William B. Truelove Jr.,
Northeast Capital & Advisory Inc.,
2000 NY Int. 104
Plaintiff William B. Truelove, Jr. brought this action
against his former employer, defendant Northeast Capital &
Advisory, Inc., under article 6 of the Labor Law to recover the
unpaid balance of a bonus he was awarded in December 1997,
payable in quarterly installments through the following year.
His complaint alleges that his bonus constituted "wages" within
the meaning of Labor Law § 190(1) and that, following his
resignation after the first bonus payment, defendant violated
Labor Law § 193 by enforcing an express condition in the bonus
plan predicating payment of each quarterly installment on
continued employment. We agree with Supreme Court and the
Defendant, a small investment banking firm, hired plaintiff in June 1996 as a financial analyst in a non-revenue generating position. Plaintiff elected a compensation plan under which he was to receive an annual salary of $40,000 and be eligible to participate in a bonus/profit sharing pool. Plaintiff's offer of employment stated that a "bonus, if paid, w[ould] reflect a combination of the individual's performance and Northeast Capital's performance."
The terms of the bonus plan were further clarified in two memoranda by defendant's Chief Executive Officer. The memoranda explained that a bonus/profit sharing pool would be established only if the firm generated a certain stated minimum of revenues and that the pool, once established, would be calculated pursuant to a graduated percentage schedule of firm revenues. The memoranda further stipulated that bonus/profit sharing distributions would be allocated in the CEO's sole discretion and would be paid in quarterly installments, with each payment contingent upon the recipient's continued employment at the firm. Employees were required to have an "acceptable" performance rating to participate in the bonus/profit sharing pool.
At the end of 1997, defendant established a
bonus/profit sharing pool of $240,000 based upon firm revenues of
Plaintiff brought this suit under Labor Law article 6, alleging that his bonus fell within the definition of wages set forth in Labor Law § 190(1). Plaintiff claimed that defendant's failure to pay him the three remaining bonus installment payments for 1997 violated Labor Law § 193, which provides that "[n]o employer shall make any deduction from the wages of an employee, except" under certain limited circumstances not relevant here. Supreme Court granted summary judgment to defendant on the ground that plaintiff's bonus did not constitute wages within the meaning of Labor Law article 6. The Appellate Division affirmed (268 2 648). We granted leave to appeal and now affirm.
Article 6 of the Labor Law sets forth a comprehensive set of statutory provisions enacted to strengthen and clarify the rights of employees to the payment of wages (see, Mem of Indus Commr, June 3, 1966, Bill Jacket, L 1966, ch 548, at 4). An employer who violates the requirements of Labor Law article 6 is subject to civil liability and criminal penalties (see, Labor Law §§ 198 and 198-a). The dispositive issue in this case is whether plaintiff's bonus constitutes "wages" within the meaning of the Labor Law.
Although New York has provided statutory protection for
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
Unlike in other areas where the Legislature chose to
define broadly the term "wages" to include every form of
compensation paid to an employee, including bonuses (see
Unemployment Insurance Law §§ 517, 518), the Legislature elected
not to define that term in Labor Law § 190(1) so expansively as
to cover all forms of employee remuneration. We therefore agree
with those courts that have concluded that the more restrictive
statutory definition of "wages," as "earnings for labor or
services rendered," excludes incentive compensation "based on
factors falling outside the scope of the employee's actual work"
(Tishmann v ITT/Sheraton Corp.,
The legislative history of the statute confirms our
conclusion. As we previously noted, prior to the recodification
of the Labor Law regulating the payment of wages in 1966 (L 1966,
ch 548), the statute did not provide a definition of the term
"wages." Then, as now, an employer was subject to both civil and
criminal liability for failing to pay "wages" as required by the
Thereafter, when the Legislature enacted article 6 of the Labor Law in 1966 and provided the first statutory definition of the term "wages," it intentionally followed Vetri's restricted view of wages for purposes of civil and criminal liability, specifically excluding from the definition wage supplements such as "health, welfare and retirement benefits, and vacation, separation or holiday pay" (L 1966, ch 548; see also, Bill Jacket, L 1966, ch 548, at 3 ["The bill specifically excludes fringe benefits from the term wages * * * in accord with the holding of the Court of Appeals * * * (in) People v Vetri"]).
The Legislature subsequently amended the statute in
1972 by removing the wage supplement exclusion and providing
certain statutory protections for the kind of fringe benefits
commonly found in regular terms of employment (see, L 1972, ch
Finally, we reject plaintiff's argument that he had a vested right to the bonus payments once defendant declared that a bonus would be paid and calculated the amount of that bonus. In Hall v United Parcel Serv. (76 2 27, 36), we held that an "employee's entitlement to a bonus is governed by the terms of the employer's bonus plan." Here, the bonus plan explicitly predicated the continuation of bonus payments upon the recipient's continued employment status. Because plaintiff resigned shortly after he received his first quarterly payment, he was not entitled to receive the remaining three payments.
Accordingly, the order of the Appellate Division should be affirmed, with costs.