Alaska Employment Law

Alaska’s Late Payment law requires prompt payment of “all wages, salaries, and other compensation” after termination of employment.   The statute reads:

If the employment is terminated, all wages, salaries, or other compensation for labor or services become due immediately and shall be paid within the time required by this subsection at the place where the employee is usually paid or at a location agreed upon by the employer and employee. If the employment is terminated by the employer, regardless of the cause for the termination, payment is due within three working days after the termination. If the employment is terminated by the employee, payment is due at the next regular pay day that is at least three days after the employer received notice of the employee’s termination of services.

What is prompt?  That depends on the nature of the termination.  If the employer fires the employee, it must pay “within three working days after the termination.”  AS  23.05.140(b)(2d sent.).  If the employee resigns or otherwise “terminates” the employment, the employer must pay “at the next regular pay day that is at least three days after the employer received notice of the employee’s termination of services.”  AS 23.05.140(b)(3rd sent.).  What if the employment ends on a date agreed to by both parties (e.g., under a term contract)?  Given the employer’s advance knowledge of that final workday (and thus its ability to prepare the last check), the safer reading may be that the employer must deliver the final pay within three working days.  

What counts as “other compensation”?  A recent Connecticut court opinion, construing a similar statute, held that a wide range of bonuses (perhaps all bonuses) count as “other compensation.”  In the Connecticut case, the employer (a law firm, as it happens) promised a bonus to the employee (an attorney), and referenced various factors (business generation, work quality, “loyalty,” etc.) without identifying at all how those factors would work together to result in a bonus. The court held:

the plain and ordinary meaning of the term ‘‘compensation,’’ standing alone, is not limited to salary. See Webster’s Third New International Dictionary (defining compensation as ‘‘payment for . . . service rendered’’ and bonus as ‘‘money or an equivalent given in addition to the usual compensation’’ [emphasis added]); Black’s Law Dictionary (7th Ed. 1999) (compensation includes wages, profit sharing, commissions, bonuses and other benefits); Ballentine’s Law Dictionary (3d Ed. 1969) (defining compensation as ‘‘a remuneration for services, whether in the form of a fixed salary, fees, commissions or perquisites of whatever character’’). The ordinary meaning of the phrase ‘‘annual compensation’’ therefore includes salary, commissions, bonuses and other benefits paid and received over the period of one year. See, e.g., Cosgrove v. Waterbury, 286 Conn. 759, 764 n.7, 945 A.2d 932 (2008) (‘‘annual compensation’’ includes annual longevity payment); O’Connor v. Waterbury, supra, 286 Conn. 745 n.11 (same).

Ziotas v. The Reardon Law Firm, P.C., ___ A.2d. ___ (Conn. Ct.App. Nov. 25, 2008). 

If the Alaska statute were all we were dealing with, the answer might be the same in Alaska.  Unfortunately for employees, the Alaska Department of Labor has issued a regulation that undercuts that “ordinary meaning” of the word “compensation.”  8 AAC 25.030(4) provides:

“regular wage, salary or other compensation,” as used in AS 23.05.140 means that level of compensation paid to an employee for services that was usual and regular for a daily, weekly, or monthly period of work, as the case may be; this “regular” level is to be determined based on the employee’s actual working situation and is not limited to a level of compensation based on a “standard” eight-hour workday or 40-hour workweek where the employee’s regular and usual course of employment actually involved more or less hours of work for the relevant period; nothing in this paragraph requires that an employee have been hired on an hourly or weekly basis; the employee may have been paid by piece rate, salary, commission, or other method of compensation agreed upon between the employer and employee;

That regulation may define “bonus” out of “compensation,” because a bonus is typically not a payment that is “usual and regular for a daily, weekly, or monthly period of work.”  On the other hand, a bonus calculated and paid on a weekly or monthly basis may still qualify.

Unless the Alaska Labor Department has overstepped its authority by issuing a regulation that conflicts with the statute, an Alaskan employer’s failure to pay a bonus is probably not a violation of the Late Payment statute.  Even if the regulation is invalid, the presence of the regulation might insulate an employer from liability, because liability for “waiting time penalties” generally exists only if the employer acted unreasonably, in bad faith, etc., see Hallam v. Holland America Line, Inc., 27 P.3d 751, 756 (Alaska 2001), and reliance (if it existed) on an invalid regulation probably is reasonable and/or in good faith.

How does an employee enforce the Late Payment law?  The employee can sue on her or his own, or can assign the claim to the Department of Labor.  The choice matters.  If the Department of Labor enforces the claim and proves late payment, the court apparently must impose the waiting time penalty (” an employer found liable . . . shall be required to pay”) but at a reduced daily rate (”the employee’s straight time rate of pay for an eight-hour day”).  AS 23.05.140(c).  If the employee sues directly, the court needn’t impose the penalty (”the employer may be required to pay”), but if it does, the penalty may exceed eight hours of straight time pay (”in the amount of the employee’s regular wage, salary, or other compensation,” id. at 140(d), defined in the regulation as “not limited” to a standard 8 hour work day).  Under either of the two enforcement schemes, the penalty stretches “from the time of demand to the time of payment, or for 90 working days, whichever is the lesser amount.  Id.  

Failure to make a demand is fatal to a Late Payment claim.   Hallam v. Holland America Line, Inc.,  180 P.3d 955, 960-61 (Alaska 2008). 

If the employee also has an overtime claim, the employee can recover both overtime liquidated damages and waiting time penalties only if the claim has been assigned to the Department of Labor.  AS 23.05.140(f).

H/T: Dan Schwartz at Connecticut Employment Law