Appellate Court Upholds Denial of Uncertain Bonus Claim
A manager at our client Clark Atlanta University hired a manager via a letter agreement stating that his base salary would be supplemented with an annual bonus of “up to 15%” of his base salary based on his successful achievement of mutually agreed-upon performance objectives. When the University refused to pay bonuses because the manager had never participated in establishing performance objectives, the manager sued in Georgia state court for breach of contract, claiming that his good-to-excellent annual staff performance evaluations both established the performance objectives and demonstrated his satisfaction of those performance objectives.
The trial court rejected the manager’s claim and the Georgia Court of Appeals affirmed. The appellate court held that, to substantiate a claim to future compensation such as a bonus, an employee must prove (a) that definite bonus terms existed, (b) that the terms specified an exact amount of the bonus or contained a formula for computing the bonus, and (c) that the terms were established at the beginning of employment. We argued, and the appellate court agreed, that a bonus amount “of up to 15%” did not specify an exact amount of bonus, and that, at best, the manager could show only an “agreement to agree” to pay a bonus, which is not enforceable.