DONALD G MC CLELLAND, Employee

HARLEY DAVIDSON MOTOR CO, Employer

An administrative law judge (ALJ) for the Division of Unemployment Insurance of the Department of Workforce Development issued a decision in this matter. The Department filed a timely petition for review.

The commission has considered the petition and the positions of the parties, and it has reviewed the evidence submitted to the ALJ. Based on its review, the commission makes the following:

The employee worked about three years as an electrician for the employer, a motorcycle manufacturer. He was laid off on February 11, 2007 (week 7) to March 3, 2007 (week 9).

During his employment the employee is potentially eligible for a "short term incentive plan" (STIP) payment. The STIP payment is based on the number of days, regular hours, overtime hours, and Saturday and Sunday hours work in 2006. In order for the employee to receive a STIP payment, the company must perform better than it had in the prior year. Performance is based on sales, customer satisfaction and quality.

The employer distributed the STIP payment in week 8 of 2007, but the employee was not present at the time. The employee received his STIP payment on February 27 (week 9), in the amount of $1,804.31. The employee did not know the amount of the payment until he received it. The employee did not know whether he was going to receive a STIP payment until the company disclosed whether one would be issued.

The issue to be decided is whether the STIP payment the employee received should reduce his benefits in any of the weeks that he was unemployed.

Wisconsin Statute § 108.02(26)(a) defines wages to include every form of remuneration payable, for a given period, or payable within a given period, by an employing unit to an individual for performance of personal services. There is no dispute that the STIP payment was remuneration for performance of personal services in 2006 and, as such, must be considered "wages" for unemployment insurance purposes.

Wisconsin Statute § 108.05(3) provides that "if an eligible employee earns wages in a given week, the first $30 of the wages shall be disregarded and the employee's applicable weekly benefit rate shall be reduced by 67 percent of the remaining amount." The question is when the employee "earned" the STIP payment.

The ALJ held that the employee did not earn the 2006 STIP payment in week 8 of 2007, "Rather, the employer based the remuneration on his prior year of service. Furthermore, he was totally unemployed in that week."

The department has petitioned the appeal tribunal decision. It is the department's position that the STIP payment is earned in, and should reduce unemployment benefits for, week 8 of 2007. It is the employee's position that the payment was earned in 2006 and it should not reduce benefits during the weeks the employee was unemployed in 2007.

The department relies on its own policy regarding a bonus payment and the commission's decision in Ali v. Golden Books Publishing Co., Inc., UI Dec. Hearing No. 99603262RCG (LIRC Feb. 17, 2007).

The department's policy on bonus payment is as follows:

C. Bonus

A bonus is a payment made by an employer to an employee in addition to the employee's normal wages. It is generally an incentive or reward. A bonus may be based on length of service, attendance, productivity, etc.

A bonus is treated as wages for the week in which the employee becomes eligible for the bonus and has enough information to calculate the amount of the bonus. If the employee does not know when he/she becomes eligible for the bonus or does not have enough information to calculate the amount of it, the bonus is reportable for the week in which the employer notifies the employee of his or her eligibility and the amount of the bonus, or for the week in which the bonus is paid, whichever occurs first.

An attendance bonus may be paid to an employee if he/she performs all of the work that he/she is scheduled for within a calendar month. The claimant who meets the attendance requirements knows he/she is entitled to the bonus as the end of that month. If the claimant is filing for partial unemployment insurance benefits, the bonus must be reported as wages for the week that includes the end of that month if the claimant knows the amount of the bonus or has enough information to calculate the amount of the bonus.

Profit sharing, in general, is a variation of a bonus and should be accorded the same treatment as other types of bonuses. Profit sharing is wages only if the amount of the profit sharing is based on the earnings of the individual or on the employee having performed services for the employer during the time frame the "profit'" was made by the employer. Profit sharing will be reported in the week in which the claimant is told the amount of the profit sharing bonus.

Disputed Claims Manual, Vol. 3, Part VII, Ch. 8, pp. 10-11.

