As a Louisiana employer, you are no doubt aware of the state’s draconian termination pay law. Whether it’s vacation, bonuses, commissions, or monies owed by the employee that are withheld from the final paycheck, employers that do not pay terminated employees all earned wages and benefits within 15 days of termination or the next regular payday (whichever is earlier) risk penalties of up to 90 days’ wages, attorneys’ fees, and costs.

On August 1, an amendment to Louisiana’s termination pay law (LSA-RS 23:631(E)) will take effect. It reads as follows:

1. For purposes of this Section and R.S. 23:634, compensation available in the form of commission, incentive pay, or bonus shall be considered an amount then due only if, at the time of separation, the compensation has been earned and not modified in accordance with a written policy addressing the commission, incentive pay, or bonus.

2. The following provisions shall be lawful:

a. A policy providing for adjustments to the amount based on changes to the order generating a commission which affects the amount of the commission.

b. A policy providing that a payment to the laborer or employee is not earned unless and until the employer has received the payment which generates the commission, incentive pay, or bonus.

3. In the case of a bonus, the amount of which is determined by financial information reflecting the employee’s or employer’s performance on an annual, quarterly, or other periodic basis, a reasonable amount of time, not to exceed one-hundred twenty calendar days from the end of such periodic basis, shall be allowed based on standard accounting practices used by the employer to make the determination as to whether a bonus is due and the amount thereof.

This new law is in response to many court cases finding employers liable for penalties because commissions or bonuses were not paid on time. One case held that commissions were due even though the customer never paid!

You should always have bonus and commission plans in writing. Now is the time to create or review these in order to protect your company.