Court Opinion

ID: 5156345
Source: CourtListenerOpinion
Date Created: 2022-01-02 02:21:51.922575+00
Date Added: 2024-06-11T08:25:22.265808
License: Public Domain

[17] Under ordinary circumstances, no specific, continuing contractual right arises from the pattern or fact of past payment of a bonus. Bonus systems are managerial devices designed to create incentive for employees by which an employer attempts to encourage continued faithful service and higher quality performance. Implicit in the practice of payment of bonus is the condition that employee must maintain his status as such until the bonus is actually paid. It not only rewards an employee for past special job performance, but it also integrally connected to employer's future expectation of such performance. As a matter of common business practice, the two component parts are so intertwined, to assign more status to past performance than to future performance1 is to destroy its value and perhaps, eventually, the custom.
[18] I believe Cain's Coffee Co. v. McNutt, Okla., 308 P.2d 651
(1957), is the controlling case, though I would interpret its holding differently from that of the majority.
[19] Cain's board of directors declared a bonus derived from company profits related to the fiscal year which had previously ended. A fund for the payment of that bonus had even been set aside by written resolution of the board. It was to be paid at Christmas and was equal to one-twelfth of the employee's salary. Employee was terminated in October and sued to enforce payment of the bonus. The supreme court denied recovery relying mainly on the factual absence of a contract2 and the legally implied condition that plaintiff had to have been employed at the time payment was to be made.
[20] In both the case at bar and in Cain's:
 (1) the employer declared a bonus was to be paid;
 (2) the bonus was for work already performed in a past fiscal year;
 (3) the amount was declared or could be easily computed ($7,000 as compared to 1/12 annual salary);
 (4) the bonus was to be paid at a later date;
 (5) employment terminated prior to its payment.
[21] The wording in employer's (Hodges) September letter "I am giving" and that *Page 796 
payment was postponed until "next year" clearly assumes an ongoing relationship and clearly contemplates, if not directly, then impliedly, the continued employment of plaintiff as a condition of payment.
[22] The net result of the majority opinion is to declare that an employee's right to a bonus vests and becomes absolute when: (1) employer declares its intention to pay a bonus; and (2) the amount of the bonus is made definite. Both of these factors are almost always present in any bonus scheme either directly, as inCain's, or impliedly by custom of past payments. This decision creates an unnecessary and unwarranted legal intrusion into what has traditionally been a prerogative of the employer. It also goes against the grain of the holding in Cain's.
[23] I would hold that employee's right to a bonus does not vest until it is paid, unless a contrary contractual obligation is proven.
1 From a practical, common sense standpoint the future aspect is the only business reason employer pays a bonus unless one assigns to a bonus the status of a gift which the courts have uniformly declined to do!
2 In the present case, there can be no valid assertion of a contractual right prior to the September letter because, as employer points out, no prior agreement to pay the bonus existed between the parties and the work performed had already been performed.