The Vanishing Earned Bonus: Part II
Just wanted to post a quick update to our ongoing blog series addressing the ways in which employers and courts have been eating away at earned bonuses by reliance on language providing employers with absolute discretion in awarding incentive compensation.
Yesterday, in McCleary v. Wells Fargo Securities, LLC, 2015 Ill. App. (1st) 141287-U (Ill. App. 1st Dist. Mar. 17, 2015), the Illinois Appellate Court for the 1st District reversed a lower court’s decision which had granted an employer’s motion to dismiss a former employee’s earned bonus claims alleging breach of contract, unjust enrichment, and a violation of the Illinois Wage Payment & Collection Act. The court held the plaintiff employee’s allegations that the defendant employer had breached the covenant of good faith and fair dealing by denying him his earned bonus were sufficient to state a claim where he had “pled that he had a reasonable expectation to a bonus from a defendant that abused its broad contractual discretion by arbitrarily withholding the bonus in a manner not reasonably anticipated by the parties at the time of contract formation.” Further, the court explained that these allegations were enough to state a claim not only for breach of contract, but also for unjust enrichment and the violation of the IWPCA.
This decision represents yet another court allowing an employee to proceed on his claims for his earned bonus despite that the employer had repeatedly and explicitly retained absolute discretion the decision of whether or not to award that bonus under the compensation plan. We are pleased to see this line of cases grow and hope that it represents a move back toward fairness for employees who depend upon these key pieces of compensation.
