Raymond Brown, on behalf of Himself and All Others Similarly Situated v. Bucher and Christian Consulting, Inc., d/b/a BCforward

FILED
Nov 01 2017, 6:03 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
Ronald E. Weldy Michael A. Blickman
Barker Hancock & Cohron Paul C. Sweeney
Noblesville, Indiana Derek R. Molter
Justin P. Spack
Ice Miller LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Raymond Brown, on behalf of November 1, 2017
Himself and All Others Similarly Court of Appeals Case No.
Situated, 49A04-1611-PL-2564
Appellants-Plaintiffs, Appeal from the Marion Superior
Court
v. The Honorable Michael D. Keele,
Judge
Bucher and Christian Trial Court Cause No.
Consulting, Inc., d/b/a 49D07-1604-PL-12518
BCforward,
Appellee-Defendant
Baker, Judge.
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 1 of 16
[1] Raymond Brown appeals the trial court’s order granting the motion for partial
judgment on the pleadings filed by Bucher and Christian Consulting, Inc.,
d/b/a BCforward (BCforward), on Brown’s claims under the Wage Payment
Statute.1 Brown argues that the trial court erred by finding as a matter of law
that he is not entitled to seek damages for salary-based wages or commission-
based payments under the Wage Payment Statute. Finding no error, we affirm.
Facts
[2] On December 9, 2013, BCforward hired Brown as a consultant pursuant to an
employment agreement. During Brown’s tenure with BCforward, the company
paid him an annual salary of approximately $36,000. Brown was entitled to
additional compensation as follows: he was eligible to receive “Incentive
Compensation”2 or sales commission,3 each of which was calculated and paid
monthly, and each of which were paid forty-five days after the calendar month
in which they were earned. For the first six months of his employment, he was
guaranteed a minimum monthly Incentive Compensation payment of $500.
[3] On March 1, 2016, Brown quit his employment with BCforward. On March 28,
2016, Brown filed a class action complaint against BCforward under the Wage
1
Ind. Code § 22-2-5-1 et seq.
2
Incentive Compensation was calculated based upon the monthly gross profit made by the resources
managed by Brown. Appellant’s App. Vol. II p. 94-95.
3
The percentage of sales commission to which Brown was entitled also depended on the amount of monthly
gross profit made by the resources managed by Brown. Appellant’s App. Vol. II p. 87.
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 2 of 16
Payment Statute, arguing that BCforward failed to pay its employees their
salary-based wages within the timeframe mandated by Indiana’s Ten-Day
Rule.4 Individually, Brown also filed claims that BCforward failed to pay him
all commissions earned following his voluntary termination of employment and
thereby (1) violated the Wage Payment Statute and (2) breached its contract
with him. On May 24, 2016, BCforward filed a motion for partial judgment on
the pleadings, arguing in relevant part as follows:
• No actionable Wage Payment Statute claims exist because all wages
have been paid to Brown; and
• The Incentive Compensation and commission payments do not qualify
as wages under the Wage Payment Statute.
On August 22, 2016, the trial court granted BCforward’s motion. In relevant
part, it found and held as follows:
1. It is undisputed that Brown received all of his salary from
[BCforward]. Therefore, Plaintiff holds no basis for Count
I of his lawsuit because (a) there exist no unpaid wages;
(b) attorney’s fees and liquidated damages are only
recoverable under the current version of the Wage
Payment Statute in a claim for unpaid wages; and,
(c) retroactive [a]pplication of the Wage Payment Statute,
as revised, stands warranted.
2. As a matter of law, the commissions paid to Brown . . . fail
to qualify as wages under the Wage Payment Statute
because (a) they are contingent on factors outside the
4
I.C. § 22-2-5-1.
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 3 of 16
employee’s control; (b) commissions hold no relation to
the time worked by the employee; (c) the commissions
were not paid on a regular periodic basis for regular work
done by the employee; and, (d) employees received the
commissions in addition to the wages. Since the
commissions fail to qualify as wages under the Wage
Payment Statute, Brown fails to state a claim in Count II
of the Complaint.
