Hey, Where’s My Christmas Bonus?

Hey, Where’s My Christmas Bonus?

Workers are entitled to be paid for the hours they work.  So, even if they are fired, the employer has to pay for the time spent in its employ.  If the worker was pulling a Wally in Dilbert’s company, and working harder on avoiding work than actually doing any work, the employer still has to pay for those hours, and deals with the lack of productivity by firing the “Wally.”

Things get more complicated for other types of compensation.  Some people are paid entirely or in large part by commission; others get a significant portion of their annual compensation by bonus.  What rights does the departing employee have to commissions for sales brought in before he left?  What right does the employee leaving in November have to her year-end bonus, if her numbers were stellar until she was laid off or quit?

The best way to deal with these questions is in advance, with a contract.  Highly compensated, gifted salespeople are more likely than other non-union workers to have contracts.  The end of the relationship should be addressed in the employment agreement.  Unless the employee leaves only because the company goes defunct, there will be some work in progress that may merit commission or partial compensation.

Without a clear provision in the employment contract, the employee should look to the commission structure and any policies that have been written about it.  Fortunately, some of the more draconian policies are unenforceable under Maryland law.  Consider, for example, a policy that states “no commission is payable unless the employee is currently employed on the date of payment of the commission.”  The Maryland Court of Appeals rejected this policy in the case of a salesperson who had performed all of the tasks necessary to earn the commission, other than being present on the date of the payment to him.  If the deal has been struck, delivery made, and the client paid the bill, the salesperson has earned that commission.  In a structure like this, there will always be some uncompensated work, but when there is nothing left for the sales force to do, the whole commission should be paid.  On the other hand, if the salesperson has done only a part of the work to conclude the sale, and someone else must step in to finalize the deal, he can legally be denied the commission.

Questions about bonuses can be murkier.  One question is whether anyone should be paid a year-end or Christmas bonus if the worker is no longer employed; another is whether the amount of the bonus can be determined.  These questions are related, and usually come down to this: how much of the bonus is based on objective numerical criteria?  A court cannot enforce a deal if it has to guess how much a worker’s bonus should have been.

Often, bonuses are paid based on a handful of factors, including the company’s productivity and the worker’s specific goals.  Some bonus plans allot a bonus pool to a department, and the manager has the discretion to dole out the bonus among the department members.  When an element of subjectivity is allowed to define the amount of the bonus, the unhappy worker cannot mount a claim (unless there is proof that the subjective factor is an illegal one, such as the recipients’ race).

Other bonus plans are almost completely subjective.  These may weigh the employee’s attitude and contribution to team spirit, for example.  Moreover, they may be intended not just to reward past performance, but to provide an incentive to stay.  The amount of these types of bonuses cannot be figured out until they are paid.

On the other hand, if a bonus is based solely on the employee’s performance, then an employee who reached her goals in eleven months should not be deprived of the bonus.  This is akin to the commission structure, though it’s paid not on one deal but the year’s effort.

If an employer withholds bonuses or commissions without a genuine dispute about whether it has been earned, the employee is entitled to get attorney’s fees for the enforcement action, and can request the court to double or triple the amount owed, under the Maryland Wage Payment and Collection Act.

Bonus or no, enjoy your end of year holidays.

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