AIG Executives’ Right to Bonuses

Like most employment law questions, the answer is “it depends.”  AIG argued that it was required by the Connecticut Minimum Wage Act, to the bonuses since they would be considered “wages” under this law.  A recent article, written by the Hartford Courant, suggests that a number of prominent Connecticut lawyers disagree on this topic.
While the Connecticut Minimum Wage Act states that bonuses may be considered wages (and therefore employers are obligated to pay them), this is not always the case.  In fact, Connecticut Courts have gone both ways on this issue.
AIG could argue that the executives were not due their bonuses because they breached their employment agreements.  Every employment contract requires that an employee materially perform his or her duties to take advantage of the terms of the contract.  If the employee does not perform his or her duties, then the employer is excused from providing the employee with the benefits of the contract.  As Attorney Hayber noted in his recent blog entry on this topic, the Connecticut Appellate Court held in one case that an employee materially breached his employment contract by not working hard enough and was therefore not entitled to severance pay.
AIG may avoid paying the retention bonuses to its executives by arguing that the executives breached their employment agreements by their poor job performance.  Trading risky securities that ultimately bankrupted AIG may constitute a material breach.

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