There are many workers who receive a yearly bonus on top of their salary, and these are usually given out during the winter holidays. Bonuses are a great way to motivate workers and thank them for the hard work they put into their job. They also provide a much needed boost for employees, who often use these funds to pay off debts, pay for their child’s college, or make a down payment on a house.
What happens, though, if your employer fails to pay the bonus after all your work and dedication? Can you sue your employer for a promised bonus that was never paid? If you were promised a bonus that was performance based and you met all the required criteria, you may have grounds to file a lawsuit against your employer.
Laws Regarding Discretionary Bonuses
Discretionary bonuses are additional forms of compensation that the employer can choose to give at their own discretion, which is why they are sometimes referred to as unearned bonuses. However, employers usually have good reasons to give these extra payments, like exceptional commitment or innovative ideas that improved conditions or generated profit for the company.
Employers have the freedom to decide when discretionary bonuses are given out, meaning there is no set schedule, like bonuses that are given at the end of the year based on sales generated by an employee. Keep in mind, however, that employers are not required to justify a bonus that is given solely at their discretion. Thus, this is really a gift from your employer, rather than a promised amount of compensation.
This is an important distinction when it comes to your right to take legal action for unpaid bonuses. Because discretionary bonuses are unexpected and not based on any type of performance metrics, employees should not expect them, even if their employer has previously given out bonuses during the holidays for excellent work performance.
Your Right to Nondiscretionary Bonuses
A nondiscretionary bonus is a payment that the employee has the right to expect. This is due to the fact that such bonuses are based on performance goals, like meeting sales targets and customer satisfaction rates. Nondiscretionary bonuses are usually part of the work contract, so they are predetermined and paid by a certain date of the year, or whenever the employee meets the requirements set forth by the employer. Because these are “earned” bonuses, they are considered a part of the worker’s wages.
Why the Type of Bonus Matters
Now that you understand the difference between discretionary and nondiscretionary bonuses, you can understand how the type of bonus impacts your legal rights. Discretionary bonuses do not have to be paid, so employees usually have no recourse to enforce these payments from their employer. As we mentioned before, even if your employer has traditionally given out bonuses at the end of the year, they may choose not to if there is an economic recession and profits are down.
However, if you were promised a year-end bonus based on meeting specific work objectives, this counts as a nondiscretionary bonus. In this instance, your employer is legally required to pay you the bonus. Unfortunately, there are employers that will try to cheat their workers by insisting that a bonus was discretionary. In that case, you will need to prove the following in order to file a legal case:
- The bonus was agreed upon by both you and your employer
- The bonus was linked to performance metrics that are tied to your job duties
- You achieved the metrics that were required to earn the bonus.
If I Quit or Get Fired, can the Company Withhold my Holiday Bonus?
Yes, if the bonus was discretionary in nature, the company may choose not to pay you in the event you are fired or resign from your job. This a bonus that’s at the employer’s discretion, so whether you receive the bonus or not is ultimately up to them.
Employers, however, cannot withhold earned or nondiscretionary bonuses when you have met all the requirements. These payments are technically wages, since they were promised to the worker and based on performance metrics. Thus, if your employer did not pay you a nondiscretionary bonus, you are entitled to this money whether you are still working, fired from the job, or chose to quit on you own. You also have the right to file an unpaid wages or breach of contract lawsuit against your employer.
The only exception to this rule if your work contract or employer’s policies state that employees must be employed at the company at the time the bonus is distributed. Or, the contract may state that you need to be employed for a certain amount of time in order to earn the bonus. This is why it’s essential to read over the policies and contracts with your employer if you are thinking of moving on to another job.
In some cases, an employer may fire you because they didn’t want to pay a nondiscretionary bonus. This is another illegal tactic that can be used for a wage violation claim. At the end of the day, lawsuits for non-payment of a bonus are extremely complicated and challenging to prove. That’s why you should seek help from a California employment lawyer as soon as possible.
Protecting Your Rights as an Employee
As an employee who was denied a nondiscretionary bonus, make sure to review your employment contract and workplace policies for payment of bonuses. Then, collect all communications and documentation between you and your employer that shows you were promised a bonus based on work performance. You will also need evidence to show that you performed the required work, such as performance reviews, pay stubs, emails, and tax forms.
If you feel comfortable, speak with someone in Human Resources about the bonus that was promised to you. California law forbids employers from retaliating against workers for filing a wage and hours complaints, whether it’s done internally or to an agency, like the California Labor Commissioner’s Office.
If your employer refuses to pay you the bonus you rightfully earned, you have the right to seek representation from an employment attorney.
Let Us Help You Fight for a Promised Holiday Bonus
It’s unfair and frustrating to know that your employer is withholding a bonus you earned by going above and beyond at your job. Allow us to help you secure what is rightfully yours, while ensuring that your finances are not impacted by your need to find an attorney. With the Zero Fee Guarantee, the cost of legal services is charged to your employer, which we only receive by winning your case.
It all starts with a free consultation, so contact us anytime to speak with a Los Angeles employment rights lawyer.
