Can I Still get my Bonus After Being Terminated?
Bonuses are incentives throughout all industries, but they are particularly popular throughout the financial industry. For many financial industry employees, a performance bonus, also referred to as “incentive compensation” or “discretionary bonus,” is a major component of their yearly compensation. These bonuses are paid at the end of the calendar year and often amount to more money than an employee’s base salary. Financial bonuses are calculated using a formula that takes the employee’s yearly profit generation into account. When employees are terminated or resign before receiving their promised bonus, employers will often refuse to pay it. While companies argue that bonuses are at their discretion, courts have repeatedly sided with employees who say that bonuses can be equated to unpaid wages.
Legal Background and Precedent
The Fair Labor Standards Act and state wage laws determine whether or not financial employees are entitled to their incentive compensation. In some cases, bonuses are considered a gratuity or benefit, while in other cases, bonuses qualify as “wages” because they are annually given to employees. In the state of New York, even an oral pay agreement made at the beginning of an employee’s career is enforceable. After all, on Wall Street, “it’s all done by a handshake. Your word is your bond.”
When You Can Get Your Bonus
Litigation surrounding these disputes has confirmed the following criteria for when an employee is entitled to a bonus after termination or resignation.
- When an employee has reasonably anticipated a bonus of a predetermined amount.
- When an employee’s overall salary package was designed to emphasize performance pay over salary, so bonuses were an integral part of their compensation.
- When the bonus was measurable and reliant upon individual performance quotas that were satisfied before termination.
- When the bonus was paid to most other employees.
When You Can’t Get Your Bonus
On the other hand, there are many instances in which employees are not entitled to bonus pay after termination or resignation.
- When bonuses are based on the discretion of managers, rather than on a performance-based formula.
- When bonuses are not a significant portion of an employee’s yearly pay.
- When bonuses are gratuitous, or not a regular form of compensation. A bonus only qualifies as an implied employee-employer contract when it is an annual payment.
- When an employer has clearly prohibited extra payments to terminated or resigned employees.
- When bonuses were just introduced prior to the employee’s termination, so it was not always expected.
- When performance criteria that entitled one to a bonus have not been satisfied.
Seek Legal Assistance
If you’ve been terminated and your employer will not pay your yearly bonus, the Law Office of Christopher Q. Davis, located in New York City, can assist you. Contact us today at (646) 430-7930 to schedule a free case evaluation and receive experienced legal counsel. You don’t pay unless we win.