Case Law Developments Affecting Bonus and Incentive Plans and Non-Competes
Case Law Developments Affecting Bonus and Incentive Plans
It is quite common for employers to have bonus and incentive plans that require participants to be employed by the employer on the plan’s payment date in order to receive payment for a completed performance period. (Many of these plans are not “ERISA plans” so they may not claim that State laws arguably affecting the plans are preempted by federal law.)
Increasingly, courts are concluding that State wage payment laws (with their triple damages provisions) prohibit this requirement of employment on a payment date in order to receive a bonus or incentive. And these courts are reaching this conclusion even in cases in which the participants had actual knowledge of this requirement before the start of the performance period.
In light of these developments, employers should review their bonus and incentive plans (and related employment contract provisions) and consult with counsel about what steps should be taken if they utilize employment-on-payment date provisions.
Case Law Developments Affecting Non-Competes
In a similar vein, a number of recent cases – even in employer-friendly States – have limited the scope of non-compete provisions that may be enforced by employers against former employees. Courts continue to review the geographic and temporal scope of non-competes, but the trend of these latest cases is to require carefully limited descriptions of the actual type of acts that are prohibited by the non-compete and a specific identification of the competing companies for whom those acts may not be undertaken.
In light of these developments, employers should consult with counsel about their non-competes to determine whether they need “tightening” in order to survive judicial challenges based on this latest trend.
Please contact us if we can assist with the review of your bonus and incentive plans and/or non-competes.