Wage Payment and Collection Act Amendments Allowing for Attorneys’ Fees and 2% Interest – One Applies Retroactively, the Other Doesn’t – IL 1st Dist

Aside from its application of the apparent agency doctrine to a dispute over commissions, Thomas v. Weatherguard Construction Company, 2015 IL App (1st) 142785 also provides an interesting analysis of when attorneys’ fees and statutory interest can be tacked on to a successful Illinois Wage Payment and Collection Act (“Wage Act”) plaintiff’s suit for unpaid wages against an employer.

The Wage Act was amended in 2011 to allow a winning plaintiff to add to his unpaid damage award (a) attorneys’ fees and costs, plus (b) 2% monthly interest on unpaid amounts. 820 ILCS 115/14(a).

Before this change, a Wage Act plaintiff could still recover fees but he had to do so under the Attorneys Fees in Wage Actions Act, 705 ILCS 225/1.  Since the plaintiff in this case filed suit in 2007 (before the amendment), the question was whether Section 14(a) (the section with the attorneys’ fees provision) applied retroactively.  The defendant argued that the amended Wage Act could not apply retroactively since it fastened two new liabilities – an attorneys’ fees provision and a 2% interest term – on Wage Act defendants.

Generally, procedural changes in a statute do apply retroactively while substantive changes do not.

Deciding whether a statutory amendment is procedural or substantive isn’t always easy though.

‘Procedure is the machinery for carrying on the suit, including pleading, process, evidence and practice, whether in the trial court, or in the processes by which causes are carried to the appellate courts for review, or laying the foundation for such review.’ By contrast, a substantive change in the law establishes, creates or defines rights. (¶ 66)

A procedural statutory amendment will not be applied retroactively if the statute would have a “retroactive impact” – meaning the amended statute would impair rights a party possessed when he acted, increase a party’s liability for past conduct, or impose new duties with respect to transactions already completed.

Here, the amended Section 14(a) of the Wage Act was not a substantive change since it did not create a new attorneys’ fees remedy.  At the time plaintiff filed suit (2007), a Wage Act plaintiff could recover fees under the Attorneys Fees in Wage Actions Act cited above.  In addition, the amended law didn’t have retroactive effect on the defendant.  The amended statute didn’t impair any pre-existing rights of the defendant, increase the defendant’s liability for past conduct or impose new obligations on the defendant.  Again, a prevailing Wage Act plaintiff could recover attorneys’ fees under the prior version of the statute that existed when the lawsuit was filed. (¶¶ 66-74)

The court reached the opposite conclusion concerning the 2% monthly interest provision though.  Where a statutory amendment creates a new liability that didn’t exist under a prior version of a law, the new liability is a substantive change.  Since the 2% monthly interest provision didn’t exist in the earlier version of the Wage Act, its presence in the current statute was a substantive change that could not be applied retroactively.

The end result was that the court remanded the case so that the trial court could assess plaintiff’s attorneys’ fees incurred in his partially successful Wage Act claim.

Take-away:

This is a pro-claimant case as it gives added strength to a Wage Act remedy.  By raising the specter of prevailing plaintiff attorneys’ fees on top of the unpaid wages amount, the amended Wage Act may level the playing field between former employees who might normally lack the resources to fund litigation against deeper-pocketed ex-employers.  By allowing for fees and interest, the Wage Act provides an incentive for aggrieved employees to sue under the statute.

 

No Future Damages Allowed in Wage Payment and Collection Act Claim – IL 2d Dist.

Eakins v. Hanna Cylinders, LLC, 2015 IL App (2d) 140944 is the third in a trio of recent Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq., (“Wage Act”) cases that address an employee’s rights to recover future damages after an employer prematurely terminates a multi-year contract.

(The other two cases – Majmundar v. House of Spices (India), Inc., 2013 IL App (1st) 130292 and Elsener v. Brown, 2013 IL App (2d) 120209 are summarized here and here.)

The Eakins plaintiff sued after he was fired 14 months into a 24-month contract to serve as a plant manager for the industrial company defendant.  The employment contract was silent on grounds for termination.  The plaintiff sought as damages, compensation for the ten month remaining on the employment contract under a breach of contract theory and he joined a Wage Act claim.  The trial court entered summary judgment for the defendant on both claims and the plaintiff appealed.

Held: Breach of contract judgment reversed; Wage Act judgment for employer affirmed.

Q: Why?

A: The appeals court reversed the breach of contract judgment for the defendant employer.  In Illinois, an employment agreement with no fixed duration can be ended at the will of either party.  The contract here was clearly for a fixed term, 24 months, and so wasn’t at will.  By firing the plaintiff 14 months into the contract term, the defendant breached.

The court rejected defendant’s argument that the plaintiff’s failure to meet certain performance metrics (e.g. keep costs down, grow market share, meet sales quotas, etc.) justified defendant’s premature termination of the plaintiff.  The court found that since the contract didn’t specify poor performance (as opposed to outright failure to perform – e.g. by not showing up to work) as a ground for contractual cancellation, the defendant breached by firing plaintiff before the 24 months was up.

Otherwise, according to the court, any employer could transmute a fixed-term contract into an at-will one by claiming the employee didn’t meet the employer’s performance requirements.  The court remanded to the lower court so it could decide plaintiff’s money damages. (¶¶ 23-29).

