United States District Court, D. New Jersey
August 15, 2005.
CARL SLUKA, Plaintiff,
LANDAU UNIFORMS, INC., and John Does 1-50, inclusive, fictitiously named defendants, jointly, severally and in the alternative, Defendants.
The opinion of the court was delivered by: JOSEPH IRENAS, District Judge
This action, removed from state court, stems from Defendant
Landau Uniforms, Inc.'s ("Landau") termination of Plaintiff Carl Sluka's employment. Landau is a Tennessee corporation with its
principle place of business in Olive Branch, Mississippi, and
Plaintiff is a citizen of the State of New Jersey. This Court has
subject matter jurisdiction over all counts under
28 U.S.C. § 1332. Although the Fifth Count asserts a federal cause of action,
the removal petition was based solely of diversity of
citizenship. Venue is proper under 18 U.S.C. 1391(a) and
Plaintiff's Complaint contains five counts: (I) material breach
of the Employment Agreement; (II) material breach of the implied
covenant of "good faith and fair dealing;" (III) violation of the
New Jersey Wage Payment Law, N.J.S.A. 34:11-4.1 et seq. ("NJ
WPL"); (IV) age discrimination in violation of New Jersey's Law Against Discrimination, N.J.S.A 10:5-1 et seq. ("NJ
LAD"); and (V) failure to provide Plaintiff with notice pursuant
to Consolidated Omnibus Budget Reconciliation Act,
29 U.S.C. § 1161 ("COBRA"). Both parties filed motions for summary judgment;
each motion will be considered in turn.
Plaintiff seeks summary judgment on Count I, his breach of
contract claim, and on Count V, his COBRA notice claim. Plaintiff
claims that the express terms of his Employment Agreement entitle
him to two year-end payments that Landau has failed to issue. In
addition, as to Count V, Plaintiff argues that he is entitled to
statutory penalties, attorney's fees and costs based on Landau's
untimely delivered COBRA notice.
Landau seeks summary judgment on all five counts. Landau
contends that Plaintiff was not entitled to the two "bonuses,"
under the Employment Agreement after he was fired, that he was
paid his regular salary and that he was terminated for
performance issues. Finally, Landau argues that it should not be
held liable for the late COBRA notice because there is no proof
The relevant portions of the Employment Agreement unambiguously
classify the two year-end payments in question as compensation.
Plaintiff is entitled to all forms of compensation duly earned prior to termination. Therefore, summary judgment
will be granted for Plaintiff and denied for Defendant on Count
I. Count II will be dismissed as moot because it mirrors Count I.
Because the two payments are clearly incentive based, Landau did
not violate the NJ WPL, and accordingly, summary judgment in
favor of Defendant will be granted on Count III.
Summary judgment will be denied on Count IV, the NJ LAD claim,
because Plaintiff has raised issues of triable fact as to the
reasons why he was fired. As to Count V, the COBRA claim, summary
judgment will be granted in favor of Plaintiff and against
Defendant. A statutory penalty of twenty dollars per day will be
Landau is in the uniform business marketing and selling
uniforms to retail accounts. Plaintiff's training and experience
is in sales and marketing. (Pl.'s Stmnt. of Facts at ¶ 2.) On
August 31, 2001, Landau offered Plaintiff the position of
Territory Manager for Pennsylvania, New Jersey, Maryland and
Delaware. (Landau Letter, attached as "Exhibit D" in Supp. of
Pl.'s Mot. for Summ. J.) A.
On September 7, 2001, Plaintiff and Landau entered into an
employment agreement for the Territory Manager position.
