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Connecticut’s Wage Laws — What Do They Really Say About Bonuses, Wages and Double Damages?

Posted in Laws and Regulations, Wage & Hour

UPDATED

Over the last 24 hours, it seems that every politician is decrying the use of Connecticut wage and hour laws as apparent support for AIG’s payout of various retention payments. Connecticut Attorney General Richard Blumenthal’s comments are among the most pointed, according to Capitol Watch:

"I have significant doubts about the validity of AIG’s claims that they are required by Connecticut law to pay these outrageous bonuses,” Blumenthal said. "AIG is shamelessly shielding itself behind the Connecticut Wage Act — a joke of a justification for squandering scarce taxpayer resources.”

One reporter has even called Connecticut’s wage laws, an "obscure" law.  But that would likely be news to the Connecticut Department of Labor which features that law prominently in the materials about the subject in its website. 

So, what IS the law that everyone keeps referencing? Well, the main provision is Conn. Gen. Stat. Sec. 31-72. That law states, in part:

When any employer fails to pay an employee wages in accordance with the provisions of sections 31-71a to 31-71i, inclusive, …., such employee may recover, in a civil action, twice the full amount of such wages, with costs and such reasonable attorney’s fees as may be allowed by the court…  

In plain English, what this means is that if an employer does not pay an employee "wages", that employee can sue the company and MAY recover twice the amount of wages that should have been paid. 

And what’s a "wage"? Well, Conn. Gen. Stat. Sec. 31-71a(3) defines it as "compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation."  As I’ve discussed in prior posts, some (but not all) bonuses are treated as "wages" and therefore, employees may sue under this statute. 

That view was confirmed in a quote from an unnamed Department of Labor official in today’s Courant: 

"Our first step is to determine if the bonus is a wage," said a state Department of Labor official.  "If it’s a wage, it’s based on performance, production and efficiency"" the official said. "It has to tie directly to your performance, that you met certain standards and certain goals in order to turn that into a wage. … Companywide performance is less likely to be a wage."

What’s left unanswered in the whole debate though is why Connecticut’s wage and hour laws should NOT apply here.  Is Connecticut now saying that retention payments are never "wages" or just not in this case?  Is it simply the amounts of the payments that make such payments intolerable here?

Of course, that’s not to say that of an employee’s right to be paid under a contract is absolute. But existing laws don’t make it easy to get around that right.  Slate has a good column that suggests several legal theories that may be out there to attempt to break or avoid such contracts.  (And, as I said yesterday, I’ll leave it to others to opine on whether the payments here were proper or not.)  The New York Times has a very good series of columns about whether the contracts can be broken as well. 

One thing is certain: The debate over these payouts is far from over. And Connecticut’s wage laws are likely to never be the same again.

  • http://www.pointoflaw.com/archives/2009/03/this-is-about-v.php PointOfLaw Forum

    “This is about vengeance, not about saving money”

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