Cash Bonus Litigation (By Employees vs. Employers)
General Contract Law Principles
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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