Legal Question Regarding Employee Bonuses

[ringfinger]

Just curious if any of you were or are in a similar boat as me, and, whether anyone with any legal standing has any thoughts on this.

So I have been with my employer for just over 3 years. In my original offer, I agreed to a base salary plus a "bonus" of 15% of annual salary. No details in the offer on how said bonus is obtained and when I originally questioned the recruiter on it, he told me it was based on company goals. Ok, fine, that's fairly common.

Since that time, they have reduced all managers' bonuses to 10% and eliminated it entirely for non-managers as the company has been flat in sales year over year. I'm a manager so I still have a 10% bonus tied to my comp.

Anyway, here's my question: In the 3+ years I have been there, not only have I never been paid a penny in terms of bonus payout (fine, that happens sometimes), I have never even been notified that we didn't make bonus. There has not once been a communication on what metrics were needed to be met and to what degree in order for it pay. In fact, it almost feels like a thing you don't talk about because if you do you're just here for the money or something.

It's at the point where I seriously wonder if there even is a bonus program at all. Like, perhaps, they just include that in offer letters to suppress base salary and save on that a bit. If this were true, it wouldn't be surprising as my company is cheap af. So long question short -- let's assume there is no actual bonus plan at all. There is no set of metrics they track to determine whether bonuses pay, and it's really just something that they do if and when they decide they were in a good mood that year.

Is that legal?

Of course a company isn't legally obligated to pay a bonus, but, I have a bonus incentive tied to my comp agreement of 10%. Shouldn't there legally have to be an actual mechanism behind that or is it totally lawful to just .... lie and pretend there is?

[lakerjoshua]

Was the 10% included in your OTE or outlined specifically as to how it was paid out in your initial offer letter, or other documents concerning your compensation package at the start of your employment?

[jonnybravo]

AH is probably the man to ask. IIRC he's a lawyer that deals with workers.
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KOBE

[unleasHell]

My understanding is that Bonuses are only paid out if the company meets certain financial goals.

Typically, companies would pay these into a Bonus Pool Account, but again if there is no money put into it, then there is no money to pay out.

Typically, these Bonus Pools (if they do have a limited amount of money) pay the people on top first, so while Managers and Directors may not get their bonuses, the CEO and VP's still get theirs.

It's a RHIP (Rank Has Its Privileges)...
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“Always remember... Rumors are carried by haters, spread by fools, and accepted by idiots.”

[LakerSanity]

I'm an employment lawyer who often specializes in wage cases. Without more details, I can't tell you. However, in general, the written policy or offer letter dictates the terms of your employment. Those terms can be proactively applied, or changed, but not retroactively applied or changed (after the work has already been done). If the bonus arrangement/plan is not in writing, but was just an oral promise, that typically won't be upheld. If its in a contract, offer letter or employee manual/handbook, that's better evidence and more likely to be enforceable.

Again, it all depends on the details and how solid of a commitment it is. If its discretionary or there isn't a term for an automatic non-discretionary bonus, then there could be issues with any type of claim for non-payment.
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[ringfinger]

[ringfinger]

[Aeneas Hunter]

LS is the guy to talk to. Bonus issues are very much a question of state law, and I don't practice in California. I'll give you a couple generic comments, though:

1. If the recruiter told you that the bonus was based on company goals, that sounds like a discretionary bonus. This should be a lesson to anyone who gets a job offer with a bonus component. Unless there is a specific formula, the promise of a bonus is usually just fluff. I find it remarkable that so few people ask questions about this. The same is true for commissions, by the way. Few people ask for a written commission plan. They hear "you get a five percent commission," and then they find out that the employer deducts a zillion little charges before calculating the commission, or the employer says "we only pay a two percent commission on that sort of deal."

2. The general common law rule is that an employer can change the terms of your employment at any time, as long as it is prospective. You accept the changes when you elect to continue your employment. This is different if you have an actual written employment agreement with specific termination provisions and the like, but few employees actually have anything like that. So a vague promise for a 15% bonus is written in water.

So yeah, the bonus language in your offer letter may very well have been a scam of sorts. The company is probably still telling new employees that they get salary plus bonus, even though there has been no bonus for years.

[Aeneas Hunter]

[ringfinger]

[LakerSanity]

I agree with AH. They can put anything in the offer letter, but if the language is ambiguous and comes with a bunch if subjective, discretionary conditions, then it isn't really a guarantee of anything no matter the conditions. Basically, it's no more than someone saying that if they have a good year they might be willing to cut you off a slice, but no promises. Under the law, you can't sue someone because they said they might do something if they feel like it, no matter how hopeful you were.

For something to be enforceable, it cannot be discretionary and has to be automatically guaranteed based on set criteria, whether that be performance, length of employment or any other criteria. If it has to be approved by anyone before it is issued, that is automatically a sign it's not guaranteed, especially where the agreement does not spell out any objective criteria that would force anyone to approve it, no less any criteria at all.
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[ringfinger]

[LakerSanity]

^It depends on the situation, but the basic things I and AH are saying are true. As an attorney, I am not going to give a definitive yes or no on an internet forum, but hopefully the above gave you some guidance. Ultimately, if you really care, you should have a consultation with an attorney who can go through all the specific details of your situation and give you a more informed analysis that can't be had through this medium.
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[splashmtn]

[LakerSanity]

^I doubt the labor commissioner would look into something as vague as that nor do I think they would they find that somwthing like that was within their preview, but nothing stopping you or anyone from trying. Also, there is an assumption here that the employer is lying. They may not be. They honestly may just not have the money or justification to bonus people out despite having every intention to under the right circumstances. Thats just one example of how fact specific these situations are and why there isn't just one generalized or cookie cutter answer I nor an attorney can provide without knowing all the specifics of a situation, which is inherently impossible to do in an online forum like this.
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[Aeneas Hunter]

[unleasHell]

These guys are giving you great facts to work with, but coupled with your limited information not much else can be resolved here.

I suggest you approach HR, in a respectful manner and ask them to explain to you exactly how the Bonus program works, as an employee who had it mentioned on your offer letter, you should have done this during your first year there.

Like I said before, most likely it is tied to the companies' profit goals/expectations. It is not like you are demanding a raise, you are just asking how something that was vaguely promised to you works.

Don't be shy, get in there tomorrow and report back to us here...!
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“Always remember... Rumors are carried by haters, spread by fools, and accepted by idiots.”

[ringfinger]

[ContagiousInspiration]

find out if the bonus plan is still being offered from a new employee or some way without you asking HR

stay discreet

Have a friend call HR and act as a prospective employee looking at benefits current companies are offering before you apply and submit your resume.
See if anyone is willing to explain the benefit plan to them in clear details.

You know what you want to ask.. just get someone else to do it so it doesn't trace back to you

[Aeneas Hunter]

[Heartburn]