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Binding or not
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Binding or not
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Hi Everyone,
Last year at this time we gave certain upper mgmt sales people letters awarding them retention bonuses of $25K to "be paid sometime within the year period". Well, unfortunately, one of t
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Binding or not
posted at 4/5/2010 7:23 AM EDT
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Posts: 188
First: 10/11/1999 Last: 5/5/2010 |
Hi Everyone,
Last year at this time we gave certain upper mgmt sales people letters awarding them retention bonuses of $25K to "be paid sometime within the year period". Well, unfortunately, one of those recipients did not do well at all this quarter in sales and was let go. He has called me stating that he wants his retention bonus. Are we legally required to give him that since he is no longer here? |
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Binding or not
posted at 4/5/2010 7:43 AM EDT
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Posts: 562
First: 11/12/2009 Last: 9/14/2011 |
I think you might want to consider letting go the person who drafted the letter instead.
Were there any parameters attached to receipt of the bonus? For example, the person had to stay until XXX date, had to have satisfactory performance, etc. Need more info. |
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Binding or not
posted at 4/5/2010 8:19 AM EDT
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Posts: 562
First: 11/12/2009 Last: 9/14/2011 |
You also suggest that some got the letters, others didn't. What was the basis of the determination of who got them and who didn't? Was the bonus based on their past performance with no further action required on their part to receive the bonus? |
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Binding or not
posted at 4/5/2010 8:40 AM EDT
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Posts: 188
First: 10/11/1999 Last: 5/5/2010 |
these letters were given out exactly one year ago, April 2009. The basis of determination for getting the bonus was to be a high performer the previous quarters consistently.As far as what else the letter says, it is just congratulations etc. |
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Binding or not
posted at 4/5/2010 8:55 AM EDT
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Posts: 562
First: 11/12/2009 Last: 9/14/2011 |
I'd dust off the check book and start writing.
It was for past performance, so the bonus was earned. Absent any requirement other than to keep breathing, I'm thinking you owe this person the money. It all depends, as Dave notes, on what was actually in the letter. Since it doesn't appear to be much, you're probably on the hook. |
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Binding or not
posted at 4/5/2010 10:43 AM EDT
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Posts: 410
First: 1/26/2006 Last: 11/15/2010 |
Hi:
Yeah, you should probably dust of the checkbook!! While there might be some form of argument as to whether there was consideration for the promise, that would probably be an uphill, costly battle. Dave Arnold, Ph.D., J.D. |
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Binding or not
posted at 4/5/2010 12:21 PM EDT
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
I agree with the others but would also take a hard look at the dates and where the one year falls. You say one year was April 2010, but exactly what was the timing on when this employee was let go? Was it after the end of the 1st quarter? If the bonus was earned based on the last 4 quarters and he was still employed at the end, I would say you would have a tough argument on not paying it.
Also in the letter, most retention letters/agreements state what happens if the employer lets the employee go vs if the employee leaves on their own. I take it this was NOT in your letter? I just read one (it was a relocation agreement) this weekend that stated if the employee left voluntary or was let go due to 'cause' the agreement must be paid back...otherwise if it was involuntary or caused by the employer, the amount was forgiven. (a bit opposite, but they covered both eventualities) It sounds like your letter is very vague and badly written. I would chalk this up to an expensive mistake and next time do better. I also forget what state you are in...some states do have specific bonus and commission rules and all have contract law (if this rises to the level of a contract which is sounds like it does). |
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