Legal Question in Business Law in California

Annual Bonus Compensation

I am employed ('at will') with a firm that pays an annual bonus. The bonus is discretionary, but is unofficially based on production of the firm during the year. My contract states that I must be employed by the firm to be paid the bonus. The bonus is paid in the form of a check (like regular payroll), through a third party payroll company, but not processed through direct deposit or 401k withholdings. I would like to know: a) at what point the funds represented in the check are 'legally' mine, i.e. when the check is presented to me, when the check is drafted, when the funds clear into my account, etc. and

b) At what point does the 'employed at the time the bonus is paid' clause in my contract cover me?

I plan on joining a different firm at the beginning of the year and due to certain timing contsraints, I would like to quit as soon as the funds are legally mine. I plan on offering two weeks notice, but there is a chance they will refuse and my employment will end at that time. I would like to know how to time the notice of employment termination without endangering my legal rights to the bonus compensation - which will be in the $50k range. Thanks.


Asked on 10/22/03, 7:39 pm

4 Answers from Attorneys
Yaphett Powell Vubiquity, Inc.

Re: Annual Bonus Compensation

First, the funds are legally yours and become your property when the check is physically delivered to you and accepted by you.

Second, the "employed at the time bonus is paid" provision in your contract covers you up until the day the company lets you go.

So, if you think they'll refuse your 2 weeks notice, then don't do anything until that check hits your hands.

Wait until you receive the check from the 3rd party payroll company before doing anything. Also, consult with a financial advisor about effective ways to invest the $50k. I can help you, if you wish. 800-545-8914, ext. 4246 (Beverly Hills office)

Best of luck!

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Answered on 10/25/03, 10:35 pm
Siamak Pishvaee Pishvaee & Bavar

Re: Annual Bonus Compensation

Get the check. Go to the bank. Deposit. Then use the bank phone to tell them you wont be returning. But dont ever list them on your resume after you do.

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Answered on 10/24/03, 11:43 pm
Sheldon G. Bardach Law Offices of Sheldon G. Bardach

Re: Annual Bonus Compensation

It appears to be appropriate to wait until the bonus is actually paid to you before resigning. As to what was meant by payment, was this ever discussed between you and your employer? Do you have any understanding how this was handled in the past? If so, be governed by that. Short of that, If I were you, under these circumstances,I believe that I would wait until I negotiated the check and received the cash, before I would terminate my employment with your employer under these circumstances.

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Answered on 10/22/03, 8:12 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Annual Bonus Compensation

I have discussed your situation with a colleague and did some basic research in an employment law practice manual. I believe a bonus which is calculated and paid in the ad-hoc manner you describe has many of the characteristics of a gift (even though as a practical matter it has some of the characteristics of a bribe).

A gift legally becomes the property of the donee when it is physically delivered and accepted under circumstances where it is clear that a gift (rather than a loan, or temporary custody of the item for some other purpose) is intended.

Therefore, I believe the money is yours when they hand you the check and you say "thank you."

I think the employer is very likely NOT to give you the bonus -- or to make it a lot smaller -- if you have given notice.

I also suggest that you cash the check before giving notice, even though stopping payment would probably be illegal.

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Answered on 10/22/03, 9:39 pm


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