Bonuses are important to us. Whether these are bonuses that we make for hitting a sales quota, or a nice check that we receive at Christmas, we rely on this money to make ends meet. This is why it is important to understand how bonuses work in California and your legal rights when it comes to bonuses.
In California, there are two different types of bonuses, those that are "discretionary" to the employer, and those that are "non-discretionary". Discretionary bonuses are "sums paid as gifts at a holiday or other special occasions, such as a reward for good service, which are not measured by or dependent upon hours worked, production or efficiency, are not included for purposes of determining the regular rate of pay." In other words, an employer is under no requirement to pay discretionary bonuses.
In contrast, non-discretionary bonuses are part of an employer policy, implicit promise, or explicit contract that obligates an employer to pay. These bonuses are predicated on the employee hitting pre-determined productivity or performance targets.
The California Labor Code, Section 200 defines "Wages" to include "all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation." Wages include both discretionary and non-discretionary bonuses.
Because bonuses are wages, employers are required to timely pay these bonuses to employees in the proper pay period after they are earned. And for employees whose employment is terminated or who quit, earned non-discretionary bonuses must be included in the employee's final paycheck. Employees who have not fulfilled their pre-determined productivity or performance targets may still be entitled to collect a pro-rated portion of their bonus as of the time of their termination.
Bonuses and Overtime Rate of Pay
The distinction between the types of bonuses is important. This is because under California law, non-discretionary bonuses play an important role when calculating your overtime rate of pay. Overtime pay is calculated as 1.5 times an employee's regular rate of pay. This regular rate of pay is calculated by adding non-discretionary bonuses and commissions to an employee's base rate of pay. Therefore bonuses can significantly increase what you make when you work overtime.
Protect Your Legal Rights
If your employer (or former employer) is refusing to timely pay your bonus, or refusing to pay your bonus entirely, you may be entitled to relief. The attorneys at Moss Bollinger have spent years standing up to employers to protect the legal rights of employees. Call us and we can help determine whether you have a legal claim. If we accept your case, we work on a contingency basis and we collect nothing up front. Call Moss Bollinger at 800-249-1175 to schedule a free consultation or contact us online.