NC Court of Appeals upholds jury verdict for employee to collect earned bonuses

Earlier this month, the North Carolina Court of Appeals issued Kornegay v. Aspen Asset Group LLC, an interesting case that raises and decides some key issues under the North Carolina Wage and Hour Act (NCWHA). At issue was whether the employee-plaintiff had a contract that included bonus payments, and if so, whether those had to be paid to him. Plaintiff worked for a real estate developer and claimed to have an oral (never written) contract that provided for bonus payments based on properties that he helped sell.  The primary issue was whether there was in fact an oral contract; the Court upheld the jury’s finding that there was an enforceable contract that included bonus payments. Given that there was a contract for bonuses, the Court then turned to whether plaintiff was owed these bonues under the NCWHA.

Continue for further analysis: 

Defendants claimed that they had notified plaintiff that the bonus plan was being discontinued before they had to pay him. This issue is addressed by two provisions in the NCWHA. N.C. Gen. Stat. § 95-25.13(3) requires employers to “[n]otify employees, in writing or through a posted notice maintained in a place accessible to its employees, at least 24 hours prior to any changes in promised wages.” N.C. Gen. Stat. § 95-25.7 states in relevant part: “Wages based on bonuses, commissions or other forms of calculation shall be paid on the first regular payday after the amount becomes calculable when a separation occurs. Such wages may not be forfeited unless the employee has been notified in accordance with G.S. 95‑25.13 of the employer’s policy or practice which results in forfeiture. Employees not so notified are not subject to such loss or forfeiture.”

The Court held that the employer’s supposed notice was not sufficient under the NCWHA because it did not state that the bonus program was being ended, but only that plaintiff’s bonuses may be delayed. As the regulations provide, ambiguities are construed against the employer. The Court also followed the plain language of the NCWHA to reject defendants’ argument that the bonuses were not calculable before plaintiff was terminated; the NCWHA plainly provides that they still must be paid as soon as the amount can be calculated. The Court also rejected defendants’ argument based on the statute of limitations, which is two years under the NCWHA. The Court held that the statute of limitations did not begin running until the bonuses were payable — upon the property’s resale — and defendants failed to pay them. It did not begin with defendants’ ambiguous notice about the bonuses.

Although the plaintiff won at trial on his NCWHA claims, the court did not award him liquidated damages or attorneys’ fees under the NCWHA. The Court reviewed both decisions.  The NCWHA provides for a doubling of damages as “liquidated damages.” “The employer bears the burden of avoiding liquidated damages by showing that it acted in good faith and with a reasonable belief that its actions were not in violation of the NCWHA.” As an initial matter, the Court held that the issue of liquidated damages is for the court to decide, not the jury. This follows the language of the act, and does not violate the constitutional right to a jury trial. As to the decision on liquidated damages, the Court upheld the trial court, finding no abuse of discretion, because the underlying contract question was very disputable, and reasonable minds could have thought there was no contract for bonuses. For the same reason, the Court upheld the trial court’s discretionary denial of attorneys’ fees.