What Does the Ralphs Decision Mean for Employers?
The California Supreme Court effectively provided a judicial seal of approval to the Ralphs decision when it denied both parties’ petitions for review, because the case is now binding precedent on lower courts. Until (and if!) the legislature becomes involved with the issue, employers will have to deal with the consequences of the decision. For now, bonus and incentive plans must be drafted to ensure workers compensation costs are not included in the formula for calculating the bonus. This means that net profit-based bonus plans technically are illegal. Additionally, bonus and incentive plans for non-exempt employees must not deduct costs for cash shortages, breakage or loss of equipment. That means not only that employers cannot deduct such shortages from wages, but also that bonuses for non-exempt employees cannot be based on a calculation that includes such shortages. The following categories of incentive plans should be considered in compliance with California law in the wake of Ra
