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.
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 (203) 221-3100 or JMaya@Mayalaw.com.