When does a company legally owe you a bonus that was promised in writing?

December 16, 2007 5:38 PM

Does anyone here have experience with the legalities of performance bonuses as they apply to someone living in Canada? This is complicated.

Here's the situation in (necessarily anonymous) detail. I have received my performance review for the past fiscal year at my company. The review includes a performance bonus target, which is one factor in determining the amount I'll receive as a bonus for FY 2007, with other factors being company performance, etc. The usual considerations. FY 2007 is finished.

I am seriously considering quitting my job. The point of the question is, at which point is it financially "safe" to do so, which is to say at which point does the company owe me the bonus it has (sort of) promised me in writing?

Even though FY 2007 is now past I won't quit until January (because logistically that's how it would work out anyway with a standard two-week notice), but is it legal for a company to not pay out a bonus for past performance to an employee who has quit? Or is the bonus dependent on my employment with the company at the time at which said bonus is paid out?

(this is posted anonymously for obvious reasons)

posted by anonymous to law & government (5 comments total)

Please check your employee handbook. If this is a company of any size, it will be spelled out there in detail. Here's another thread that might help.
posted by jacquilynne at 7:00 PM on December 16, 2007

This sounds like the sort of thing that will be dictated more by the language of your employment contract than any state (errr.... provincial) or national laws.

I don't know if it's required, but I've had employment contracts that spelled out things like "all bonuses are at discretion of employer" or something like that, presumably to avoid gerrymandering. (Often employees are capable of spiking or tanking quarterly or annual bonuses to manipulate the calendar: a salesperson may deliberately "hold" sales to make the next period seem bigger, or pre-submit all sorts of questionable things right before a period ends, so contracts that dictate bonus structures usually deal with all those situations.)

If your contract is unclear on this, why not just wait to GET the bonus, then quit? Seems easier than delving into matters complex, nefarious and legal, especially if the difference is only a couple of weeks.
posted by rokusan at 10:33 PM on December 16, 2007

IAN your personnel manager, but I am a personnel manager.

Employee handbook should be your first point of call. If you've achieved your objectives for the year and this is documented then it should be pretty straightforward that you will be paid out.

However, check the handbook. In my company, you have to have a full year's employment under your belt to receive the bonus. Resign on Jan 1st and you're safe, resign on Dec 27th and you can say goodbye to the bonus.
Some employers may pro-rate the bonus according to time served during the year if they are based on the performance of a team rather than an individual.

As always, read the manual!
posted by arcticseal at 12:12 AM on December 17, 2007

Please check your employee handbook.

In many jurisdictions, an employee handbook is not a contract and is legally meaningless. (I hesitate to say "most" or "all" because I haven't looked at the issue in the last 5 years.) It's not considered a contract and its terms are not binding. The idea is because that the contractual relationship is already defined: X works, Y pays. Thus all that other stuff in the employment handbook are things proposed by the employer that are not supported by consideration from the employee. Thus, the obligations in an employee handbook would be, at best, illusory contracts because past consideration is no consideration at all. There may be some equitable claims that can be made about it, but it isn't binding.

To the poster: go talk to a lawyer. The lawyer will help you answer two important questions: (1) do you have a binding employment agreement or are you an at-will employee; and (2) is the issue of bonus covered in your employment agreement.

at which point does the company owe me the bonus it has (sort of) promised me in writing?

That little "sort of" will be the entire thing that resolves this question. The "sort of" is what you need to talk to an attorney about.
posted by dios at 10:47 AM on December 17, 2007

I've seen it play out both ways. I believe the more common thing is, outside a contractual agreement to the contrary, a bonus is a bonus, you aren't entitled. If you leave, say byebye to the money. Wait for the money, then say byebye to the job, instead.
posted by Goofyy at 8:02 AM on December 18, 2007