In November, the Franklin County Court of Appeals affirmed
an employer’s summary judgment on an employee’s claim for unpaid commissions on
the grounds that the employee’s agreement failed to specify when the
commissions were earned, thus making them entirely discretionary. Dolder
v. Auto Boutique Collision, Ltd.,
2018-Ohio-4508. While the
agreement specified the percentage range of the commission, it did not indicate
when the commission would be earned, leaving them to the employer’s unfettered
discretion. Because the parties never
had a meeting of the minds as to what would trigger the payment of the promised
commission, the promise to pay a commission was illusory and unenforceable.
According to the Court’s decision, the plaintiff worked
approximately 14 months for the defendant employer as the shop manager. In addition to his salary, his employment
agreement provided that he would receive “commission payments . . . based on 10-25% OF SALARY of $57,000.
This commission will be paid monthly on the thirtieth day of the following
month.” Although the plaintiff had been paid all of the salary which he had been promised, he had
never been paid any commission as provided in his employment agreement.
The Court rejected the plaintiff’s argument that his
agreement required that he be paid this “commission” every month on top of his
salary. The employer argued that the
term was too ambiguous and indefinite to be enforced. Because the agreement failed to define “commission,”
the court relied on its commonly understood meaning: “compensation earned by an
employee based on a percentage of revenue generated from the employee's
services.” This is contrasted with a salary
which is a fixed compensation paid on a regular basis and which is not
dependent on the revenue generated.
In view of these definitions, a salary payment is fixed and
not tied to any numerical performance variable, whereas a commission payment is
based on a defined calculus relating to the employee's performance in
generating revenue. Thus, the parties'
use of the term commission here indicates a general intent to somehow link the
payment to Dolder's revenue generating performance. The commission payment provision sets forth
how a commission is calculated, at least within a certain range, and when an
earned commission is paid. However, this
provision does not define how a commission is earned, such as by meeting a
certain revenue benchmark. Because the
contract contains no language addressing how the commission is earned, the
commission payments were entirely at the employer's discretion, making the
provision illusory. . . .
In sum, the contract's commission payments provision contains
no indication the parties reached any agreement in defining the circumstances
under which a commission would be due to Dolder. Therefore, in the absence of a meeting of the
minds as to what triggers the earning of a commission, this provision is
indefinite and uncertain, rendering the promise illusory.
NOTICE: This
summary is designed merely to inform and alert you of recent legal
developments. It does not constitute legal advice and does not apply to any
particular situation because different facts could lead to different results.
Information here can be changed or amended without notice. Readers should
not act upon this information without legal advice. If you have any questions
about anything you have read, you should consult with or retain an employment
attorney.
