by John F. Fullerton III

The New York Court of Appeals recently upheld a jury verdict in favor of a brokerage firm employee who claimed that his employer breached an oral promise (and violated New York wage law) when it failed to pay him a guaranteed bonus of $175,000, to be paid at the end of his first year of employment.  The discussions with the hiring manager regarding compensation were not put in writing.  Nevertheless, the employee subsequently signed an acknowledgment in the formal employment application that  “compensation and benefits are at will and can be terminated, with or without cause or notice, at any time” at the discretion of the employer or the employee.  He was discharged after less than two years of employment, and had not been paid the full $175,000 he claimed to be owed.

After a jury found for the employee and the intermediate appellate court sustained the verdict in a 3-2 decision, the employer appealed to the top court.  To be clear, the employer denied having made any such oral promise, but the jury believed the employee, so the employer appealed as a matter of law based on, among other things, the at-will language in its employment application, arguing that all compensation, including bonuses, was discretionary.  The Court noted that the at-will language was silent as to bonuses, and unanimously held that the oral promise of a guaranteed bonus made at the outset of employment was contractually enforceable and had vested as wages.  Thus, while the employer maintained the right to change compensation going forward, its at-will language did not bar recovery on the breach of contract and wage law claims for compensation allegedly due and owing. The case is called Ryan v. Kellogg Partners Institutional Services and is a worthwhile read, particularly for the way it distinguishes the New York case law employers routinely rely upon to support the position that discretionary bonuses do not constitute “wages.”

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