The California Supreme
Court recently ruled that employers may lawfully use net-profit-based incentive
plans to compensate their employees.1 Employers may base profit-based bonus or
incentive plans on the traditional measure of company profits, regardless of
whether the employee is exempt. Before the ruling, an employer would have had
to add workers’ comp and other business-related expenses back into the profits
figure to calculate the bonuses.
employers should still use caution, however, to ensure that if workers’ comp or
other business deductions are taken into account, the plan is based on profits
and not on an employee’s individual efforts.
The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.
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1 Prachasaisoradej v.
Ralphs Grocery Company, Inc.,
Supreme Court No. S128576, 2007