Thus, under the department's policy, a bonus is treated as wages for a week in which the employee is eligible/knows he is eligible for the bonus, and knows the amount of the bonus. As the employee argues, the department's internal policy is not a rule. When the employee is told he is eligible for a bonus and the amount of the bonus does not establish when the bonus was "earned."

In addition, the department's reliance on the commission's decision in Golden Books is misplaced. In Golden Books, the employer had been having financial difficulties. As a result, it asked the bargaining units, which represented the employees, to accommodate the employer in order to limit the employer's exposure to excessive overtime pay. The unions agreed and contracts were established whereby the employees would receive, in lieu of an across-the-board wage increase, "a lump-sum payment equivalent to 2.0% of scheduled Calendar Year 1999 straight-time hourly wages, payable in January 1999." The economic benefit to the employer in allowing the wage raise to be paid in a lump sum and at standard hours was that the employees would be giving up that pay raise for any future overtime hours. The bonus amount was reportable as taxable income. In Golden Books the commission stated:

The commission finds that the bonus was "earned" in week 4 of 1999. That is, it was earned as of week 4 of 1999 and therefore it is treated as wages solely in that week. The bonus is earned not by working in the upcoming year, indeed not by working even another day, but by being employed by the employer in week 4 of 1999. It is paid and payable by the employer to the employe whether or not the employe worked for the employer in the prior week, whether or not the employe works for the employer after that week. The employer has no right to seek return of the payment if an employe quits after week 4 of 1999. There is no provision that it is prorated based on the number of hours the employe actually works in a week, or is prorated based on the number of hours the employe actually works in the calendar year, in which the payment is received. [Footnote omitted.]

The language of the contract at issue here provides for "a lump-sum payment equivalent to 2.0% of scheduled Calendar Year 1999 straight-time hourly wages, payable in January 1999." While the contract language provides that the lump-sum amount is the equivalent of 2 percent of 52 weeks of work in the upcoming year, it also provides that the lump sum is payable once in January of 1999. Thus, as long as an employe is employed on the date of the lump-sum payment, the employe is entitled to the full amount of the lump-sum payment. The contracts do not provide for division or proportionate distribution of the lump-sum payment under any circumstances. For example, there is no evidence that an employe who begins work before the payment and leaves shortly after the bonus payment can be required to repay a portion of the bonus, nor does the contract indicate that any portion of the lump-sum payment is obtainable if an employe begins working for the employer, for example, the day or week after the bonus is paid and works the remainder of the year.

In Golden Books, the commission found the payment earned in the week it was paid because the employees "earned" the bonus by being employed by the employer in that week. Even if the employees had been paid the bonus in a later week, it was "earned" in week 4 of 1999. The employees had an irrevocable right to the payment based on their employment in week 4 of 1999. The record in this case does not reflect that the bonus was based in any part on services the employee performed for the employer or his employment status in week 8 or 9 of 2007. The focus should be on services and conditions that led to the employee's entitlement to the payment, and not on when the employer decided to calculate the amount of the bonus and notify the employee of the amount of the payment.

The commission therefore finds that in week 8 of 2007, the employee did not earn wages reducing his benefit entitlement in that week, within the meaning of Wis. Stat. § 108.05(3).

The decision of the administrative law judge is modified to conform to the above findings and, as modified, is affirmed. Accordingly, the employee is eligible for benefits in week 8 of 2007, if he is otherwise qualified.

Dated and mailed October 26, 2007
mccledo . urr : 132 : 1 : UW 965

/s/ James T. Flynn, Chairman

/s/ Robert Glaser, Commissioner

/s/ Ann L. Crump, Commissioner

The department requests that the commission consider the STIP policy it indicates was obtained from the employer's website. The department asks the commission to remand the case for introduction of the policy and to allow the department to subpoena the employer's staff familiar with the STIP and administration of STIP payments. The commission finds nothing in the STIP policy or department's brief that would lead to the conclusion that the STIP payment was earned in week 8 of 2007. The commission declines to order further hearing.

cc:
Daniel J. La Rocque, Director, Bureau of Legal Affairs
Attorney Marianne G. Robbins
Attorney Sara J. Bolden

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uploaded 2007/10/29