Opinion
Civil Action No. 04C-01-020 (THG).
November 23, 2005.
David A. Boswell, Esquire Schmittinger Rodriguez Rehoboth Beach, DE 19971.
Craig A. Karsnitz, Esquire Young, Conaway, Stargatt Taylor, LLP Georgetown, DE 19947.
Dear Counsel:
This is the Court's ruling on the Parties' Cross-Motions for Summary Judgment:
STATEMENT OF THE FACTS
Cathy S. Chabot, Plaintiff, worked as a sales representative for Gemcraft Homes Delaware, Inc., Defendant, selling Gemcraft's new construction residential homes. Plaintiff worked in various Gemcraft communities including Bunting Mills, Oakmont Estates, Cedar Valley, and Meadows at Georgetown. She was an employee of Gemcraft and not an independent contractor nor was she a realtor.
Defendant paid Plaintiff a $20,000.00 annual salary, benefits, and Plaintiff could earn commissions on sales which she generated. This compensation package was contained in written agreements executed by the parties. The agreements set forth that commissions were earned at settlement, but fifty (50%) percent of the commission would be paid when the sales contract was signed and the other fifty (50%) percent would be paid at settlement. The agreements also stated that if a sales representative was terminated before settlement, then the sales representative was not entitled to the second fifty (50%) percent of the commission. The second half commission is sometimes called the back half commission. If termination occurred, the agreement stated "The balance of the remaining 50% commission will be retained by Gemcraft Homes to facilitate the sale through closing".
Plaintiff resigned from her position in July of 2003. At the time of her resignation, Plaintiff had initiated sales for the Defendant which had not proceeded to closing. Defendant did not pay Plaintiff the back half commissions for these sales per the commission agreement.
Plaintiff filed suit seeking the back half commissions, arguing that the retention of same by Gemcraft was really a forfeiture which violated the Wage Payment and Collection Act. The Defendant denies that it has violated the Act stating it did not withhold any "earned" commissions.
The parties filed Cross-Motions for Summary Judgment advising the Court the decision on their Motions would be case dispositive as there are no critical facts in dispute.
STANDARD OF REVIEW
"When the Court is faced with cross-motions for summary judgment the same standard is applied to each party's motions." The standard is the summary judgment shall be granted if it is shown that "there is no genuine issue as to any material fact and that the moving party is entitled and that the moving party is entitled to judgment as a matter of law." However, the only issue presented to the Court is if either party is entitled to judgment as a matter of law because the parties advised the Court when filing their Cross-Motions for Summary Judgment that no material facts are in dispute. The evidence must be viewed in the light most favorable to the non-moving party.
Acro Extrusion Corp. v. Cunningham, 810 A.2d 345 (Del. 2002).
DE R S CT Rule 56 (c).
Merrill v. Crothall-American Inc., 606 A.2d 96, 99-100 (Del. 1992).
A SIDE TRIP
Before addressing the pivotal issue of the case, it is necessary to resolve a separate matter that came up during the discovery and auditing of Plaintiff's sales during her employment. The Defendant has acknowledged that there were three sales which occurred close in time to her departure in which she did not receive the first half or front end portion of her commission. The Defendant has tendered a check in the amount of $1,958.85, as being the net amount Defendant admits it owed Plaintiff as earned commission.The litigation and the Summary Judgment Motions focus primarily on the back-end commissions, but nevertheless, the above commissions are a part of the case.
Defendant has acknowledged its mistake and argued that this error should not trigger the sanctions of the Wage Act. Plaintiff argues to the contrary, noting that Plaintiff's supervisor had "signed off" on these commissions but she was not paid.
The Defendant, as an employer, has an obligation to pay an employee wages that are earned. Defendant has a duty to pay without condition all wages conceded to be due in a timely manner. 19 Del. C. § 1104. Since the record reflects Plaintiff was due the front-end commissions and her supervisor had authorized same, Defendant's plea of mistake is not a "reasonable ground(s) for dispute" under 19 Del. C. § 1103(b). The Defendant must pay as liquidated damages an amount equal to the unpaid wages. Therefore, in addition to the payment of $1958.85 Defendant owes Plaintiff another $1958.85.
Plaintiff seeks to have this Court award her attorney's fees for this entire action based upon this violation of the Act. 19 Del. C. § 1113(c). Plaintiff is entitled to reasonable attorney's fees and as I noted at oral argument, it would be unreasonable to assess attorney's fees for something other than the harm at issue. Both parties know that the issue in this case that has been hard fought is the back-end commissions. Defendant's counsel was correct as to his comment that the audit and discovery of the Defendant's obligation as to the front-end commissions is the tail of the dog. Reasonable attorneys' fees will be determined after Plaintiff has submitted an affidavit as to work on this issue and Defendant's counsel has the opportunity for comment. Now back to the main event.
