In most cases, courts only enforce employee bonus promises if they are part of the employee’s employment contract. Generally speaking, employee bonus payment laws would require that the employer promises a bonus in exchange for an employee’s promise to achieve certain results in their work for the employer.
In other words, a bonus that has to be paid legally would be promised in anticipation of future performance, rather than as a reward for work that has already been done. If an employer simply promises a bonus of some sort after the employee has achieved a result that pleases the employer after the fact, a court is likely to view it as an unenforceable promise and not part of a contract.
Why Is an Employee Bonus Only Good for Future Work?
Courts are not in the business of making people keep their promises. What courts do is enforce contracts as provided by contract law in each state in the United States. So, in order to enforce a bonus agreement, a court must find that a contract exists between the employer and the employee that includes a bonus provision.
For a contract to be valid and enforceable by a court of law, both the employer and the employee have to exchange something of value. In other words, the employer has to get something of value from an employee in return for their promise to pay an employee bonus. So the employee would have to promise to provide some result for their efforts or some specific service in exchange for the promised bonus.
This is usually what happens when a bonus is promised for subsequent performance in connection with employment. Here, the employer’s return benefit comes from the employee’s promised future work efforts or results. However, this cannot be the case when a bonus is promised after the employee has performed their job.
In this latter case, nothing is given by the employee for the promise of a bonus, so there is no contract regarding the bonus. Since the employee has already done their work, any promise to provide a bonus lacks a return benefit. Simply put, an employer cannot exchange the promise of a bonus for something that they have already received.
Can an Employer Take Away a Bonus?
Again, if the bonus is promised as part of a contract of employment and the employee has provided the performance promised by the employee on their part in the contract, then the employer should not be able to withhold bonus payments. If an employer promises to pay a bonus to the employee in exchange for some performance on the part of the employee in connection with their employment, e.g. achieving a certain sales goal, then if the employee performs as promised in the contract, the employer must pay the bonus as promised in the contract. Failure to pay the bonus would be a breach of their contract.
If an employer fails to perform as promised in a valid contract, the employee who is harmed by the failure to perform may sue the employer for breach of contract.
However, if the employer wants to renegotiate the employment contract with the employee and remove a provision for payment of a bonus, then it would be up to the employee to decide whether they are interested in continued employment on new terms that do not include a bonus.
Can a Promised Employee Bonus Be Enforced Even If It’s Not Considered a Contract?
It is possible in some cases, that a court would enforce an employer’s promise to pay a bonus even if a contract is not proven. A court might enforce a promise to pay a bonus on the theory of detrimental reliance. However, it is important to note that courts reserve detrimental reliance only for cases that present the possibility of an injustice being done. Courts in some states recognize a claim of detrimental reliance and courts in others do not recognize it. A person seeking to rely on the theory of detrimental reliance would want to consult an experienced contract lawyer to find out the status of detrimental reliance in the state where the person works.
The theory of detrimental reliance might be available to the employee who relies on the promise of their employer to pay a bonus and is affected detrimentally by that reliance, suffering a loss or injury.
The employee would have to show the following elements to succeed:
- A promise was made by an employer to the employee;
- The employee relied on the promise and took some action in reliance on it;
- The reliance by the employee was reasonable and foreseeable;
- The employee suffered a detriment by relying on the promise.
- Failure to enforce the promise would result in an injustice..
For example, suppose employer X promises employee Y a bonus for his past work and contribution. Y, hoping to use the money as down payment for a house, talks with X to confirm the bonus and explain his need for the money. Although Y is concerned, X reassures him that the bonus will be paid, so Y moves forward with his purchase of the house. In this case, although it is unlikely that a contract has been formed, Y may still be able to claim detrimental reliance if X fails to pay the bonus.
If an Employee Is Terminated, Must an Employer Still Honor a Promise to Pay an Employee Bonus?
If the employment of an employee who is promised a bonus in a valid contract of employment is terminated, the employer might still be obligated to pay the terminated employee a bonus. It would depend on the circumstances of the case.
It may be that the employment was terminated for perfectly good reasons and possibly by mutual agreement of the parties. But, again, the main issue would be whether the employee fulfilled their part of the employment agreement with the employer and provided the employer with the performance that was promised in exchange for the bonus. So, to look again at the example of a salesperson who is promised a bonus in exchange for reaching certain sales goals, if the sales person achieved the promised goals before their employment was terminated, a court may well find that the employer must pay the promised bonus.
How Can a Lawyer Help Me?
If your employer promised you a bonus that has not been paid, you should consult an experienced employment lawyer. Your lawyer will be able to analyze the facts of your case and determine whether or not there is a contract between you and your employer. Your lawyer can advise you as to how best to proceed to recover what has been promised.
If you are thinking about starting a new job and the employer has promised you a bonus, you should review the situation with an experienced employment lawyer. They can help make sure you have a contract that is valid and enforceable in a court of law.
If you are an employer who wants to motivate your employees by offering bonuses for enhanced performance of job responsibilities, you might also want to consult an experienced employment attorney for advice on how to structure any employment agreement. An attorney can help you get the performance you want.
