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Complicated compensation formula? Prepare to spell out all details in court

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in Compensation and Benefits,Human Resources

Here’s a warning for employers with overly complicated compensation systems: If someone believes the pay plan is discriminatory, you’ll probably have to spend considerable time explaining the system in court. Simpler may be better.

Recent case: Lal, who is of Asian Indian origin, worked as a rural route mail carrier. Carriers are paid a set salary based on a complicated system that measures average deliveries, time and other factors. Some routes are so long that they cannot be completed within a standard day and therefore require several days off every pay period in order to avoid overtime pay.

Lal filed an internal discrimination complaint and then asked for a longer route. The Postal Service reconfigured several routes and gave Lal a longer one. He then discovered that this meant a lower salary because the route was so long he had to take two days off per pay period.

He sued, alleging the lower salary was retaliation for his initial complaint.

The Postal Service had to spend considerable time and effort explaining the complicated compensation system to the judge. Ultimately, the judge dismissed the case, since although Lal’s salary went down, he also received more time off as part of the changed route. (Dev v. Donahoe, No. 2:12-CV-3026, ED CA, 2014)

Final note: Remember that litigation is expensive in terms of time, money and effort expended that could be better used elsewhere. Work with your attorneys to design simple pay programs that don’t invite litigation.

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