Posts tagged with "Employment Contract Bonus Payments"

Year End Employment Contract Bonus Payments in Connecticut: Enforceable Promises?

Employment Contracts in Connecticut: When is a promise to pay a year-end bonus enforceable against an employer?

Given the downturn in the economy, millions of employees lost their jobs at the end of 2012. Many of those jobs were based upon a compensation structure including a base salary and a bonus to be paid at the end of the year, or early this year, as in now. If you are one of those individuals who lost your job, you are probably wondering whether you are entitled to the bonus you thought you were promised. The Connecticut Appellate Court answered this question in favor of employees.

Case Background

Here are the facts of the case. An employee worked for a small Connecticut employer for several years. At the outset of the employment relationship, the employee agreed to accept a lower salary in consideration for the employer’s promise to pay a year-end bonus. This arrangement continued for several years. Eventually, the employee left the firm and the employer decided to pay only his base salary, but no year-end bonus. The employee sued.

In the lawsuit, the employee alleged breach of contract and wrongful withholding of wages. After trial the court entered judgment for the employee on the breach of contract count awarding damages.  In reviewing the case, the Connecticut Appellate Court found that the trial court properly looked at the employment contract, and parole evidence – circumstances outside of the employment contract – to determine the appropriate compensation, including a bonus payment, for the employee during the last year of his employment. The Connecticut Appellate Court determined the parties entered into a written employment contract setting forth the criteria upon which annual compensation would be based and therefore, the employee had a viable claim to a bonus payment.

The Court’s Decision

The Court found the written employment contract only set forth the timing and basis for calculating the amount of annual compensation. The written employment contract did not set forth the expression of the parties intent as to the timing, form and amount of payment, which are essential terms to an employment contract.

The trial court concluded that the employer had agreed by either words or deeds pursuant to the compensation clause in the contract to pay a bonus to the employee for that portion of the year the plaintiff was employed with the employer. The Appellate Court further found that even though the employer and the employee were indefinite as to the amount of the bonus, this did not render the bonus promise unenforceable. The employer’s promise of a yearly bonus was supported by the consideration of the employee accepting a lower salary throughout the year.

The Appellate Court also reversed the trial court and found that the claim for wrongful withholding of wages should not have been dismissed. The Court determined that under the employment agreement the bonus could have been classified as wages under Connecticut Labor Law.

 

If you have any questions regarding this article, or would like to discuss an employment contract, severance package, non-competition agreement, non-solicit agreement, or any other issue related to your employment, please contact Joseph C. Maya, Esq. at JMaya@Mayalaw.com or (203) 221-3100.

Is a Bonus a ‘Wage’?: Not According to a Recent Connecticut Supreme Court Decision

Is a Bonus a ‘Wage’?:  Not According to a Recent Connecticut Supreme Court Decision

Are you currently employed in Connecticut and have been promised a year-end bonus or had been promised a year-end bonus and never received it?   A recent Connecticut Supreme Court decision may affect the amount of protection you are afforded under Connecticut law if your employer defaults or has defaulted on that promise.

This recent case addressed the question of whether a year-end bonus promised by an employer is considered a ‘wage’ for the purposes of the Connecticut Wage Act.  Answering that question in the negative, the Supreme Court denied a Connecticut employee the ability to proceed with a wrongful withholding of wages claim that he had initially pursued after his employer failed to pay out what the employee had thought to be a promised year-end bonus.

Under this decided Supreme Court case, the amount of liability your employer will face for failing to pay out a promised year-end bonus will hinge upon how your employer defined the conditions under which a bonus would be paid.  If the conditions are specific goals set for you as an individual employee (e.g. a certain number of billable hours need to be reached), then under the Connecticut Wage Act your employer will be required to pay out that bonus as wages in accordance with their promise.  If they do not, you are afforded the protections of the Wage Act and can bring an action against your employer for wrongfully withholding wages.  If successful, it is possible that you could receive, by way of damages, twice the full amount of your bonus and any attorney fees incurred in pursuing the action.  In addition, due to the serious nature of such an offense, your employer could potentially be fined and/or imprisoned for their actions.

Unfortunately, however, if your employer was more ambiguous about the requisite conditions for a bonus, under this new case law, it is likely that they will be able to avoid liability for wrongfully withholding your wages.  If that is the case, while you can still pursue other causes of action against your employer, you will not be able to receive twice the full amount of your bonus or attorney fees.

The events of this recently decided case unfolded as follows:   At the beginning of the employment relationship between an employee and a Connecticut law firm, the parties agreed that the employee’s annual compensation would consist of a base salary and a year-end bonus.  The employment contract called for this year-end bonus to be based on factors such as seniority, business generation, productivity, professional ability, pro bono work, and loyalty to the firm.  The employee remained at the firm for several years and each year he received his salary and the promised year-end bonus.  When the employee left the firm he discovered that he was not going to receive the year-end bonus for that last year of his employment.  To try and recover what he had thought was a promised bonus; the employee commenced an action against his employer alleging breach of contract and wrongful withholding of wages.

The trial court dismissed the wrongful withholding of wages claim, determining that the year-end bonus was not ‘wages’ as defined by the Connecticut Wage Act.  The breach of contract claim, however, went to trial.  The Trial Court found in favor of the employee and awarded him damages in the amount of his year-end bonus plus interest.  On appeal, the Appellate Court upheld the Trial Court’s finding as to the breach of contract claim but reversed the Trial Court’s decision to dismiss the wrongful withholdings of wages claim.  The Appellate Court determined that the structure of the agreement as to the year-end bonus meant that the bonus could have been classified as ‘wages’ under the Connecticut Wage Act and therefore held that the employee could proceed with his wrongful withholding of wages claim.

The issue of the wrongful withholdings of wages claim was appealed to the Connecticut Supreme Court where the Court decided that because the employee’s bonus was discretionary, (not ascertainable by applying a formula) it did not constitute ‘wages’ under the Connecticut Wage Act.  The employee, therefore, was not able to proceed with his wrongful withholding of wages claim.

Although the employee did recover some monetary damages through his breach of contract claim, it was not anywhere near as much as he would have received if he had been able to proceed with his wrongful withholding of wages action.

It is quite possible that after the release of this opinion many employers will revisit their bonus policies to make the language a little less precise or announce that their bonuses are discretionary in order to take advantage of the protections afforded under this recent case.  It is important, therefore, that as an employee you are aware of what kind of bonus you have been promised so that you know how strongly to rely on that promised bonus and what options are available to you if the employer refuses to pay.

If you have already been denied your year-end bonus and believe that it was a discretionary bonus, there are still ways in which you can potentially recover that lost income, such as the breach of contract claim pursued by the employee in this recent case.  If you have been denied a year-end bonus that was not discretionary and you had met the required conditions for receiving that bonus, you are still protected under the Connecticut Wage Act and can bring a wrongful withholding of wages action against your employer.  This action may allow you to receive damages in the amount double your bonus and possibly receive any incurred attorney fees.

If you have any questions regarding employment and labor law in Connecticut, please contact Joseph C. Maya, Esq. He can be reached at (203) 221-3100 or via e-mail at JMaya@Mayalaw.com. Mr. Maya handles cases involving employment contracts, separation agreements, non-competition agreements, restrictive covenants, union arbitrations, and employment discrimination cases in New York and Connecticut.

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