Legal Question in Employment Law in California
California employee here. Hired at a Director level position at a privately held company and the offer letter says my comp package is salary + eligible for 30% of salary as part of the company Management Bonus Program. 18 months into the job and I ask HR about the bonus only to be told (by the outgoing HR rep) that they hadn't paid one in the last 3-4 years. CFO tells me it's unlikely it will be paid this year either. I understand that management bonus can be at the discretion of the BOD based on reaching corporate goals - however I've asked for a management bonus plan document and there is none. I've gone back through the corporate budgets for the last 3 years and bonus isn't even budgeted for. I left my last company telling my current company that I was leaving $$ on the table by going to them and leaving my bonus behind so the management bonus was a key inducement to join them. (My former company was public so I had a way to check through SEC filings whether bonuses were paid.) My currently company is privately held so I had no way to tell that. Question is: if the inducement to work there was a comp package that included a bonus but the company in fact had no such documented plan nor have they even budgeted to pay bonus for the last 3-4 years is that a deceptive practice? Probably yes, unethical yes, scummy yes (and was I stupid not to ask whether a management bonus had ever been paid - yes) but is it an issue worth taking action over? Point is, if they tell me there's insurance I can tell pretty quickly if I have no insurance. If they represent that they have a 401k match but they never budget to fund it, nor do they say they've discontinued it isn't that fraudulent? I assume they're budgeting for and paying taxes and SSI, as well. I shouldn't have to check whether or not the company has budgeted for or paid premiums on accidental death and disability insurance benefit (or whether they even have such a plan). Does the same hold true for benefits like bonuses?
Kind regards.
1 Answer from Attorneys
Actionable? Yes. Successfully? Eh.....?
Since it was stated as "eligible for", it was not guaranteed, and was discretionary as to 'if' and 'how much'. Thus, while you can easily prove you are eligible, you can't prove you are 'entitled'. Yes, it is fraud in the inducement of employment contract, but the question is 'what are your damages'?, leading back to the 'entitled' issue. You might convince a jury to award you 'general damages' somewhat related to the difference between your prior comp level, and the actual new comp level. That litigation threat made properly through your attorney, threatening disclosing to the business world and headhunters that they are liars could induce them to settle with you without litigation. That would be the first objective.
To do any of this requires you make a demand on the company for payment and follow up with a lawsuit. You become a pariah, and you can guess the long term consequence. I might advise you locate a new job before doing anything rash. If and when you are ready to take action, feel free to contact me.
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