By Stefanie L. Baker
An Ohio Court of Appeals recently recognized that employers are not always free to change their employees’ compensation, even when those employees are employees at will.
The case is Pate v. Quick Solutions, Inc., 2011-Ohio-3925. The employee in the Pate case was an employee at will who had, at one time, signed a written contract with his employer. That contract provided that a “Bonus Calculation Model” would determine certain salary increases and cash bonuses throughout his employment.
In 2004 the parties attempted to reach an agreement on a new bonus plan, but were never able to agree. The President of the company then chose to simply change Pate’s bonus to a purely discretionary bonus, reasoning that he could do so because Pate was an employee at will. However, the company presented no evidence that it actually informed Pate it was making this change: it simply implemented the change.
When the company eventually fired Pate, Pate filed a lawsuit, claiming (among other things) that he was owed unpaid bonuses under the “Bonus Calculation Model.” The trial court initially threw out Pate’s bonus claim, but the Court of Appeals reversed, agreeing with Pate that he might be owed bonus money. The Court of Appeals recognized that the company, as an employer of at-will employees, was free to change the compensation of its employees at its whim, and the employees would be deemed to have accepted this change if they continued to show up and work for the employer after the change was announced. But the Court of Appeals found that there was no evidence presented regarding whether or not the company had ever announced to Pate that it was changing the manner in which his bonus was calculated. If, in fact, the company never notified Pate of the change, Pate never had the opportunity to accept it (by continuing to work) or reject it (by quitting). If that were the case, there was never a valid change, and the “Bonus Calculation Model” would still apply. The Court of Appeals remanded the case back to the trial court to determine whether Pate received notice or otherwise knew of the alleged change to his cash bonus plan.
The Pate case illustrates that employers of at-will employees cannot simply implement changes to their employees’ compensation and benefits without actually informing employees of the change. Otherwise, courts might find the employer on the hook for benefits that the employer thought it replaced long-ago.
