Can my company short change my bonus?

I and my co-workers get quarterly bonuses that are based on 1) chargeability (we are a services team), and revenue. Every quarter, our corportae finance team gives my management a pool of money to divvy up for bonuses. For the past 5 years everyone whose met their objectives got theri full bonuses and some got more. Now, we find out, our organization is having financial and accounting issues due to fact our employees are not submitting all billable customer expenses to our invoicing system. Therefore, for the last quarter, our Finance team reduced the bonus pool (general amt) by over 7%, so even those of us that met our objectives, we got 30% of usual bonus. Is it fair for entire team to be penalized?

Asked on September 19, 2012 under Employment Labor Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

If there is a written bonus agreement or employment contract which sets out the terms of your bonus, you must be paid in accordance with that agreement; so if you hit the defined targets, you should get the appropriate bonus. However, if there are no quantifiable parameters for your bonus incorporated into some written agreement, then the bonus is discretionary--that is, it's subect to the employer's discretion, choice, option, or will. Even if in the past they always chose to give a certain bonus, they could now choose to reduce--or even eliminate--the bonus; that's because in the absence of a contract, employers are free to set, change, or reduce employee compensation at will.

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