Employers Net A Victory: The California Supreme Court Allows Deductions for Operating Losses from Profits Which Form the Basis of Incentive Compensation/Bonus Plans

On August 23, 2007, the California Supreme Court in Prachasaisoradej v. Ralphs Grocery Company, Inc. held that an incentive compensation plan that allows employees to share in profits, as calculated by subtracting operating expenses from revenues, does not violate Labor Code provisions or Wage Order regulations that prohibit an employer from taking wage deductions to cover operating losses.