The court did affirm judgment for the defendant on the Wage Act claim though.  Looking to Majmundar for guidance, the court held that unpaid future compensations coming due under an untimely ended employment contract doesn’t qualify as “final compensation” under the Wage Act.  The reason for this is that once an employee is fired, he no longer performs any services for the employer.  So the employer isn’t receiving anything of value from the employee to support an obligation to make future payments. (¶¶ 31-32).

Take-aways:

Where a contract is for a fixed term and doesn’t provide for “for cause” firing or otherwise spell out grounds for termination, the contract will be enforced as written in the employee’s favor and his failure to meet an employer’s subjective work standards won’t constitute a basis for nullifying the contract;

Future payments due under a fixed-term contract aren’t considered final compensation under the Wage Act since there is no reciprocal exchange (services for wages) once an employee is fired;

Procedurally, the case makes clear that the denial of a summary judgment motion is appealable so long as there are cross-motions for summary judgment filed and the disposition of those motions resolves all issues in a given case.

 

Law Firm Isn’t An Employment Agency – Can Recover In Quantum Meruit For Negotiating Personal Services Contract (IL Law)

 

Todd W. Musburger, Ltd. v. Meier, 394 Ill.App.3d 781 (1st 2009), while dated, is still post-worthy for its in-depth discussion of a lawyer’s quantum meruit recovery  from a client after the client fires the lawyer under a contingent fee contract.

The defendant radio personality had previously hired the plaintiff law firm under a multi-year written contract to serve as the defendant’s exclusive agent in negotiating defendant’s radio and television contracts.  That contingent fee contract called for the defendant to pay plaintiff 5% of the gross amount of any contract consummated by the plaintiff.

Plaintiff claimed that after the fee agreement was verbally renewed, the plaintiff spent about 200 hours over a one-year period negotiating the renewal of defendant’s radio contract with the WLS (AM 890) station and shopping defendant to competing stations.

Plaintiff alleged that its aggressive negotiation efforts culminated in a $12M/10-year contract offer from WLS; an offer rejected by defendant.  Plaintiff would have received $600,000 under the parties’ contingency contract if the defendant accepted the station’s offer re-upped there.

After it was fired by the defendant, the firm sued to recover for the value of its pre-termination work on the defendant’s behalf.

At trial, a jury awarded damages to the plaintiff of about $70K and the defendant appealed.

Held: Affirmed:

Q: Why?

A:  The court stated the operative rules governing attorney-client relationships and an attorney’s entitlement to recover fees:

a client may discharge her attorney at any time, with or without cause;

–  when a client fires an attorney who was representing the client on contingency, the contingent-fee contract ceases to exist and is no longer operative;

– a discharged attorney may be compensated for the services rendered before the termination of the contingent fee contract on a quantum meruit basis;

– Quantum meruit is based on the implied promise of a recipient of services to pay for valuable services because otherwise the recipient would be unjustly enriched.”

– in quantum meruit recovery, the former client is liable for the reasonable value of the services received during the attorney’s employment.

–  an attorney’s quantum meruit recovery can be barred if an attorney has engaged in illegal conduct;

– just because a client doesn’t receive tangible benefits from a lawyer’s services, it doesn’t mean that a lawyer still can recover under a quantum meruit theory.

The court affirmed the jury verdict and rejected all of defendant’s arguments on appeal.

The court first rejected defendant’s argument that plaintiff was prevented from recovering since it wasn’t licensed as a private employment agency under the Illinois Private Employment Agency Act 225 ILCS 515/11

The court found that plaintiff – a law firm – didn’t meet the statutory definition of “employment agency” since the plaintiff was hired to draft and negotiate on-air talent contracts.  It wasn’t a recruiter or job placement firm.

Next, the court affirmed the trial court’s barring defendant’s retained expert, a lawyer, from testifying that plaintiff shouldn’t have been allowed quantum meruit recovery and that plaintiff breached its fiduciary duties to the defendant.

In Illinois, the decision to admit or bar expert testimony is within the sound discretion of the trial court and the trial court’s ruling will not be reversed absent an abuse of that discretion.

Expert testimony is admissible if the proffered expert is qualified by knowledge, skill, experience, training, or education, and the testimony will assist the trier of fact in understanding the evidence.  But – “expert testimony as to legal conclusions that will determine the outcome of the case is inadmissible.”

Here, the trial court properly barred the defendant’s expert’s quantum meruit opinions since they invaded the province of the trial court.  It’s an axiom that the trial court decides legal issues while the jury decides factual ones.  The defendant’s excluded testimony that plaintiff wasn’t entitled to quantum meruit recovery was a blatant legal conclusion that attempted to interpret the parties’ oral agreement.

The court upheld the jury’s quantum meruit damages award.  The court cited the voluminous trial testimony (over 100 pages in the record), offered in chronological detail, where plaintiff discussed the nature and difficulty of the contract negotiations carried out on defendant’s behalf, the money and degree of responsibility involved, and the time and labor required  Plaintiff’s testimony was supported by a radio station executive who had first-hand knowledge of the negotiations.

Afterwords:

  • This case provides a useful summary of quantum meruit in the fairly convoluted and interesting fact pattern involving high-level personal services contracts;
  • A law firm isn’t a job placement agency under the Illinois Private Employment Agency Act and so doesn’t have to be licensed to recover for employment contract negotiations;
  • A lawyer can recover for pre-termination services where he can support and quantify the services either through documentary or testimonial evidence.