Court Decision Illustrates Importance of Having a Clear Written Agreement or Policy on Bonuses and Commissions

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A recent decision from the North Carolina Court of Appeals shows why it is important to have a clear written agreement or policy on bonuses and commissions.

In Kornegay vs. Aspen Asset Group, LLC, a jury found the employer and employee had an enforceable verbal agreement that, in addition to his salary, the employee would be paid a bonus of “20% of the profits” from real estate investment projects he “originated and implemented.” On appeal, the employer argued there was insufficient evidence to support the jury’s verdict because the parties had negotiations for the employee’s bonus but intended to reach an agreement on the bonus only if and when it was put in writing and signed by both parties, which never happened. The Court of Appeals upheld the lower court’s award of bonus compensation based on the jury’s verdict, finding there was sufficient evidence that the employer and employee reached an enforceable verbal agreement on “definite and certain” terms of how the bonus would be calculated and when it would be earned and payable to support the jury’s decision.

The employee worked for the employer more than seven years and left its employment without ever receiving a bonus. On appeal, the employer argued that even if the parties had an agreement on a bonus for the employee, the bonus had been eliminated when the employer sent the employee a written statement during the fifth year of his employment telling him there would be “No Bonuses, No Commissions, No Nothing Until [the employer] sees fit & confident we are making money.”

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