Wis.LIRC UC Decision: Ali - February 17, 2000 - UW 965 - Gratuity - bonus - tips - lump-sum payment equal to 2 percent of wages for 52 weeks, paid in lieu of wage increase for the coming year, is wages in the week in which it was paid

STATE OF WISCONSIN
LABOR AND INDUSTRY REVIEW COMMISSION
P O BOX 8126, MADISON, WI 53708-8126 (608/266-9850)

JAMES P ALI, Employe

GOLDEN BOOKS PUBLISHING CO INC, Employer

UNEMPLOYMENT INSURANCE DECISION
Hearing No. 99603262RCG
See Note

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 of Workforce Development has filed a timely petition for review of the decision of the ALJ.

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:

FINDINGS OF FACT AND CONCLUSIONS OF LAW

Each of the employes at issue here was a member of one of three union locals. Pursuant to contracts virtually identical as to the issue before the commission, each of the employes received a lump-sum payment from the employer in week 4 of 1999. The employer was at least partially shut down in week 4 of 1999 and the employes at issue filed for UI benefits. (Some employes were not laid off and received both their regular pay and the bonus.)

The employer had been having financial difficulties. As a result it asked the bargaining units, which represent the employes at issue, 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 employes 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." Exhibits A and B. 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 employes would be giving up that pay raise for any future overtime hours. The bonus amount was reportable as taxable income.

The issue is whether the total amount of the bonus is wages in week 4 of 1999, or only 1/52 of the amount of the bonus is wages in week 4 of 1999.

First, the lump-sum payment received in week 4 of 1999 must be considered wages for UI purposes. Wis. Stat. � 108.02(26)(a) provides that wages means 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. The lump-sum payment is a payment by the employer in return for personal services, albeit future personal services. Wis. Stat. � 108.05(3) provides that, except for instances not applicable here, if an employe earns wages in a given week, the first $30.00 of the wages shall be disregarded and the employe's applicable weekly benefit rate reduced by 67 percent of the remaining amount. The statute provides for reduction for receipt of holiday pay, vacation pay, sick pay, back pay, and termination pay, under specific statutory sections. Particularly for holiday, vacation and termination pay, the payment is treated as wages for partial unemployment for a given week only if it is definitely payable within a specified time from the close of the week, the employe has notice of the payment, it is definitely allocated and payable to the employe for that week and is allocated at not unless the employe's approximate full weekly wage rate or another reasonable basis for allocation. No such specific statutory section applies to "bonus" pay; therefore, the general statutory provision of Wis. Stat. � 108.05(3) applies.

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. (1 )

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.

The employes' position is that because the bonus is in lieu of a raise, which would constitute an increase in pay on a weekly basis, it should be spread out throughout the year. The commission disagrees. Merely because the payment is based on work that is to be performed throughout the year does not mean that it is earned in each week of that year. It is, as indicated above, earned by virtue of the fact that the individual was employed on the date the bonus was paid. All that an employe need do to obtain the bonus has been done by the time the bonus is paid. The employes have a right to the bonus in week 4 of 1999 no matter what should occur thereafter in terms of their ongoing employment with the employer.

The commission therefore finds that in week 4 of 1999, the employes received a bonus which must be treated as wages for that week, and therefore reduces or eliminates unemployment insurance benefits payable for that week, within the meaning of Wis. Stat. � 108.02(26) and Wis. Stat. � 108.05(3).

The final issue to be decided is whether recovery of overpaid benefits must be waived.

Wisconsin Statute � 108.22(8)(c), provides that the department shall waive the recovery of overpaid benefits if the overpayment was the result of departmental error, and the overpayment did not result from the fault of the employe. Under Wis. Stat. � 108.02(10e)(a) and (b), department error is defined as an error made by the department in computing or paying benefits which results from a mathematical mistake, miscalculation, misapplication or misinterpretation of the law or mistake of evidentiary fact, or from misinformation provided to a claimant by the department, on which the claimant relied.

The overpayment in this case results from the commission's modification of the appeal tribunal decision. Such modification was not due to department error as defined in Wis. Stat. � 108.02(10e)(a) and (b). Rather, the commission has reached a different legal conclusion when applying the law to the facts found.

The commission further finds that waiver of benefit recovery is not required under Wis. Stat. � 108.22(8)(c), because although the overpayment did not result from the fault of the employe as provided in Wis. Stat. � 108.04(13)(f), the overpayment was not the result of a department error. See Wis. Stat. � 108.22(8)(c)2.

DECISION

The decision of the administrative law judge is modified to conform to the foregoing findings and, as modified, is reversed. Accordingly, in week 4 of 1999 the employes received a bonus payment which must be treated as wages. This matter is remanded to the department to calculate the amount of benefits overpaid and/or due each employe based on the receipt of the bonus payment in week 4 of 1999.

Dated and mailed February 17, 2000
alijame.urr : 132 : 1 : UW 965

/s/ David B. Falstad, Chairman

/s/ Pamela I. Anderson, Commissioner

/s/ James A. Rutkowski, Commissioner

MEMORANDUM OPINION

The commission did not discuss witness credibility and demeanor with the ALJ. The facts in this case were not in dispute. The commission has modified the ALJ's decision because it reaches a different legal conclusion when applying the law to the facts.

cc: GRAPHIC COMMUNICATION INTL UNION
LOCAL NO 223 B

GREGORY A FRIGO
DEPARTMENT OF WORKFORCE DEVELOPMENT
BUREAU OF LEGAL AFFAIRS

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Footnotes:

(1)( Back ) No testimony was given, and no contract provision introduced, that would indicate that the bonus can be prorated, or is not payable, based on length/existence of employment, future or past.

Note: This was a "group case", involving 43 similarly situated employes of Respondent Golden Books Publishing who were all members of Graphic Communications Intl Union Local 223B. James P. Ali's case was designated "lead case" for purposes of a name to use in the caption.

Other "group cases" decisions, identical to this one, were also issued on February 17, 2000 in related cases involving the same employer and other groups of employes who were members of other union locals. These decisions were:

Altenbach, Hrg. No. 99603264RCG, (36 employes, Graphic Communications Intl Union Local 254 M)
Bartsch, Hrg. No. 99603268RCG (15 employes, United Automobile Workers Local 1007 )

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