Appellant’s App. Vol. II p. 10-11. The trial court dismissed Brown’s class
action claims under the Wage Payment Statute; his individual claim for breach
of contract is still pending before the trial court. Brown now appeals.
Discussion and Decision
[4] Brown argues that the trial court erroneously ruled as follows: (1) under the
Wage Payment Statute, an employee is only entitled to damages and attorney
fees for unpaid wages, and Brown’s wages are not unpaid; and (2) Brown’s
commission payments do not qualify as wages under the Wage Payment
Statute.
I. Standard of Review
[5] A motion for judgment on the pleadings under Indiana Trial Rule 12(C) tests
the sufficiency of a claim or defense presented in the pleadings and should be
granted “only where it is clear from the face of the complaint that under no
circumstances could relief be granted.” Veolia Water Indianapolis, LLC v. Nat’l
Trust Ins. Co., 3 N.E.3d 1, 5 (Ind. 2014). We base our ruling solely on the
pleadings and accept as true the material facts alleged in the complaint. KS&E
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 4 of 16
Sports v. Runnels, 72 N.E.3d 893, 898 (Ind. 2017). We apply a de novo standard
of review to a trial court’s ruling on a motion for judgment on the pleadings. Id.[6] We also apply a de novo standard of review to issues of statutory interpretation.
Id. If a statute is clear and unambiguous, we put aside canons of statutory
construction and require that words and phrases be taken in their plain,
ordinary, and usual sense. Id. at 898-99.
II. Wage Payment Statute
[7] The general rules set forth by Section 1 of the Wage Payment Statute are as
follows: (1) every employer shall pay each employee at least semimonthly or
biweekly; and (2) payment shall be made for all wages earned to a date not
more than ten business days prior to the date of payment (the “Ten-Day Rule”).
Ind. Code § 22-2-5-1. Section 2 sets forth the penalties for employers who
violate Section 1.
A. Count I: Class Action Claim For Untimely Paid
Wages
[8] Brown concedes that BCforward paid him all salary-based wages he was owed
before the lawsuit was even filed. Nevertheless, he sued BCforward, alleging
that there were some occasions during his employment when the calendar was
such that BCforward’s bimonthly pay schedule resulted in the payment of
Brown’s wages slightly outside Section 1’s Ten-Day Rule.
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 5 of 16
1. Retroactive Application of Section 2
[9] In this case, while Brown alleges that BCforward did not comply with the
Section 1 Ten-Day Rule during his employment there, it is undisputed that he
has received all salary-based wages he is owed. The trial court found that
because he has been paid all salary-based wages, he is not entitled to seek
damages pursuant to Section 2.
[10] As we consider under what circumstances a claimant under the Wage Payment
Statute is entitled to damages and attorney fees, we must first determine which
version of the statute applies in this case. The version of Section 2 of the Wage
Payment Statute in place during the first one and one-half years of Brown’s
employment with BCforward stated as follows:
Every [employer] who shall fail to make payment of wages to
any such employee as provided in section 1 of this chapter shall,
as liquidated damages for such failure, pay to such employee for
each day that the amount due to him remains unpaid ten percent
(10%) of the amount due to him in addition thereto, not
exceeding double the amount of wages due, and said damages
may be recovered in any court having jurisdiction of a suit to
recover the amount due to such employee, and in any suit so
brought to recover said wages or the liquidated damages for
nonpayment thereof, or both, the court shall tax and assess as
costs in said case a reasonable fee for the plaintiff’s attorney or
attorneys.
I.C. § 22-2-5-2 (2014). This Court interpreted the prior version as allowing
employees to recover attorney fees and liquidated damages for late-paid wages,
even if the employees had received all the wages to which they were entitled
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 6 of 16
before filing suit. E.g., Valadez v. R.T. Enters., Inc., 647 N.E.2d 331, 333 (Ind.
Ct. App. 1995).
[11] In 2015, however, the General Assembly amended this section, which now
provides as follows:
Every [employer] who shall fail to make payment of wages to
any such employee as provided in section 1 of this chapter shall
be liable to the employee for the amount of unpaid wages, and the
amount may be recovered in any court having jurisdiction of a
suit to recover the amount due to the employee. The court shall
order as costs in the case a reasonable fee for the plaintiff’s
attorney and court costs. In addition, if the court in any such suit
determines that the [employer] that failed to pay the employee as
provided in section 1 of this chapter was not acting in good faith,
the court shall order, as liquidated damages for the failure to pay
wages, that the employee be paid an amount equal to two (2)
times the amount of wages due the employee.
