Commission Confusion, Right-Now Write-Ups, and Lazy Lies by Phillip S. Oberrecht

01-Feb-2018

Commission Confusion, Right-Now Write-Ups, and Lazy Lies

 

by Phillip S. Oberrecht

The Idaho Supreme Court finished its 2017 season with a trio of employment cases: Allen G. Nettleton v. Canyon Outdoor Media, LLC, which discusses problems with unclear commission agreements; Raoul Mendez v. University Health Services, Boise State University, Mariel Doyle, which reviews Idaho’s approaches to unlawful discrimination, retaliation, breach of employment contract, and breach of the covenant of good faith and fair dealing; and finally, Dennis B. Current v. Wada Farms Partnership and Idaho Dept. of Labor, which found a willful misrepresentation by the claimant to the Idaho Department of Labor, resulting in a denial of unemployment benefits for 52 weeks.

Commissions

Allen Nettleton was hired by Canyon Outdoor Media, LLC in the fall of 2013 as an advertising sales person in Canyon Outdoor’s billboard advertisement business. In April of 2015, Nettleton resigned his position. In August of the same year, Nettleton filed a complaint against Canyon Outdoor alleging two claims, one under Idaho’s Wage Claim Act seeking treble damages; and the other a claim for breach of employment contract. The parties litigated this case for two years only to have the Supreme Court in a December 2017 opinion send the case back down to the trial court for continued litigation. The Supreme Court sent the case back to the trial court so the parties could present further evidence to the court on what their commission arrangement actually was. Canyon Outdoor said the commissions were not due because the “commission agreement” required servicing the client accounts for entitlement to commission wages. Nettleton did not continue to service those client accounts once he resigned his employment, and Canyon Outdoor refused payment of the commissions as a result.

Partway through Nettleton’s employment with Canyon Outdoor, both Nettleton and Canyon Outdoor signed a written schedule setting forth commission rates for new and renewal contracts. Otherwise, there was no written arrangement between them. The dispute which has already resulted in two years of expensive litigation will now continue in the courts because the parties simply failed to set forth their “commission agreement” in clear, enforceable, written language. The court explained the problem by saying:

Taken together, the assertions of Massood, Nettleton, and Martin intimate that after a client contract was entered, Nettleton maintained some level of relationship to ensure the client remained satisfied and to address concerns or issues that arose during the course of the contract. From there, however, the testifying parties diverge with conflicting conclusions as to how completion of these takes related to Nettleton’s entitlement to commissions wages. The record does not contain a written contract that conclusively sets forth whether a servicing requirement existed as a term of the employment agreement. Rather we are left with the parties’ contradictory assertions that seek to answer that exact question.


Lessons Learned

How do you prevent such extended, time consuming and expensive litigation? Prepare, discuss and execute a commission agreement that fully explains in plain language how commissions are earned and paid for. This exercise too frequently results in confusion and misunderstandings. Save yourself some money by spending more time on these matters at the beginning of the commission employment and less time in litigation at the conclusion of that employment.

Timely Write Ups

Raoul Mendez was hired by University Health Services, Boise State University, as a customer service representative in August of 2011. His team lead, Mariel Doyle, was one of Mendez’s supervisors. After Mendez was notified that his employment was being terminated, he opted to resign in lieu of termination in November 2011. Mendez filed a four count complaint alleging (1) unlawful discrimination in violation of the Idaho Human Rights Act; (2) retaliation for complaining about discrimination; (3) breach of his employment contract; and (4) breach of the implied covenant of good faith and fair dealing. The court discussed each of these claims in detail, starting with the employment discrimination claim on the basis of his Hispanic race. The court applied the McDonnell Douglas three-part test, finding that Mendez belonged to a protected class, was qualified for his position, experienced an adverse employment action through his forced resignation, and similarly situated people outside his protected class received more favorable treatment or at least there were circumstances surrounding his termination that gave rise to an inference of discrimination. The burden of producing evidence then shifted back to University Health to prove a legitimate non-discriminatory reason for his termination. Once that was accomplished, Mendez then had the burden of producing evidence showing that the reason set forth by University Health for his termination was in fact a pretext for unlawful discrimination. The court not only found that there was no unlawful discrimination, but also ruled against Mendez on his retaliation, breach of contract, and breach of the covenant of good faith and fair dealing claims, relying heavily on the documented evidence prepared during the course of employment by Mariel Doyle.