(Employmnt. Agrmnt., attached as "Exhibit D" in Supp. of Pl.'s
Mot. for Summ. J.) Counts I, II, and III stem from disputes over
the interpretation of the Employment Agreement and the nature of
certain payments. An attachment to the Employment Agreement,
provides the specific break down of Plaintiff's compensation:
Employee shall be compensated as follows: Initial
Base Salary of $60,000 per year plus commission of 1%
on all net sales to accounts assigned to Employee
plus 2% commission on net sales from new customers
generated by Employee, plus 2% commission on year
over year increase in net sales to accounts assigned
(Emplymnt Agrmnt. at Exhibit "A")
The text portion of the Employment Agreement explains the
timing of the various components of Plaintiff's compensation:
Employee's compensation is detailed in Attachment A
(attached hereto). The salary portion of Employee's
compensation will be paid weekly or bi-weekly. The
commission-based portion will be paid monthly, on the
10th of each month for sales accruing the
preceding month. The bonus portion would be paid at
(Id.) Although not explicitly stated in the Employment
Agreement, the ordering of the components implies that the salary
portion refers to the Initial Base Salary, the commission-based portion refers to the 1% on all net sales, and the bonus portion
refers to the two 2% commission payments (2% net sales from new
costumers and 2% year over year increase).*fn2
The Employment Agreement specifically provides that Plaintiff
was an at-will employee. (Id.) In addition, the Employment
Agreement states that it "supersedes all previous agreements and
may be modified only in writing, signed by both parties. The
Landau handbook is not intended as a contract and in no way
supersedes this Employment Agreement." (Id.) Both parties
signed the Employment Agreement. It is undisputed that they both
intended the provisions of the Employment Agreement to be binding
and enforced to "the fullest extent permissible." (Pl.'s Stmnt.
of Facts at ¶ 6.)
Plaintiff began working for Landau on September 17, 2001.
(Id. at ¶ 3.) There is some dispute as to Plaintiff's
performance levels and work history. In January, 2002, Plaintiff
received his first "2% net increase" payment, after he had been
working for only a few months. (Sluka Dep. at 97-100.) However, according to Landau, Plaintiff was counseled for performance
issues on February 8, 2002. (Def.'s Answer to Interogg. at 4.)
Towards the end of 2002, and early 2003, Plaintiff took on a
larger sales territory and received another year-end payment.
(Pl.'s Am. Compl. at ¶ 5.) During December, 2002, and January,
2003, while Landau was seeking to find a permanent New England
Territory Manager, Plaintiff was asked to fill-in as needed for
the New England Territory. (Id.) In addition, New York's five
boroughs and Long Island were added to Plaintiff's territory in
January, 2003. (Id.)
Landau states that Plaintiff was counseled for performance
issues on March 27, 2003, and June 9, 2003. (Def.'s Answer to
Interogg. at 5.) In June, 2003, Darryl Williams, Landau's
Vice-President of Sales and Marketing, as well as Plaintiff's
supervisor, received a complaint from one of Plaintiff's
customers that the customer no longer wanted calls from
Plaintiff. (Williams Dep. at 35.)
Plaintiff contends that the importance of obtaining new
accounts outside the normal channel of distribution was
emphasized at a number of sales meetings; Plaintiff and one other
salesmen (out of sixteen total) successfully accomplished this
goal. (Pl.'s Am. Compl. at ¶ 6.) Plaintiff's accomplishment was highlighted at the August, 2003, group Landau headquarters sales
meeting. (Id.) Furthermore, Plaintiff states that his dollar
sales for the year were up approximately 10% over the preceding
year and his monthly sales were up 10% over the previous month as
of September, 2003. (Id. at ¶ 7.)
Plaintiff was again counseled for performance issues on October
6, 2003. (Def.'s Answer to Interogg. at 5.) On October 21, 2003,
Darryl Williams met with Plaintiff at the Hampton Inn in
Philadelphia, PA. (Pl.'s Am. Compl. at ¶ 8.) Mr. Williams
provided Plaintiff with a copy of a proposed Separation
Agreement, including a severance pay offer. (Id.) The
Separation Agreement does not mention cause or misconduct, but
does reference age discrimination. (Id.) Through his attorney,
Plaintiff rejected the proposed agreement on October 23, 2003.
(Id. at ¶ 9.)
Plaintiff was terminated from employment on October 21, 2003.
(Def.'s Stmnt. of Facts at ¶ 10.) Landau states that Plaintiff
was terminated for poor performance; the specific reasons
included: communication problems with fellow employees and
customers, not following expected procedures, and because "other than one new account added by Plaintiff, Plaintiff's sales
were either flat or declining." (Def.'s Answer to Interogg. at
1.) These reasons are hotly contested by Plaintiff, who points
out that according to Landau, "[t]hrough September, 2002,
[Plaintiff] had gross volume sales in the amount of $1.7 million.
