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with the present annotation, because of the principles involved, is the annotation in 25 A.L.R. 1450, on promise of additional compensation for completing building or construction contract. Definition of the term “bonus,” as used in this class of contracts, is not easy, although that term is one which has come to be frequently used, and conveys a certain popular meaning. The term as used in employment contracts conveys an idea of something which is gratuitous, or which it may be claimed is gratuitous, over and above the prescribed wage which the employer agrees to pay. It is this element which distinguishes the class of cases under discussion from other cases where obviously there was no lack of consideration or mutuality, even though the wage was not definitely fixed, as in those instances where the employee works on commission. It may be stated generally that the present annotation does not purport to include cases where the agreement was to give the employee, as a part of his salary, a commission or percentage of the business transacted by him or a percentage of the profits of the business, without any other stipulation as to the length of service which he must render to entitle him thereto. Cases are also excluded where the promise was of a gift to the employee at some future time, but the nature of the employment or of the gratuity was such as to distinguish the promise from what is ordinarily regarded as a promise of a bonus. The annotation includes cases generally in which the extra compensation is expressly designated a bonus, and, apart from these cases, only those cases have been as a rule included in which it seemed that the extra compensation was in the nature of a bonus to the employee, as that term is used in popular phraseology relating to agreements between master and servant. While there is a conflict of opinion as to the validity of an agreement to pay an additional sum for per
formance of that which the promisee is already under obligation to perform, so as to give the latter the right to enforce such promise after performance, the cases which have involved the right of an employee to a bonus promised by the employer are not strictly of that class, unless the employee was already obligated to serve the term or to render the particular service for which the bonus was promised. It appears, accordingly, that if one enters into a contract of employment under an agreement that he shall be paid a certain salary by the week, or some other stated period, and, in addition, a bonus, in case he serves for a specified length of time, there is no reason for refusing to enforce the promise to pay the bonus, in case the employee serves the stipulated time, on the ground that it was a promise of a mere gratuity. This is true if the contract contemplates a continuance of the employment for a definite term, and the promise of the bonus is made at the time the contract is entered into. And if no time is fixed for the duration of the contract of employment, but the employee enters upon or continues in the service under an offer of a bonus if he remains therein for a certain time, his service, in case he remains the required time, constitutes an acceptance of the offer of the employer to pay the bonus, and after that acceptance the offer cannot be withdrawn, but may be enforced by the employee. Supporting the validity and enforceability of bonus contracts on the grounds above indicated, are the following cases: United States. – Kerbaugh v. Gray (1914) 129 C. C. A. 326, 212 Fed. 716. Alabama. — Henderson Land & Lumber Co. v. Barber (1920) 17 Ala. App. 337, 85 So. 35. Georgia. — Haag v. Rogers (1911) 9 Ga. App. 650, 72 S. E. 46; Phillips & Co. v. Hudson (1911) 9 Ga. App. 779, 72 S. E. 178. See also Duncan v. Cone (1915) 16 Ga. App. 253, 85 S. E. 203 (if promise is made at beginning of term).
