Is consent required to change a bonus value?

[yourtree]

Pennsylvania

I have been employed at a company for roughly 18 months. I accepted the job with a fully executed offer letter (but I don't now how binding that is) that stated my starting salary would be X, and that I would be eligible to participate in the companies annual bonus program based on 20% of X. I wasn't eligible the first year because I had just started, the first full year just elapsed and the company exercised their right NOT to pay bonuses because certain financial goals hadn't been achieved (obviously unhappy, but I understand I have no recourse there. And I also understand that this is the first time in many years that they have declined to pay out.) ... A result of that decision, however, was an audit of all the employee bonuses; after which, they decided that there was inequity across the employees and that they were going to fix it.

In the end now, everyone in my division has been handed a letter stating that they have decided to reduce our bonus potential (mine has been dropped to 15% of X), and we need to execute the forms and send them back to HR. And the bottom of the form nicely reminds everyone that we are at-will employees which I already know. This company has boat loads of lawyers on staff, so I'm making an assumption that the signature on the form may been deemed a CYA requirement by someone, or is genuinely needed in order to override the acceptance signatures on the original offer letters.

So my question is, if I refuse to sign this form, are their only options to fire me, or continue to honor the 20% calculation base I was promised? Or can they simply impose the 15% without my signature?

Had they paid out this year, or offered some small salary bump in exchange for the signature (since they are potentially taking lots of money out of my pocket as this is an annual payout), I doubt I would be asking this question now ... but they didn't.

Thanks for any insight.

 

[cbg]

Your signature is not your agreement or consent; it is your acknowledgement of what they are telling you. Should you at some point claim that you were never notified of the change, they will whip that puppy out and hand it to you so you can see that you've signed it.

If you refuse to sign the form, they can fire you if they wish. They can leave you in place if they wish. But one thing you may rest assured; when and if you get the bonus, it will be at the 15% calculation. They don't need you to give them permission to make the change.

 

[xylene]

They don't need you to give them permission to make the change.

I'm sincerely curious how the employer can retroactively reduce an incentive bonus on work previously completed - though I have to admit I'm not exactly clear about the timeline from the way the OP describes it.

 

[yourtree]

The timeline is ... fiscal year April 1, the letters came out the other day, so we are several months into the next fiscal year at the change notification. Bonuses are calculated at the end of the fiscal year.

And while I completely accept that they can fire me should I choose not to sign off on the revision, isn't this similar to reducing my base compensation without cause? (which they may not need either) ... but as I mentioned, the original offer letter was executed by both parties and quite thorough, and though they specified provisions in the offer about how all the listed benefits were governed (including the bonus program as a whole, underlying calculations and such), the base salary, and the percentage used for participation in the program had no caveats for adjustment ... does it not carry any weight as an executed contract? Understanding that the could totally be concluded by my termination, which is their right, but the change feels like a breach and that's where I'm fuzzy about it.

Heck, I accept the fact that they could revise the program itself so that the calculations start "% * .5" and go from there or even eliminate it entirely without violating the spirit of the offer. This particular approach just feels like a violation of the original terms to which I accepted the job.

As stated the, motive here is 'fairness' across the employees (not a company in financial distress) ... so not to be disrespectful; but if John Doe signed off and was happy with 10%, good for him. I didn't, in my case, the bonus was a sticking point when I accepted the job ... 20% is what they offered me out of the gate and I didn't want that much of my salary tied up in it, but this is how it played out (it was a hard sell). And now it feels like they're reneging on their end of the bargain before they even bothered to fulfill it.

I really don't know, I'm not trying to beat a dead horse.

 

[HC1432]

The timeline is ... fiscal year April 1, the letters came out the other day, so we are several months into the next fiscal year at the change notification. Bonuses are calculated at the end of the fiscal year.

And while I completely accept that they can fire me should I choose not to sign off on the revision, isn't this similar to reducing my base compensation without cause? (which they may not need either) ... but as I mentioned, the original offer letter was executed by both parties and quite thorough, and though they specified provisions in the offer about how all the listed benefits were governed (including the bonus program as a whole, underlying calculations and such), the base salary, and the percentage used for participation in the program had no caveats for adjustment ... does it not carry any weight as an executed contract? Understanding that the could totally be concluded by my termination, which is their right, but the change feels like a breach and that's where I'm fuzzy about it.

