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An employee who was fired in late September was entitled to an end-of-year distribution from his former employer’s profit-sharing plan, the Superior Court has ruled. Addressing an issue of first impression, Judge Calvin L. Scott Jr. in Grove v. Breeding & Day held that absent an employment contract provision to the contrary, employers will be required to pay up at bonus time, even when an employee has been fired before bonuses are issued. The decision resulted in an award of $11,250 plus prejudgment interest to plaintiff James E. Grove Jr. Grove began working for Wilmington, Del.-based Breeding & Day, a plumbing, heating and cooling company, in February 1998, the opinion said. The plaintiff’s attorney, R. Stokes Nolte of Nolte Brodoway & Saltz in Wilmington, said Grove managed the company’s heating and cooling division. Shortly after Grove started at Breeding & Day, the company’s president, Clifford Breeding, sent him a letter that set out the parties’ verbal agreements, the opinion said. The letter included the amount of compensation and benefits Grove would receive, including paid vacation, paid holidays and health insurance. At issue before the court was a provision in the letter that said that “at the end of the year, you will receive 25 percent of all distributed profits, whether it be as a bonus or 401(k) or a combination of both.” In his Nov. 3 opinion, Scott said “distributed profits” was an ambiguous term and concluded that, here, it referred to an amount “equal to that paid as profit-sharing to the employees’ 401(k) plans over and above that paid into the plans as company matching funds.” According to the opinion, Grove was fired on Sept. 28, 1998, and Oct. 2, 1998, was his last day at Breeding & Day. Grove’s termination letter indicated that he was fired due to sluggish business, Nolte said. The defendant’s 1998 financial statement showed a net income of $107,779, the opinion said. The statement also revealed that the company paid a total of $45,000 in distributed profits that year. At the time of trial, the plaintiff had not received any of the $45,000, the opinion said. Before the court, Grove argued that he was owed a share of the $45,000 because the letter from Breeding constituted an employment contract and did not specifically state that he had to remain an employee in order to receive his year-end bonus. The plaintiff claimed that the profit sharing was part of the incentive for him to join the company, the opinion said. The defendant, on the other hand, denied that the bonus payment was partly responsible for Grove’s decision to work for the company. According to the opinion, the defendant also contended that the requirement that Grove be employed by Breeding & Day at the end of the year was an implicit condition for payment. “There are no cases in Delaware directly on point concerning whether an employee must be employed by the employer when any bonus payment is made, particularly when the employment contract is silent on the issue,” Scott wrote. “Cases in other jurisdictions are split over whether an employee must be employed on the date that a bonus is paid.” Looking to other jurisdictions — including Florida, Georgia, Wisconsin and Indiana — Scott concluded that generally, in cases in which bonus payments were not made, the parties’ employment contracts expressly stated that the payees had to be employed at the time of distribution. “The court finds that the employment contract [in Grove] does not explicitly require that Grove be employed by Breeding & Day when the distribution was to be made,” Scott wrote. “Because the contract is silent on the issue of whether Grove had to be an employee of Breeding & Day when payment was due, the court concludes that employment was not a contingency for payment. Thus the court determines that payment is due Grove.” However, because the bonus payment was a “nonrecurrent benefit,” as opposed to wages, the court ruled that 19 Del. C. SSS 1103, Delaware’s statutory penalty for an employer’s failure to pay wages to a severed employee, was inapplicable, the opinion said. Scott ruled that prejudgment interest, which was set at 5 percent over the Federal Reserve discount rate, began accruing on the day the defendant distributed bonuses to its employees. Bayard Snyder of Snyder & Associates in Wilmington represented Breeding & Day. At press time, the defendant had not appealed the case.

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