BACK END COMMISSIONS
The Wage Payment and Collection Act requires that an employer must pay an employee the wages that she has earned on the next regularly scheduled payday if the employee resigns or is fired. The Act does not establish when an employee earns her wages. The Act only provides an employee with rights and recourse when an employer does not pay wages that have been earned. Defendant argues that the wages or commissions that Plaintiff seeks were not earned by her so she does not have any right to them under the Act.
People are free to enter into their own contracts and have an expectancy that the courts will enforce the agreements as written unless it produces an unconscionable result or is ambiguous, or is specifically in violation of a law.
The commission agreement signed between Plaintiff and Defendant states that "[c]ommissions are earned at settlement, but will be paid 50% at sale and 50% at settlement." Ambiguity does not exist where the court can determine the meaning of a contract "without any other guide than a knowledge of the simple facts on which, from the nature of language in general, its meaning depends." Further, "[c]ontractual language is not ambiguous merely because parties in litigation disagree concerning the provision's proper construction." Thus, "[w]here the language is clear and unambiguous no court may use "ambiguity" as an excuse to create a more perfect contract never agreed to by the parties." The clear language of the contract coupled with the facts as presented by the parties establishes that the contract is not ambiguous.
Taken from the Commission Agreement at A-7 of Plaintiff's Appendix to Opening Brief.
E.I. DuPont de Nemours Co. v. Admiral Insurance Co., 711 A.2d 45, 57 (Del. Super 1991) citing Rhone-Poulenc Basic Chems. Co. v. American Moterists Ins. Co., 616 A.2d 1192, 1196 (Del. 1992).
Id. citing City Investing Co. Liquidating Trust v. Continental Casualty Co., 624 A.2d 1191, 1198 (Del. 1993); Rhone-Poulenc, 616 A.2d at 1196; Aetna Cas. and Sur. Co. v. Kenner, 570 A.2d 1172, 1176 (Del. 1990).
Id. citing Hallowell v. State Farm Mut. Auto. Ins. Co., 443 A.2d 925, 926 (Del. 1982).
There is no need for this Court to attempt to interpret what the language may mean because it is clear on its face what the parties intended. The contract clearly states and it was known by the parties that the commission was not earned until settlement. Plaintiff knew that her commissions were not earned until settlement when she agreed to the contract compensation language. Therefore, Plaintiff has no claim to the second 50% of commissions for the homes for which she procured sales contracts under the Wage and Payment Collection Act because those commissions were not earned. Plaintiff received compensation pursuant to the terms of her employment contract. She was an employee, not an independent contractor such as a real estate broker or agent. Plaintiff knew her compensation formula. She knew what she would be paid when she decided to terminate her employment. This is not a case where an employer fired a commissioned employee to avoid paying commissions. She cannot now re-write the contract to her benefit. "Courts are to give effect to the intentions of the contracting parties and are not to rewrite the parties' contract."
Union Fire Ins. Co. of Pittsburgh, P.A. v. Pan American Energy, LLC, 2003 WL 1432419 (Del.Ch.) citing Walton v. Eastern Analytical Labs Inc., 667 N.Y.S. 2d 407, 409 (N.Y.App. Div. 1998).
Plaintiff makes many arguments as to why the Court should find the compensation agreement unconscionable or in violation of the Wage Act. To accept Plaintiff's arguments would result in ignoring both parties' reasonable expectations under the contract and provide the Plaintiff a windfall.
THE 100% APPROACH
Plaintiff argues that she is entitled to 100% of her commission regardless of when or what other work may be necessary to get the case to closing. She cites case law about sales commissions and when they may be considered earned and due. It is unnecessary to review these cases because they do not recognize a right for all salespersons to receive full compensation upon execution of a sales contract. Each case must be examined with an eye on the facts of the case and the profession involved. None of the cases cited by Plaintiff provide authority for this Court to ignore the written compensation agreement which clearly spells out what Plaintiff earns and the time she earns it.
Finally, cases where an employer discharges an employee to avoid paying a commission are not relevant. Plaintiff chose to leave the job, presumably for a better job.
THE FORFEITURE ARGUMENT
Plaintiff argues that she earned 100% of the commission at the time of the sale and that the compensation agreement splitting her earned compensation 50-50 between obtaining a sales contract and closing on that contract is an attempt at a private agreement in contravention of the Wage Act and is illegal. 19 Del. C. § 1110.
