Near the end of August, the Ohio Court of Appeals affirmed an employer’s summary judgment on claims of “breach of contract, detrimental reliance, unjust enrichment, and fraud” arising out of the refusal of employer to pay out a $50K incentive bonus earned in the prior year because the plaintiff was not still employed at the time the bonus was payable. Rusu v. Carter-Jones Lumber Co., 2023-Ohio-2927. The Court agreed that the parties’ contract provided that the employee was not entitled to the incentive bonus unless he was still employed at the time the bonuses were paid out every year in March. In short, the employee did not earn the bonus unless all of the conditions of the agreement were satisfied: certain profit targets were achieved in the calendar year AND he was still employed at the time the bonus was paid every March.
According to the Court’s opinion, the plaintiff was hired in
2016. The terms of his offer letter
specified that he would be eligible for an incentive bonus. The addendum, which the plaintiff signed,
provided that to receive the bonus, the plaintiff must still be employed when
the bonus was paid out in March. If his
employment ended for any reason before the bonus was paid in March, he would
not receive any portion of the bonus.
The plaintiff also admitted that he had been paid the incentive bonus
each March that he was employed. However,
he was terminated on January 10, 2020 and was not paid any portion of the 2019
incentive bonus that he asserted he had already earned. He then filed suit.
The plaintiff argued that it was inequitable for him to forfeit
his bonus on January 10 after he had already earned it the prior year. He argued that his situation was akin to when
another employer’s bonus policy provided “the employee was entitled to a bonus
based on the calendar-year profit when that year’s audit was completed.” In that case, the court had concluded that
the policy caused the employee to lose his bonus “based solely on the
fortuitous timing of the completion of the audit procedures, which procedures
could in no way alter the profit or bonus actually earned.” The Court rejected the analogy because in
this case agreement was specific about how long he had to remain employed and
it was not a vague or uncertain date in the future:
However, here, the addendum specifically set forth that the bonus would be distributed in the following March. Thus, the timing of the bonus distribution was not “fortuitous,” but instead was a specific term of the agreement. Moreover, the Ohio Supreme Court has held that “[a] person competent to contract who, pursuant to a written agreement with another has performed services, is entitled to compensation therefor only in accordance with the terms of such bargain, in the absence of fraud, illegality or bad faith.”
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
