Unpaid Bonus and Commission Claims

You hit the number. The bonus was calculated, discussed, and in some cases stated in writing. Then you resigned in January, or were terminated in February, and the company told you that bonuses require active employment on the payment date, or that the bonus was always discretionary, or that the commission was never earned because the customer had not yet paid.

Whether you can recover depends less on fairness than on two questions: what the plan document actually says, and whether the money qualifies as wages under the New York Labor Law. The Law Offices of Albert Goodwin handles unpaid incentive compensation claims for managers, salespeople, and professionals in New York City.

Why the Wages Question Is Worth More Than the Bonus

If your unpaid compensation is wages under the Labor Law, the claim carries remedies that transform it:

• Liquidated damages of one hundred percent of the amount owed, unless the employer proves good faith;
• Prejudgment interest;
• Mandatory attorney fees for a prevailing employee; and
• A six year limitations period.

If it is not wages, you have an ordinary breach of contract claim: the amount owed, interest, no fee shifting, and each side pays its own lawyers. For a $40,000 bonus, that difference frequently determines whether the claim is worth bringing at all, and it certainly determines how the employer evaluates settlement.

When Incentive Pay Is Wages

The Labor Law defines wages as earnings for labor or services rendered, including earnings based on a commission or other basis. New York's highest court has drawn the line at discretion and at the connection to the employee's own work.

• Compensation that is discretionary and tied to the employer's overall financial success is generally not wages. A partnership-style profit pool, allocated by management judgment at year end, ordinarily falls here.
• Compensation that is guaranteed, or determined by a formula tied to your own performance, with no meaningful employer discretion, is generally wages. New York courts have enforced bonuses as wages where the employee's entitlement did not depend on the employer's discretion.
• Commissions are expressly wages, and they receive additional statutory protection described below.

The label in the plan document is not controlling, but the operative language is highly persuasive. Plans drafted by sophisticated employers say, in terms, that the award is discretionary, that no employee has any right or expectation until payment, and that management may reduce or eliminate it for any reason. Plans drafted casually, or communicated in an offer letter as a percentage of salary on achievement of stated targets, look very different.

Commissions and Labor Law Section 191

Commission salespeople have protections that other employees do not.

Section 191 requires that the terms of employment of a commission salesperson be set out in a written agreement signed by both parties, describing how wages, salary, drawing account, commissions, and all other monies earned are calculated, and addressing how compensation is handled on termination. Where an employer fails to produce such a signed writing, the statute provides that the employee's account of the terms of employment is presumed to be the agreement, which shifts the entire evidentiary posture of the case.

When a commission is earned is set by the parties' agreement. Absent an agreement addressing it, New York courts have held that a commission is earned when the salesperson produces a ready, willing, and able buyer, rather than at collection or delivery. Employers may lawfully define earning differently, including conditioning payment on collection, but they must actually do so in the agreement rather than asserting it after the fact. Deductions from commissions are permissible only where they follow an agreed formula for calculating the commission itself, and not as unilateral chargebacks.

Post-termination commissions are a recurring dispute: the deal you sourced closes six weeks after you leave. The answer is in the agreement, and where it is silent, the earning analysis and the parties' course of dealing govern.

The Employed-on-the-Payment-Date Clause

This provision defeats more bonus claims than any other, and it is worth understanding precisely. It says you receive nothing unless you are actively employed, and not under notice, when bonuses are paid. Its effect is that a year of work can be erased by a February termination.

New York courts enforce clear forfeiture conditions where the underlying compensation is genuinely discretionary. The arguments that succeed against them:

• The compensation is wages, and wages already earned cannot be forfeited by such a condition.
• The employer prevented the condition from being satisfied, by terminating you before the payment date, which implicates the implied covenant of good faith and fair dealing that New York reads into every contract. This argument is meaningfully stronger where the termination was without cause and the timing looks deliberate.
• The language does not say what the employer claims. Plans frequently condition eligibility on employment through the end of the performance period rather than through the payment date, which is a different and much better position for a departing employee.
• The condition was not applied consistently, and others who departed were paid.
• You were promised otherwise, in an offer letter, a retention discussion, or writing from a supervisor with authority, which may support a separate contract or promissory estoppel theory notwithstanding the plan.
• You resigned for good reason or were constructively discharged, if your arrangement recognizes that concept.

Whether you resigned or were terminated frequently decides the entire question, which is why an employee considering resignation with a bonus outstanding should get advice about timing before submitting anything.

Other Recurring Disputes

• Retroactive plan changes. The employer amends the plan mid-year, after the work is done, and applies the new terms. Whether it may do so depends on the plan's amendment provision and on whether the compensation had already been earned.
• Quota and territory changes that make an achieved target unreachable, or reassign an account before the deal closes.
• Windfall and cap clauses invoked selectively to reduce an unusually large commission.
• Draws treated as loans, with the employer demanding repayment of unearned draw after departure. Whether a draw is recoverable depends on the agreement, and New York restricts deductions from wages.
• Unlawful deductions under Labor Law section 193, which permits only specific categories of deductions from wages and does not authorize deductions for shortages, breakage, customer non-payment, or business losses.
• Deferred bonus and clawback terms, where a portion is paid over subsequent years subject to continued employment.

Executives and Deferred Compensation

Where the disputed compensation sits in a nonqualified deferred compensation plan for management or highly compensated employees, a different legal regime applies, including a requirement to exhaust the plan's internal appeal before suing and a deferential standard of review. See unpaid executive compensation.

How We Approach a Claim

1. Collect the documents: offer letter, plan documents for each relevant year, commission schedules, quota letters, plan amendments, and every written communication about the amount, including messages from your manager.
2. Characterize the compensation. Wages or contract, and whether each component may be characterized differently.
3. Compute the number, precisely, with liquidated damages and interest modeled, because employers respond to arithmetic.
4. Demand, which resolves a substantial share of these claims, particularly once the fee shifting exposure is visible.
5. File in court or, where an arbitration agreement governs, in arbitration. The New York State Department of Labor also accepts wage claims, which is a lower cost route for smaller amounts, though it is slower and the recovery is narrower than a private action.

You can contact us by phone at 212-233-1233 or by email at [email protected].