I.C. § 22-2-5-2 (current version) (emphasis added).
[12] Our Supreme Court has explained the rules regarding retroactive application of
statutes as follows:
The general rule is that unless there are strong and compelling
reasons, statutes will not be applied retroactively. An exception
to this general rule exists for remedial statutes, i.e. statutes
intended to cure a defect or mischief that existed in a prior
statute. Ultimately, however, whether or not a statute applies
retroactively depends on the Legislature’s intent. That is, when a
remedial statute is involved, a court must construe it to “effect
the evident purpose for which it was enacted[.]” Accordingly,
remedial statutes will be applied retroactively to carry out their
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 7 of 16
legislative purpose unless to do so violates a vested right or
constitutional guaranty.
Bourbon Mini-Mart, Inc. v. Gast Fuel & Servs., Inc., 783 N.E.2d 253, 260 (Ind.
2003) (internal citations omitted). We must determine, therefore, whether the
2015 amendment of Section 2 constitutes a remedial statute that should be
applied retroactively.
[13] The primary changes made to Section 2 as a result of the 2015 amendment can
be summarized as follows:
• Employers are liable to employees for violations of Section 1 for unpaid
wages due, attorney fees, and court costs.
• Liquidated damages are additionally available only if, in violating
Section 1, the employer was not acting in good faith. Under such
circumstances, the employee is entitled to liquidated damages totaling
two times the amount of wages due.
It is apparent that in effecting these statutory changes, the legislature intended
to cure the defect or mischief that existed in the prior statute that permitted
exorbitant recovery in cases in which there were no actual unpaid wages and
where the employer acted in good faith. For example, if an employer
mistakenly delays payment of an employee’s salary by a minimal amount of
time and corrects that error as soon as the employee brings the error to the
employer’s attention, the employer no longer faces the possibility of a
substantial liquidated damages penalty.
[14] We also note that the Wage Payment Statute is a penal statute because it
imposes a penalty beyond the actual amount of unpaid wages owed. GHPE
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 8 of 16
Holdings, LLC v. Huxley, 69 N.E.3d 513, 518 (Ind. Ct. App. 2017). There is a
presumption that an amendment removing or diminishing a penalty, such as
the 2015 amendment of the Wage Payment Statute, will apply even to conduct
that predates the amendment. See Landgraf v. USI Film Prods., 511 U.S. 244,
270-71 (1994) (observing that “at common law a contrary rule applied to
statutes that merely removed a burden on private rights by repealing a penal
provision (whether criminal or civil); such repeals were understood to preclude
punishment for acts antedating the repeal”) (emphasis original). Given the
remedial nature of the 2015 amendment and the penal nature of the Wage
Payment Statute, we can only conclude that the 2015 amendment may be
applied retroactively.
[15] Brown argues that applying the current version of the statute retroactively is
prohibited because it violates a vested right or constitutional guarantee. We
disagree. The liquidated damages provision, as well as the attendant court costs
and attorney fees, is punitive in nature, and there is no vested right to
prejudgment punitive damages. Cheatham v. Pohle, 789 N.E.2d 467, 471-72
(Ind. 2003). Consequently, there is no bar to the retroactive application of the
Wage Payment Statute, and the trial court did not err in this regard.
2. “Unpaid Wages”
[16] Having concluded that the trial court did not err by retroactively applying the
current version of the Wage Payment Statute, we must next determine whether,
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 9 of 16
as the trial court concluded, Brown is precluded from recovery because his
wages are not unpaid.
[17] As noted above, Section 2 of the Wage Payment Statute states that an employer
who violates Section 1 (by making insufficient or untimely salary payments to
its employees)
shall be liable to the employee for the amount of unpaid wages,
and the amount may be recovered in any court having
jurisdiction of a suit to recover the amount due to the employee.
