Last month, the Ohio Court of Appeals mostly affirmed an employer’s summary judgment in a case where a former employee challenged the amount and payment of his incentive compensation. Bollman v. Lavery Automotive Sales, 2019-Ohio-3879. The employee never signed an incentive compensation agreement and, instead, relied on a chart that the employer distributed each year summarizing its compensation plan. The court found that the employer was free to change that chart and incentive plan at will. Further, the court found that sales commissions do not constitute wages under Ohio’s prompt payment statute. However, the court agreed with the employee that the employer had been unjustly enriched when it deducted $20/per car more from the bonus pool than it was being charged by GM for its incentive compensation system.
According to the Court’s opinion, the employee was employed at will as a sales consultant. He was paid a salary plus a commission for every car he sold over 10 each month based on a bonus chart provided by the employer when he was hired. After 6 years, the employee began participating in a GM incentive program that paid $100/car sold and required the employer to pay $25/car into the bonus pool. This GM program was in addition to the commissions he received from his employer. The employer informed its sales staff that it would deduct the GM $25/car charge from their bonus pool. When GM increased the charge to $30/car, the employer began deducting $50/car from the bonus pool. When the employees objected, the employer told them that they could resign. The employee resigned a few years later and brought suit.
The Court rejected the employee’s breach of contract claim based on its deduction of the GM charge from the bonus pool. The chart did not contain any explicit terms and he conceded that other incentive compensation plans were not documented either. Further, employee admitted that the employer orally informed him that it would be deducting the GM charge from the bonus pool and that the employer continued to pay his base salary. The employee objected, but continued to cash his paychecks. The employer was free to change the compensation plans at will.
The Court also rejected the employee’s claim that the bonus deduction violated Ohio’s prompt wage payment statute: “The per vehicle dealer contribution charges Appellee withheld were deducted from Appellant’s commission. This Court has held the definition of the word “wage” as used in R.C. 4113.15 does not include commissions, which are not guaranteed pay or reimbursement for expenses.”
The Court, however, agreed with the employee that the employer may have been unjustly enriched by deducting $50/car from the bonus pool when GM was only charging it $30/car.
The doctrine of unjust enrichment “applies when a benefit is conferred and it would be inequitable to permit the benefitting party to retain the benefit without compensating the conferring party.” Garb–Ko, Inc. v. Benderson, 10th Dist. No. 12AP–430, 2013–Ohio–1249, ¶ 25 (Citation omitted). The elements of an unjust enrichment claim are: (1) the plaintiff conferred a benefit on the defendant, (2) the defendant knew of the benefit, and (3) it would be unjust to allow the defendant to retain the benefit without payment to the plaintiff.
While the Court had no problem with the employer offsetting the amount it was charged by GM from the employee’s sales commissions/bonus pool, it concluded that the employer “was unjustly enriched by deducting amounts which exceeded the per vehicle dealer contribution charge it paid to General Motors . . . “
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 change or be 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.
