When it comes to bonuses, an employee is not entitled to these payments if they are fired before the bonus payment date. This is an unfortunate reality, but there are circumstances where an employee can recover bonuses that were expected.
To understand the laws that may apply to your situation, let’s start by looking at the two categories of bonuses in California: discretionary and non-discretionary. Then, we will look at how you can make a case for unpaid, non-discretionary bonuses, even after you are terminated by your employer.
Did you lose out on a bonus because you were fired before the expected pay date? If you have questions or concerns about your right to a bonus under California law, contact our office and schedule a free consultation.
Why the Type of Bonus Matters
Under the law, bonuses can either be discretionary or non-discretionary. If a bonus is discretionary, it is at the employer’s discretion rather than a payment that is earned via exceptional job performance, hitting sales goals, etc. As a general rule, you are not entitled to bonuses that are categorized as “discretionary.”
You also cannot demand discretionary bonuses upon being fired, as it’s given at the employer’s judgement. That means your employer controls whether it is offered or rescinded, how much you will be paid, and whether you can receive the bonus even if you are terminated. This is completely different than a non-discretionary bonus, which is contingent on performance metrics, like your efficiency, worked hours, and profits you brought in to the company.
Discretionary Bonuses are Not Considered Wages
Why is this an important statement? It’s because employees are entitled to payments that are classified as wages, meaning they are entitled to payment for any work that’s performed on the employer’s behalf. A non-discretionary bonus is a promise that the employer makes to you, based on your ability to meet certain goals. These goals are tied to responsibilities and duties that have to do with your job. Thus, you can make the argument that a non-discretionary bonus counts as wages, which you are legally entitled to.
On the other hand, a discretionary bonus refers to payments that have no association to anything that’s done on the employer’s behalf. That means it is unearned and given out solely at your employer’s discretion. A holiday bonus given at the end of the year is a common example of a discretionary bonus. This is really a gift or recognition of a worker’s overall service at the company rather than payment that is earned by the employee.
Bonuses that can be Recovered if You are Laid Off before the Payment Date
So, let’s move on to non-discretionary bonuses and your right to recover these payments after you have been fired. As we mentioned before, this is considered a part of your wages under California law, and therefore, your employer owes you this sum of money, even after you are dismissed.
The definition of a non-discretionary or earned bonus as wages is in accordance with California’s Division of Labor Standards Enforcement. In order to sue your employer, you must have proof that the bonus is directly linked to your work performance, and there is an agreement between you and the employer.
So, the idea that a bonus is linked to specific objectives that benefit the employer is crucial to the definition of a non-discretionary bonus. In addition, the promise of the bonus must be spelled out in an agreement between the involved parties with terms like the payment date and the objectives that must be satisfied.
Review Your Employment Contract
Generally, the terms related to your wages, including bonuses, are included in the contract you signed when you were offered the job. In this document, you are likely to find information, like the formula used for calculating the bonus and the terms that must be met by the employer to receive these payments.
If a bonus payment was promised to you in an employment contract, this in itself may be enough to designate it as earned wages, which you are entitled to as compensation from your employer. It’s a good idea to have your contract reviewed an employment attorney. That way, you verify your eligibility for a bonus after being fired and take legal action against your employer if they refuse to pay.
Proving that You have the Right to an Unpaid Bonus
There may be challenges for employees who are denied bonuses after being terminated from their job. For example, there may be ambiguity surrounding the terms of a bonus agreement, such as:
- A verbal agreement for the bonus, rather than something in writing
- The promise of a bonus was implied and not explicitly stated
- The amount of the bonus was not clearly established, meaning it would be calculated based on subjective factors related to your work performance, as evaluated by your employer / supervisor
If the bonus was promised orally, it’s easy for the employer to contest the amount or the terms of the bonus arrangement. Thus, employees should always obtain advice and guidance from a lawyer that’s experienced in unpaid non-discretionary bonus claims. If an agreement does not explicitly state the bonus amount, your attorney can help you calculate a sum that’s acceptable to both parties. Or, they can try your case before a judge and jury and let them decide how much you are owed.
Contact a Lawyer that can Sue for Wrongful Termination
A legal advocate is your greatest ally when you are cheated out of compensation by your employer, especially if the incident happened after you were fired. Our employment lawyers have decades of experience in wage theft violations, and we are more than ready to fight for justice on your behalf.
All of our attorneys work on contingency, under an agreement known as the Zero Fee Guarantee. When you hire us, you will not be charged a single penny in legal fees. Instead of asking you for hourly fees or a retainer, we wait to receive a percentage of your settlement. That way, you owe us absolutely nothing if we do not resolve the case in your favor.
We look forward to speaking with you during a free consultation, which you can schedule by contacting out office.