The court shall order as costs in the case a reasonable fee for the
plaintiff’s attorney and court costs. In addition, if the court in
any such suit determines that the [employer] . . . was not acting
in good faith, the court shall order . . . liquidated damages . . . .
I.C. § 22-2-5-2. In other words, the employee is entitled to file a lawsuit to
recover the amount due to him as well as his costs and fees incurred in the
litigation. Under certain circumstances, he may also be entitled to liquidated
damages.
[18] In this case, Brown has conceded that there are no wages due to him by
BCforward. Instead, he alleges that BCforward at times paid his salary on a
timeframe exceeding the Ten-Day Rule. The plain, ordinary, and usual
definition of “unpaid” is “not paid.” Merriam-Webster Dictionary, at
https://www.merriam-webster.com/dictionary/unpaid. While it may be the
case that BCforward occasionally paid Brown’s wages on a schedule that
exceeded the Ten-Day Rule, it is undisputed that the company did, in fact,
ultimately pay his wages. We cannot conclude that this scenario equates to the
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 10 of 16
“unpaid wages” referred to in Section 2; nor can we conclude that Brown is
entitled to maintain a lawsuit “to recover the amount due to” him, as there is
no amount that is, in fact, due. I.C. § 22-2-5-2; see also City of Lawrence Utils.
Serv. Bd. v. Curry, 68 N.E.3d 581, 587 (Ind. 2017) (explaining that the purpose of
the Wage Payment Statute “is to prevent employers from stealing their
employees’ wages and profiting from their labor”). As liquidated damages are
“[i]n addition” to the employee’s recovery of unpaid wages, attorney fees, and
court costs, the plain statutory language signifies that if one is not entitled to the
latter, one may not seek the former. As a result, we find no error in the trial
court’s conclusion that because Brown has no unpaid wages, as a matter of law
his claim for costs, fees, and liquidated damages under the Wage Payment
Statute must fail.5
B. Count II: Individual Claim for Unpaid Commissions
[19] In addition to his class action claim for unpaid wages, Brown filed an
individual claim alleging that BCforward violated the Wage Payment Statute by
failing to pay him all commissions earned after he left his employment.
Clearly, unlike Count I, this count includes a claim that the commissions were
“unpaid,” but we must determine whether the commission payments
constituted “wages.”
5
Because we affirm the trial court on this basis, we need not consider Brown’s argument regarding the trial
court’s observation that other purported class members whose employment was involuntarily terminated are
not entitled to file claims under the Wage Payment Statute.
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 11 of 16
[20] In Bragg v. Kittle’s Home Furnishings, Inc., this Court considered whether
commissions are “wages” pursuant to the Wage Payment Statute. 52 N.E.3d
908 (Ind. Ct. App. 2016), reh’g denied, trans. denied. After a lengthy and
thorough discussion of relevant precedent, this Court examined the following
factors in determining whether the commissions at issue qualified as wages:
(1) whether the commission is easily calculated and paid within ten days after it
was earned; (2) whether the commission is linked to a contingency outside the
employee’s control; (3) whether the commission is linked to the amount of time
the employee worked; (4) whether the commission was paid on a regular basis
and whether the amount of commission payments could vary widely from
month-to-month; and (5) whether the commission was paid in addition to the
employee’s salary. Id. at 921, 925-27 (citing to Thomas v. H & R Block E. Enters.,
Inc., 630 F.3d 659, 664 (7th Cir. 2011), for factors).
