Can Discretion Be Abused? Lessons from Burnett v. Finance of America Mortgage on Colorado Bonus Disputes
A significant recent decision from the U.S. District Court for the District of Colorado—Burnett v. Finance of America Mortgage, LLC, 2025 U.S. Dist. LEXIS 34395—delivers critical insight into the enforceability of discretionary bonus policies under the Colorado Wage Claim Act (CWCA). This case underscores how employers, even when invoking broad contractual discretion, can face liability when their conduct creates an enforceable expectation of compensation.
Case Overview
Mark Burnett, a long-time employee of Finance of America Mortgage (FOAM), held the role of non-producing branch manager overseeing three profitable Colorado offices. His employment contract outlined eligibility for various bonuses —including “discretionary” ones—based on performance, retention, and contributions to corporate initiatives.
In September 2022, during the potential sale of FOAM’s assets to Guaranteed Rate, Burnett requested an $875,000 bonus, citing years of exceptional performance and the healthy financial state of his branches. Two high-ranking executives approved the bonus, and it appeared in the company’s internal payroll system—before vanishing days later.
The Legal Dispute
After FOAM later refused to pay the bonus — citing shifting financial priorities and reserve policies during its exit from the mortgage business — Burnett sued under three claims:
- Violation of the Colorado Wage Claim Act (CWCA)
- Breach of Contract
- Unjust Enrichment
He also initially named FOAM executive Graham Fleming individually, but conceded those individual claims under common law were not viable. The U.S. District Court noted, however, that individual liability for wages, including earned bonuses and commissions, can be imposed on individual corporate officers under the CWCA.
Court’s Ruling: Partial Summary Judgment
Judge Robert E. Blackburn ruled:
- ✅ Summary judgment was granted for Graham Fleming individually (as contract and unjust enrichment claims do not support personal liability under Colorado law) and the plaintiff had not sued the individual under the CWCA.
- ❌ Summary judgment was denied as to all remaining claims against FOAM.
Key Holding: FOAM’s “discretion” in awarding bonuses did not provide absolute immunity from liability — especially in light of the approvals given and Burnett’s reliance on those approvals to continue working through the company’s wind-down.
Why This Case Matters: Colorado Wage Claim Act in Action
The CWCA, at its core, ensures prompt payment of wages owed to an employee. This includes bonuses and commissions, which are defined under § 8-4-101(14)(a)(II), C.R.S., as compensation earned “for labor or services performed in accordance with the terms of any agreement.”
The defense strategy in Burnett leaned on the “discretionary” language in the bonus agreement, arguing FOAM retained at all times, even after approvals by managers, complete control and thus had no enforceable obligation. But the court rejected this logic—pointing to:
- Prior approval of the bonus by two senior executives,
- The appearance of the bonus as payable in FOAM’s CompenSafe system,
- Testimony that no other bonuses approved at that level had ever been denied,
- Burnett’s assertion that he relied on the expected bonus, staying on to assist with branch closures.
The court noted that under Colorado Supreme Court precedent (Nieto v. Clark’s Market, Inc., 2021 CO 48), an employee need not prove “vesting” if the bonus was earned—i.e., awarded in return for services rendered.
Contractual Discretion Isn’t a Free Pass
FOAM argued that because Burnett’s bonus was “discretionary,” it was never earned or owed, or vested. However, as Judge Blackburn emphasized, bonuses and commissions only have to be earned, not vested. Further, Colorado employment law imposes an implied duty of good faith and fair dealing in all contracts.
This means:
- An employer cannot arbitrarily revoke promised compensation once an employee has performed the labor and received approval.
- Even when discretion is granted in a contract, it must be exercised reasonably and in good faith.
This ruling echoes a growing line of Colorado bonus dispute cases s where courts refuse to permit employers to hide behind ambiguous language designed to deny employee compensation rights like bonuses or commissions, especially where performance and approvals suggest a legitimate expectation of payment.
Practical Implications for Employers and Employees
⚖️ For Employers:
- Bonus Policies Must Be Clear and Consistent: If you retain discretion, document how it’s exercised and apply it evenly across the company.
- Watch for Legal Triggers: If a bonus appears in payroll systems or receives high-level approval, courts may consider it “earned compensation.”
- Honor Implied Expectations: Once a bonus is approved, attempts to retract it may expose you to liability under the CWCA or breach of contract theories.
👩⚖️ For Employees:
- Document Everything: If you receive verbal or written approvals of a bonus, preserve that evidence—it could be key in litigation.
- Understand Your Rights: Under the CWCA, “discretionary” does not mean “untouchable.” If you’ve done the work and met expectations, you may be entitled to payment, even if the employer later claims discretion.
What Burnett v. FOAM Means for Colorado Wage Law
Burnett v. FOAM is a textbook case illustrating that labels don’t determine legal obligations—conduct does. Discretionary bonus policies, when not exercised in good faith or when contradicted by approval and reliance, may give rise to enforceable claims under Colorado wage law.
At Baird Quinn, our experienced employment lawyers assist employers and employees in navigating complex wage and compensation issues. Whether you’re developing a bonus or commission policy or facing a dispute over unpaid compensation such as unpaid bonuses and withheld commissions, we offer experienced, strategic legal counsel grounded in the latest case law. Get in contact with us today.