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Wage & Hour Law Update

Connecticut Supreme Court Rules Discretionary Bonus Not Subject to Wage Statute

As discussed here, Connecticut’s highest court has clarified that discretionary bonuses are not subject to that state’s wage claim statute, Conn. Gen. Stat. 31-72, et seqSee Ziotas v. The Reardon Law Firm, P.C., SC 18292 (Conn., June 8, 2010). Ziotas concerned a law firm associate employed pursuant to an at-will employment agreement which included a provision for a discretionary bonus. The Supreme Court reinstated the trial court’s original decision (reversed by the intermediate appellate court on appeal), that because the bonus was discretionary and based on factors other than simply the employee’s performance (such as the firm’s overall performance), it did not constitute “wages” within the meaning of the wage payment statute, even though the employee might be entitled to the same bonus under the contract itself. This decision is consistent with the general legal principle in many states (such as New York, discussed here) that incentive compensation (such as bonuses and commissions) becomes “wages” under the law once that compensation is “earned”. As Ziotas demonstrates, defining the factors used to determine any potential incentive payment as well as any earning criteria is often essential if an employer wishes to keep claims for incentive compensation outside the purview of wage statutes (and the attorneys fees provision often contained therein).