Court Rejects Claims for Unpaid Commissions When Details Were Never Agreed

Last month, the Montgomery County Court of Appeals affirmed an employer’s summary judgment on a claim for unpaid sales commissions.  Brown v. Fukuvi USA Inc., 2022-Ohio-1608.  The plaintiff alleged that he had been verbally promised sales commissions before accepting the job in 2006.  His offer letter – which he signed -- said that a commission structure would be discussed later,  and it was.  However, they could never come to an agreement on a salary and commission structure.  Instead, the employer kept his salary in place and eventually raised it several times before he finally sued in 2019.  The courts found that there was never a meeting of the minds or agreement on the details of a commission structure and, therefore, the employer was not obligated to pay any commissions. 

To be enforceable, contracts must be definite and certain.  An agreement to agree is only enforceable if it is sufficiently definite to be enforced. “When the terms of a contract are not sufficiently definite, the contract is unenforceable.  . . . ‘The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.’ ””  The plaintiff’s offer letter offered a salary until 2007 and then a reduced salary with a commission – the details of which were to be discussed.  The details were never mutually agreed to and his salary remained unchanged.   “[N]o specific amount of commission or bonus was outlined. Furthermore, details were to be discussed at some future date, with no indication of what those details would be.”

The plaintiff

contends that he was told when he signed the Offer Letter that “his commission structure would operate in the same manner as the prior sale representative, which was a percentage on sales over an initial threshold or goal.”  . . . However, taking this statement at face value, it was made by a [HR] person who lacked authority to authorize payment of commissions; it was also inconsistent with the letter, which said that details would be discussed later. When “later” came, [the company president] elected not to pay commissions due to the severe financial position of the company, and this was communicated to [him]. At that point, if [he] were dissatisfied with the situation, he could have left the company. Instead, he chose to stay. Notably, his salary was not decreased to the considerably lower level mentioned in the Offer Letter.

“Here, the parties may have envisioned a commission and bonus structure, but the details were left to future discussion. Consequently, there was no enforceable promise.”

The court refused to find enforceable details from a commission policy document which the plaintiff had found in his predecessor’s files and which he claims had been referenced during his employment discussions.  The court refused to incorporate them into the offer letter without more evidence.  There was no evidence that the company had provided the policy to the plaintiff during their negotiations or were part of or intended to be part of his offer letter.  The document did not even indicate who prepared it.

The Court also rejected his claims for promissory estoppel, negligent and fraudulent misrepresentations and unjust enrichment on the grounds that they were time barred by the then six-year (and now four-year) statute of limitations.  It rejected his argument that the failure to pay commissions constituted a continuing violation because (1) the Supreme Court of Ohio had taken the position that courts are reluctant to apply this doctrine outside the civil rights context; (2) “continuing violations are distinguished from ‘continuing effects of prior violations’; in this context, ‘ “ ‘ “[a] continuing violation is occasioned by continual unlawful acts, not continual ill effects from an original violation” ’ ” ’ ”; and (3) the lack of authority in Ohio extending this doctrine to breach of contract cases.

The  Court also rejected his equitable estoppel claim because none of his allegations were sufficient to show that the company prevented him from filing suit earlier.   Indeed, a person of reasonable intelligence would have been on notice years earlier of his need to file suit. 

Finally, the plaintiff could not show that he had not been paid his wages under Ohio’s prompt payment act because there was no underlying obligation to pay him commissions.

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.

Sixth Circuit Reverses Dismissal of Discriminatory Hiring Claim Where No Candidate Was Ever Hired

 

Earlier this month, the Sixth Circuit Court of Appeals reversed the dismissal of a reverse sex discrimination complaint brought under §1983 and Title IX when the college cancelled the faculty search instead of hiring the top-rated candidate because of the Dean’s alleged preference to hire female candidates.  Charlton-Perkins v. Univ. of  Cincinnati, No. 21-3840 (6^th Cir. 6-3-22).  A plaintiff need not have a valid claim in order to have standing to assert it, so it was irrelevant to a ripeness inquiry whether the position had ever been filed or not.  The plaintiff suffered a concrete injury when he was not hired.  The plaintiff also need not have alleged that less qualified female candidates had been hired instead of him when other evidence of discrimination was present.  “Instead, to state an employment discrimination claim, [the plaintiff] only needed to plead sufficient facts from which we could plausibly conclude that defendants failed to hire him because of his gender.”  In this case, the plaintiff alleged that the job requisition was cancelled to avoid hiring him because he was male and that was sufficient to allege unlawful discrimination.   

