Cash Bonus Litigation (By Employees vs. Employers)
General Contract Law Principles
2020.01.16 "Aramark Strikes $21M Deal To End Managers' Bonus Suit" -- Bloomberg, by Emily Brill:
2019.11.27 Good Faith and Fair Dealing. Principles of fairness generally entitle executives and other employees to collect bonuses and other performance-based compensation if applicable goals have been satisfied, as well as if failure occurs due to improper employer action. Regarding the latter, the First Circuit's decision in Suzuki v. Abiomed cites Massachusetts law for the following equitable principles that many courts will apply:
2019.11.21 Another Backfire from Moving Bonus Goals. Law360's article titled "Aramark Nears Deal To End Suit Over Manager Bonuses" reports that a settlement is expected for class action litigation that had its roots in discontent described in the Philadelphia Inquirer's article titled ‘Moving the goal post’: Why thousands of Aramark managers didn’t get their 2018 bonuses" (2019.02.13). See 2018.06.05 item below titled "Moving the Bonus Plan Goalposts - Be Smart or Be Sued."
2019.10.23 "Bonus entitlement on basis of reasonable expectation" from Fasken Law includes the following discussion regarding the severance pay considerations that arise from bonus expectations:
2018.08.23 EBITDA allegedly Manipulated (lawsuit). According to a Law360 article titled "Sweetener Co. Altered Data To Avoid Exec Awards, Suit Says" (subscription needed), a company's three-year bonus plan hinged on its EBITDA, which participants claim should have triggered payment of a portion of their calculated incentive awards. However, the lawsuit seeks "hundreds of thousands" of bonus payments" (per Law360), based on the complaint's allegations that --
2018.06.05 Moving the Bonus Plan Goalposts - Be Smart or Be Sued. Whenever a company announces performance goals that apply to cash bonus, equity award, or vesting conditions, there is some risk that affected employees will later question the end-of-period determinations. Well-drafted plans and programs include significant employer protections. But some defects can haunt, such as the failure to allow for the impact of a future merger or acquisition, or the omission of a maximum limit. Panera Bread tried to recover from the latter, but lost in the 8th Circuit because its bonus plan did not clearly reserve a right for Panera to unilaterally modify or terminate the plan. As a result, the court held in Boswell v. Panera that "Since the managers had begun performing the unilateral contract offer, Panera was not entitled to move the goalposts on them by imposing a bonus cap, which was outside the contemplation of the unilateral-contract offer." Whether drafting a new plan or handling one that is already in place, solutions are available to employers who act quickly and smartly. Note this case was decided under Missouri law. See generally Litigation Precautions.
State Contract Claims
New York Law
2011.Sept.30 Former Employee Loses Contract-based Bonus Claims. Applying NY law, the Southern District of NY reviewed and dismissed multiple contract-based claims by which a former executive sought to collect a pro rata portion of his formula-based bonus for the year in which he resigned from employment. Here are relevant quotes from Devon v. Societe General:
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