Employee's Bonus Scheme Consists of Combination of Individual Performance and Corporate Performance
In Truelove v. Northeast Capital & Advisory (95 NY2d 220 ), the Court of Appeals found that a bonus scheme, the payment of which was within the employer's discretion, predicated upon a combination of individual performance and corporate performance, and then based on the firm generating a set amount of revenue and establishing a bonus/profit sharing pool, was not a wage within the contemplation of the Labor Law.
In so finding, the Court of Appeals stated:
"The terms of defendant's bonus compensation plan did not predicate bonus payments upon plaintiff's own personal productivity nor give plaintiff a contractual right to bonus payments based upon his productivity.
To the contrary, the declaration of a bonus pool was dependent solely upon his employer's overall financial success.
In addition, plaintiff's share in the bonus pool was entirely discretionary and subject to the non-reviewable determination of his employer.
These factors, we believe, take plaintiff's bonus payments out of the statutory definition of wages." (95 NY2d, at 224.)
It follows that a compensation scheme which is predicated upon an employee's personal productivity and the objective success of the venture--not the employer's discretion or any subjective standard--is a contractual right of the employee. (See, Tischmann v. ITT/Sheraton Corp., 882 F Supp 1358 [SD NY 1995] [bonus plan which is contingent on the financial success of the business does not constitute wages as defined in Labor Law 190 (1)].)