According to the Court’s decision, after considering 62 applications, the plaintiff had been the top-rated candidate in a faculty search conducted by the department.  However, the Dean insisted that both next ranked female candidates be hired instead.  When the committee chair objected, the Dean cancelled the faculty requisition altogether claiming that the process had been tainted by a potential conflict of interest that the Diversity Officer had earlier approved.  The plaintiff sued and the trial court dismissed the complaint on the grounds that his claims were not ripe because he could not have been legally “injured” when the position had never been filled after the Dean cancelled the process and so the plaintiff could not prove that female candidates had been treated better.  

On appeal, the Court found that the trial court had conflated a ripeness inquiry with an analysis of the merits of the claims presented.  It was enough that the plaintiff did not get the posted job to show that he had suffered an injury sufficient to assert a ripe claim. “Ripeness is really, or at least paradigmatically, a doctrine about pre-enforcement challenges. That is why the relevant factors—whether the claim “concerns a dispute that is likely to come to pass” and whether there would be “hardship to the parties of withholding court consideration”—sound so out of place in the context of [this] claim.”  Indeed, the plaintiff “himself could later get the job and it would not erase the fact that he was denied the opportunity to get it in the first instance in 2018. So his injury is not speculative or even imminent; it is instead “actual” because the denial has undisputedly already occurred.” 

The Court also rejected the university’s argument that his claim could not be ripe if he suffered no adverse employment action.  “That reasoning is erroneous, again, because whether the plaintiff suffered an injury in fact does not necessarily hinge upon the substantive requirements of any particular cause of action.”

The Court also rejected the argument that the plaintiff had failed to plead a prima facie case sex discrimination. “Instead, to state an employment discrimination claim, [he] only needed to plead sufficient facts from which we could plausibly conclude that defendants failed to hire him because of his gender.”  While alleging that someone else was given the position is a default rule for proving employment discrimination, it is not the only manner in which unlawful discrimination can be proved or alleged. “Instead, to state an employment discrimination claim, [the plaintiff] only needed to plead sufficient facts from which we could plausibly conclude that defendants failed to hire him because of his gender.”

We understand [the plaintiff] to make such a claim here—that defendants not only failed to hire him because of his gender, but they then canceled the search itself as a pretext to conceal the discriminatory reason for the failure to hire.

In particular, the plaintiff alleged “that defendants canceled the search to facilitate their allegedly unlawful gender discrimination against [him]. There was thus no need for him to additionally allege that somebody else filled the (canceled) position.”

The Court also rejected the argument that cancelling the hiring process purged any discrimination because other court decisions in which such purging had occurred resulted in new job searches without the taint of discrimination.  In contrast, the university here never re-opened the job search which would have given the plaintiff another opportunity to apply and be hired. 

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.

Ohio Appeals Court Applies ADAA Definitions to O.R.C. 4112.02 Claim of Disability Discrimination

 

Last month, the Cuyahoga County Court of Appeals reversed an employer’s summary judgment on a disability discrimination claim when it had fired the plaintiff less than a month after hiring her prior to completing her 90-day probation.   Anderson v. AccuScripts Pharmacy, L.L.C., 2022-Ohio-1663.   First, the Court applied the definition of disability from the ADAA, rather than the more restrictive definition from the ADA, to find that the plaintiff suffered from a disability.  Second, it found a material factual dispute as to whether the plaintiff had actually engaged in misconduct – by leaving work without authorization before the completing her shift. 

According to the Court’s decision, the plaintiff claimed that she had informed her employer during her job interview that she suffered from epilepsy (which it denies) and gave them a list of the medication she regularly took (which it admits) to ensure that she did not fail any drug tests.  The employer admits that it asked her if she could drive and claimed to ask that of all applicants.  The employee handbook only referred to a 90-day introductory/probationary period twice.    She claims that she had had no performance issues after beginning work on May 8, but it contends that in just a few weeks she had been missed work on May 15 (because of a spider bite), was hours late to work on May 16, violated a few rules and then left work on May 19 without authorization after she had explained that she did not feel well.  None of the performance issues were documented.    She claims that she told the shift supervisor on that Saturday that she had epilepsy and wanted to bring her service dog into the pharmacy with her to alert her to oncoming seizures.  The supervisor claims that she only said that she was not feeling well after taking too much menstrual medication and was authorized to take a short break.  The supervisor denied authorizing the service dog because it would have to be cleared with the State Pharmacy Board and was not her decision to make.   The supervisor says that she went looking for her after 15 minutes, could not find her and reported the absence (but not the service dog) to the manager on Monday, when he decided to terminate her.  When informed of the termination, the plaintiff objected on the grounds that she had volunteered to work on Saturday, which was not her scheduled shift.  “Please tell me where in the handbook it says you cannot go home on days you aren’t scheduled.”    She also claimed that the supervisor had told her that she could leave after lunch if she was not feeling any better.  The employer claimed that it generally fired employees for poor attendance after only one verbal warning.  Once litigation commenced, the plaintiff claimed that her supervisor encouraged her to leave work early because they were not busy, denied asking to leave early, but also claimed that the supervisor had been unsympathetic and condescending.

