Under California Law, Bonuses are considered "wages" within the meaning of Labor Code section 200. An employee's eligibility for bonuses is determined by the contract terms of your agreement with the employer, and the Company policies on bonuses.
Miller Wilmers APC, a Southern California based Law Firm. Notes on Bonuses
Bonuses are categorized as either discretionary or non-discretionary. The employment lawyers at Miller Wilmers APC have found that almost all Companies categorize any type of bonus as discretionary. There is a strategic reason for this. A discretionary bonus does not have to be paid out to an employee if the Company does not wish to do so, regardless of the performance of the employee throughout the year. When Companies terminate employees who are entitled to bonuses as wages, the first defense we will hear is that the bonus was discretionary, and the employee was never entitled to the bonus to begin with. A non-discretionary bonus must be paid to the employee once the terms and conditions for receiving the bonus have been completed.
Terms and Conditions for Receiving a Bonus
A binding contract is formed between the parties at the time of the commencement of employment. While in some cases, such as "at-will employment", it can be terminable at the will of either party, in others the contract is similar to the contracts you would have for any other matter. The contract obligates the employer to deliver the promised benefits when the employee completes the requires services in accordance with the terms of the plan.
In some cases, employees who voluntarily leave their jobs before the bonus calculation date are generally not entitled to the bonus. Essentially, you have not fulfilled the terms and conditions of receiving the bonus, which would be to have been employed by the employer. Additionally, some employers construct contracts that even if the bonus is non-discretionary, you will not be entitled to the bonus if you are terminated with good cause. Logically, if the agreement offers a bonus if a person is employed for a specific set of dates, the bonus is only paid out if the employee remains employed until that date. It is in this situation that we see that employees are often let go just on the eve of the bonus payout.
A Discretionary Bonus is one given at the sole discretion of the employer. What the Courts look to see is if the employee had a reasonable expectation to receive a bonus. Employers typically don't announce discretionary bonuses in advance and occur on a one-time basis. Even if the bonus relies on the employer's discretion, if the employer sets goals or standards in advance of the payout, the Courts will treat the bonus as a nondiscretionary bonus if those goals and standards are met.
A Nondiscretionary bonus is a pay increase offered by an employer if the employee meets the conditions discussed above. These are usually standing offers that incentivize performance in the workplace. Nondiscretionary bonuses typically appear as hiring bonuses; attendance bonuses; bonuses for quality of work; bonuses for accuracy of work; longevity pay for retention bonuses; profitability bonuses; individual or group production bonuses. Nondiscretionary bonuses must be paid to the employee upon the completion of the terms and conditions. Meaning if you have completed those terms and conditions and are either fired or resign, you will still be entitled to receive those bonuses.
Contact us for a Free Consultation
If you believe you are entitled to a bonus that your employer did not pay out on; whether you are still with the Company, have been terminated or resign, you may be entitled to that bonus. Call our employment attorneys at Miller Wilmers APC for a free consultation to discuss the best path forward to receiving those unpaid wages that your employer has unlawfully withheld.
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