Through September, 2003, [Plaintiff] had gross volumes sales of
$2.1 million. Of the 2003 number, $243,000 represents sales to a
`new' account (Supershoes)." (Letter from Def.'s Counsel to Pl.'s
Counsel, attached as "Exhibit F" in Supp. of Pl.'s Mot. for Summ.
After Plaintiff's termination, Landau paid him his remaining
initial base salary on October 24, 2003. (Austin Aff. at ¶ 7.) On
November 12, 2003, Plaintiff was paid for his October, 2003, 1%
net commissions. (Id. at ¶ 6.) It is not disputed that
Plaintiff did not receive any payment for his year-over-year
increase in sales Plaintiff achieved in 2003 versus 2002 or for
the 2% net sales for his new customers in 2003. (Pl.'s Stmnt. of
Facts at ¶ 8.) In early 2004, four months after Plaintiff was terminated, Landau filled Plaintiff's former position with a
forty-one year old man.*fn3 (Def.'s Answer to Interrog. at
On May, 28, 2004, Plaintiff filed an action in the Superior
Court of New Jersey, Burlington County. Landau was served with
the Complaint on June 7, 2004. Later in June, 2004, Landau paid
Plaintiff for vacation time he had accrued.*fn4 (Austin Aff.
at ¶ 8; see also Supplemental Aff. of Council "Exhibit A,"
attached in Supp. of Opp'n to Def.'s Mot. for Summ. J.)
At the time Plaintiff was terminated in October, 2003, he was
enrolled in a group health plan maintained by Landau. (Pl.'s
Stmnt. of Facts at ¶ 9.) It is undisputed that Landau did not
send Plaintiff the COBRA notice until December 10, 2004. (Austin
Aff. at ¶ 11.) Landau has acknowledged this oversight, and
offered to make coverage retroactive. (Id. at ¶ 12.)
The test for summary judgment is stated in Rule 56 of the
Federal Rules. Summary judgment is appropriate where "the
pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986).
In deciding a motion for summary judgment, the court must
construe the facts and inferences in a light most favorable to
the non-moving party. Pollock v. Am. Tel. & Tel. Long Lines,
794 F.2d 860, 864 (3d Cir. 1986). The role of the court is not
"to weigh the evidence and determine the truth of the matter, but
to determine whether there is a genuine issue for trial."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
However, "a party opposing a properly supported motion for
summary judgment may not rest upon the mere allegations or
denials of his pleading, but . . . must set forth specific facts
showing that there is a genuine issue for trial." Id. at 248
The issue in deciding summary judgment for Counts I and II is
whether Plaintiff was entitled to both year-end payments (2% net
year-over-year sales increase and 2% net sales from new costumers). Plaintiff asserts that the express terms of the
Employment Agreement do not mention any cause for denial of those
payments; specifically, the terms provide for payment at
year-end, but do not explicitly require that he must be working
at distribution time. Landau contends that the payments are
"bonuses" and since Sluka was terminated prior to bonus
distribution, he is not entitled to them. According to Landau,
unwritten company policies mandate that an employee must be
working at Landau at the time of bonus distribution and the
employee must have worked the full twelve months of the year in
order to receive a bonus.
The first step for this Court in interpreting the Employment
Agreement is to determine if it is ambiguous. U.S. v.
Pantelidis, 335 F.3d 226, 235 (3d Cir. 2003). "The determination
of whether a contract is ambiguous is a question of law." Id.
The language in a contract is ambiguous if the words in the
contract are subject to two or more possible meanings. Cooper
River Plaza East, LLC v. Braid Group, 359 N.J. Super. 518, 528
(App.Div. 2003). When a contract is determined to be unambiguous, "the
construction and effect of that agreement is a matter of law
which must be resolved by the court and not the jury." Cedar
Ridge Trailer Sales, Inc. v. National Community Bank of New
Jersey, 312 N.J. Super. 51, 62-63 (App.Div. 1998). The Court
must enforce the unambiguous terms as written, and it has "no
power to rewrite the contract of the parties by substituting a
new or different provision from what is clearly expressed in the
instrument." East Brunswick Sewerage Authority v. East Mill
Associates, Inc., 365 N.J. Super. 120, 125 (App.Div. 2004).
