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Neal v. Eastern Controls

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


March 18, 2008

JOSEPH NEAL, PLAINTIFF-APPELLANT,
v.
EASTERN CONTROLS, INC., DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-1005-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 28, 2007

Before Judges Axelrad, Payne and Messano.

Plaintiff Joseph Neal appeals from the grant of summary judgment dismissing his complaint against his former employer, defendant Eastern Controls, Inc. (Eastern). At issue is plaintiff's claim to compensation for post-termination sales commissions--commissions on sales orders placed with defendant before he resigned, but not paid for by the purchaser until after he resigned. Plaintiff raises two points on appeal. First, he argues the motion judge erroneously concluded that plaintiff implicitly agreed to defendant's policy regarding post-termination commissions because he continued to work for defendant after the policy was announced. Second, he argues that the motion judge erred as a matter of law by dismissing his claims for "quasi-contract" or "quantum meruit." We have considered these arguments in light of the motion record and applicable legal standards. We affirm.

In reviewing a grant of summary judgment, we use the same standard employed by the trial court. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 230 (App. Div.), certif. denied, 189 N.J. 104 (2006)(citations omitted). We decide first whether there was a genuine issue of material fact; if not, we then decide "whether the motion judge's application of the law was correct." Id. at 230-31. "In carrying out our review, we owe no deference to the interpretation of the motion judge on matters of law." Id. at 231. In this case, the essential facts are not in dispute and plaintiff challenges only the legal conclusions reached by the motion judge on those facts.

I.

Plaintiff was employed as an at-will commissioned salesperson by defendant for nearly twenty years, resigning on November 12, 2004, to accept employment with another company, a competitor of Eastern. In a memo dated September 8, 1989 (the 1989 memo), distributed to the seven or eight commissioned salespersons on staff including plaintiff, Eastern set forth its policy regarding the payment of commissions. Since the memo is brief, we quote it in its entirety.

We are establishing the following policy regarding payment of commissions due.

It is Eastern Controls Inc.'s policy when hiring a new salesman, for an unestablished territory, to keep that salesman on salary for one to two years depending on the situation until the commission income is such that his portion of the income, per our established policy, will sustain or exceed his base salary. With this in mind and the fact that Eastern Controls, Inc. must train a new salesman, should the present salesman retire or leave for any reason, all payment of salaries and/or commissions will terminate on that date. This means that even though you may have sold a large job prior to leaving Eastern Controls, Inc., there will be no commission paid on that project if it is shipped and commission paid to Eastern Controls, Inc. after termination of employment.

Please acknowledge receipt of this memo by your signature below, and return to Carol Lalli for your personnel file.

Plaintiff never countersigned the document or returned it to the personnel department, though he acknowledged he knew of its contents.

On April 17, 1994, Eastern sent a letter to plaintiff and three other commissioned salespersons who had not executed the 1989 memo. The letter noted that "[a]fter reviewing [their] personnel files" Eastern "d[id] not have a completed memo with [their] signature." It requested plaintiff and the others to "review, sign, and return," the attached 1989 memo for inclusion in their personnel files.

Plaintiff did not sign the re-circulated policy memo but acknowledged that he received, reviewed, and was fully aware of its contents. On November 7, 1994, he faxed the following handwritten comments to Eastern:

After reviewing the attached and giving much thought to the subject, I feel that some type of compensation of commissions should be paid to the salesperson leaving the company.

Since we are paid commissions after the fact, it would be more appropriate for a percentage of the commissions on orders booked to be allotted to that salesperson.

Although the record is unclear as to whether Eastern ever responded directly to plaintiff's comments, it is undisputed that it never changed its post-termination commission policy contained in the 1989 memo and plaintiff did not contend that anyone ever received post-termination commissions from the company.

In 1995, Eastern issued a handbook to all its employees and plaintiff acknowledged its receipt. The receipt form reads in relevant part, "I understand that this handbook replaces any and all prior handbooks, policies and practices of the company." This manual primarily referenced employee conduct and responsibility and did not refer to any policy regarding payment of commissions or compensation for any of Eastern's employees.

