Truelove v. Northeast Capital & Advisory, Inc., 95 N.Y.2d 220 (2000)

Under New York Labor Law, a bonus based on overall company performance and discretionary allocation, rather than an employee’s direct productivity, does not constitute ‘wages’ and is not protected by statutory provisions regarding wage deductions.

Summary

William Truelove sued his former employer, Northeast Capital & Advisory, for the unpaid balance of a bonus. The bonus plan stipulated quarterly installments contingent upon continued employment. Truelove resigned after receiving the first installment. The court addressed whether the bonus constituted ‘wages’ under Labor Law § 190(1), thus protected from deductions under Labor Law § 193. The Court of Appeals held that the bonus, dependent on the firm’s overall financial success and discretionary allocation, did not qualify as wages under the statute because it wasn’t directly tied to the employee’s individual performance. Therefore, the employer was not obligated to pay the remaining installments after Truelove’s resignation.

Facts

Northeast Capital hired Truelove as a financial analyst in June 1996. His compensation included a $40,000 salary and eligibility for a bonus/profit-sharing pool. Bonus pool creation depended on the firm reaching a revenue minimum. The CEO had sole discretion over bonus allocation, paid in quarterly installments contingent on continued employment. In 1997, a $240,000 bonus pool was created. Truelove was allocated $160,000, paid in quarterly installments. He received the first $40,000 installment but resigned and sought the remaining payments.

Procedural History

Truelove sued Northeast Capital under Labor Law article 6, claiming the bonus was ‘wages’ and non-payment violated Labor Law § 193. The Supreme Court granted summary judgment to Northeast Capital, finding the bonus was not ‘wages’. The Appellate Division affirmed. The Court of Appeals granted leave to appeal.

Issue(s)

Whether a bonus, where the bonus pool’s declaration depends solely on the employer’s overall financial success and the employee’s share is entirely discretionary and subject to the employer’s non-reviewable determination, constitutes ‘wages’ under Labor Law § 190(1), thus protected from deductions under Labor Law § 193.

Holding

No, because the bonus was contingent on the company’s overall financial performance and the employee’s share was subject to the employer’s discretion, it does not constitute ‘wages’ under Labor Law § 190(1).

Court’s Reasoning

The Court reasoned that Labor Law § 190(1) defines wages as ‘earnings of an employee for labor or services rendered.’ Previous court decisions construed this to exclude incentive compensation resembling profit-sharing arrangements contingent on the business’s financial success. Truelove’s bonus was not based on his personal productivity but on the company’s overall financial performance. His share was discretionary, further distancing it from the statutory definition of wages. The Court stated, “Discretionary additional remuneration, as a share in a reward to all employees for the success of the employer’s entrepreneurship, falls outside the protection of the statute.” The Court distinguished this case from instances where the Legislature broadly defined ‘wages’ to include bonuses (e.g., Unemployment Insurance Law). The legislative history, particularly People v. Vetri, 309 N.Y. 401 (1955), supported a restricted view of wages for civil and criminal liability purposes. The Court also rejected Truelove’s claim of vested rights because, per Hall v. United Parcel Serv., 76 N.Y.2d 27 (1990), bonus entitlement is governed by the bonus plan’s terms, which here required continued employment.