Court of Appeals of Iowa Provides Additional Guidance on When Bonuses Will be Included in Wage Calculations

Recently in Pella Corp v Minar, 2014WL3930464, the Court of Appeals of Iowa determined that for purposes of determining weekly earnings, a “vesting bonus” will be considered a regular bonus and should be included in the calculation of average weekly wage. In Minar, the employer paid its employees annual service bonuses and a quarterly performance bonus which were subject to conditions precedent. However, the condition for the service bonus was simply that the employee had to be an active employee on November 30 of the year the bonus was paid. The evidence demonstrated that the bonus was paid every year although the amounts varied.

The employer disputed that the bonuses should be included as part of the wage calculation as they were not paid in the 13 consecutive weeks immediately preceding the injury. Noting that although one of the bonuses was paid subsequent to the date of injury, the Court noted that this was not an “anticipated” bonus but a “vested” bonus which should have been included in the claimant’s wage calculation.  The court reasoned that the bonus had already vested at the time of injury even if it had not yet been paid.   The Court of Appeals of Iowa relied on ICA § 85.36 and determined that this was a weekly earning as it was an earning “to which such employee would have been entitled.”

Accordingly, in calculating average weekly wage and the attendant disability benefit rate for an employee who regularly receives bonuses, we advise employers to look beyond the 13 weeks and to determine whether there are bonuses paid throughout the year which could be considered to have already been “earned” but not yet paid. For any questions regarding calculations of average weekly wage or benefit rates under Iowa Workers’ Compensation Law, please  contact Iowa Workers’ Compensation Attorney Paul Barta at pbarta@baylorevnen.com.