An employee’s entitlement to incentive compensation continues to be a litigation issue. Recently, a Massachusetts federal district court held that an employer’s refusal to award an employee a discretionary bonus does not violate the Massachusetts Wage Act. Comley v. Media Planning Grp., No. 14-10032, 2015 U.S. Dist. LEXIS 76383 (D. Mass. June 12, 2015).
In Comley, the plaintiff, a Senior Vice President and Managing Director, claimed that the employer’s decision not to award her a bonus under the company’s Management Objective Plan violated the Massachusetts Wage Act because the bonus should have been treated as an earned commission. In response, the employer argued that payment of the bonus was entirely discretionary under the Plan. The Court agreed, relying on language from the Plan guidelines providing that “[t]he availability and terms of [the bonus] are at the sole discretion of Havas Media’s global Board of Directors and can be eliminated or amended at any time,” to find payment of the bonus to be discretionary. As the court observed, “[w]hile the result may seem harsh, discretion is what it is, and if retained by the employer over the award of a bonus, the employee . . . has no resort to the Wage Act.” Because the plaintiff was not entitled to payment under the Wage Act, the court also found that her retaliation claim premised on her objection to being passed over for a bonus also failed.
Business owners should analyze their employees’ compensation structure to ensure compliance with federal and applicable state wage and hour laws, and to maximize discretion over incentive compensation awards where appropriate.