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What you need to know about workplace bonuses
EDNA Team • Sep 09, 2021
Image: https://www.shutterstock.com/image-photo/bonus-word-cube-on-reflection-1018399684
What you need to know about workplace bonuses
For most people, getting a bonus from their employer is a pleasant surprise, a nice show of appreciation beyond the regular paycheck, or a little something extra around the holidays. However, the process of being paid a bonus is not always straightforward – especially if the specifics are undefined and open to interpretation.
If your contract includes terms for a bonus and you uphold your end of the deal, from a legal perspective, that payment is rightfully yours. At Employee Law Group, we have worked with many clients to help them claim the cash rewards they are owed by employers who refused to pay up.
Here’s what you need to know about workplace bonuses.
What is a bonus?
A bonus is a financial compensation
over and above your typical wage. Companies hand out bonuses to employees at all levels—from entry to senior—to incentivize high performance, attract talent, enhance employee retention, ward off jealousy among team members, and other reasons. Bosses can give bonuses for any reason… or no reason at all. But when the bonus is contingent on reaching defined targets, it becomes something else.
When is a bonus not a bonus?
In short, a bonus is not a bonus when it becomes a wage.
Sometimes, your boss’s generosity might not be what it seems. Instead of a gift, that payment might just be a part of your regular wage, if it meets certain requirements
A bonus that depends on meeting specific goals—say, if you increase sales by 20 percent, you will get a $1,500 bonus—is a wage you are owed the moment you meet that goal. It becomes a part of your salary, just as if it were wages earned by working the required hours. Think of it this way: If I tell you “Wash my car, and I’ll give you $10,” and then you wash my car, I owe you $10. You met the goal I set, so I’m on the hook.
However, whether the bonus is guaranteed is sometimes disputed by the employer.
Case study: When a boss refuses to pay a bonus
For instance, in one case, our client’s employer wrote an offer letter that included the promise of a bonus “up to” his annual salary if he met his production goals. After our client met those goals, he was forced out of his job. When our client demanded his bonus payment, the employer said he was not entitled to be paid because there was no guarantee.
When Employee Law Group got involved in the case, we filed a lawsuit on our client’s behalf that claimed unpaid wages and breach of contract, among other damages and penalties.
The employer was convinced that they did not owe anything because the phrase “up to” wasn’t a firm guarantee. Instead, they argued, it was a “promise to negotiate.”
But every contract, including employment contracts, involves what’s called “the implied covenant of good faith and fair dealing.” That’s lawyer-speak for the idea that if you make a contract, you must act in good faith to give the other side what they expect from the contract.
We had evidence that showed our client tried several times to discuss the terms of his bonus plan and nail down his boss on the specifics. But every time he made contact, his boss blew him off, delayed answering, or reacted harshly. Eventually, it became clear that the employer was never going to make good on his promise.
By repeatedly refusing to negotiate, the boss acted in bad faith and prevented our client from getting a firm guarantee of his bonus.
Before the case went to trial, we negotiated a fair settlement for our client based on bonuses paid to other employees. We believed the evidence was strong that the offer letter committed the employer to negotiating, that refusal to negotiate breached the employment contract, and that the bonus—even though its exact numbers weren’t defined—was owed because the employee held up his end of the deal by meeting his goals. And as a result, it was an owed wage with penalties and damages attached for non-payment.
How to protect yourself
What lesson can you take from this?
- First, be aware that your “bonus” may be guaranteed compensation. If you have an agreement that says, “meet goal X and receive bonus $Y,” and you meet goal X, you are owed bonus $Y as a wage. Your employer cannot avoid or delay paying it to you. It’s yours. You earned it.
- Another important lesson is to make sure that you specify the terms of your employment as clearly and precisely as you can. Our client was able to receive a sizeable settlement because we could cut through the other side’s smoke and mirrors—but it would have been a much simpler matter if the terms of the agreement didn’t leave the boss room to try wiggle out of it.
- And a final valuable lesson is, when you are negotiating with a potential employer, it helps to have qualified legal counsel to assist you. While even the best lawyer can’t anticipate every problem that could arise in your job, we have seen a lot of issues that could have been avoided with a pair of trained eyes looking over a contract before signing.
Contact our team today
Need help claiming a bonus you are entitled to? Want a professional's advice on the employment contract you are gearing up to sign? We can help. Contact the dedicated team at Employee Law Group today.
Our initial consultation is free, and we provide a flat-rate fee for reviewing, advising, and, if necessary, negotiating contract terms for you. The cost may purchase the best peace of mind you’ll ever buy.
Get in touch, and let’s discuss the specifics of your situation.
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