She later filed suit claiming that she had been fired for requesting to bring her service dog and because of her epilepsy.  The trial court granted the employer judgment on the grounds that she did not suffer from a disability because she failed to submit evidence that her epilepsy substantially limited any major life activities.  She had testified as to the various types of seizures that she suffered and how they affected her.   She takes medications to control her seizures and has not had a significant seizure between six and eight months.    However, she often had tonic-clonic type seizures around her menstrual cycle and wanted to bring her service dog with her during that time because it would alert her to an oncoming seizure and, thus, prevent her from becoming injured during a seizure.

The trial court found that the plaintiff had failed to show that her epilepsy “substantially limited” a major life activity.   O.R.C. §4112.02 does not define “substantially limits” and in 1998, the Ohio Supreme Court had directed courts to rely on the federal ADA for the appropriate definition.  However, in 2008, the ADA was amended (i.e., the ADAA) to broaden the definition of “substantially limits.”  The Ohio Revised Code was not then amended to incorporate the changes from the ADAA.  The employer argued (and the trial court agreed) to apply the original ADA definition of “substantially limits,” but the Court disagreed and applied the federal definition in place at the time of her termination.   The Court then found that she suffered a disability as a matter of law:

Specifically, under 29 C.F.R. 1630.2(j)(1)(vii), “[a]n impairment that is episodic * * * is a disability if it would substantially limit a major life activity when active.” It is undisputed that when Anderson is experiencing a seizure, she cannot work, see, speak, hear, and sometimes breathe.

The Court then found that there was a genuine dispute of material fact as to why the plaintiff had been terminated:

Anderson averred that during her May 19, 2018 shift, she experienced an “aura” and told Bauman she was not feeling well. Anderson further testified that Bauman told her to go home. Bauman, on the other hand, testified that Anderson stated she was not feeling well, and Bauman told her to “go into the break room and sit down for a while and see.” Bauman testified that she did not tell Anderson to go home. In other words, there is at least a question of fact whether Anderson left her shift with or without permission.

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.

Ohio Supreme Court Affirms BWC Decision that Workers Were Misclassified as Independent Contractors

 Earlier this week, a divided Ohio Supreme Court affirmed a decision of the Bureau of Workers’ Compensation and agreed that there was sufficient evidence to show that workers were employees and not independent contractors under the common law right to control test.  State ex rel. Ugicom Ents., Inc. v. Morrison, Slip Opinion No. 2022-Ohio-1689.   While some evidence supported the employer, there was sufficient evidence to show that the employer exercised too much control over the workers to consider them independent. 

According to the Court’s opinion, following a 2009 audit, the BWC found that the workers had been misclassified as independent contractors for the past five years and assessed the employer with $346,817 in unpaid premiums.  The employer appealed and was initially successful because the BWC had applied the 20-factor test instead of the common law test.  Upon remand and following an evidentiary hearing, the BWC again found that the workers had been misclassified. 

The employer was a Time-Warner Cable contractor.  Workers had to be approved by TWC and pass TWC’s drug and background checks.  The workers would be assigned jobs at a certain price by the employer, but were not required to accept them and could schedule them at any time (with the authorization of the property owner), although they were expected to respond within 2 hours.  The cables were supplied by TWC, but the workers otherwise used their own tools.  The workers drove their own vans (but with the employer’s logo and TWC identified on them) and wore TWC contractor badges.  The workers were required to sign one-year agreements which contained non-compete clauses (which did not apply post-employment) and could be terminated on 60-days' notice.   A quality inspector checked about 20% of the work.  There was some dispute about the amount of skill required, but it was once described as just digging and filling a trench for the cable and connecting it to the house.

There is no bright line test for the common law test, and a number of factors are considered. 

The factors which demonstrated employment status included:  The work was an integral part of the employer’s business.  The workers did not seem independent from the employer because they wore badges and vests and drove vans with the names of the employer and TWC.  This factor is one of the most important considerations in evaluating employment status.  The jobs were posted at set prices with a take-it-or-leave it approach and were not negotiated or bid on by the worker and this was found to exercise control over the workers.  The workers did not advertise or offer their services elsewhere and had long-term and ongoing  relationships with the employer.   The workers could not offer their services to the employer’s competitors because of non-compete clauses.  The work involved required minimal skill or training.