*o Indiana. — Orton & S. Co. v. Mil- as the time specified in the bonus no: ; tonberger (1920) 74 Ind. App. 462, tice, but who after reading the notice 129 N. E. 47. remained in the service and worked North Carolina. — Roberts v. Mays continuously during the four months' Mills, post, 338. period, was entitled to the bonus
ennsylvania. — Snyder v. Hershey, offered, and that the employer could Chocolate Co. (1916) 63 Pa. Super. not claim lack of mutuality as a deCt. 528; scholl v. Hershey Chocolate fense in an action by the employee
Co. (1919) 71 Pa. Super. Ct. 244. to recover the same. It was said: . Philippine. — Liebenow v. Philip- “There is no mutuality in a unilateral Fine Vegetable Oil Co. (1918) 39 contract, until the party claiming Philippine, Go. under it has complied with the terms ashington. — SCOTT v. J. F. of the proposition. When, however, DUTHIE & Co. (reported herewith), one makes a promise conditioned upon ante, 328. the doing of an act by another, and
Moonsin: — Zwolanek v. Baker the latter does the act, the contract o #. Co. (1912) 150 Wis. 517, 44 is not void for want of mutuality, R.A. (N.S.) 1214, 137 N. W. 769, and the promisor is liable; for upon
Ann. Cas. 1914A, 793. performance of the conditions by D *nada. — Smith v. White Owl the promisee the contract becomes rug Co. (1922) — Manitoba, –, clothed with a valid consideration
§ o West. Week. Rep. 501, 70 which relates back and renders the § 3. tioni) .550. See also Sims v. Harris promise obligatory. . . . It is an to In K o: L- Rep. 455. elementary principle that, where one where er ough v. Gray (Fed.) supra, publishes an offer, and before it tion ...intendent of construc- is withdrawn another acts upon it, from hi Sought to recover a bonus the one making the offer is bound to “The * oloyer, the court said: perform the promise; in other words, *: 6 # **on nainly relied upon at the act becomes binding when the act promise .** here was that this is performed. . . ... Under the nudum pact bonus, if made, was terms of the offer published by de
**n because the plaintiff, fendant, it applied to “every man in
o: o to do his best for his our employ (except men doing wnsio. rh othing in the way of piecework).’ Plaintiff was certainly Of a on O support the promise in the employ of defendant at the
the plaintiff This would be true if time the offer was made, and per
tontinue in Yvere legally bound to formed service in that capacity for defendant to e employment of the the term stipulated, We can see no But he Was the end of the season. reason why, if his testimony is to be quit work at Inot, and could have believed, which we must do on ap
fore the jo-oy time. . . . There- peal, he is not within the terms of he continued had a right to find that the offer.”
this promise rh the employment after So, the proposition that a contract upon it.” of a bonus, relying by which an employer is to pay the And wher. employee a certain amount as wages notice that the employer posted a in any event, and an additional day he Woul eginning on a certain amount if he remains in the employTer cent to <l give a bonus of 5 ment until the end of the contract,
except men Very man in his employ, is not unenforceable as to the extra served “four doing piecework, who compensation on the ground that it is it was held months' straight time,” nudum pactum, is supported by Haag Mumber Co in Henderson Land & v. Rogers (1911) 9 Ga. App. 650, 72 that a fore V. Barber (Ala.) supra, S. E. 46. - - - this offer \\ San who knew nothing of And in Phillips & Co. v. Hudson agreement Wtil after he had made an (1911) 9 Ga. App. 779, 72 S. E. 178, Per month S work for a certain sum it was held that a promise by an eginning on the same day employer to pay as a bonus to the
employee a percentage of the company's earnings during the year, in addition to his stated salary, if made concurrently with the contract for the employee's services for to at year, at the beginning of the employment, is enforceable at the termination of the year's service. The court observed that "if the promise for the bonus were made during the term of employment or after performance was complete it would not be enforceable. So, where a company which had been accustomed to pay to employees a share of its profits equal to 20 per cent of their wages, at the end of the first year of the plaintiff's employment, paid him a share of the profit, at the same time sending him a letter urging employees to take a more active interest in the welfare of the business “in which they share the profits,” and stating that by each employee giving the business his best efforts their mutual interest would be materially benefited, it was held in Snyder v. Hershey Chocolate Co. (1916) 63 Pa. Super. Ct. 528, that on remaining in the service during the succeeding year, the