Is it legal to change an incentive program in middle of the earning period?

Husband moved for a job promotion with an understanding that he would have great potential to earn big bonuses under the incentive plan he has had with his company. They are paid bonuses based on performance quarterly. After 2 months into the first quarter, he has been told that they are now putting a cap on the amount of money his position can earn. Therefore taking away from the money he has already earned in the first two months. That is not what he signed into when he took the position. Is this legal?

Asked on February 29, 2012 under Employment Labor Law, Texas

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

You should consult with an employment attorney; this may not be illegal. While companies can certainly change incentive or  other compensation programs going forward, or could use their discretion to not pay any portion of an incentive or bonus plan which is discretionary, they cannot usually take away compensation already earned according to the terms under which the work was done at that time. Also, if there was an actual agreement in place as to the compensation plan, they may not be able to disclaim or dishonor ther terms of that agreement. And if they knew your husband would have to move for the job, but promised him an aggressive incentive plan to encourage him to move, the fact that he moved (did something to his detriment) in reliance upon that promise may "estop," or prevent, the company from denying or dishonoring its promise. Thus, there are several theories under which your husband might have a legal claim, depending on the specific facts; it is therefore well worth his time to consult with an employment law attorney to discuss the situation, his rights, and his options in greater depth.


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