Wording of Bonus Plans
Employers drafting bonus plans have to be very careful about the wording they use. Judges will usually take those words at face value.
Zachary started working as a Branch Manager for a farm supply company after receiving a written offer of employment. He would receive $102,000.00 a year in salary and an “annual performance bonus: 2% growth over the first 5 million dollars in total sales.” After 13 months he met with his boss to figure out what bonus he had earned in the first 12. They agreed that it was $114,000.00.
Apparently the employer had buyer’s remorse and decided that they were paying too high a price. Before the monies were paid out performance issues suddenly arose. The boss complained that Zachary was spending too much time away from the office developing sales. Zachary disagreed. It was alleged that employees started complaining about Zachary’s attendance, attitude and management style.
After 20 months, the boss told Zachary that the employment relationship was not working out and that he was terminated.
Zachary sued for the unpaid bonus and pay in lieu of notice. The employer claimed there was just cause for Zachary’s termination and therefore they owed no notice and no bonus.
Zachary’s lawyer brought a Summary Judgement Motion seeking the unpaid bonus. That is a procedure where instead of having a full trial with live evidence in front of the judge, written affidavits are presented.
The employer argued that the whole thing needed a full trial to decide if there was just cause for the termination. But the judge decided that whether or not Zachary was entitled to a bonus was unrelated to the issue of just cause. Whether or not Zachary did something so bad that the employer was entitled to terminate him without any notice was unrelated to the work he had already performed by the time he was terminated. The wording of the bonus arrangement was clear. There was no additional wording indicating that Zachary had to be employed at the time of payout or innocent of any bad behaviour. It simply told him he would get a percentage of profit growth.
By the time Zachary was terminated he had earned $151,000.00 in bonus and the judge awarded it. Whether or not Zachary was guilty of behaviour so bad that it was just cause for termination without notice could be decided at a later trial.
I doubt that trial will ever happen. The employer’s excuses for firing Zachary were belated and somewhat desperate. They were just trying to get out of paying the bonus.
Employers are the ones with the power and leverage when negotiating a contract and more access to legal counsel than most employees. If they put something down in writing they are going to have to live with it. Clearly this boss did not realize how motivated Zachary was and how much his bonus would be. Most bosses don’t like it when people that report to them make more than them. Those regrets don’t change the law.