When plaintiff resigned, his attorney forwarded a letter to Eastern demanding that plaintiff be paid his commissions "for pending orders entered prior" to his resignation.*fn1 By letter from Eastern's president, Cliff McLaughlin, Jr., defendant refused to pay plaintiff any commission for orders pending at the time he resigned. McLaughlin's letter in pertinent part provided,

It has been Eastern['s] [] long-standing policy that once a salesman quits, he is no longer entitled to receive ANY commissions from any orders placed but remaining unpaid on or before the last date of employment for that salesman. [Plaintiff] received a copy of this policy statement memo in May of 1994 when he faxed the same memo back to [Eastern] management with personal remarks .

. . . That memo is a policy statement, not a policy discussion. Therefore, the policy memo remains in force as written and [plaintiff] is NOT entitled to any compensation for orders placed on or before, but paid for after, Nov. 12, 2004.

On June 15, 2005, plaintiff filed his complaint against Eastern alleging breach of contract, fraud, and violation of the Wage Payment Law, N.J.S.A. 34:11-4.1 through -4.14 (the WPL). On July 19, 2005, Eastern answered and asserted a counterclaim for breach of contract, breach of the covenant of good faith and fair dealing, fraudulent inducement, and a claim for repayment of outstanding monies allegedly advanced to plaintiff. Plaintiff filed an amended complaint adding additional counts seeking recovery under the theories of quantum meruit and quasi-contract.

Eastern moved for summary judgment on May 12, 2006.*fn2 It argued that having set the post-termination commission policy, plaintiff as an at-will employee was bound by its terms. It further argued that since plaintiff had not earned his commissions until Eastern was paid on those orders, and since plaintiff resigned before Eastern received payment, plaintiff was not entitled to compensation and therefore Eastern had not violated the WPL or any of plaintiff's alleged contractual rights.

Plaintiff contended that a factual dispute was presented over whether Eastern had engaged in a "bilateral situation" with respect to compensation for post-termination commissions. Plaintiff pointed to several memos and e-mail exchanges in which Eastern had requested input from its commissioned salespersons regarding compensation. Plaintiff argued that the 1989 memo was an invitation to enter into an agreement regarding the payment of commissions, and, through his non-acceptance, he rejected Eastern's proposal. Plaintiff further argued that the 1995 employee handbook by its terms replaced all company policies and procedures, and, therefore, even if the 1989 memo was a policy, the handbook's failure to reference it implied it was no longer in effect. Plaintiff noted that since Eastern negotiated with him on other issues of compensation after he tendered his resignation, factual issues were presented as to whether the 1989 memo's commission policy applied to him. Plaintiff also contended that Eastern's refusal to pay post-termination commissions violated the WPL and was against public policy because it resulted in a forfeiture of monies rightfully earned by plaintiff. Lastly, plaintiff argued that the equitable doctrine of quantum meruit should be applied to the facts at hand.*fn3

On June 30, 2006, the judge issued an order partially granting defendant's motion for summary judgment. He determined that plaintiff was not entitled to any recovery for post-termination commissions under theories of quantum meruit and quasi-contract because "such equitable relief is not available where there is an express contract governing the terms and conditions of employment." Without a statement of reasons, the judge also granted summary judgment to Eastern and dismissed plaintiff's claims for post-termination commissions under any other theory of recovery.

Plaintiff moved for reconsideration and Eastern cross-moved for reconsideration of the denial of the other aspects of its summary judgment motion. The judge heard oral argument on August 18 and 28, 2006, and denied both requests. In a supplemental order and written decision dated October 25, 2006, the judge set forth his reasons.*fn4

The judge concluded that the terms and conditions of plaintiff's employment denied him entitlement to post-termination commissions. Since plaintiff admitted knowing that Eastern's policy was not to pay commissions until it received payment, and then only if the salesperson were still employed by the company, the judge concluded that plaintiff's decision to continue to work for Eastern for "nearly a decade" under the policy "acknowledged his acceptance of those terms." The judge also determined that plaintiff was not entitled to post-termination commissions as a matter of statutory right, thus distinguishing Leodori v. Cigna Corp., 175 N.J. 293 (2003), a case relied upon extensively by plaintiff.

