Ceo Bonus Is Wages

Ed. Note: This case continues a trend of decisions in Connecticut over the past couple of years. There is a growing trend here and elsewhere that once a bonus becomes nondiscretionary and in a fixed amount even if that fixed amount is the result of a calculation the bonus becomes wages subject to state law on the payment of wages.

A corporate executive was entitled to damages under the state wage and hour law when he didn t receive bonus payments required under the terms of his employment contract, the Connecticut Supreme Court has ruled in affirming a $283,000 judgment.

The defendant hired the plaintiff to be the company s chief operating officer and senior vice president. The twoyear employment agreement required the defendant to pay him four bonuses based on the overall profitability of the company.

The defendant fired the plaintiff after only paying him the first bonus. The plaintiff sued for double damages and attorney fees under the state s wage and hour law, claiming he was entitled to the remaining bonus payments under the terms of his contract.

The defendant contended that the disputed bonuses were not wages within the meaning of state law.

The court disagreed. It said the trial court properly determined the bonuses were wages because, under the employment agreement, they were entirely nondiscretionary, both as to whether they would be awarded, and the amount thereof. The amount of the bonus, derived from the net profitability of the company after expenses, was nondiscretionary because it was subject to calculation by applying a contractually mandated, precise formula set forth in the employment agreement.