“Can I sue for not getting paid a ‘discretionary’ bonus?”

Question: I accepted a job with a company because the compensation was based on a salary and commission. This occurred for three years.

In 2009 the company announced they would no longer pay commissions, but would provide a discretionary bonus at year end.

Well, at the end of 2009 and now again at the end of 2010, no bonus was given.

Now I am about to be laid off at the end of the month and would like to decide if I want to take legal action regarding this matter. 

 Marilyn G.
Sherman Oaks, California

Answer: Dear Marilyn, As you may know, I am not licensed to practice law in California, but I can tell you what I expect California law would provide in a situation like yours: 

a. The first step in the analysis is this: If you stayed at the job, you agreed to the change in compensation structure. The law says that you could always have quit, and gone elsewhere. The way the law in almost every state sees this is, you agreed to the change from commissions to “discretionary” bonus, and you indicated your agreement by staying.

b. The second step is this: You must convince a judge that by “discretionary” the reasonable meaning is in your favor. I know it may sound silly, but it is important. Generally, there are two different definitions of the word “discretionary.”

(i) The more common definition of “discretionary” is “anything they decide, even if by whim.” If a judge decides this is the more common meaning of “discretionary,” then you don’t have much of a chance to win a case. 

(ii) However there is a second definition of “discretionary”: “within reasonable bounds.” Did you ever hear the phrase “abuse of discretion?” For example, if a law says that a crime is punishable by a jail term of 5 to 10 years, then if a judge sentences a convict to 20 years in jail, that would be “an abuse of the judge’s discretion,” as the legal limits are 5 to10 years. If you can convince a judge that this is the more reasonable interpretation, you will probably win your case.

c. Third, you could also argue that the employer never, ever intended to pay any bonus; rather, that the employer did it as a deliberate trick. That would be considered a “fraudulent inducement.” Proving that the employer never intended to pay a bonus would not be an easy thing, because it involves the employer’s “intent.” It could just be that, they intended to pay a bonus, but just don’t have sufficient monies.

The real question is this: in California courts, which way do the judge’s “lean” in these matters. Only an attorney licensed to practice law in your locale can help you. Consider obtaining a consultation.

P.S.: Monies due you (commissions, bonus, wages, expenses, etc.) owed you by former employer? Your best bet is to make a written request. We offer a Model Letter Requesting Monies Due You by a Former Employer. Shows you “What to Say, and How to Say It.”™ To obtain your copy, just [click here.] Delivered by Email – Instantly!

Frankly, Marilyn, I think your chances aren’t great, but it shouldn’t stop you. Whatever you decide, I wish you the best. 

Best, Al Sklover

If you would like to obtain a list of 5 qualified employee-sided attorneys in the Los Angeles are, where you live, just [click here].

 © 2011 Alan L. Sklover, All Rights Reserved.

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