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The End of the Year Bonus: Who Wants the Jelly of the Month Club?

It’s the holiday season.  That means bigger pants, seeing people you avoid the other 11 months of the year, spending money on things people may never use, and watching Christmas Vacation.  What can we learn from Christmas Vacation?  Well, for one thing, that if you kidnap your boss, you may get a bonus.  The second thing is that you may be exposed to liability if you empty your RV bathroom in a street sewage vent.  Finally, employers may have potential liability (other than being kidnapped) if they fail to pay an end of the year bonus to their employees.

For those of you who do not know, in Christmas Vacation, Clark, ever the family man, was expecting a significant bonus to pay for a backyard pool for his family.  Instead of the bonus, Clark received a gift certificate for the Jelly of the Month Club.  Despite the fact that the Club is the “gift that keeps on giving the whole year round,” it is not exactly what Clark had anticipated.  Other than kidnapping his boss, did Clark have any legal recourse against his employer for failing to pay the bonus he expected?

The answer to this question depends on whether Clark and his employer had a written agreement that guaranteed a bonus or wage increase at the end of a given year.  Under the Pennsylvania Wage Payment Collection Law, if an employer and an employee have a written agreement (either in a formal contract or a handbook) that guarantees the employee a certain bonus (or wage increase) based upon performance or mere employment at the end of the year, such a benefit constitutes wages under the law.  Therefore, if an employer fails to pay its employees the guaranteed bonus (or wage increase), an employee such as Clark, may bring a claim under the Collection Law and may be entitled to liquidated damages and attorneys’ fees.  In order to avoid such liability, employers may structure such payments on “discretionary” amounts that are determined solely by the employer.

The moral of the story: don’t trust Cousin Eddie with a kidnapping, and the Jelly of the Month Club is the gift that keeps on giving.  Also, employers must be mindful of how they structure bonuses and wage increases in employment agreements and handbooks to avoid potential kidnapping and liability.

For more information regarding bonuses, wage increases or any other labor and employment law matter, please do not hesitate to contact a member of our Labor and Employment Department.