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Be crystal clear about status of employee’s bonus

by on
in Employee Benefits Program,FMLA Guidelines,Human Resources

Joe Fitzpatrick told his supervisor that he was considering resigning and asked about getting one of the bonus checks that other members of his work group had received. "I have a check for you in my pocket ... All you have to do is tell me you are staying," the boss said. Fitzpatrick opted to leave, and sued for the unpaid bonus. He lost.

The reason: Under Maryland's wage law, once a bonus, commission or fringe benefit has been promised, the employee is entitled to it. But when Fitzpatrick was hired, he was promised a profit-sharing bonus after two years of employment, and he stayed for only one year. Because the company considered paying the bonus a year earlier than the agreed-upon terms, the money was merely "a gift, a gratuity" and not wages, the court said. So it was revocable at any time. (Whiting-Turner Contracting Co. v. Fitzpatrick, No. 9, Md. Ct. of Appeals, 2001)

Advice: When it comes to money, always make sure everything is crystal clear. Legal experts say the gloomy economy is sparking more lawsuits like this among employees watching every penny.

Be sure you know how your state law defines compensation that must be paid when an employee leaves, such as commissions, fringe benefits or other promised amounts.

Also, remember that the way you handle bonuses can affect the overtime rate you must pay nonexempt workers under the federal Fair Labor Standards Act. Truly discretionary bonuses aren't calculated as part of a nonexempt worker's regular rate. But attendance, productivity and other similar bonuses are.

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