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  1. #1

    Default Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    My question involves employment and labor law for the state of: IL

    I'm on track for a bonus tied to job performance for last month. However, I'm leaving the company in a few weeks. The bonus for last month does not pay out until shortly after I will have left the company. My HR sent an email saying since I will not be employed at the co. when the bonus pays out, I am not eligible for it. This seems to make no sense and be unethical, since the bonus is for my job performance last month (when I obviously WAS employed at the company, and performed well beyond expectation; thus the bonus).

    My question is, is it legal for them to keep a bonus for work already performed the previous month, just because I left the company a week or so before the bonus was to be paid? Thanks for any help!

  2. #2
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    Default Re: Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    So you want them to give you a bonus for leaving the company as opposed to rewarding you for good preformance? Think about that. While the bonus may be for past performance, it is not a bonus until they pay it out. And you won't be employed with them when that happens. You should have thought about the timing before you told them you were leaving.

    There is nothing I know of that make this illegal. A bonus is in addition to your wages. The bonus is to create an incentive to improve business performance and retention of good employees.

    This like the people that email their employer to say they got another job offer and then wonder why they get fired.

  3. #3
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    Default Re: Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    In the absence of a state law that expressly says otherwise, this is entirely a feature of your bonus agreement. It is much, much more common than it is not, for there to be a requirement that you still be actively employed by the company at the time of the payout in order to receive the bonus.

    In fact, 35+ years in HR and benefits I can only think of one instance where that was found not to be true; that one instance was not in your state; the forced payout after termination was due to the specific state's definition of deferred compensation; of the 13 states that were affected, 12 found the policy of requiring the employee to be actively at work to receive the bonus, to be legal.

  4. #4

    Default Re: Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    Thanks for the reply. I had to tell them I was leaving because there was a chance they could place me in my same position in the state where I have to move due to family illness. Turns out there is not an opening. So no, I don't want a bonus for leaving the company, I wouldn't be leaving at all if there were a position for me in the state where I have to be. It would be nice to get the bonus I handily earned a month ago, that's all. I guess I can follow the "you don't work here anymore so we don't have to give you the bonus" idea, it just seems greedy and unethical to me since the work was already done by me and it tangibly increased the company's bottom line. Anyway, thanks for the response.

    - - - Updated - - -

    Thanks for the reply, that's a good piece of information to have going forward to other employment, about it being a feature of the bonus agreement.

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    Default Re: Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    Quote Quoting chocolatepretzels
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    Thanks for the reply, that's a good piece of information to have going forward to other employment, about it being a feature of the bonus agreement.
    What do you mean by this? It seems to me you may have misunderstood part of cbg's reply...

  6. #6

    Default Re: Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    I'm not sure if I misunderstood? I meant that going forward (to other employers) I'll be sure to look at any bonus agreement closely for details pertaining to a situation like this.

  7. #7
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    Default Re: Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    Just to clarify; I have seen this kind of policy many, many times and in many, many states, always with the provision that you have to be actively employed at the time the bonus is paid out to earn it. It is unusual for that provision NOT to exist. In ONE instance, we had employees in 13 states. 12 of the states had no problem with the wording of our policy or with our withholding the bonus if the employee was no longer employed. Our policy expressly stated that they would not receive a bonus if they were not employed on the day of the payout. They knew that going in. In one state, they had a specific definition of "deferred compensation"; the way our policy was written fulfilled that definition; because of that under the ONE state's wage and hour laws we had to pay out the bonus to the employees in THAT STATE ONLY, even after they'd left the company. That is, however, very much an exception.

    I would agree that you should be sure you understand how any bonus agreements are managed and that you should look carefully at the details. I would not expect you to find very many that do not have the same provision, which may in your view be "unethical" but which are quite common and quite legal in all 50 states (even in the state mentioned above, had our policy been worded slightly differently the state would not have found us liable to pay it. It was the wording of our policy, and not the concept of having to be employed to receive the bonus, that the state objected to.)

  8. #8

    Default Re: Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    This all makes sense. Thank you for the clarification.

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    Default Re: Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    Quote Quoting chocolatepretzels
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    I'm not sure if I misunderstood? I meant that going forward (to other employers) I'll be sure to look at any bonus agreement closely for details pertaining to a situation like this.
    OK. But keep in mind that most if not all bonus agreements are going to say you won't get said bonus if you resign. (I know this 'cause I write bonus agreements for a living.) And you won't be able to do anything about that, no matter how carefully you read the agreement.

  10. #10
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    Default Re: Is an Employee Entitled to a Performance Bonus That Pays Out After He Resigns

    Agreed with the other answers. Also agreed that this is state specific, and often very specific to the type of bonus involved, and to the exact wording (if any) of the bonus agreement. If this was CA (and it is not), then CA considers commission payments to be very legally different the other types of bonus payments. I have worked for employers who had very specific bonus policies, some of which said "must be still employed" and others which were more complicated, like must be employed certain specific months to receive an annual bonus. In all cases, state DOL (CA-DLSE) upheld the exact wording of our agreement. So certainly read the bonus policy/contract where available and keep a copy at home, just in case. Even states with weak labor laws (most of them actually) will often enforce the exact wording of the policy, in court if no where else.

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