Dispute over whether payment was actually discretionary

If a bonus is meant to be discretionary, it’s key that its terms meet all the requirements set by the Department of Labor (DOL). Otherwise, employers could run into problems.

One employer claimed it gave its workers a discretionary bonus, but the circumstances behind it suggested otherwise.

Was it guaranteed?

In Linkevich v. Smithfield Foods, an employee sued his employer after he didn’t receive his bonus check. The employee said this amounted to a missed wage payment because the bonus was mentioned in his employment contract.

The employer said that the bonus was discretionary because it wasn’t guaranteed to employees.

However, the employee claimed otherwise. Almost every other worker received the bonus, and because of the wording in his contract, he was under the impression that he’d receive one, too, after meeting his goals.

The court said that, although the company considered the bonus discretionary, the way it was awarded may actually make it nondiscretionary. Now, a jury must decide if the bonus was classified correctly.

According to the DOL< for a bonus to be considered discretionary, the payment can’t be made according to any prior agreement, contract, or promise that would cause an employee to expect the payment regularly. Bonuses mentioned in contracts may end up being nondiscretionary.

Cite: Linkevich v. Smithfield Foods, U.S. D.C., D. Rhode Island, No. 20-022 WES 2/19/21.