Legal Question in Employment Law in California

I am a Director of Sales in a hotel located in Los Angeles. I am entitled to an incentive plan paid out by my employer when I meet my quarterly sales quota. Incentive is paid out within 45 days after the quarter ends. For the last 5 years of employment, I exceeded my sales quota.

Last year, my employer introduced a new policy to our incentive plan i.e. only 50% of the earned quarterly incentive will be paid within 45 days. Remaining 50% will be accured as "escrow" till January 15 of the following year as a way to ensure loyalty and continued employment. Should I resigned during the year, the 50% accured "escrow" amount will be forfeited. Is this legal?


Asked on 10/25/15, 11:52 pm

1 Answer from Attorneys

Yes, it is legal if they structured it right. By calling it an "escrow," however, they may not have. It is perfectly legal to have loyalty bonuses that are only paid on certain dates if still employed. It is also perfectly legal to have those bonuses be tied to performance goals as well. By treating it as earned compensation that is "escrowed," however, as opposed to compensation that is not even earned until the loyalty goal is met, they may not have set up a legal compensation structure. You would have to run the specifics of the plan by an employment lawyer to be sure either way.

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Answered on 10/26/15, 7:51 am


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