The Illinois Workers’ Compensation Act states that bonuses are not to be included in the average weekly wage. But the courts have found there is a distinction between incentive-based pay, which an employee received in consideration for specific work performed as a matter of contractual right, and a bonus, which an employee receives for no consideration or in consideration of overall performance at the sole discretion of the employer. Bonuses have been defined by the courts as extra benefits given to the employee by the employer.
A bonus is an extra benefit given gratuitously to an employee by the employer. Look at what the Appellate Court said about production bonuses and whether they met the definition of “bonus” as contemplated in Section 10 of the Act:
Claimant received bonuses in consideration for work performed pursuant to his collective bargaining agreement and not as an extra benefit provided by employer gratuitously. The production bonus plan stated that it was an important part of claimant’s compensation package. The employer calculated bonuses based upon measures of volume and quality of steel produced and the number of days worked without a “lost time accident.” Employer had no discretion and was obligated to pay the production bonuses if earned by its employees who had worked on the dates the objective measures were taken. The fact that an employee who did not work on those days would not receive the production bonuses further supports the Commission’s finding that the production bonuses were not a bonus as contemplated by Section 10 of the Act, but rather received in consideration for work actually performed. Because the production bonuses earned by claimant were not a “bonus” as contemplated under Section 10 of the Act, the Commission did not err by including production bonuses in calculating claimant’s average weekly wage.
Maria Alvarado v. Menards
In this case, the Commission addressed whether an “Instant Profit Sharing” payment from the company should be included in the average weekly wage in the case of Alvarado v. Menards. Petitioner had received a check every February as part of an “Instant Profit Sharing” plan. The check received in the year prior to the date of accident amounted to $7,717.76, and was included in the W-2 statement under “wages, tips and other compensation.”
Respondent Menards described the “Instant Profit Sharing” plan as discretionary. It could be removed at any time, and Menards had the discretion to end the program at any time. The benefit was based on the profit earned collectively by the unit that a team member is assigned to, not based on the productivity of the individual employee.
The Commission decided that the “Instant Profit Sharing” payment was essentially a bonus and should not be included in the calculation of the average weekly wage. The Commission noted that the IPS program was clearly discretionary, and that Menards reserved the right to amend or even cancel the program in whole or in part without notice and in its sole discretion. Furthermore, the documents explicitly showed that Menards’ intention to pay the benefits was not a guarantee, and that no contractually enforceable rights between Menards and its employees were created in the process. The most important factor was that the payments were based on the profitability of a unit, and not the individual employee. Therefore, the payments were not truly incentive based pay that an employee would receive for specific work performed as a matter of contractual right.
The morale of the story is that regardless of what your employer calls it, a bonus isn’t a bonus if you earn it for specific work that you yourself performed. Making sure that your employer is using the correct average weekly wage can go a long way in increasing the benefits that you receive as a result of your work injury. If you need help figuring out your average weekly wage, contact me for a free consultation.