If you call it a bonus is it necessarily excluded from the calculation of average weekly wage and when do you include overtime in the calculation of average weekly wage?

In a Decision of the Appellate Court of Illinois First District Workers' Compensation Division filed on November 7, 2011 the Appellate Court confirmed the Decision of the Illinois Workers' Compensation Court and circuit court which included bonus in the calculation of average weekly wage. Arcelor Mittal Steel v. IWCC No. 1-10-2180WC may be a case of first impression. In this particular case the employee was a member of the United Steel Workers Union Local 9481. He earned $21.03 per hour and received a shift differential and incentive pay. Work schedules were posted every Thursday and if the work scheduled had a "2" on the schedule that meant the individual was to work a 12‑hour shift. The Commission found that this was mandatory. There was other overtime that the Commission found to be voluntary. This overtime was included in the calculation of average weekly wage.

The collective bargaining agreement also referred to a production bonus plan as an incentive plan for the employee and a production plan for the employer. This bonus was not tied to the stock market, was not seasonal, and was not given simply due to the generosity of the employer. The bonus was based upon a production component and a safety component. If production levels were met a bonus was paid. If no time was lost due to a work-related accident a bonus was paid. Production bonuses were based on the quality of saleable goods made and if benchmarks were hit each employee on the team received a bonus. The bonus was only available when the plant was producing steel. Taxes were taken out of the bonuses. They were paid bi‑weekly and identified on the check as a separate line item "production bonus." This was also included in calculation of earnings for pension purposes.

In calculating average weekly wage the arbitrator and the Commission on Review included the mandatory overtime at the straight time rate and the production bonuses. The circuit court affirmed and the employer proceeded further before the Illinois Appellate Court.

The appellate court noted the specific finding of the Commission that stated "It is unrebutted that if steel is not being produced no bonus/incentive can be paid. Additionally, if people are injured at work, production suffers and therefore the safety piece of the bonus/incentive is also in 'consideration for work'. The arbitrator notes that the amount of steel produced has a direct impact on the amount of bonus/incentive earned. If the employees do not work hard enough to produce the minimum level of steel that is required for a bonus/incentive, no bonus/incentive is paid. However, the harder they work and the more steel they produce, the greater the bonus/incentive earned. The arbitrator finds such type of bonus/incentive is in consideration for the work the petitioner performs. The arbitrator notes that if someone is off work or not working they do not receive the bonus."

Section 10 of the Act provides that the calculation of average weekly wage shall be "the actual earnings of the employee in the employment in which he was working at the time of the injury during the period of 52 weeks ending with the last day of the employee's last full pay period immediately preceding the date of his injury, illness, or disablement excluding overtime and bonus divided by 52."

The appellate court went on to discuss the inclusion of overtime at the straight time rate relying on Edward Don Co. v. Industrial Commission, 344 Ill. App. 3d 643, 655 (2003) wherein they found there was no evidence that the work involving overtime was a condition of employment or consistently worked a set number of hours each week and denied the inclusion of overtime in average weekly wage. In citing Ogle v. Industrial Commission, 248 Ill. App. 3d 1093 (1996) the appellate court affirmed the inclusion of overtime because the Commission found overtime to be mandatory. In Freesen, Inc. v. Industrial Commission, 348 Ill. App. 3d 1035 (2004) the appellate court excluded overtime because there was no evidence that the employee was required to work overtime as a condition of his employment or he consistently worked a set number of hours of overtime each week or the overtime hours he worked were part of his regular hours.

In Airborne Exp., Inc. v. Illinois Workers' Compensation Commission, 372 Ill. App. 3d 549 the court noted that the Commission committed error when it included overtime in the average weekly wage because the uncontradicted evidence was that overtime was not required as a condition of employment but was garnered using seniority and was at the request of the injured worker. The uncontradicted evidence in Aiceloi Mittal Steel the Commission found that the uncontradicted evidence established that the injured worker was required to work overtime as a condition of his employment.

Next the court went on to discuss bonus. In citing Webster's Third New International Dictionary (1981) "bonus" is commonly defined as "something in addition to what is expected or strictly due." The court stated that there is a distinction between incentive-based pay which an employee receives in consideration for specific work performed as a matter of contractual right and a bonus which an employee receives for no consideration or in consideration for overall performance at the sole discretion of the employer. This injured employee received production bonuses in consideration for work performed pursuant to a collective bargaining agreement and not as an extra benefit provided which the employer gratuitously bestows upon an employee. In this case the production bonus was an important part of the claimant's compensation package. The employer had no discretion and was obligated to pay the production bonuses if earned. Therefore the production bonuses were not a bonus as contemplated by Section 10 of the Act and were received in consideration for work actually performed. The findings of the Commission regarding average weekly wage boiled down to a question of fact and the Commission's findings were not against the manifest weight of the evidence.

This author wonders if this decision had been different if the production and safety bonus was not part of the collective bargaining agreement. What if the employee handbook indicates that a retail store's total sales would be the basis upon which a bonus may be paid must the payment of a production or safety bonus be part of a contract rather than a policy?