plaintiff could enforce payment of the 20 per cent bonus which the company gave to its employees at the close of the year. The court said: “We may assume that the payment of the additional wages was dependent upon the success of the business, and that there was no absolute promise to pay a definite sum contained in the letter above referred to. What amount was to be distributed was to be determined by the board of directors. It was certain that the workmen were to have a share in the profits, if any were made. This was the inducement to the men to continue in the company's employ. In other words, the promise was that at the end of the year there would be some distribution of profits, if any were made, and after the company fixed the amount which was to be distributed, then that which was indefinite became definite, and all the laborers employed by the company who had taken 6mployment under the promise to
share if they continued to work during the year were entitled to receive their extra compensation fixed at 20 per cent of their wages during the year. The company offered this as an inducement to the laborers to continue in. its employ, and, this purpose being consummated by a fixing of the amount of the extra compensation, all the elements of a valid contract were present.” To the same effect, in an action against the same company by an employee to recover a bonus, is Scholl v. Hershey Chocolate Co. (1919) 71 Pa. Super. Ct. 244. Where the promise of a bonus at the end of a year is held out to an employee who enters the employment during the year, as an inducement for his entering the service, the employee who accepts the offer by entering and remaining in the service is entitled to share in the distribution of the bonus declared by the employer at the close of the year's employment, even though no definite amount or percentage is held out to him as an inducement to enter the service. Orton & S. Co. v. Miltonberger (1920) 74 Ind. App. 462, 129 N. E. 47. The court said that when the em. ployer promised a bonus he must be understood to have meant a bonus in such amount as the method adopted by it for its computation would produce, and that when the ofter was accepted by performance of the services the employer was bound by its offer. In a case involving the right of an employee to recover a bonus offered in a by-law of the employer company which contained a plan for the sharing by employees in the profits of the business, the court in Zwolenak v. Baker Mfg. Co. (1912) 150 Wis. 517, 44 L.R.A. (N.S.) 1214, 137 N. W. 769, Ann. Cas. 1914A, 793, in sustaining the right of the employee, said that a binding and enforceable contract to pay a reward rests, on one side, upon a valid offer, and, on the other side, upon an acceptance of such offer, including its terms and conditions, by a performance of the services requested in the offer, before it lapses or is revoked; that until acceptance by performance of the Services, it is merely a proposition, but that when accepted by performance it becomes a binding contract, subject to the laws governing contracts generally; that performance Constitutes acceptance of the offer, and that, after performance, it can*ot be revoked so as to deprive of °9mpensation a person who has acted °n the good faith thereof. he court in Zwolenak v. Baker Mfg. Co. (Wis.) supra, held that the fact that the employee was working *der a written contract which did * mention a right to extra com**sation for continuous service did * Prevent his recovering the same, * * was offered by his employer o he rendered the service to secure o o that the fact that the provio extra compensation was conand * A by-law of the corporation, WaS o: in the employee's contract, C0Ver "... ground for denying reo, *reof to the latter, if the ..","...s communicated to and .*.*.*, hirn. *"oohoo. V. Philippine Vegetawhere a " C is 18) 39 Philippine, 60, Services of **TP oration engaged the its factory one as superintendent of pensation “ar, a stated monthly comin the Way o a such further amount directors ma. * bonus as the board of it was held No See fit to grant you,” enforceable that there was a valid 80mething b So ontract for payment of employee ha Way of bonus after the Of employrne served the year's term contract, boot contemplated by the bonus was that the amount of the the employe **ft to the discretion of not be judio 5 which discretion could the obligatios' sally reviewed, and that thing was was satisfied if somethough it w Raid as a bonus, even The walio but a nominal amount. employer to ty of a promise by an consisting ay a bonus to employees, of earnings Sf a certain percentage stimulate of the company, offered to Ployees, at oduction. so that emmay reco Ser rendition of the service, assimo the bonus, seems to be *n such cases as Hallock v.
