Employee bonuses in California: An essential guide for HR professionals

September 12, 2023Media Mention
Human Resources Director (HRD)

Employment Partner, Karina Sterman, provided her commentary to Human Resources Director regarding employee bonuses.


For HR professionals navigating this landscape, understanding these nuances is paramount. Karina B. Sterman, partner at Greenberg Glusker LLP, sat down with HRD to glean some invaluable insights into the intricate subject.

"It's key to understand that it will not be merely about the terminology used in bonus agreements. It's about grasping the essence of what 'discretionary' and 'non-discretionary' bonuses genuinely signify," she tells HRD. Non-discretionary bonuses are earned. Discretionary bonuses are more akin to gifts.

Sterman emphasizes that the legal ramifications of these classifications are profound in practice. For instance, a bonus labelled 'discretionary' in an employment agreement can quickly become non-discretionary if tied to specific performance metrics.

"Once you establish the criteria for its attainment, its discretionary nature may effectively get nullified if you are providing the terms for earning it."

“Many disputes stem from bonus plans that haven't been vetted by HR or reviewed by counsel. A company's intentions might be well-placed, but they could inadvertently stray from legal guidelines.”

"While it might not be the most user-friendly, it's a treasure trove of official opinion letters on bonuses. Engaging a knowledgeable, California-focused employment attorney is also invaluable. Such expertise not only provides clarity but can also shield businesses from unanticipated legal entanglements and significant financial repercussions.”

"With non-exempt or hourly workers, bonuses can complicate overtime calculations for employers. If a company pays non-discretionary bonuses, these must be factored into the regular hourly pay, which subsequently impacts overtime calculations and even premium payments."

“A proactive approach, rooted in clarity and legal expertise, can pre-empt a multitude of potential challenges down the line."