The factors which indicated independent contractor status included: They signed independent contractor agreements and received 1099 tax forms. They were able to accept or reject jobs based on their complexity and distance.  The workers supplied their own tools, ladders, vehicles, cell phones, etc. and the BWC was found to have erred in not crediting this factor.  The BWC was also found to have erred in construing control over the details and quality of work, which were factors that supported independent contractor status.  No one told the workers where or how to dig.  This was not just an indication of competence; “a lack of supervision is indicative of a lack of control.”  They could accept or reject any assignment and set their own hours of labor.  The quality standards were set by TWC, not the employer.  Nonetheless, “even if [the employer] had prescribed the standards, a contract provision stating that a job shall be performed subject to the “ ‘approval or satisfaction of the employer * * * is not an assumption by the employer of the right to control the person employed as to the details or method of doing the work, but is only a provision that the employer may see that the contract is carried out according to the plans.’ ” That TWC might fine the employer for substandard work was not indicative of whether the workers were employees of the employer.

The Court agreed that the BWC erred in construing piece rate offers by the employer to be indicative of an employment relationship because it mistakenly relied on a different test under the FLSA: “the bureau erred in concluding that the installers’ receipt of piece-rate compensation (essentially, payment per job rather than payment per hour) was evidence of an employment relationship.”  Nonetheless, the “take it or leave it” approach and lack of negotiation for making the offers was evidence of control by the employer.

The Court was also unmoved that the BWC disregarded and gave no weight to uncontroverted affidavits from a couple of workers confirming that they believed that they were independent contractors.   Similarly, the Court found no abuse of discretion that the BWC also refused to assign any weight to the independent contractor label used in the parties’ agreement. 

Although the bureau was perhaps too dismissive of the contract—by suggesting that such a contract may be a “red flag”—the bureau’s conclusion that it was not bound by the parties’ labels was nevertheless correct, because “a description by the parties of their future relationship is not necessarily determinative when viewed in light of their actual subsequent activities,”

Ultimately, the Court agreed that while there was evidence supporting contrary conclusions, it was bound by an abuse of discretion standard. “[W]e are not called upon to reweigh it here; rather, our function is to determine whether the bureau abused its discretion by entering an order that is not based on some evidence in the record.”  Albeit some of the factors weighed in the employer’s favor, there was enough evidence in the record to support the BWC decision.

The Court also affirmed the BWC decision that the quality control inspector was an employee and not an independent contractor.  Although he held himself out as an independent contractor and maintained his own workers’ compensation policy, the employer was his sole source of income, making him financially dependent on the employer.

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.

Motions to Compel Arbitration Are Subject to Same Waiver Rules As Other Disputes

 

Earlier this week, the Supreme Court reversed an order compelling an employee to submit her FLSA claims to arbitration on the grounds that the lower courts had improperly required a “special” showing in arbitration disputes of prejudice to the employee before finding that the employer had waived its rights to compel arbitration by first litigating in court for eight months over other procedural and substantive defenses.    Morgan v. Sundance, Inc., No. 21-38 (May 23, 2022).   A unanimous Court held that the FAA precludes courts from applying a “special” waiver test for arbitration disputes which requires a showing of prejudice before a waiver will be found if such prejudice is not required in evaluating other types of waivers.

According to the Court’s opinion, the employee filed a class action alleging that the employer violated the FLSA overtime provisions even though she had signed an arbitration agreement prior to being hired.  Although it could have done so, the employer did not immediately move to compel arbitration of her claims.  Instead, it moved to have her case dismissed as duplicative of another class action.  Then, it filed an answer with affirmative defenses, none of which mentioned the arbitration agreement.   The parties attempted to mediate their dispute and then began scheduling discovery before – eight months after the litigation commenced --  the employer moved to stay the litigation and compel arbitration.    Although the employee objected on the grounds that the employer had waived its right to compel arbitration by engaging in litigation, the employer’s motion was granted and affirmed on appeal on the grounds that the plaintiff had not been prejudiced by the employer’s delay. 

Outside the arbitration context, a federal court assessing waiver does not generally ask about prejudice. Waiver, we have said, “is the intentional relinquishment or abandonment of a known right.” . . .

                . . .

               But the FAA’s “policy favoring arbitration” does not authorize federal courts to invent special, arbitration-preferring procedural rules. . . . Accordingly, a court must hold a party to its arbitration contract just as the court would to any other kind. But a court may not devise novel rules to favor arbitration over litigation. . . . If an ordinary procedural rule—whether of waiver or forfeiture or what-have-you—would counsel against enforcement of an arbitration contract, then so be it. The federal policy is about treating arbitration contracts like all others, not about fostering arbitration. . . .

                . . . So Section 6 [of the FAA] instructs that prejudice is not a condition of finding that a party, by litigating too long, waived its right to stay litigation or compel arbitration under the FAA.

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.