Economy Drawing Table & Mfg. Co. (1923) — Mich. —, 193 N. W. 825, where the question was as to the computation of the bonus. The decision in Black v. W. S. Tyler Co. (1917) 12 Ohio App. 27, seems out of line with the other decisions above set out, or at least questionable, unless it can be regarded as based merely upon the particular provision of the profit-sharing plan offered by the employer to employee to the effect that employees who voluntarily left the service of the company or were dismissed or discharged forfeited their right to share in any dividend. The decision does not seem to be placed, however, exclusively at least,-on this provision, although the court calls attention thereto, but on the general ground that there was no enforceable contract between employer and employee for payment of the bonus in question. In this case, on July 1, 1914, the employer promulgated a profit-sharing plan for the benefit of employees, beginning January 1, 1915, and applying to the profits for the preceding year, the plan providing for a division of cash dividends between stockholders and employees who had been in the service of the company for six months or more. As already indicated, the plan provided that employees voluntarily leaving the service of the company, or dismissed or discharged, forfeited their right to dividends. The plaintiff was an employee during the year 1914 and received his share of the dividends which were declared for that year. He remained in the service during 1915, and early in 1916 the employer declared a cash dividend payable to employees in instalments during that year. About the middle of the year the employment was terminated because of discontinuance of the department in which the employee worked, and it was held that the latter could not recover instalments of dividends declared at the beginning of the year 1916, but which did not become payable until after termination of the employment. The plaintiff testified that he accepted the offer of the employer, relied on it, and remained in the service because of it, but it was not shown that he communicated to the employer the fact of this reliance or acceptance of the proposition; and the court said that so far as was shown he would have continued up to the date of his dismissal had the profit-sharing plan not been adopted, and that, this being true, it could find no consideration for any contract obligating the employer to pay to the plaintiff the instalments of profits sued for. It was held also in Black v. W. S. Tyler Co. (Ohio) supra, that the instalment authorized by the directors of the employer company in January, 1916, did not become vested on that date so as to entitle the employee to recover the same, the court saying that the mere fact that the company decided, as a matter of policy, to offer to its employees a share of its profits, doubtless with the hope of encouraging efficiency and harmonly among them, did not create a contract obligating it to pay the same the moment the dividend was declared, as though it were a declaration of a dividend on stock of the corporation; and that to become vested, a contract must have existed.
If the employee is already under obligation to serve for a stipulated time, for a specified compensation, then an offer on the part of the employer to pay an additional sum by way of a bonus may be lacking in consideration and unenforceable. This depends upon the view which the court takes regarding the validity of a promise to pay an additional sum for accomplishment of that which the promisee is already obligated to perform. And the authorities on this general question are not in harmony. The promisor, by making the offer of additional compensation, secures performance instead of a mere right of action for damages. The old contract might plausibly be regarded as yielding to the terms of the new offer. But this general question is one which, of course, cannot be profitably discussed, even theoretically, in the present
annotation. (See in this connection, annotation in 25 A.L.R. 1450.) There are several cases involving bonuses wherein the courts have held the promise or offer of a bonus unenforceable for lack of consideration. The doctrine that where an employee is bound to serve for a definite time at a fixed salary, a promise made by the employer during this time to pay the employee at the close of the term of service an additional sum as a bonus is without consideration and cannot be enforced, is applied in Price v. Press Pub. Co. (1907) 117 App. Div. 854, 103 N. Y. Supp. 293, where a journalist was employed for a term of three years to work on a newspaper, the employer agreeing to pay not less than $9,000 the first year, $10,000 the second, and $11,000 the third. During the second year of this contract the employee asked for a release therefrom, stating to his employer that he intended not to break the contract and would carry it out, but that he had entered into an agreement for service with, another newspaper at the end of the term, and that for him to carry out his present contract would mean to him a loss of $10,000; whereupon the employer promised him that he would lose nothing by staying, and that a bonus of this amount would be given to him at the end of his service. It was held that after service of the term the employee could not recover the bonus, as he was already bound by the contract to serve for the time therein specified at the salaries fixed, and that there was no consideration for the agreement to pay this additional amount as a bonus. It was held also in Davis v. Morgan (1903) 117 Ga. 504, 61 L.R.A. 148, 97 Am. St. Rep. 171, 43 S. E. 732, that if the contract of employment was for a year, at a stipulated monthly salary, an agreement by the employers to pay a certain additional sum to the employee if he remained in the service until the end of the year was not binding, being without consideration. The court said that the promise was to pay more than