Whenever a company announces performance goals that apply to cash bonus, equity award, or vesting conditions, there is some risk that affected employees will later question the end-of-period determinations. Well-drafted plans and programs include significant employer protections. But some defects can really come back to haunt employers, such as the failure to allow for the impact of a future merger or acquisition, or the omission of a maximum limit. Panera Bread tried to recover from the latter, but lost in the 8th Circuit Court of Appeals because its bonus plan did not clearly reserve a right for Panera to unilaterally modify or terminate the plan. As a result, the court held in Boswell v. Panera that –
Since the managers had begun performing the unilateral contract offer, Panera was not entitled to move the goalposts on them by imposing a bonus cap, which was outside the contemplation of the unilateral-contract offer.
Whether drafting a new plan or handling one that is already in place, solutions are available to employers who act quickly and smartly. For general information about reducing your litigation risks, see our partner Mark Poerio’s blog, or feel free to contact him via email.