Background and Facts

To recruit and retain managers for

its restaurants, Panera Bread Company created a program under

which managers were eligible to receive a one-time bonus. A

manager who signed an agreement to participate in the program

would be paid the bonus five years later, provided he or she was

still working for Panera at that time. The amount of the bonus

depended on the profitability of the manager's restaurant. Later,

a change in general business conditions led Panera to conclude

that the bonuses would be too costly. The employer set a $100,000

cap on the amount.

Mark Boswell, and sixty-six other Panera managers, filed

a suit in a federal district court, maintaining that by imposing

the cap, the company had committed breach of contract. The

court issued a summary judgment in favor of the managers.

Panera appealed to the U.S. Court of Appeals for the Eighth

Circuit.

In the Words of the Court

ARNOLD

, Circuit Judge:

* * * *

The managers here were * * * at-will employees when

they signed their respective agreements, and those documents

expressly recognized that the managers would remain at-will

employees during the five-year bonus period. * * *

Employment

at-will can be characterized as a unilateral contract because there

is an express or implied promise that the employer will pay if the

employee works as directed.

[Emphasis added.]

* * * *

* * * An employer's promise to pay a bonus in return for an

at-will employee's continued employment is an offer for a unilat-

eral contract.

The question that arises at this point is whether Panera could

modify or terminate the terms of its offer to pay the one-time

bonus by imposing a cap on it. Generally, an offeror can withdraw

an offer at any time before the offeree accepts it.

* * * The offeree of a unilateral-contract offer * * * to make

the offer irrevocable * * * must merely begin performance.

* * * [Because] each of the managers * * * here had at least begun

performing under the offer, we conclude that Panera could not modify

the offer terms.

* * * *

Panera maintains, though, that no matter when a

unilateral-

contract offer becomes irrevocable as a general matter, in this

specific instance Panera expressly reserved the power to revoke

or modify its offer. It argues that it reserved that power by con

-

ditioning the payment of the bonus on the managers' continued

employment, a matter that Panera controlled since the employ-

ment was at will.

* * * We do not think that the reservation of power here

accomplishes the goal that Panera hopes. Keeping in mind that

the purpose of the rule precluding an offeror from modifying or

terminating a unilateral-contract offer after the offeree begins

performance is to protect the offeree in justifiable reliance on

the offeror's promise, the alleged reservation of power here

adds nothing beyond what the at-will relationship already pro-

vides

* * * . Panera could have terminated the managers if it

chose and precluded them from receiving the bonus, but it did

not. * * * [Because] the managers had begun performing the

unilateral-contract offer, Panera was not entitled to move

the goalposts on them by imposing a bonus cap, which was

outside the contemplation of the unilateral-contract offer.

[Emphasis added.]

Decision and Remedy

The U.S. Court of Appeals for the

Eighth Circuit affirmed the judgment of the lower court. Panera's

promise to pay bonuses in return for the managers' continued

employment was an offer for a unilateral contract.

Critical Thinking

Economic

Could Panera have successfully argued that a drop

in its revenue allowed it to impose the cap? Why or why not?

Legal Environment

Does the fact that the managers con-

tinued to work for Panera after it imposed the cap undercut their

claim? Explain.