Under New York law, a terminated employee may pursue claims for breach of express and implied contract, unjust enrichment, and violation of Article 6 of the New York Labor Law against his employer for failing to compensate the employee for bonuses owed to him, even where no agreement to pay bonuses is set forth in writing. Such unpaid bonuses may be particularly large for highly paid professionals on Wall Street. (This author’s two recent articles on unpaid bonus claims by investment bankers and financial services employees are linked here and here, respectively.)
Whether the employer lawfully may fire the employee for bringing an arbitration or a lawsuit seeking to recover an unpaid bonus depends on the theory or theories on which the employee’s arbitration or suit is based.
If an employee’s arbitration or lawsuit seeks to recoup an unpaid bonus under Article 6 of the New York Labor Law, then the employer may not lawfully terminate the employee for bringing or prosecuting that arbitration or lawsuit. By contrast, if the employee’s arbitration or lawsuit seeks to recover a bonus owed to him either based on breach of an express or implied contract, or because the employer has been unjustly enriched, then the employer lawfully may fire the employee for filing or maintaining that arbitration or lawsuit.
In general, employment in New York State is at-will. Absent an employment agreement between an employer in New York and a worker, the employer may fire a worker for any reason or no reason, except for a reason prohibited by statute or by public policy. The public policy exception to at-will employment in New York is a narrow one.
Consequently, unless the employer and the employee have entered into an employment agreement, an employer in New York may discharge an employee for bringing or prosecuting an arbitration or a lawsuit against the employer, except where a statute prohibits such a retaliatory discharge.
N.Y. Labor Law § 215 bars an employer from firing, penalizing, or otherwise discriminating or retaliating against an employee because the employee has instituted a proceeding alleging New York Labor Law violations, or because the employee has otherwise exercised rights protected under the Labor Law. N.Y. Labor Law § 215 authorizes a worker to sue an employer who retaliates against him for bringing claims under the New York Labor Law. In such a lawsuit, a terminated employee may recover damages and reasonable attorneys’ fees, and may be reinstated to his former position.
Where an employer’s bonuses or incentive compenation are “wages” under Article 6 of the New York Labor Law, the employer violates N.Y. Labor Law § 193(1) by withholding from a terminated worker his unpaid bonuses. An employer may not lawfully fire an employee for bringing an arbitration or a lawsuit alleging that the employer violated N.Y. Labor Law § 193(1) by withholding from the employee his unpaid bonuses. Rather, such a firing would give the employee a cause of action for retaliatory discharge under N.Y. Labor Law § 215.
Employees in New York may enforce an oral agreement to pay an annual bonus made at the beginning of an employment relationship where that bonus is an integral part of the employee’s compensation package. Apart from these oral contracts, the course of dealing between an employer and an employee, either in the financial industry or in other fields, may evince an implied promise that annual or semi-annual bonus payments are part of the employee’s compensation. However, the employer is free to fire an employee for filing or maintaining an arbitration or a lawsuit seeking to recover a bonus owed to him based on breach of either an express or an implied contract.
Again, an investment banker or a financial services employee may be entitled to recover a bonus from an employer, in quantum meruit, where the professional’s salary alone is insufficient to constitute reasonable value for the services he performed in his job with the employer. However, the employer lawfully may terminate an employee for prosecuting an arbitration or a lawsuit seeking to recover a bonus owed to him because the employer has been unjustly enriched.
Before currently employed investment bankers or financial services employees bring arbitrations or lawsuits against their present employers seeking to recover unpaid bonuses, the employees should analyze, with knowledgeable counsel, the consequences of bringing such proceedings.