Bonus Compensation

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A former Wal-Mart employee had his $102 million dollar verdict overturned in a recent win for California employers.  Roderick Magadia, the former employee, brought a class action and Labor Code Private Attorneys General Act (“PAGA”) complaint against Wal-Mart alleging, in part, that Wal-Mart issued deficient wage statements in violation of Labor Code Section 226.  The alleged defect was prompted by a “Myshare” bonus, a quarterly bonus based on non-discretionary metrics.  Because the bonus was non-discretionary, the law required Wal-Mart to factor the bonus into the “regular rate” of pay used to calculate the overtime premium.  But, since the bonus was earned and paid quarterly while the overtime premium on hourly pay is paid during every two-week pay period, the premium must be recalculated and adjusted with a supplemental payment each quarter.
Continue Reading Sheppard Mullin Helps Overturn $102 Million Dollar Verdict

Employers operating, even on a limited basis, in Colorado should be aware of Colorado’s recent wage disparity and discrimination bill, which takes effect in 2021 and imposes widespread requirements related to record-keeping, disclosure, and transparency.

In May of 2019, Colorado Governor Jared Polis signed the Equal Pay for Equal Work Act into law.  The Act will go into effect on January 1, 2021.  The Act was enacted to address pay disparities affecting women and minorities, and includes several provisions aimed at preventing wage discrimination, such as:
Continue Reading What Employers Need to Know About Colorado’s New Equal Pay Act

Ending a more than 15-year-long legal battle, the Fifth Circuit on May 24, 2019, unanimously affirmed the dismissal of a proposed class action against subsidiaries of UBS AG, alleging violations of U.S. securities laws for their role as a broker of Enron’s employee stock option plan and for failure to disclose material information about Enron’s “financial manipulations.” Lampkin et al. v. UBS PaineWebber Inc. et al., No. 17-20608 (5th Cir. May 24, 2019).
Continue Reading Fifth Circuit Affirms Enron Broker Not Liable to Employee Stock Option Holders for False or Withheld Information

The Senate voted yesterday to begin formal negotiations with the House of Representatives to reconcile their two versions of the Tax Cuts and Jobs Act, a bill that seeks to make sweeping changes to federal tax law. Republicans are racing to enact a final bill before Christmas. Under both versions of the bill, tax-exempt organizations would face new burdens and taxes in order to pay for tax cuts elsewhere. In particular, the proposed changes would:

  1. make it harder for larger tax-exempt organizations to attract and retain top talent, by imposing a new 20% tax on annual compensation of over $1 million per year paid to any of their top 5 highest paid employees (including certain severance payments);
  2. reduce revenues, by eliminating certain tax incentives to make charitable donations;
  3. eliminate critical low-cost financing for hospitals and universities from tax-exempt bonds;
  4. make certain employee benefits more expensive, by taxing organizations that pay certain fringe benefits and taxing employees on certain employer-provided education and tuition assistance; and
  5. add new pressures on Section 501(c)(3) organizations to support or oppose political candidates, by loosening the current absolute prohibition against political activity.

Continue Reading Tax Reform: Nonprofits and their Executives Brace for Impact

In March 2014, President Obama signed an executive order directing the Department of Labor to revise its aging rules governing overtime pay for white collar employees.  The Department solicited comments from the public on an earlier draft in July 2015.  Yesterday, the Department of Labor released the final version of the new rules.  The new version includes a number of changes—some expected, but others less so.
Continue Reading DOL Makes Last-Minute Tweaks to New Overtime Exemption Rules

On January 20, 2015, the United States District Court for the Southern District of New York issued a decision plainly reminding employers of the importance of precisely drafting employment documents.  In the case of In re Lehman Brothers Holdings Inc., 2015 WL 247403 (S.D.N.Y. Jan. 20, 2015), the Court held that a prospective employee, who had never worked a day at Lehman Brothers Inc. (“LBI”), was not entitled to a $350,000 performance bonus detailed in an offer letter which LBI rescinded.  Significantly, in reaching this conclusion, the Court relied exclusively upon its reading of the offer letter itself.
Continue Reading New York Court Finds That Plaintiff Who Never Worked a Day For Company Is Not Entitled To A $350,000 Performance Bonus

By Thomas Kaufman; (follow me on Twitter)

Deleon v. Verizon Wireless (Deleon II) is another pro-employer case that is in many ways a carbon copy of Steinhebel v. Los Angeles Times Communications, 126 Cal. App. 4th 696 (2005),  one of my favorite cases (I argued it successfully in the Court of Appeal).  The two cases address the lawfulness of agreements in which employers advance commissions to sales employees when a sale occurs, but the commission is subject to being "charged back" (recouped) if the customer cancels the sale within a certain period of time.

As explained below, Deleon II clarifies earlier precedent and effectively expands the universe of proper chargeback agreements.Continue Reading Deleon II Further Expands Employers’ Right to Charge Back Commission Advances

On August 23, 2007, in the case of Prachasaisoradej v. Ralphs Grocery Company, Inc., the California Supreme Court reversed earlier appellate decisions by holding that a company may lawfully offer its employees bonus compensation (over and above their regular wages) based on a profit calculation that takes into account ordinary operating losses, workers’ compensation costs, tort claims by non-employees, and other business expenses beyond the employees’ control.


Continue Reading California Supreme Court Approves Bonus Plan Using Net Profit Calculation