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My ex-employer (I resigned from the company on March 12th,

Customer Question
2012 and although I had...
My ex-employer (I resigned from the company on March 12th, 2012 and although I had an 'at will' contract as I was based in California I gave 2 weeks notice, however as I was moving to a competing company they advised me that my last day of employment would be the day after my resignation, March 13th, 2012) confirmed to me in writing on March 16th, 2011 that I was to receive a 2011 bonus award of $4,930.56 for my contribution to the company's performance during the period January-December 2011. The letter also stated that the payment would be made in my March 2012 salary.

As I had not received the bonus payment by April 14th I contacted my ex-employer who said they would look into the issue. The bonus payment was eventually made on April
On April 26th, 2012 I received notification that the bonus payment had been made however I noted that the payment was for only $1268.35 after taxes had been deducted.

On April 26th, 2012 I contacted my ex-employer as the bonus payment was much lower than I had anticipated based on the written confirmation I had received on March 12th, 2012. The HR Director of my ex-employer responded the same day to advise ' That sum had to be prorated because u worked only 5 months of the year. Sorry for the confusion'. (I had in fact restarted with my ex-employer for the 3rd time in July, 2012).

Based on the written confirmation I received stating that I was to paid a bonus payment of $4930.56, is the company entitled to renege on their original offer?

Kind regards

Jonathan
Submitted: 5 years ago.Category: California Employment Law
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5/2/2012
California Employment Lawyer: Patrick, Esq., Lawyer replied 5 years ago
Patrick, Esq.
Category: California Employment Law
Satisfied Customers: 13,389
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Hello and thank you for entrusting me to answer your question. I am very sorry to hear that you were let go and have encountered these difficulties getting paid.

To answer your question, it is first important to understand the difference between discretionary and performance-based bonuses. Discretionary bonuses are paid at the discretion of the employer and therefore the employer has no obligation to pay them at all, even if it alludes to the fact that it will. Furthermore, since discretionary bonuses are not mandatory, they do not qualify as a "wage earned" until they are actually paid.

Performance-based bonuses, however, are bonuses tied to specific performance based goals and automatically must be paid upon an employee or the company meeting those goals. For example, if the company has an agreement with the employee in place that for any quarter in which the employee sells more than 1,000 widgets he gets a $1,500 bonus, that bonus would accrue and be considered a wage payable immediately upon that employee's sale of 1,000 widgets.

I bring this distinction to your attention because if a bonus was discretionary, an employer has no obligation to pay it and no obligation to make it a specific amount, even if a larger amount was previously promised. Thus, if your bonus was purely discretionary, no legal cause of action would likely arise from the fact that it was untimely paid (since it is not a "wage earned" until paid) nor the fact that a larger amount was previously promised.

However, if the bonus was performance-based, it would constitute a "wage earned" immediately upon satisfaction of the terms that trigger it. Thus, if your bonus was performance-based, your employer would have been required to pay it to you within 72 hours of your notification of intent to quit, assuming it had already accrued (Labor Code 201). Furthermore, failure to pay this bonus within 72 hours would give rise to a late penalty against your employer in the amount of your "daily rate of pay" for each day that the bonus went unpaid for up to 30 days. (Labor Code 203) However, keep in mind that this duty and this penalty only apply if the bonus is a "wage earned," and that is only the case if the bonus is performance based.

So to summarize, if the bonus is purely discretionary, there would typically be no duty to timely pay it or to make it a certain amount, despite previous promises of a higher amount. However, if the bonus is performance based, a duty would arise to pay it within 72 hours of an employee's notice that they quit and a penalty would be assessed for each day of non-payment up to 30 days.

To file a wage claim with the Department of Labor Standards Enforcement, visit this link: http://www.dir.ca.gov/dlse/howtofilewageclaim.htm

I sincerely hope that this information helps you and I wish you the best.

My absolute greatest concern is that you are satisfied with the answer I provide, so please do not hesitate to contact me with follow-up questions. Also, please bear in mind that none of the above constitutes legal advice nor is any attorney client relationship created between us.
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