Private agreements which contradict the statute are illegal as the legislature recognized the leverage an employer might have over an employee who is dependent on his/her paycheck or "cash flow". It would be easy for an employer to "negotiate" a "discount" in the wages owed an employee by merely threatening or implying payment might not be made until a discount is agreed upon.
But that is simply not what is before the Court. "Wages" is defined by the Code at 19 Del. C. § 1101(a)(5).
The definition allows the parties to determine how the compensation is to be paid, whether it be by time, by the piece, by commission or "other basis of calculation." The parties have defined what the wages (compensation) would be and when those wages would be earned. There is nothing in the agreement that smacks of over-reaching by the employer. Upon termination, unknown work was necessary to move the sale to closing. The parties reasonably apportioned that risk and the earnings in the commission agreement. Plaintiff acknowledged that 40% of her work came after a contract was signed. The 50-50 split is not unreasonable or unfair.
I find that the agreement sets forth the "basis of calculation" as to when earnings are due and that this agreement is not contrary to the statute.
CONTRACT OF ADHESION AND RESTRAINT UPON THE FREE ALIENATION OF LABOR
Plaintiff argues the Court should find the compensation package illegal and against "public policy" because any employee who desires to move to another job is reluctant to do so because of the loss of the back-end commissions. Plaintiff argues this creates an inefficient labor market. Plaintiff provides no legal authority for this rather broad claim. I find Plaintiff has not established that the contract agreed upon before Plaintiff started her employment and which she also considered when leaving Defendant's employment was a restraint upon the free alienation of labor. The contract reasonably addresses what might be earned and when the employee would vest as to the earnings.
MISREPRESENTATION
Plaintiff argues that when she or other salespersons left Defendant's employment, those persons would have been responsible for getting the sale to closing were not always paid the back-end commission.
I find this to be a non-issue. Plaintiff wants to argue that Defendant unscrupulously takes these back-half commissions to Defendant's "bottom line". Plaintiff argues that if Defendant did not pay someone else the back half commissions on her sales, then she should get them.
Plaintiff's compensation package does not state that another salesperson shall be entitled to or receive the back half of the commission if Plaintiff terminates her employment.
As to that back half commission it states "The balance of the remaining 50% commission will be retained by Gemcraft to facilitate the sale through closing". Whoever Gemcraft assigns to facilitate the closing, and whether that person receives all or a portion of the commission or is deemed "paid" for this work as a part of their salary, is Gemcraft's and the other employee's business.
Gemcraft is desirous of getting the sale to closing so it can be paid for the house it produced and sold. Gemcraft is the party responsible to expend whatever resources may be necessary to get the sale to closing. Who, how, and what compensation Gemcraft pays to another person does not impact the Plaintiff's wages at all. It is just not a part of her deal.
THE PRO RATA APPROACH
Plaintiff testified at her deposition that approximately 60% of her efforts went into obtaining a signed contract of sale and with the 40% balance devoted to getting the sale to closing.
Plaintiff argues that she should be paid a portion of her back-end commissions that reflects her actual work. Plaintiff would have the parties negotiate on a case-by-case basis the percentage of the back half commission she believes she is deserving. Paying commissions on a pro rata basis would be administratively complicated as well as an uneconomical expenditure of resources. The parties agreed that 50% was an appropriate number. That agreement is not an unreasonable method of determining earnings for work that must necessarily be done in order for the sale to close. Plaintiff can not now be heard to complain that her salary, benefits, and commission compensation is so unfair that the courts should ignore her agreement.
I do not find Plaintiff should be compensated on a case-by-case pro rata basis.
MISCELLANEOUS
Plaintiff argues that there was no signed compensation agreement as to two sales in the Gemcraft communities of Meadows at Georgetown and Cedar Valley. Plaintiff's counsel argues that she facilitated these two sales while providing vacation coverage for other sales people.
She argues that since there was no written agreement as to these two sales, she could not have agreed to give up the back half commission. Plaintiff is mistaken. The course of conduct of the parties clearly establishes her relationship to Defendant as an employee, and that their relationship was based on the compensation agreement. She was paid per the agreement. Finally, I note each signed agreement states it is applicable "for any new community".
CONCLUSION
I deny Plaintiff's summary judgment motion with the exception of the "side trip" ruling on the three sales which Defendant concedes it owes for front end commissions. Plaintiff is awarded $1,958.85. Plaintiff's counsel shall provide his affidavit as to time expended on this single issue.
I grant Defendant's Summary Judgment Motion finding that Plaintiff did not "earn" the back-end commissions which closed after she left Defendant's employment. Therefore, Plaintiff has no wage claim under the Wage Act. I find that the compensation agreement was a reasonable means of establishing when commissions were earned in circumstances of a termination. I do not find the agreement to be unconscionable.