In East Brunswick Sewerage Authority, a developer entered
into an agreement to pay fifty-five percent of all costs
associated with a construction project. Other than two paragraphs
concerning construction and permit costs "the agreement contained
no other limiting or conditional language." Id. The Superior
Court of New Jersey, Appellate Division found the terms of the
contract to be clear, and awarded damages amounting to fifty-five
percent of the total costs. Id. at 127.
Although Landau argues that it has an unwritten policy to pay
"bonuses" only if the employee is still working at the time of distribution, the compensation portion of the Employment
Agreement is unambiguous and contains no such limitation. In the
section of the Employment Agreement titled "Compensation," it
clearly states that Plaintiff's compensation is detailed in
Attachment A. Attachment A explicitly lays out that Plaintiff
will be compensated with (1) an initial base salary, (2) 1%
commission on all net sales to his accounts, (3) 2% commission on
net sales from new customers, and (4) 2% commission on
Plaintiff's year-over-year increase in net sales.
Despite the Employment Agreements vague identification of which
payments are called "bonuses" and which are "commissions," it is
absolutely clear that all four payments are compensation. This
Court accepts the premise that Landau calls the two percent
year-over-year increase and the two percent of new costumers
payments "bonuses." The nomenclature for these two payments does
not change the fact that they are compensation for Plaintiff's
services already rendered. There is absolutely no limiting or
conditional language in the Employment Agreement concerning
Plaintiff's compensation. That Plaintiff was not an employee at
the time these payments were to be distributed is not relevant to
whether Plaintiff is entitled to compensation for services
already rendered. The express terms of the Employment Agreement entitle Plaintiff
to all four forms of his compensation. Summary judgment will be
granted for Plaintiff and denied for Defendant on Count
Since summary judgement is warranted as to Count I in favor of
Plaintiff, any review of Count II, which alleges a breach of the
implied covenant of good faith and fair dealing, would be
duplicative. Count II will be dismissed as moot.
In Count III, Plaintiff alleges that Landau violated the NJ WPL
because it failed to pay him the year-end payments, referred to
as "commission" in the Addendum to the Employment Agreement.
Defendant contends that the payment in dispute is a bonus, to
which the NJ WPL does not apply, as bonuses are not
wages.*fn6 The NJ WPL provides that "every employer shall pay the full
amount of wages due to his employees." N.J.S.A. 34:11-4.2. Wages
are defined as:
the direct monetary compensation for labor or
services rendered by an employee, where the amount is
determined on a time, task, piece, or commission
basis excluding any form of supplementary incentives
and bonuses which are calculated independently of
regular wages and paid in addition thereto.
The express terms in the Employment Agreement do not explicitly
make it clear whether both of the year-end payments were
"bonuses" or "commissions." However, it is clear that the
payments in question are incentive based. The two percent
commission based on new costumers is designed to motivate and
reward a salesperson who seeks out and creates new clients.
Similarly, the two percent year-over-year increase payment is
aimed to motivate and reward a salesperson who creates more
business each year.
"Supplementary incentives" are the types of payments that, by
definition, are not included under the NJ WPL. Therefore, summary
judgment on Count III will be granted in favor of Defendant. VI.
In Count IV, Plaintiff alleges discriminatory termination in
violation of the NJ LAD.
The Supreme Court of New Jersey established that in a case
where an employee is alleging discriminatory discharge the proper
analysis is to first determine if the plaintiff has made out a
prima facie case. Clowes v. Terminix Intern., Inc.,
109 N.J. 575, 596-7 (1988). The elements of a "prima facie case on a
termination claim" require Plaintiff to show by a "preponderance
of the evidence that ?he (1) belongs to a protected class, (2)
was performing in the position from which ?he was terminated,
(3) nevertheless was fired, and (4) the employer sought someone
to perform the same work after ?he left." Zive v. Stanley
Roberts, Inc., 182 N.J. 436, 457-58 (2005) (citations omitted).
These elements serve "essentially a gatekeeping function." Id.
It is undisputed that Plaintiff was fifty-seven years old at
the time of termination, and therefore is a member of a protected
class so as to satisfy the first element of a prima facie case. 2.
