About three years ago, seven plant managers lost their jobs following an investigation into allegations of betting on how many workers there would get sick from the coronavirus. Shortly before losing their jobs, a handful did not receive a bonus they felt the company improperly withheld. So they sued.
What happens when five of the most unsympathetic plaintiffs in recent memory claim state wage payment law violations?
The dispute revolves around what payments, if any, plaintiffs are entitled to receive for their work in 2020 under the company’s Annual Incentive Plan (AIP), which provides eligible employees with an “opportunity to receive a cash incentive award” every year.
Like most incentive programs, this one included language clarifying that all allocations and awards are discretionary.
Now, let’s drill into the timeline:
- On November 13, the company entered the plaintiff’s AIP bonuses into its internal systems, with the amounts scheduled for payment on November 25.
- On November 18, the company advised managers to communicate the awards to team members, and the plaintiff received statements notifying them of their awards. These statements, which were “intended for general information purposes only,” reiterated that “payouts made to eligible team members under the AIP are considered fully discretionary,” which the company could adjust “in its sole discretion.”
- On November 19, the proverbial 💩 hit the fan, and the company placed each plaintiff on leave without pay pending the completion of an internal investigation in response to a lawsuit about the COVID-19 betting pool.
- Sometime after November 19, based on the facts discovered during that investigation, the company’s internal governance committee recommended terminating the employees without paying AIP bonuses.
- On December 15, the company fired the plaintiffs without paying them the AIP bonuses.
Most states have wage payment laws that require companies to pay all wages due to their employees, less any lawful deduction, on designated regular intervals of time. Bonuses generally count as wages. But, a bonus constitutes a wage only if the employer is obligated to pay it.
Here, reasoned an Iowa federal judge, the employer was not obligated to pay the AIP bonuses to the plaintiff because the bonuses were discretionary.
Indeed, the plaintiffs failed to cite anything in the AIP indicating that the bonuses had vested or become a contractual obligation. Instead, they relied on a portion of the policy stating, “a team member must [still] be [employed] … on the Award payment date to receive any Award or payout under this Plan.” But that wasn’t enough to overcome the express policy language (and the separate notice they received in November) that the bonuses remain discretionary. As such, there is no contractual obligation to pay the bonus. Thus, the bonuses here are not considered “wages.”
#TheMoreYouKnow before wagering on the health of your workforce.