The New York Court of Appeals Latest Word on Bonus Compensation Disputes

The case of Ryan v. Kellogg Partners Institutional Services, presents a scenario familiar to many employers – a former employee claims that he is entitled to bonus compensation based upon oral assurances he was given by senior management, while his employer responds that the employee has no right to any bonus because bonuses are discretionary. Despite upholding the employee’s claim for a bonus, the New York Court of Appeals in Ryan actually reaffirmed the well-established New York principle that employees have no legal right to unvested, discretionary bonuses. Significantly, the Court of Appeals confirmed that properly drafted discretionary bonus policies could vitiate a bonus claim, but that the at-will statements in the employment application and handbook that Kellogg was relying upon simply did not meet the standard. The Ryan Court also restated its previous holding in Truelove v. Northeast Capital & Advisory, explaining that discretionary bonuses linked to an employer’s financial success do not constitute “wages” under the New York Labor Law, and that a bonus does not vest and become earned until the conditions of the employer’s bonus plan are met, which may include the requirement that the employee be employed by the employer at the time the bonus is paid.