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socrateaser
socrateaser, Lawyer
Category: California Employment Law
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Experience:  Retired (mostly)
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i was with a company for 8 years and it had a non-discretionary annual bonus (longevity bo

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i was with a company for 8 years and it had a non-discretionary annual bonus (longevity bonus) based on monthly (units sold/yrs service)x$ and those gets accumulated from 10/1-9/30 and to be paid out sometime in november. On 9/30 i was informed effective 10/1 my pay would be cut by 27% thus forcing me to leave the company and they are stating that i am not entitled to the longevity bonus -since it get s paid out in november. i have been reading ca law regarding this and noticed that this bonus is not being applied to overtime pay calculation to our sales associates: because some months they do not earn enough commission and are paid based on on minimum wage for hours worked: big portion of it being over time. this company is a nation-wide company with over 257 locations.
Submitted: 3 years ago.
Category: California Employment Law
Expert:  socrateaser replied 3 years ago.
Hello,

Thank you for your information.

What is the question that I can "justanswer" for you?
Customer: replied 3 years ago.
1. is there anything that i can do to get my bonus paid?
2. way i read the regulation, they are in violation for not paying overtime rate for its associates after calculating bonus into it?
Expert:  socrateaser replied 3 years ago.
1. is there anything that i can do to get my bonus paid?

A: Assuming that you are entitled to the bonus, then you can either sue (in small claims, if the bonus is $7,500 or less), or file a complaint with the Labor Commissioner. The question is whether or not you are entitled to the bonus.

2. The way i read the regulation, they are in violation for not paying overtime rate for its associates after calculating bonus into it?

A: I'm not aware of any single regulation that definitively resolves this issue. My understanding is that the issue is extremely uncertain on each side. If you have a citation to legal authority that contradicts my understanding, please let me know.

First, what you and your former employer describe as a bonus, seems to me not to be one.

The term "bonus" is generally equated with "incentive compensation." Incentive compensation, is generally understood as an inducement to employees to procure efficient and faithful service. Only when an employee satisfies the condition(s) precedent to receiving incentive compensation, which often includes remaining employed for a particular period of time, can that employee be said to have earned the incentive compensation (thereby necessitating payment upon resignation or termination). An employee who voluntarily leaves his employment before the bonus calculation date is not entitled to receive it. Schachter v. Citigroup, Inc. (2009) 47 Cal. 4th 610.

Based upon the cited case law, and your statement that you resigned, you would not be entitled to the bonus. However, your statement that the bonus was a function of sales volume divided by years of service, suggests a commission to me -- not a bonus. This is because the value of the bonus increases with the amount of sales -- not with the amount of years of service.

Assuming that a court were to agree that your bonus is a disguised commission, then the case law above is irrelevant to the analysis. Instead, your right to commissions “must be governed by the provisions of the [employment agreement].” Nein v. HostPro, Inc., 174 Cal. App. 4th 833, 95 Cal. Rptr. 3d 34 (June 3, 2009).

Since I do not know exactly what your commission agreement was, I cannot analyze its terms and conditions. However, there is case law to support the payment of commissions where an employee is discharged in order to avoid payment. Gould v. Maryland Sound Industries, Inc. (1995) 31 Cal. App. 4th 1137. Here, again, you have the problem that you resigned, but your resignation could be deemed with good cause, considering what you allege was a 27% reduction in pay. So, I can see how a court could conclude that the timing of the pay cut was systematically designed to cause employees to quit as a means of avoiding payment of a pending "longevity bonus" (which is really a disguised commission).

That is how I would argue this in court. There is one problem with all of this. Small claims court judges are not very interested in complex legal arguments. They like clean straightforward positions. Also, small claims courts do not generally entertain submission of a "trial brief," to explain the parties legal position. This makes small claims a poor forum for your claim. Conversely, a Labor Commissioner complaint could take a very long time to resolve, assuming that it's ever resolved (could take a year just to get a hearing).

Obviously, if your commissions are very large, then there might be a rationale for hiring a lawyer and suing in Superior Court. If not, then you may be stuck with a small claims suit, and you'll just have to take your chances that you can get the court to read a brief that you submit on the law, containing a discussion such as I have presented here. If you intend to try this, then you must serve a copy of the brief on the other party at least 16 court days prior to the hearing (see this link for a calculator).

