A verbal promise proves costly to employer
Under New Hampshire law, every employer is required to notify employees in writing at the time of hiring as to their rate of pay or salary, pay day and pay period, as well as to the company’s policies and practices regarding any fringe benefits, such as paid vacation, holidays, sick leave, bonuses, severance pay, personal days, payment of expenses and pension plans.
As one New Hampshire company learned the hard way this summer, failure to give such written notice to employees can prove very costly when an employee challenges the company regarding an alleged a failure to pay wages or benefits claimed to be due.
On July 17, 2007, the New Hampshire Supreme Court decided the case of The Demers Agency v. Tami Childs Widney, in which the court upheld a lower court decision awarding employee Tami Childs Widney $7.106.25 for a bonus that was paid by the company after Ms. Widney had left the employment of the company, another $7,106.25 in liquidated damages, and $2,500 in attorney fees.
The claim for wages was first brought by the employee at the state Department of Labor. The hearings officer at the department found that when Widney began employment, she was verbally promised compensation of an annual base salary, quarterly bonuses based upon sales and a year-end bonus based on the company’s profitability for the year.
Widney worked for the company from March 2003 to February 2005. She took a job at another insurance agency approximately six weeks before the date that The Demers Agency typically distributed the year-end bonus. When she asked for her 2004 year-end bonus, the company refused, saying that since she was not employed at the time the bonus was paid, she was not entitled to it.
The department disagreed with the company on the basis that the company had failed without good cause to pay the bonus despite the financial ability to do so. The company appealed to the Superior Court, which affirmed the decision of the Labor Department.
The company then appealed to the state Supreme Court, which found that the bonus qualified as “wages” within the meaning of New Hampshire’s wage statute, and the employer had not included a condition on the payment of the bonus, nor had it made known to the employee that the employee had to be employed at the time of the payment to get the bonus.
The court also found that the employee was entitled to liquidated damages because the employer acknowledged that it knew the amount of the bonus prior to the employee resigning, and there was evidence in the record that the employer’s decision not to pay the employee the bonus was made from anger at the employee for leaving after the employer spent time and money training her.
The court pointed out that the holding in this case is limited to those circumstances in which a bonus is part of an agreed-upon compensation package and the employee has performed all of the duties necessary to trigger the employer’s obligation to pay the bonus.
State law provides that when an employer willfully and without good cause fails to pay an employee wages, the employer can be liable for liquidated damages of up to double the amount due. Here, where the company had no written policy requiring continued employment as a qualification for being paid the year-end bonus that had already been earned, there was evidence to support that the employer should have known that it owed the bonus and it was withheld “only because [the owner] was upset with [the employee] moving on to other employment.”
The Department of Labor lists the failure to provide written notice to employees of their wage rate, pay period, pay day and description of fringe benefits, including any changes as the top New Hampshire labor law violation. Many of the decisions handed down by the department at wage hearings stem from this violation and can be easily avoided by giving notice in writing.
Verbal notice of the terms to be eligible for a bonus is not enough — as this employer found out the hard way.
Linda Johnson is the lead employment lawyer at the law firm of McLane, Graf, Raulerson & Middleton, where she chairs the firms Employment Law Practice Group. She can be reached at email@example.com or 603-628-1267.