With respect to the court’s denial of the discrimination claim, it said:

Here, the district court cited Mendez’s supervisor Mariel Doyle’s well documented performance concerns in the record, including inappropriate conversations with patients, untimeliness, staying on the clock longer than should be required, failure to follow procedures, negative attitude, and inappropriately ‘gawking’ at people, among others. The district court concluded that Respondents had ‘legitimate, non-discriminatory reasons for disciplining [Mendez] and terminating his employment.’

On the retaliation claim, the court once again relied on Ms. Doyle’s documentation, stating that the district court had found:

From September 27, 2011 through October 7, 2011, Ms. Doyle documented numerous concerns regarding Plaintiff’s performance, including Plaintiff’s inappropriate conversations with patients, his unwillingness to answer telephone calls, and his failure to follow procedures for checking patients out and for recording patients’ insurance information. On October 5, 2011, before Plaintiff engaged in protected activity by meeting with Mr. Cover regarding his discrimination concerns, Ms. Doyle created a Record of Employee Conference Form setting forth performance issues Ms. Doyle had observed on October 3 and October 4, 2011. Further, as early as October 4, Ms. Doyle indicated in an email conversation that Plaintiff may not ‘work out’ and may need to be released.

Mendez’s claim for breach of contract failed for lack of evidence of either an express or implied contract. On the implied covenant of good faith and fair dealing, the court again turned to supervisor Doyle’s evidence showing numerous instances where Doyle “flagged issues with Mendez’s work, spoke to him directly about those issues, and provided corrective instruction.” She stated that there were “dozens of these issues beginning in September and leading up until just days before informing Mendez of University Health’s decision to finally terminate him, which were documented in her file.” There was no evidence that the implied covenant of good faith and fair dealing, which attached to Mendez’s at-will employment, was violated in any respect.

Lessons Learned

The Mendez case is a clear illustration of why the employment lawyer always asks the employer for the documentation in the employee’s file who claims discrimination, retaliation or breach of contract. If the employee has been terminated, demoted, or disciplined for specific non-discriminatory reasons, those reasons should be thoroughly and clearly set forth in documents shared with the employee and placed in his personnel file. Without such documents, the poor performance defense rings hollow and seldom works. Fortunately, the work of supervisors like Mariel Doyle often result in improved employee performance. If necessary, they also provide good evidence of sound defenses. Supervisor training should always include the proper documentation of supervisor concerns, communications with the troubled employees, and actions taken as a result. This type of active management will always save time and money in the long run.

Lies of Omission

The final case in this employment trio addressed Dennis Current’s loss of unemployment benefits. When he lost his job with Wada Farms Partnership, he filed for unemployment benefits and was found ineligible based on a willful misrepresentation of his wages. Under Idaho law, “[t]he claimant bears the burden of proving statutory eligibility for unemployment benefits.” [Citations omitted.] Further, ‘[a] claimant shall not be entitled to benefits for a period of fifty-two [52] weeks if it is determined that he has willfully made a false statement or willfully failed to report a material fact in order to obtain benefits.’” Idaho Code Section 72-1366(12).

Current was a seasonal employee of Wada Farms for seven years, punched a time clock, and received his pay by direct deposit. From December 2015 to May 2016, he did not have electronic access to his paystubs or his hours. He did receive copies of his paystubs in December 2015 after a winter layoff. However, Wada Farms updated its payroll system and provided him with a password in April of 2016. Due to technical issues, however, he did not have access to that system until late May 2016.

There was no direct evidence that Current willfully misrepresented material facts when he estimated his earnings, and those estimates underreported his earnings according to the employer’s documentation. The crux of the case was that Current was provided information by the Department of Labor that explained his obligations to provide accurate information and required him to supplement any estimate of his earnings with the actual earnings once he obtained that information. In this case, Current was properly informed of his reporting obligation but he failed to follow up to ensure that his reporting was accurate. The court decided:

Ultimately, the Commission conceded that Current may not have intended to commit any fraud by underreporting his wages, but that ‘he made assumptions about his hours and did nothing to verifying that the wages he reported were correct.’

Lessons Learned

Care should always be taken by the employer and the employee to provide accurate information to the Department of Labor on every unemployment benefits case. This case clearly shows that the failure to provide accurate information and to follow up when necessary can be fatal to a claim, or a defense in such a case. Double check your records, state the facts accurately, and follow through on any additional requirements you have in presenting your case to the Department of Labor. Such actions will pay for themselves and provide for a fair determination by the Commission.