Friday, June 4, 2010

Maryland and Connecticut Issue Opinions under Their Respective State Wage Statutes Defining the Term “Wages” (Part II)

In Ziotas v. The Reardon Law Firm, P.C., SC 18292 (Conn. June 8, 2010), available here, the Connecticut Supreme Court, in an opinion to be officially released on June 8th, held that a year-end bonus, the amount of which is discretionary, did not constitute “wages” within the meaning of the Connecticut statute. 
Chief Judge Rogers, writing for the court, found that the bonus did not constitute “wages” under the statute when the amount of the bonus is discretionary and is not ascertainable by applying a formula.  Two years ago in Weems v. Citigroup, Inc., 961 A.2d 349 (Conn. 2008), the Connecticut Supreme Court had considered whether bonuses that were discretionary and based upon performance and profitability of the employer’s business constituted “wages” within the meaning of the statute, and determined that they were not.  In Weems, the court found that the language of the state statute was ambiguous and subject to two different reasonable readings, thus permitting the court to look at legislative history.  Finding that the legislative history was of no assistance, the Weems court looked at the decisions of other courts and agreed with their determinations that “bonuses that are awarded solely on a discretionary basis, and are not linked solely to the ascertainable efforts of the particular employee, are not wages under [the statute].”
In Ziotas, while the defense relied upon the holding in Weems, plaintiff argued that the Weems decision only barred claims when the bonus itself was discretionary, not when the bonus was contractually required and only the amount was discretionary.  As stated, the Ziotas court rejected plaintiff’s attempt to distinguish Weems.  Illustrative of the significant difference in an employer’s exposure depending upon how the particular court interprets the term “wages,” here the lower court had entered judgment for the plaintiff on a breach of contract claim, finding that the plaintiff was entitled to a bonus.
In Ziotas, the plaintiff is a lawyer who had worked as an associate for the defendant law firm.  Plaintiff and defendant had a written agreement which provided that plaintiff would receive a bonus but said bonus would not be calculated on the basis of any particular percentage of the defendant’s income.  Bonuses were to be paid only in December of each year.  Plaintiff’s employment terminated in mid-October of 1998, and plaintiff did not receive a bonus in December of that year.  Plaintiff filed suit seeking damages for the law firm’s failure to pay him a bonus in 1998, alleging breach of contract and a violation of the state wage statute.  The trial court struck the statutory claim while acknowledging that under certain circumstances a bonus may be considered “wages” under the state statute.  The trial court emphasized that a bonus may be considered “wages” when a bonus is based on individual performance; when a connection existed between the additional work performed and a promise of a bonus; and when the bonus was promised if the plaintiff accomplished certain objectives of the employers, relying upon earlier Connecticut decisions.  The trial judge held that the bonus in the Ziotas case was not “wages” because the bonus was an arbitrary figure determined by the success or lack of success of all members of the law firm, with no relationship to any actual services performed by the plaintiff.  Thereafter, plaintiff amended his complaint, reasserting the statutory wage claim, and the court again struck the claim, finding that the bonus did not accrue as a result of the plaintiff’s personal efforts alone.  Thereafter, the contract claim went to trial, and the trial court rendered judgment in plaintiff’s favor.
On appeal, plaintiff contended that the trial court improperly struck the wage claim, and the Appellate Court reversed the trial court.  On appeal, the defendant law firm contended that, when the amount of a bonus is discretionary and is not ascertainable by applying a formula, the bonus does not constitute “wages” under the state statute.  In reversing the Appellate Court and reinstating the trial court’s decision, the Supreme Court held as follows:  
“Although the plaintiff is correct that neither Weems nor the cases that we cited in that decision address the situation in which the payment of a bonus was contractually required and only the amount of the bonus was discretionary, we conclude for the following reasons that such a bonus does not constitute wages under § 31-71a (3). First, our reasoning in Weems also applies when an employee is contractually entitled to a bonus, but the amount is indeterminate and discretionary. We stated in that case that ‘the wording of the statute, in expressly linking earnings to an employee’s labor or services personally rendered, contemplates a more direct relationship between an employee’s own performance and the compensation to which that employee is entitled. Discretionary additional remuneration, as a share in a reward to all employees for the success of the employer’s entrepreneurship, falls outside the protection of the statute.’”

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