based upon nepotism

Not per se.  Is there any contract, either individual or union, that mandates equal treatment or some such?  If not, and if the discriminatory compensation wasn't based on some statutorily forbidden factor, such as race, religion, gender, etc., the owner of hte business can generally give bonuses to whomever they want.  If the person giving the bonuses is not the sole owner, he/she may have breached a duty to the other owners by using the business's assets to benefit her own family at the expense of the other owners, but I don't see any duty to the other employees to treat them the same as her family.