At the prima facie stage "even if a plaintiff candidly
acknowledges, on his own case, that some performance issues have
arisen, so long as he adduces evidence that he has, in fact,
performed in the position up to the time of termination, the
slight burden of the second prong is satisfied." Zive,
182 N.J. at 455. The New Jersey Supreme Court stated that "[a]ll that is
necessary is that the plaintiff produce evidence showing that she
was actually performing the job prior to the termination." Id.
Plaintiff has proffered evidence in the form of raw sales
numbers and expanded areas of responsibility to suggest that he
was performing his job adequately prior to termination. In
addition to his raw sales numbers, he demonstrated his ability to
obtain new accounts outside the normal channel of distribution.
A rational jury could find that Plaintiff's performance was
adequate and that he was qualified for the position that he held.
Plaintiff has produced sufficient evidence to satisfy the second
element of a prima facie case. 3.
It is undisputed that Sluka was terminated from employment;
thus Plaintiff has demonstrated the third element of a prima
It is undisputed that Landau sought a replacement for Sluka,
and that four months after his termination a younger employee was
hired as his replacement. Therefore, Plaintiff has established
all four elements of a prima facie case for his claim of
"Once the prima facie case has been established, the McDonnell
Douglas [burden shifting] analysis is followed in all other
respects." Clowes, 109 N.J. at 597. When a plaintiff
establishes a prima facie case, "the plaintiff creates a
rebuttable presumption that the employer unlawfully discriminated
against her and the burden shifts to the employer `to articulate
some legitimate, nondiscriminatory reason for the employee's
[termination].'" Parker v. Hanhemann University Hosp.,
234 F. Supp. 2d 478, 488 (D.N.J. 2002) (citations omitted). In Zive, the court stated, "if the employer proffers a
non-discriminatory reason, plaintiff does not qualify for a jury
trial unless he or she can `point to some evidence, direct or
circumstantial, from which a factfinder could reasonably either
(1) disbelieve the employer's articulated legitimate reasons; or
(2) believe that an invidious discriminatory reason was more
likely than not a motivating or determinative cause of the
employer's action.'" Zive, 182 N.J. at 455-56 (quoting Fuentes
v. Perskie, 32 F.3d 759, 764 (3d Cir. 1994)).
Landau has articulated a non-discriminatory reason for Sluka's
termination poor communication skills and sales performance.
However, Plaintiff has produced sufficient evidence to suggest
that his sales performance was more than adequate. Based on the
evidence, a rational jury could reasonably disbelieve Landau's
proffered legitimate reason.*fn7 Therefore, Landau's Motion
for Summary Judgment on Count IV will be denied.
In Count V, Plaintiff requests monetary penalties for Landau's
undisputed failure to provide Plaintiff with the required COBRA notice upon the termination of his employment. In
addition to the statutory penalties, Plaintiff seeks attorney's
fees and costs associated with his COBRA claim.
Landau argues that because there is no evidence of any bad
faith or malice on its part, monetary penalties should not be
imposed. Landau acknowledges that this Court can assess
penalties, but argues that the Court should decline to impose any
COBRA, 29 U.S.C. § 1161, states that "each qualified
beneficiary who would lose coverage under the plan as a result of
a qualifying event is entitled, under the plan, to elect, within
the election period, continuation coverage under the plan."
Termination is listed as a "qualifying event" under
29 U.S.C. § 1163.
Any administrator "who fails to meet the requirements" of §
1161 "with respect to a participant or beneficiary . . . may in
the court's discretion be personally liable to such participant
or beneficiary in the amount of up to $100 a day from the date of
such failure." 29 U.S.C. § 1132. A district court has considerable discretion to impose a
penalty on a company that fails to comply with the notice
provisions of ERISA or the COBRA amendments. Several cases
demonstrate the breadth of this discretion. The Fourth Circuit
Court of Appeals stated in an unpublished opinion that when a
violation is "clear and without excuse, a penalty should be
imposed, regardless of whether the plaintiff has been
prejudiced." Underwood v. Fluor Daniel, Inc., No. 95-3036, 1997
WL 33123 (4th Cir. Jan. 28, 1997). The court reasoned that in
order for justice to be served with equal force to all, prejudice
should not be a prerequisite to imposing the statutory penalty.
