Tag: future payments

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.

 

Illinois Wage Payment Act Doesn’t Apply to Future Payments – Ill. 1st Dist.

moneyIt’s likely a sign of the economic times that there seems to be an uptick* in published cases involving the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 (IWPCA).

The IWPCA offers a powerful remedy for unpaid wages allowing a separated employee to recover money damages from his ex-employer.  Specifically, the IWPCA plaintiff can recover unpaid wages, plus monthly interest at 2%  and attorneys’ fees incurred in enforcing his employment contract rights.

Majmudar v. House of Spices (India), Inc., 2013 IL App (1st) 130292 examines whether a Wage Act claim applies to unpaid future payments under a multi-year employment contract.  The answer? No, it doesn’t.

In Majmudar, the plaintiff and defendant entered into a five-year written employment contract totaling about $625K plus some additional benefits.  The defendant fired the plaintiff just 15 months into the 60-month term and plaintiff sued under the IWPCA.

After a bench trial, the trial court entered judgment for the plaintiff on his breach of contract count but found for the defendant employer on the Wage Act claim.

On the breach of contract count, the court found that the employer defendant prematurely breached the 5-year contract by firing the plaintiff with 45 months left on the contract. But the court only awarded the plaintiff $173K, less than two years’ worth of payments.

The court found the plaintiff failed to make reasonable efforts to find substitute employment and so didn’t mitigate his damages.

On the IWPCA count, the trial court sided with the defendant on the basis that the statute doesn’t allow recovery for future payments.  Plaintiff appealed.

Affirming the trial court, the First District focused on the IWPCA language allowing a plaintiff to recover earned wages or final compensation.  “Wages” are broadly defined as any compensation owed by an employer to an employee pursuant to an employment contract.

  “Final compensation” means wages, salaries, commissions, bonuses, and the monetary equivalent of unused vacation pay, holiday pay and any other contractual compensation owed to a separated (as opposed to current) employee.   ¶¶ 11-12, 820 ILCS 115/2. 

The IWPCA requires an employer to pay final compensation to the separated employee by the next scheduled payday and to pay current employees (bi-weekly or semi-monthly) no later than 13 days after the end of the last pay period.  820 ILCS 115/4, 5.

In rejecting plaintiff’s claim for 45 months of future payments, the Court looked to dictionary (Black’s and Merriam-Webster’s) definitions of “compensation” (payment received in return for service rendered) and “owe” (to be obligated to pay for something received) for guidance.

Applying these definitions, the Court held that once the defendant terminated the employment contract, the defendant no longer received anything of value from the plaintiff.

This led the Court to squarely hold that unpaid future wages under a terminated contract are not “final compensation” and cannot be recovered under the Wage Act.  ¶ 15.

Comments: For such a high-dollar contract, the details were surprisingly sparse.

The plaintiff could have pressed for a contract term that said if the employer untimely terminated the contract, plaintiff could accelerate the remaining payments under thr contract.

Majmudar gives the IWPCA a narrow reading – applying it to wages previously earned by a separated employee; not to future payments owed on a terminated contract.