Can an annual bonus be pro-rated?

I started at my company on 12/01/09. I just received my bonus and was surprised when I was told that it was pro-rated for the months worked. The language in the offer letter didn’t mention it being pro-rated or the timing of the bonus cycle. Here’s the language: “You will be eligible for a potential annual performance-based bonus with a target of XXX. Bonus amounts are generally determined by individual and company performance, but are determined at the sole discretion of the Company and no bonus payment is guaranteed.” Am I entitled to the full “XXX” amount?

Asked on July 26, 2010 under Employment Labor Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Unfortunately, no. Once a bonus letter, offer letter, employment agreement, etc. says something like "are determined at the sole discretion of the Company and no bonus payment is guaranteed," the company has FULL discretion to offer you essentially whatever it likes--as much as you may like to hear this, a "sole discretion of the Company" bonus is essentially at the company's whim, and the offer letter is meaningless in terms of mandating or guaranteeing a bonus. That language preserves the company's unfettered right to determine your bonus to be anything it wants.

Being pro rated for months worked, by the way, is actually quite common and fair--it's not something I would recommend a person complain about.

Going forward, though, next time to negotiate something like this, try to get rid of "sole discretion" type language.


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