Thanks for the interesting case info. You probably didn't realize just what sort of complex issue you have stumbled into.

Best wishes.


And, if you need to contact me again, please put my user id on the title line of your question (“ToCustomerrdquo;), and the system will send me an alert. Thanks!


Customer: replied 3 years ago.
clearification: after 7 years as a sales manager: company's contribution is 7% of monthly gross pay and accumulated monthly from 10/1-9/30 (vesting period) and paid out in the month of november=$6500 ytd.

2nd issue: longevity for the sales are calculated (per units sold)x $amount per unit based on years of service (ie. 5yrs=$50 unit)=total for the month: this has same vesting period. way i read CA reg. is that this bonuse affects the over-time rate thru out the year and the difference needs to be paid out with the bonus.-shouldn't this be a ground for a class action law-suit: there are over 15,000 sales associates.
Expert:  socrateaser replied 3 years ago.
To what "CA reg" do you refer, exactly (please provide legal citation or link to law, etc.)?
Customer: replied 3 years ago.
49.2.4 &49.2.4.1 of CA Emp law.-since it is a "non-discretionary" bonus and earned during the vesting period and during this period overtime took place earning this bonus: then bonus should be calculated with overtime over the vesting period to be paid along with the bonus(for minimum wage earned period: many months a sale associate do not make enough and min. wage and overtime kicks in: so, during those months they are being paid less for their overtime, earned bonus should change the overtime rate.
Customer: replied 3 years ago.
http://www.cpehr.com/hr-articles/california-employer-insight-wage-a-hour-laws.html
Expert:  socrateaser replied 3 years ago.
Thank you for the clarification.

First, be very careful when relying on commercial websites containing statements of law. Many websites are rarely updated, and have a bias designed to generate revenue, rather than to objectively discuss a legal issue.

In this case, you also must be careful of relying on a government website, as well. The fact is that tThe various Sections of the DLSE Manual are not California law, to the extent that a Section stated therein has not been subjected to either the formal regulatory enactment process, or an appellate court decision determining that the particular Section is law.

In the case of DLSE Manual Sections 49.2.4 and 49.2.4.1, the DLSE bonus formula has been deemed a valid formula (Marin v. Costco Wholesale Corp, (2009) 169 Cal. App. 4th 804 (as modified)) -- though not the only possible valid formula.

This creates a difficult proposition: any bonus formula which differs from the DLSE formula is still subject to dispute as to its validity. I am not in a position to evaluate the mathematics to determine whether or not your employer's formula would satisfy a California court (I would need a forensic accountant as an expert witness). However, the fact that the employer's formula may not mirror the DLSE's formula does not, provide grounds, by itself, for a class action. You are certainly free to try to find a class action law firm to try to analyze this issue further.

That said, since hiring a forensic accountant and having that person testify on your behalf would cost you as much as you're owed, the next best thing could be to try to argue your position to the small claims judge as if a deviation from the DLSE formula does represent a violation of law. Maybe you can make that position stick, especially if the judge doesn't feel like trying to engage in a mathematical exercise -- he might just rule in your favor and let it go at that.

However, in my opinion, my orignal answer is correct, i.e., the principal issue here is whether or not your bonus is actually a bonus, rather than a commission, and then whether or not the payment is still owed to you after you voluntarily quit. In order to overcome the case law that would hold against you, you will have to demonstrate that the employer's 27% pay cut was systematically designed to get you to quit immediately prior to the bonus/commission being paid. That sort of bad faith conduct by the employer could be used to win, because it's the sort of thing that a small claims judge would latch onto as an easy means of resloving the dispute (without math, or some other complicated and timely research).

In closing, please understand that I "justanswer" questions “about” the law. I have no interest in providing you with anything less than a completely satisfying answer. However, if the law does not favor your unique circumstances, then the best that I can do is to explain what the law "is" and what it "is not."

 

 


 

socrateaser, Lawyer
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Experience: Retired (mostly)
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socrateaser
California Employment Lawyer
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Retired (mostly)