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Employment Law Advisory:

California Court Rules that Incentive Bonus Plans Deducting Workers Compensation Costs, Cash Shortages, Losses of Equipment and Breakages Are Unlawful

In Ralphs Grocery Co. v. Superior Court (Swanson), ______ Cal.App.4th ______ (2nd Appellate District - Appellate No. B168257 - 10/23/2003), (petition for review to California Supreme Court denied February 18, 2004), the California Court of Appeal determined that portions of incentive bonus plans are unlawful if they use certain factors to determine the bonus. The California Supreme Court denied review of this case on February 18, 2004, and therefore the legal proposition is now valid law.

Based upon this case, these Workers’ Compensation and other illegal chargebacks may not lawfully be considered in calculating incentive compensation bonuses. While portions of this opinion appear to be limited to nonexempt (i.e., hourly) employees only, it should be noted that this case held that, with respect to both nonexempt and exempt employees, deductions from bonuses based upon Workers’ Compensation costs is unlawful because it violates California Labor Code §3751.  Therefore, even salaried managers are covered by this opinion to the extent that they have been deprived of a bonus based upon Workers' Compensation costs.

If you are an employee in California who believes that you have been deprived of a bonus, or a portion of a bonus, because your employer deducted Workers' Compensation costs, cash shortages, loss of equipment and breakages in the calculation of your bonus, please contact us for a free consultation.  You may have been illegally deprived of your bonus!  In such event, please contact us at, or call us at (310) 277-3000, as soon as possible, so that we can protect your legal rights.

Important Note:  Do not rely upon this Advisory.  It does not constitute legal advice.  Seek independent counsel with the attorney of your own choosing.  This article was written in general, and may not be relevant or accurate with regard to a particular person, corporation, or entity.  While deemed accurate in some circumstances in California at the time of the writing of this article (2004), no attempt has been, nor will be, made to update this article to reflect subsequent changes in the law, and therefore, it may no longer be accurate at the time of your viewing this webpage.