Court Rejects Terminated Employee’s Claim to Bonus and Severance

In O’Grady v. Bluecrest Capital Mgmt. LLP, No. 15-CV-1108 SHS, 2015 WL 3740701 (S.D.N.Y. June 15, 2015), the court dismissed, under FRCP 12(b)(6), plaintiff’s claims for a bonus and severance pay. This case illustrates that courts will look to the terms of an employee’s employment agreement when assessing those claims.

As to plaintiff’s claim for a bonus, the court concluded that plaintiff

is not entitled to any bonus payment pursuant to the plain language of his employment contract. Section 3 of the Agreement unequivocally states that “any bonus program and awards made pursuant thereto by the Company will be subject to the Company’s sole and absolute discretion.” It is well established that an employee cannot recover for an employer’s failure to pay a bonus under a plan that provides the employer with absolute discretion in deciding whether to pay the bonus.

The court also rejected plaintiff’s claim for severance pay. The parties’ agreement stated that if plaintiff was terminated without cause, the company may “in its absolute discretion, terminate [his] employment immediately … and make a lump sum payment equivalent to [his] Base Salary through the end of the [one month] notice period …, provided that [he] execute[s] a valid and irrevocable release agreement in a form acceptable to the Company.” Plaintiff’s failure to allege that he signed a release – the condition precedent to any severance pay – doomed his claim for one month’s severance.

It also rejected plaintiff’s argument that the failure to pay a bonus under New York Labor Law 193, since “[a] plaintiff cannot assert a statutory claim for wages under [section 193 of] the Labor Law if he has no enforceable contractual right to those wages” and the terms of plaintiff’s agreement made plain that “any bonus awards are subject to the ‘sole and absolute discretion’ of” plaintiff’s employer.