Heck, I accept the fact that they could revise the program itself so that the calculations start "% * .5" and go from there or even eliminate it entirely without violating the spirit of the offer. This particular approach just feels like a violation of the original terms to which I accepted the job.

As stated the, motive here is 'fairness' across the employees (not a company in financial distress) ... so not to be disrespectful; but if John Doe signed off and was happy with 10%, good for him. I didn't, in my case, the bonus was a sticking point when I accepted the job ... 20% is what they offered me out of the gate and I didn't want that much of my salary tied up in it, but this is how it played out (it was a hard sell). And now it feels like they're reneging on their end of the bargain before they even bothered to fulfill it.

I really don't know, I'm not trying to beat a dead horse.

While no one here can say for 100% certainty exactly what your contract allows/does not allow without reviewing it in its entirety (and if you feel strongly about your interpretation you should ultimately have an attorney review it and provide advice), I suspect that all of this speculation on what they can and can't do to your terms and condition of employment is trumped by your "at-will" status. Most contracts that are considered "at-will" will state as such in a provision and usually allude to something along the lines of "the company reserves the right to change, amend, or terminate this contract at any time...blah blah..".

All that your failure to sign the new document will do is show that you are uncooperative. As cbg pointed out, your decision to continue working for the company under the conditions of the new agreement constitute your acceptance of the terms. The signature is merely an acknowledgement that they would LIKE to receive as proof that you were notified of the change, it is not a requirement in order to make the change.

Take the drop to 15% or move on.

 

[eerelations]

Pennsylvania

I have been employed at a company for roughly 18 months. I accepted the job with a fully executed offer letter (but I don't now how binding that is) that stated my starting salary would be X, and that I would be eligible to participate in the companies annual bonus program based on 20% of X. I wasn't eligible the first year because I had just started, the first full year just elapsed and the company exercised their right NOT to pay bonuses because certain financial goals hadn't been achieved (obviously unhappy, but I understand I have no recourse there. And I also understand that this is the first time in many years that they have declined to pay out.) ... A result of that decision, however, was an audit of all the employee bonuses; after which, they decided that there was inequity across the employees and that they were going to fix it.

In the end now, everyone in my division has been handed a letter stating that they have decided to reduce our bonus potential (mine has been dropped to 15% of X), and we need to execute the forms and send them back to HR. And the bottom of the form nicely reminds everyone that we are at-will employees which I already know. This company has boat loads of lawyers on staff, so I'm making an assumption that the signature on the form may been deemed a CYA requirement by someone, or is genuinely needed in order to override the acceptance signatures on the original offer letters.

So my question is, if I refuse to sign this form, are their only options to fire me, or continue to honor the 20% calculation base I was promised? Or can they simply impose the 15% without my signature?

Had they paid out this year, or offered some small salary bump in exchange for the signature (since they are potentially taking lots of money out of my pocket as this is an annual payout), I doubt I would be asking this question now ... but they didn't.

Thanks for any insight.

Employment offer letters in the US seldom (and I mean REALLY seldom) rise to the level of contracts. So it's very (and I mean REALLy very) unlikely that your offer letter is a binding contract. This means that you may refuse to sign the form, and the company's options are this: reduce your bonus to 15%, remove your bonus altogether, or fire you.

 

[xylene]

I still don't understand how an employer can reduce (let alone cancel) a nondiscretionary incentive bonus on work already performed under PA law.

 

[cbg]

Because an offer letter is not a contract, nor yet a non-discretionary bonus, and an offer letter is all the OP says he has.

 

[LdiJ]

I still don't understand how an employer can reduce (let alone cancel) a nondiscretionary incentive bonus on work already performed under PA law.

That is a valid concern, however it does not appear that this bonus was non-discretionary, and honestly almost no bonus is ever non-discretionary. Bonuses are normally based on overall company performance, and normally based on individual productivity above a base level.

It would be HIGHLY unusual for someone to be promised a base salary, plus a 20% bonus, no matter how the company performed and no matter how they performed their job. However it might be possible that a person could receive a 20% bonus, even if the company underperformed, because that individual increased their sales significantly, even if no one else did.

The whole purpose of a bonus is to increase productivity...either on the across the board profit sharing basis or an individual productivity basis. Can you actually imagine a scenario where someone would be entitled to a 20% bonus if they just did the minimum or less required to do their job?