Update Applicable to:	Effective date
All employers in Louisiana	August 1, 2024

What happened?

On June 10, 2024, Governor Jeff Landry signed HB 352 (Act No. 556) into law, amending provisions of payment after termination of employment.

What are the details?

The Background:

• The LWPA requires an employer to pay a discharged employee all compensation due under the terms of their employment at the time of discharge.

• Employers could not condition an employee’s earning of a commission on the employer receiving payment from a customer. This led to issues when a commissioned employee left the company, as commissions might still be due to the departing employee, despite the employer not having received payment.

• Employers often unintentionally violate(d) the law when establishing bonus policies.
  • For example, provisions requiring an employee to be employed in good standing with the company at the time the bonus is paid.
  • These types of provisions were often ruled by courts to be unlawful wage forfeitures and subjected employers to claims for unpaid wages, penalties, and attorneys’ fees.
  • All amounts should be paid in full within 15 days of departure from the company.

Key Bites for Employers:

• Allows employers to establish policies concerning when an employee earns a commission, incentive payment, or bonus.

• Emphasizes that commissions, incentive pay, and bonuses are only considered “due” if the employee has already earned them at the time of separation and per the employers’ policy.

• The new law overrules jurisprudence that deemed some provisions in employer bonus policies and agreements to be wage forfeitures.

• The law identifies lawful policies that will not be deemed wage forfeitures; they must be in writing:
  • a policy providing for adjustments to a commission when there is a change order or other event that affects the amount of the commission (e.g., order cancellations).
  • a policy providing that the employee does not earn a commission, incentive payment, or bonus until the employer receives payment from the customer on the sale or other event that generates the commission, incentive payment, or bonus (withhold payout until the employer receives the payment that generates the commission if applicable).

• For bonuses determined by the employer’s or company’s performance (e.g., annual financials or other periodic basis), the law extends the 15 days, within a reasonable period, though not to exceed 120 calendar days, from the end of the calculation period used by the employer to determine the bonus.

Business Considerations

• Employers should review and update bonus policies to ensure they are compliant with the law.
• Employers should pay discharged employees all due compensation as per the LWPA.
• Employers should take advantage of the law and establish in writing clear provisions regarding bonuses, commissions, or incentive pay, according to the law requirements.
• Employers should train the appropriate personnel to correctly manage these situations. Employers should work closely with accounting, and HR in the case of a termination.

Source References

• LA HB 352 (Act 556)

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