Hunton Employment & Labor Perspectives

In Weiss v. DHL Express, Inc., the First Circuit held that the employee was not entitled to a bonus based on the language of the company’s bonus plan and the bonus plan committee’s determination that the employee had been terminated for good cause.  The Court also held that the employee had no recourse under the Massachusetts Wage Act because his bonus did not qualify as wages under the Act.  Nos. 12-1853 and 12-1864 (1st Cir. June 3, 2013).

Background

In 2007, DHL gave employee Jeremy Weiss (“Weiss”) the opportunity to participate in DHL’s Commitment to Success Bonus Plan (“Bonus Plan”).  Under the Bonus Plan, Weiss was eligible for a $60,000 bonus if he remained with the company through the end of 2009.  Specifically, the Plan provided that if Weiss was terminated “without cause” and (or?) or his position was eliminated he would receive the full payout.  However, if he voluntarily left or if he was terminated for “good cause” prior to the payment date, he would be ineligible for the bonus.  The Plan was administered by the Employee Benefits Committee (“Committee”), which had  broad authority under the Plan.

DHL terminated Weiss in September 2009, several months prior to the payout date for the Bonus Plan.  Weiss’ termination letter explained that he was terminated for just cause because the results of an investigation “present[ed] a picture of significant management failures” during his time as a director in charge of a district where improper sales practices were found.  Because he was terminated for good cause prior to the payout date of the bonus, Weiss did not receive his $60,000 bonus.

Following his termination, Weiss brought suit alleging claims of 1) non-payment of wages in violation of the Massachusetts Wage Act; 2) violation of the implied covenant of good faith and fair dealing; 3) detrimental reliance; and 4) unjust enrichment.  The district court granted summary judgment for DHL on Weiss’ Wage Act claim and found that the only issue that would go to the jury was a breach of contract claim.  The jury then found for Weiss.

Committee Not Jury To Determine Termination for “Good Cause”

The First Circuit reversed the judgment against DHL regarding the breach of contract claim.  The Bonus Plan stated that the Committee “shall have full power and discretionary authority” to make determinations under the Plan and its decisions, including decisions relating to terminations and other actions, “shall be final, conclusive and binding.”  The Court focused on this “plain language” and found that the Committee was the “sole arbiter” of whether a Plan participant is terminated for good cause.  “The Plan gave the Committee broad discretionary authority to determine all matters pertaining to the Plan, including whether a participant qualified for payment.”  Based on this and the unrebutted testimony of several individuals who were on the Committee, the Court found that the Committee had, in fact, determined that Weiss was terminated for good cause.  This determination made Weiss ineligible for a bonus and precluded his breach of contract claim.

Bonus Is Not Wages

Next the Court affirmed the district court’s finding that a bonus is not wages within the Massachusetts Wage Act.  The Act requires prompt payment for “wages earned” but does not address bonuses specifically.   The Court reasoned that the bonus was based on a contingency – either his continued employment in good standing or the Committee’s determination that his termination was without good cause.  Because neither contingency occurred, Weiss’ bonus was never “earned” and the Court ultimately held DHL did not deprive Weiss of “earned wages.”

Employers Control Bonuses

This case illustrates that employers continue to have control over terminations and the implementation of bonuses.  Although a bonus plan may be construed as a contract, employers maintain control by establishing plans that provide the employer broad discretion in administering and implementing the plan.  Such a provision is crucial in ensuring that the employer, rather than a jury, determines whether an employee is entitled to a bonus.