[21] Here, Brown’s compensation began with a guaranteed annual salary of
approximately $36,000. From December 9, 2013, through February 28, 2015,
he was eligible to receive monthly Incentive Compensation payments on top of
his salary. Those payments were “based on the Gross Profit generated by the
Resources [that Brown was] responsible for generating in each calendar
month.” Appellant’s App. Vol. II p. 94. The following factors played a role in
calculating Incentive Compensation:
• “Gross Profit” was defined as “the difference between the amount
billed to the client for the work completed by the resource minus the
fully-burdened cost of the resource to [the Company]. This shall
include, but not [be] limited to, allocations for benefits, taxes, and
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 12 of 16
overhead. The calculation of the fully-burdened cost and Gross Profit
shall be made at the sole reasonable discretion of [the Company].” Id.• The percentage of Gross Profit paid to Brown as Incentive
Compensation “shall vary based on the classification of the type of
resource placement being made. This classification will be made in
the sole and reasonable discretion of [the Company].” Id.• That percentage also varied “based on the volume of the Gross Profit
generated by [the employee] in a given month, and calculated
separately between Competition and Non-Competition
classifications. As the Gross Profit increases to each stratum shown
[in the agreement], the incentive percentage earned will increase, as
applied to Gross Profit dollars exceeding that threshold and through
the next threshold only.” Id.When Brown became an account manager on March 1, 2014, he also became
eligible to potentially receive monthly sales commission payments on top of his
salary, as well as Incentive Compensation if he exceeded sales performance
expectations. Id. at 82. His commission payments were tied to his own
performance, the company’s performance, and the performance of independent
consultants. Brown was not guaranteed Incentive Compensation or
commission payments on any set schedule, and could go months without
earning any such payments if his projects did not produce a sufficient gross
profit.6
[22] Turning to the Bragg factors, we must first consider whether these payments
were easily calculated and paid within ten days of when they were earned. The
6
The one exception to this setup was during his first six months in a job role, when he was guaranteed
payments of at least $500 per month. We will address these guaranteed payments below.
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 13 of 16
payments were based, in part, on gross profit, which was calculated on a
monthly basis. Therefore, the payments were not necessarily paid or calculated
within ten days of when they were earned.
[23] Second, we must consider whether the payments were linked to any
contingencies outside Brown’s control. We find that they were. Specifically,
the Incentive Compensation was linked to expenses borne by BCforward,
including taxes and overhead, as well as the classification of the type of
resource placement being made, which was solely determined by BCforward.
And commission payments were linked to, among other things, the
performance of the company, independent consultants, and age of accounts
receivable.
[24] Third, we must consider whether the payments were linked to the amount of
time Brown worked. We find that they were not. Simply working for a week,
or a month, was not enough to earn Incentive Compensation or commission
payments. Instead, he was required to complete sales and turn a gross profit for
the company.
[25] Fourth, we must consider whether the payments were made on a regular basis
and whether the amount of those payments could vary. While BCforward set up
a monthly schedule for the payment of Incentive Compensation and
commissions, Brown was not guaranteed any payments at all. Indeed, he could
theoretically have gone months without earning any such payments if his
projects did not produce a sufficient gross profit. And as a result, the amount of
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 14 of 16
his Incentive Compensation and commission payments could have varied
widely. Finally, it is undisputed that both Incentive Compensation and
commission payments were in addition to Brown’s annual salary.
[26] Brown argues that because he was guaranteed a monthly Incentive
Compensation payment of $500 for the first six months of a job role, all he had
to do to earn these payments was show up to work for those six months;
consequently, he insists that these guaranteed payments constituted wages.
Brown waived this argument because he failed to raise it to the trial court. He
argues that the issue was not presented because “BCforward failed to inform the
Trial Court that any of the commissions at issue were guaranteed.” Reply Br.
p. 18. But his own employment contract contains the provisions regarding
these guaranteed payments, meaning that he had this information in his
possession from the start. E.g., Appellant’s App. Vol. II p. 95 (employment
agreement including “Incentive Guarantee Period” and bearing Brown’s
signature). It was his responsibility, not BCforward’s, to raise this argument.
He failed to do so, and has waived it.
[27] All of the Bragg factors weigh in favor of concluding that these payments were
not wages pursuant to the Wage Payment Statute. Brown argues that Bragg was
wrongly decided, but we decline his invitation to revisit its analysis and
holding. We find that the trial court did not err by finding that the Incentive
Compensation and commission payments made by BCforward to Brown were
not wages pursuant to the Wage Payment Statute. In sum, the trial court did
not err by granting BCforward’s motion for partial judgment on the pleadings.
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 15 of 16
[28] The judgment of the trial court is affirmed.
Bailey, J., and Altice, J., concur.
Court of Appeals of Indiana | Opinion 49A04-1611-PL-2564| November 1, 2017 Page 16 of 16