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Many California employees work very hard for their bonuses, and it can come as a shock if they are not paid a bonus when expected or at all. However, do they have rights to that compensation, or is it just extra money handed out at an employer’s discretion? Fortunately, California labor laws do address this concern.
There are two categories of bonuses, “discretionary” (unearned) and “non-discretionary” (earned).
All earned bonuses are treated as wages under California Labor Code Section 200. These bonuses are “earned” as part of an employment contract, work performance policy, obligation, or an understanding between the employer and employees. For example, reaching targets in sales, productivity, etc. Whereas “discretionary” or unearned bonuses are not protected by law as they are given to employees at the employer’s discretion. For example, a holiday bonus, a reward for good service, etc. Earned bonuses factor into an employee’s regular rate. As a result, a bonus can increase overtime, which is one and one-half times an employee’s standard rate of pay.
California labor law does provide employees with two protections when it comes to bonuses.
Since an earned bonus is considered wages and employees are entitled to the timely payment of wages, your bonus should be timely paid and appear on your pay statement. However, it is subject to withholding taxes.
When an employee is terminated, they are still entitled to their earned bonuses immediately, along with any other unpaid wages earned. Additionally, if an employee quits they are entitled to all wages earned and unpaid (including earned bonuses) within 72 hours of their last day unless they have given at least 72 hours’ notice, then payment can be made on their last day.
Employers should not be able to withhold earned bonus payments. Therefore, if your employer promised a bonus related to your performance that has not been paid after a reasonable amount of time has passed, you have the right to file a wage claim with the Labor Commissioner’s Office. It can be filed online, by email, mail, or in person, and will start the process to collect on your unpaid bonuses. The Labor Commissioner’s Office will then investigate your claim and determine whether wages are owed. Most cases resolve in a settlement conference, but if not, a hearing is scheduled, and a hearing officer will review the evidence and then decide the claim.
If you believe your employer is violating California’s wage and hour laws by withholding an earned bonus, consult an experienced Orange County wage and hour attorney as soon as possible. These cases are often complicated and require concrete evidence to prove. An attorney can help you build your case by reviewing your employment contract, looking over company policies and emails, speaking to coworkers, etc. When doing so, they may discover that your employer has failed to pay other employees their earned bonuses as well. They will also handle filing your claim and ensure you recover the compensation you are owed.