“Can my bonus plan be changed due to a supposed mistake, after agreed to in a contract?”

Question: I recently was promoted within my company and I received a 10% salary increase and my bonus plan was moved from 15% to 45%, as I moved to a sales/marketing job, so I am now under the sales bonus plan. 

After both sides signed the contract, I was informed there was a “mistake” and they can no longer offer the 45% plan, and it is going back to 15%. 

Unfortunately, I overheard my old manager and old HR representative complaining when they became aware of my offer, and said “It just has to be changed,” which makes me think it was not really a “mistake,” but just jealousy or stinginess. What can I do?

Albany, New York 

Answer: Dear Christy: Your question raises issues related to (a) contracts, (b) supposed “mistakes” in contracts, (c) bonus plans, and (d) how people “correct” alleged “mistakes” in contracts and bonus plans. Here are my thoughts: 

1. Contracts must always be carefully read, with attention paid to each and every word, and each and every punctuation mark. I say it all the time: contracts must be read with extreme care, because just one word or even one punctuation mark might make a big difference. In fact, sometimes what is absent from a contract is even more important than what is present in the contract. Just like an automobile engine, if one “engine part” is the wrong part, or broken, or missing, the entire engine may not work. 

It is possible your contract says “This contract cannot be changed for one year, without your prior written consent to do so.” On the other hand, is it possible that your contract says, “This contract can be changed at any time, by either of the parties.” 

It is also possible your contract says which bonus plan – that is, the 15% one or the 45% one – you are entitled to.  As you can see, what your contract actually says sure would make a big difference in terms of what you can now do to help yourself.  

2. Bonus plans, too, must be carefully read, although compared to contracts, they are a “bird of a different feather.” While employment-related contracts are binding agreements between two parties – the employer and the employee – compensation-related “plans” are different: they are (a) payment arrangements and conditions created by the employer, that (b) are sometimes binding, and sometimes not, depending on their wording, and (c) usually provide that they can be changed at any time, at the discretion of the employer. 

In fact, most bonus, commission, equity or other compensation-related plans often have language that permits the employer to modify them whenever they wish, in any way, and to liberally interpret them in ways they see fit.  

However, there are a few limitations. One limitation is that, even if a compensation plan says, in effect, “This plan can be changed at any time,” new changes cannot be imposed retroactively; it can only be changed prospectively. Said differently, it cannot affect the past, only the future. 

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3. Mistakes in contracts and compensation plans are not generally forgiven by the law, but are frequently forgiven – or endured – in real life. As a general rule, the law provides that, if one party to a contract claims there is a mistake in the contract, it cannot be changed, but if both parties to the contract agree there is a mistake in the contract, it can be changed. That is the law. 

However, in “real life” employment, which is often “outside the reach of the law,” it may be easy to get your employer to abide by its promises if it claims “We only made a mistake, and you have not been harmed.” Pushing too hard might, in fact, lead to a bad employment relation, if not something worse than that. Surely, making demands and threats would probably be counter-productive. 

4. My best suggestion: A Respectful Written Request to Senior Management. As noted above, your former manager and Human Resources Representative are no doubt trying to reduce the company’s outflow of bonus monies, and are trying to do so by reneging on a promise to you. My first inclination in a situation like this one is to suggest that you prepare and transmit to Senior Management a respectful request that, quite simply, the company provide you with what the company promised you. With both professionalism and passion, lay out the facts, the events, and what it is you are missing out on by the company trying to change what it previously agreed to do. 

Don’t forget, though, that before sending any letter or memo, you should quite carefully read over both the contract you signed, and the bonus plan the company agreed to follow. You surely don’t want to look foolish if you miss something that is in either of those two documents. Respectful, written requests like this often “do the trick.” 

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5. If your “Respectful Request” does not work, it may well serve as great evidence for a demand for monies owed to you, to be made after you leave the company. Quite often people think that a written request to an employer regarding (a) monies they feel they are owed, (b) illegal treatment they were subject to, (c) an injury or other harm that came to them related to their job, or (d) other complaint or claim, will just be ignored, and is not worth the effort. I say, “Nothing ventured, nothing gained,” and encourage positive, optimistic, hopeful thought and action.  

And even if a thoughtful, respectful, written request is ignored, it does serve a second – and often more important – purpose: it makes a good written record that (a) the claim existed, and (b) you attempted to correct it. That is important, because your claim may just continue to exist past the day you depart from the company or organization, and you can more easily – and with less fear – raise that claim again after you leave the company. (As often noted in my writings, transmission by email, with a “bcc” to your personal email address, is best.)  

In most states, “contract-based” claims like yours remain “legally alive” for a period of six years, which is a pretty darn long time. Keep that in mind when considering whether to make your written request.    

Monies due you (commissions, bonus, wages, expenses, etc.) owed you by former employer? After leaving, you are free to make  your “demand.” 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!  

Christy, I hope this is helpful. I hope, too, you will at the very least consider the respectful letter or memo I suggest. Even for just writing in to our blogsite, “my hat is off to you!”  

My Best,
Al Sklover

P.S.: Our Sales Affiliates make real income by recommending our Model Letters, Memos, Checklists and Agreements. You can, too. Join the movement – help us help others. Just [click here.] 

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