November 2025
Maryland court says short-term incentive bonus is not a “wage” under Maryland law
In Swain v. Paramount Global, Inc., et al., a Maryland federal court held that an employee’s annual bonus under Paramount’s Short-Term Incentive Plan (“STIP”) was not a “wage” under the Maryland Wage Payment and Collection Law (the “MWPCL”) because it was dependent on conditions other than the employee’s efforts. The decision reiterates that bonuses tied to subjective performance metrics and subject to employer discretion do not constitute wages under the MWPCL.
The court found that provisions in both the STIP and the employee’s offer letter highlighted the discretionary nature of the bonus. Although the STIP outlined a multi-factor formula for calculating annual bonuses, one critical factor—the performance rating—was determined solely at the supervisor’s discretion. In the employee’s final full year of employment, her supervisor exercised this discretion and assigned her a 0% rating due to documented performance issues and an internal investigation that substantiated complaints about her unprofessional conduct and poor leadership. Additionally, the STIP specified that plan administrators were “authorized to interpret the [STIP], identify the Participants and determine the amount of any Bonuses and the terms and conditions for payments made under the [STIP]” and that “[n]o Company employee shall have any claim or right to receive a bonus under the [STIP].” Finally, the employee’s offer letter provided that the employee’s annual “target” bonus under the STIP, “if any,” would depend on the Company’s and her annual performance.
S&K Take: As we’ve previously covered, whether a bonus constitutes wages under applicable wage statutes is an important issue. Courts tend to construe wage statutes liberally, and violations offer carry additional penalties, including liquidated or treble damages and attorneys’ fees. Employers should clearly state the discretionary nature of any bonus opportunity in written compensation plans and offer letters.
Eighth Circuit clarifies limits on protected social and political workplace expression
On November 6, 2025, a panel of the Eighth Circuit Court of Appeals reversed a National Labor Relations Board (“NLRB”) decision that held Home Depot violated Section 7 of the National Labor Relations Act (“NLRA”) by directing a Minnesota employee to remove a “BLM” (“Black Lives Matter”) insignia from his work apron. Home Depot’s position was that the insignia violated its uniform policy, which prohibited displays of “religious beliefs, causes or political messages unrelated to workplace matters.” At issue was this workplace rule’s collision with Section 7 of the NLRA, which guarantees employees the right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.”
The NLRB had concluded the insignia was protected under Section 7 because it was a “logical outgrowth” of workplace concerns the employee had raised about racial discrimination, including vandalism of Black History Month signage in the store break room. The Eighth Circuit court disagreed.
In its decision, the panel emphasized that Section 7 rights are not absolute and may yield to an employer’s legitimate business interests under the “special circumstances” doctrine, which permits employers to prohibit otherwise protected messages when they conflict with legitimate business interests, such as maintaining safety, preventing damage, or preserving the business’ established public image. The court held the special circumstances defense was applicable given the “unique circumstances” present here, including the store’s proximity to the site of George Floyd’s murder, the ensuing period of civil unrest, and Home Depot’s interest in maintaining an apolitical face to ensure customer and employee safety.
S&K Take: While the court recognized Home Depot’s legitimate business interests in prohibiting the employee from wearing the insignia on his apron, the “special circumstances” doctrine is a narrow exception and its application requires a fact-intensive inquiry. The court’s reasoning was grounded in the unique timing and heightened local tensions surrounding the store. The decision is binding on federal courts in Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota and South Dakota, but it remains to be seen whether and to what extent its reasoning will be applied in other circumstances and by other courts. Employers should continue to ensure consistent administration of dress code and uniform policies in view of the NLRA.
Delaware Supreme Court to confirm whether forfeiture of incentive equity extinguishes restrictive covenants in grant agreement
The Delaware Supreme Court is reviewing a lower court decision that could have broad implications on how restrictive covenants tied to equity awards are crafted and enforced. The dispute involves a former senior executive accused of forming a competing business, misusing confidential information and soliciting customers and employees in violation of covenants in the executive’s incentive equity agreement. Pursuant to that agreement, the executive forfeited all vested and unvested incentive units when he was fired for cause. After his termination, the executive engaged in competitive conduct, and the employer sued for injunctive relief to enforce its non-compete, among other claims.
The lower court dismissed the employer’s lawsuit. Reyling on the “basic principal[] of contract law” that contracts require consideration, the court determined that since the executive had forfeited his incentive units, and since those units were the “sole consideration” supporting his restrictive covenants, no consideration remained to justify the post-employment restrictions.
On appeal, the employer argued that the lower court improperly evaluated whether there was consideration at the time of enforcement, rather than at the time of contract formation. In other words, the employee received valuable consideration (the units) when he signed the equity agreement, and in exchange agreed to covenants that expressly survived termination of his employment. “[B]ut for” those covenants, said the agreement, the employer would not have granted the units. The employer contended it was improper to treat the subsequent forfeiture as though it retroactively erased the consideration, as such a reading would “functionally rewrite the terms of the contract.”
During oral argument, the Delaware Supreme Court justices pressed both sides on whether the dispute is truly about consideration, as the lower court framed it. The Court suggested instead that the issue may be whether, under Delaware’s “reasonableness” test for enforcement of restrictive covenants, a covenant is “reasonable” when the employee is left, in the employee’s phrasing, with “absolutely nothing.”
S&K Take: While the appeal is framed as a dispute over consideration, the court’s questions at oral argument suggest the case may ultimately turn on the “reasonableness” of a restrictive covenants that leaves an employee with no continuing benefit, even where such benefit was forfeited as a result of employee misconduct. The “reasonableness” inquiry under Delaware law balances the employer’s protectible business interests in enforcing the restrictive covenant with the employee’s ability to earn a living and requires limits on a covenant’s scope and duration. While “forfeiture for competition” provisions generally avoid a reasonableness review under the “employee choice doctrine,” a decision declining to enforce the covenant for lack of reasonableness may require employers to ensure that terminated employees have some ongoing benefit to support post-employment restrictions.
