top of page
Modern Office

Earned, Not Given: Protecting Your Bonus and Commission Rights in New York

If your compensation includes bonuses, commissions, or any other form of incentive pay, New York has specific protections to ensure that you’re treated fairly by your employer.  The core aim of these laws to discourage employers from an all-too-common practice: the bait-and-switch bonus.  This is a situation where an employer incentivizes you to go over-and-above with the promise of a handsome reward, only to ultimately fail to deliver on that reward.  This can occur in numerous ways, detailed below.  The bottom line, however, is that this practice may be unlawful.  T&S’s attorneys can help you figure out if you’re getting fleeced when that bonus check arrives (or doesn’t arrive) at the end of the year.

 

A Matter of Contract

Bonus and commission arrangements are creatures of contract. These come in different forms; it might be in your employment contract or offer letter, in an bonus plan distributed to your entire team, or in an incentive plan provided specifically to you.  Whatever the case, it is a form of contract, and it is binding on both you and your employer. 

 

What if your employer didn’t put it anything in writing?  What if there was simply a ‘handshake deal’ or general understanding that you would receive, for example, a certain percent of deals you closed? That may still represent a binding contract. It also may be unlawful; as stated by the New York Department of Labor, “The Labor Law requires that a commission salesperson’s pay/employment agreement must be in writing and signed by both the employer and the salesperson. It must contain a description of how wages, salary, drawing accounts, commissions, and all other monies earned and payable will be calculated.”

 

In other situations, an employer will present a vague bonus plan at the beginning of the year.  Then, at the end of the year, after you’ve worked your tail off, they will provide more detail on the rules of the bonus plan in an attempt to explain why you didn’t really earn what you thought you did.  This is an all-too-common situation for employees, particularly in real estate, sales, and finance.  But the employer does not necessarily get to skew the meaning of a bonus plan to suit its purposes, or to rewrite the bonus plan after the fact. You should consult an attorney to try to figure out whether you’re employers actions might be considered a “bait-and-switch” by a court.

 

Unpaid Bonuses and Commissions: Where the Law Stands

 

New York Labor Law Section 193 specifically delves into deductions from wages, which include bonuses and commissions. If you’ve earned it, your employer should pay it, subject to the agreed-upon terms and conditions. Failure to do so could constitute a "wage theft" under New York Labor Law Article 6.  This statute also entitles employees’ to recover double damages and attorneys’ fees if they prevail in a lawsuit to recover unpaid bonuses or commissions.  Even if you do not really want to be involved in a lawsuit, this can give you a lot of leverage if you need to call out your employer for failing to live up to their bonus/commission obligations. 

The Significance of Timing

 

The timing of bonus and commission payouts should be stipulated in your contract. If not, New York law requires that commissions be paid at least once a month and not later than the last day of the month following the month the commissions were earned. This is in accordance with New York Labor Law Section 191. As above, employers can be liable for double damages and attorneys’ fees if they are found to have violated these provisions.

 

Discretionary Bonuses: A Gray Area

 

Discretionary bonuses are those without predetermined criteria, often given for exceptional performance or during the holiday season. If a bonus is clearly discretionary, employers have more leeway.  That said, they can’t deny you a discretionary bonus based on discriminatory reasons, or as punishment for a protected activity (for more on this, read more about anti-retaliation provisions here).

 

When Employment Ends

 

What if you’re employer fires you right before the end of a bonus period—typically, the year or quarter—in an attempt to get out of paying you a large bonus?  This does happen, and some courts have found it to be unlawful.  It is a very tricky situation to navigate, but there may be hope.  Talk to an attorney promptly to see if you can recover the bonus that you should rightfully have received. 

 

 

How We Can Help

 

If you believe you’ve been shortchanged on bonuses or commissions, you should stand up for your rights. It won’t happen automatically; a critical first step is to get someone in your corner.  T&S can help you understand the complex New York law pertaining to incentive-based compensation (i.e., bonuses and commissions). Whether you just want to understand your contract, you need some behind-the-scenes advice on active negotiations, or you want to file a lawsuit to right the wrongs of an unpaid bonus, T&S is happy to review the situation at your convenience, with a free and confidential consultation.

 

Set up a consultation here or call us at (646) 568-4280

Disclaimer

 

The content presented on this website, including this article, is intended for informational purposes only and should not be construed as professional legal advice. The opinions expressed herein are those of Thompson & Skrabanek and are provided "as is" without any warranty, express or implied.  While we strive to ensure the information is accurate and up-to-date, laws and regulations can change, and each legal situation is unique. Therefore, the information provided should not be relied upon as a substitute for professional legal counsel tailored to your individual circumstances.

 

We strongly encourage you to consult with a qualified attorney for advice concerning your specific legal situation. No attorney-client relationship is created by your use of this website or by relying upon the content provided.

bottom of page