In Underwood, the court imposed the maximum penalty of $100 per
day on a company that failed to provide COBRA notice, despite the
fact that the plaintiff's knew about their eligibility
independent of the defendant's required notice.
Similarly, in Torres-Negron v. Ramallo Bros. Printing, Inc.,
a statutory penalty of $45 per day was awarded to the plaintiff
when the defendant company failed to provide COBRA notice for 271
days and the company issued notice only after the plaintiff filed
a lawsuit. 203 F. Supp. 2d 120 (D. Puerto Rico 2002). The court
was not influenced by the fact that the plaintiff's former duties
included the distribution of COBRA notices because "[w]hether or not [the plaintiff] had knowledge of her rights under COBRA is
irrelevant." Id. at 125.
Furthermore, in Fenner v. Favorite Brand Intern., Inc., the
court recognized that "proof of injury or prejudice is not a
prerequisite to a claim under section 1132(c)."
25 F. Supp. 2d 870 (N.D. Ill. 1998); see also Davis v. Featherstone,
97 F.3d 734, 738 (4th Cir. 1996); Bartling v. Fruehauf Corp.,
29 F.3d 1062 (6th Cir. 1994); Moothart v. Bell, 21 F.3d 1499, 1506
(10th Cir. 1994); Rodriguez-Abreu v. Chase Manhattan Bank,
N.A., 986 F.2d 580, 588 (1st Cir. 1993); Daughtrey v.
Honeywell, Inc., 3 F.3d 1488, 1494 (11th Cir. 1993); Godwin v.
Sun Life Assurance Co. of Canada, 980 F.2d 323, 327 (5th Cir.
1992); Pagovich v. Moskowitz, 865 F. Supp. 130, 137 (S.D.N.Y.
It is also within the court's discretion to not impose
penalties. In Rodriguez-Abreu, the district court decided to
not assess penalties for untimely delivered COBRA notice, and was
upheld by the Second Circuit. 986 F.2d 580. The district court
declined to impose penalties "on the grounds that `[plaintiff]
has failed to show that his rights were harmed or otherwise
prejudiced by the delay in his receipt of the information and has
not demonstrated bad faith or intentional delay on the part of
the defendant.'" Id. at 588 (citation omitted). The Second Circuit held that the district court did not abuse its discretion
because "[a]lthough prejudice and bad faith are not prerequisites
for imposition of penalties, these are factors which the district
court properly considered in exercising its discretion not to
impose penalties." Id.
Similarly, in Boucher v. Williams, 13 F. Supp. 2d 84 (D. Me.
1998), the District of Maine opted not to assess penalties
because there was no proof of damages, bad faith or need for
A prevailing party on a claim for statutory penalties also may
be awarded "a reasonable attorney's fee and costs of action" as
provided by 29 U.S.C. § 1132(g)(1). Because the statute provides
little guidance for determination of whether to award fees and
costs the Third Circuit articulated five factors that must be
considered: (1) the offending parties' culpability or bad faith;
(2) the ability of the offending parties to satisfy an award of
attorneys' fees; (3) the deterrent effect of an award of
attorneys' fees against the offending parties; (4) the benefit
conferred on members of the pension plan as a whole; and (5) the
relative merits of the parties' position. McPherson v. Employees' Pension Plan of American Re-Insurance Company, Inc.,
33 F.3d 253, 254 (3d Cir. 1994).
In this case, there is no dispute that Landau failed to notify
Sluka of his right to elect continued coverage from the day he
was terminated, October 21, 2003, until December 10, 2004. In
addition there is no dispute as to the law that the Court may, in
its discretion, impose a penalty of up to one hundred dollars per
day. As to Count V, Plaintiff's Motion for Summary Judgment will
be granted and Defendant's Motion for Summary Judgment will be
denied. A statutory penalty of twenty dollars per day will be
awarded for every day Defendant was in violation of its COBRA
requirements.*fn8 Plaintiff's request for attorney fees and
costs will be granted, but any determination of a specific amount
will be deferred until trial. IV.
For the reasons set forth above, the Court will deny in part
and grant in part Defendant's Motion for Summary Judgment. In
addition, we will grant Plaintiff's Motion for Summary Judgment
in its entirety. The Court will issue an appropriate Order.