Holiday Bonuses and Promises: Can Your Employer Back Out?

Holiday season is here—and, for many employees, this means they are expecting a bonus in the coming months. Bonuses can add significantly to employees’ overall earnings, and many employees rely on receiving their bonuses every year to pay for gifts, pay for travel or simply manage their household expenses.

So, what happens if your employer tells you that your bonus isn’t coming?

With the current economic climate, this is an issue that many employees are likely to face this year. At many companies, costs are up and revenue is down, and this means that they don’t have the funds they need to pay bonuses like they have in the past. If your employer has promised you a bonus and backed out, here is an overview of what you need to know:

Employers Can Back Out of Paying Bonuses in Some (But Not All) Cases

Whether an employer can back out of paying an employee’s bonus depends on whether the bonus is discretionary or non-discretionary in nature. While employers can generally back out of paying discretionary bonuses, they are generally required to pay non-discretionary bonuses. So, what’s the difference?

While specific circumstances vary, a bonus will usually be classified as discretionary if it is not promised to an employee as part of the employee’s overall compensation package. If an employer has a history of paying bonuses during the holidays as a way to boost morale or say thank you to its employees for a successful year, this is more likely to be classified as a discretionary bonus that the employer is not required to continue paying on an ongoing basis.

Conversely, if a bonus is promised in an employee’s contract and/or tied to objective criteria (i.e., meeting certain performance goals), it is more likely to be classified as non-discretionary in this scenario. When a bonus is non-discretionary, the employer is required to pay—provided that any relevant objective criteria have been satisfied.

What About Other Holiday Promises?

Similar considerations apply to other promises during the holiday season. For example, if your employer has a history of allowing you to take time off during the holidays, this doesn’t necessarily mean that it is required to maintain this practice going forward. On the other hand, if you are entitled to use your vacation time at your discretion, then prohibiting you from taking time off during the holidays could be a violation of your rights. Likewise, if your employer has said that it will consider a raise or promotion at the end of the year, whether it is required to do so will ultimately come down to the specific facts and circumstances at hand.

What if Your Employer Has a Written Policy?

Does the situation change if your employer has a written policy? Employers’ written policies are enforceable in some (but not all) cases. Whether and to what extent employees can enforce their employers’ written policies also depends on the specific facts and circumstances at hand. Importantly, even when an employer’s written policies are generally enforceable, the employer may still have the right to modify its policies with sufficient notice, and any written employment policies do not alter the fundamental nature of the at-will employment relationship.

What To Do if You Have Questions About Your Legal Rights as an Employee in NJ or PA

In short, these are complicated questions. To determine whether you can enforce your employer’s promises, you will need to discuss the details of your situation with an experienced employment attorney. You should schedule a free initial consultation; and, to get ready for your consultation, you should:

• Gather Any Relevant Documentation – If you have an employment contract, if you have questions about a written employment policy, or if you have any other documentation that you believe may be relevant to your situation, you should collect this documentation to share with your attorney.
• Keep Copies of Any Relevant Communications – Likewise, if you have any written communications (i.e., emails, text messages or direct messages) related to your claim for a bonus or any other promise you are seeking to enforce, you should collect these as well.
• Avoid Making Assumptions or Relying on Untrustworthy Information – As we said above, these are complicated scenarios, and your legal rights depend on the specific facts and circumstances involved. With this in mind, you should avoid making any assumptions about your legal rights or relying on any untrustworthy information you might receive from your coworkers (or your employer) or find online.
• Avoid Doing Anything that Could Jeopardize Your Employment – If you have a claim against your employer, you do not want to do anything that could give your employer a claim against you or potentially jeopardize your employment. Among other things, this means that you should not shirk your job responsibilities, and you should not complain about your employer online.
• Take Notes and Prepare a List of Questions – Along with gathering any relevant documents and communications, you should also take detailed notes related to the issue you are facing. It is a good idea to write down any questions that you want to be sure to ask during your free initial consultation as well.

If you have grounds to compel your employer to pay a non-discretionary bonus or uphold any other promises it has made—whether to you or to its workforce as a whole—the steps you need to take will depend on the specific circumstances involved. Attempting to work out an amicable resolution, filing a complaint with a state or federal agency, and going to court are all potential options. Once your attorney learns about your situation, he or she will be able to advise you regarding the specific options you have available.

Schedule a Free Initial Consultation with an Employment Attorney at Murphy Law Group

If you have questions about your right to a bonus or your right to enforce any other promises from your employer this holiday season, we invite you to get in touch. To schedule a free initial consultation with an employment attorney at Murphy Law Group, give us a call at 267-273-1054 or tell us how we can reach you online today.