Robert S. Rifkin Labor and Employment Law Blog on Lawyers.com

Not All Commissions And Bonuses Are Wages

Thursday, January 7, 2010 by Robert S. Rifkin

On December 22, 2009, the Indiana Court of Appeals held in the case of McCausland v Walter USA, Inc. that an employee's sales commissions and bonuses were not wages under the state's Wage Payment statute, and thus the employee was not entitled to statutory treble damages or attorney fees. McCausland earned commissions as a sales manager based on the monthly sales made in his district. Sales were not made by McCausland directly; rather his commissions were tied to sales made by the salespeople he managed in his district. The court stated:

"While McCausland assisted the salespeople he managed in making sales,ultimately, those sales were directly attributable to a salesperson, and not McCausland. In other words, McCausland's commissions were not directly linked to his own efforts. Moreover, the commissions were not based on gross sales, but on 'net sales' which required a calculation of not only the gross sales but also other reductions, such as discounts and returns, which McCausland had little control over. ...Because McCausland's commissions were based on the efforts of his sales team and "net sales,' and the commissions could not always be calculated within the statutorily mandated ten-days, we conclude that the commissions were not 'wages' within the meaning of the Wage Payment Statute."

McCausland also received three types of bonuses: a Gross Profit Bonus in 2005, a
Sales Achievement Bonus in 2005, and a Cost Bonus in 2006. The court found that all three of the bonuses depended on facts other than the employee's efforts. the Gross Profit bonus was based on the overall financial success of the employer (its increase in profits), the Sales Achievement Bonus was dependent on McCausland's district team's efforts, and his Cost Bonus depended on the ability of his sales team's efforts to control expenses in their district. The court thus concluded again that none of the bonuses were "wages" as that term is defined in the Wage Payment Statute.

Posted at 09:55 AM

Topic: Labor and Employment