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Employee Bonuses in California

Employee Bonuses in California

Many workers receive bonuses at work without knowing about the intricacies of the laws around them. There are many rules surrounding bonuses, which is money promised to an employee in addition to their hourly wage, salary, commission, or piece rate. When an employer promises to give an employee bonuses, it is enforceable as a contract and is considered a form of wages. Since bonuses are a form of wages, it is considered failure to pay wages if an employer does not pay an employee their promised bonuses, and workers can take legal action against their employer to recover unpaid wages.

There are two types of bonuses: bonuses based on a definite promise and discretionary bonuses/special occasion bonuses. Bonuses based on a definite promise by the employer must be included in an employee’s regular rate of pay when calculating wages for overtime. On the other hand, discretionary bonuses, which are made by the discretion of the employer and not based on a prior contract, and special occasion bonuses, which are gifts to the employee not based on work performance, are not included in the regular rate of pay when calculating overtime pay.

Employers are obligated to pay employees bonuses based on a promise once the employees have started working and have met the conditions required to receive the bonus, such as satisfactory work performance or reaching goals for a project.

It is illegal for employers to deduct amounts from earned bonuses for any reason, even if the employee made mistakes on the job such as mishandling merchandise or causing money shortages. Employers also may not make deductions to earned bonuses to retaliate against employees who have filed a workers’ compensation claim or third-party personal injury claims against the employer. The only time that an employer can deduct from bonuses is when they provide employees bonuses based on a profit-sharing plan, and the deduction is related to profit performance.

Employees who have been terminated may still be entitled to receive a prorated share of their bonus if they were let go before the date they were supposed to be paid a bonus, but only if their termination was not a result of employee misconduct or unsatisfactory work performance. However, if the employee voluntarily quit before the date they were promised a bonus, then they will generally not be entitled to any payment for it.

If you are having issues with your employer’s treatment of bonuses, feel free to give our office a call at (323) 208-9171 or email us at info@kyletodd.com.

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