On April 9, 2007, the judge entered an order certifying the judgment as final because the parties had resolved all other compensation issues upon which plaintiff had withstood summary judgment. This appeal ensued.

II.

A.

The trial court properly found that plaintiff's entitlement to post-resignation commissions was determined by his contractual relationship with defendant. "In those cases where a salesman attempts to claim a share of a commission from his former employer, the salesman's right to that commission is governed by the laws of agency and contracts[;] . . . the dispositive factor is the express agreement between the parties." Shannon v. Keystone Info. Sys. Inc., 827 F. Supp. 341, 344 (E.D. Pa. 1993) (citing De Benedictis v. Gerechoff, 134 N.J. Super. 238 (App. Div. 1975)).

In an at-will employment relationship, the employer's policies are deemed to be unilateral contracts which an employee accepts by continuing his employment. Witkowski v. Thomas J. Lipton, Inc., 136 N.J. 385, 399 (1994). The employer remains free to change the terms of employment after the commencement of the employment agreement, as long as those new requirements are not contrary to public policy. Mita v. Chubb Computer Servs., Inc., 337 N.J. Super. 517, 526 (App. Div. 2001); see also Alexander v. Kay Finlay Jewelers Inc., 208 N.J. Super. 503, 506-07 (App. Div.), certif. denied, 104 N.J. 466 (1986). Any policy set forth by an employer, including compensation terms, is presumed accepted by the employee if the employee becomes aware of the policy and chooses to continue working. Mita, supra, 337 N.J. Super. at 527.

Plaintiff contends that the general principles we have just enunciated do not apply to him because the 1989 memo was merely an offer to create a bilateral contract which he rejected by his 1994 comments objecting to the policy and proposing some other form of compensation. We disagree, and to the extent plaintiff argues a factual dispute existed on the issue so as to foreclose summary judgment, we find that argument to be equally unavailing.

Plaintiff contends that the exchanges of e-mails and correspondence over the years demonstrate that Eastern sought the input of plaintiff and others regarding compensation issues; perhaps, but none of those documents discuss the issue of compensation for post-termination commissions. In other words, plaintiff can point to no documentary support for the proposition that Eastern intended to negotiate the issue with its commissioned salespersons generally or plaintiff specifically. Secondly, plaintiff contends that the 1995 policy manual demonstrates through its silence that the commission policy was not in force. The employment manual, however, does not address issues of compensation and was a general statement of policies and procedures regarding employee behavior applicable to all of Eastern's employees.

Therefore, the only evidence in the record to support plaintiff's claim that he and Eastern were engaging in the formation of a bilateral contract are the comments he forwarded to Eastern in November 1994, indicating his objection to the policy and suggesting some other undefined form of compensation for post-termination commissions. However, even when viewed in a light most favorable to plaintiff, his comments cannot be seen as a counteroffer that formally rejected the new policy because he never stated any terms for defendant to accept. See Berberian v. Lynn, 355 N.J. Super. 210, 217 (App. Div. 2002)(holding that a "counteroffer operates as a rejection because it implies that the offeree will not consent to the terms of the original offer and will only enter into the transaction on the terms stated in the counteroffer"), aff'd as modified, 179 N.J. 290 (2004). Instead, plaintiff continued to work with full knowledge of the policy for nearly ten years thereafter.

In sum, Eastern did not need plaintiff's acceptance to implement its commission compensation policy in 1989. Defendant was not inviting acceptance or counteroffers to a proposal. Rather, it was setting the terms for plaintiff's continued employment with the company. Plaintiff's objections do not override his implicit assent to the policy. See Quigley v. KPMG Peat Marwick, LLP, 330 N.J. Super. 252, 266 (App. Div.) (insertion of "u.d."--under duress--did not release employee from agreement when employee continued to work for employer for twelve years afterwards), certif. denied, 165 N.J. 527 (2000).

B.

Plaintiff next contends that it was error for the motion judge to conclude that his continued employment implicitly formed a unilateral contract with Eastern because the commission policy violated the WPL. Therefore, under the Supreme Court's holding in Leodori, supra, Eastern needed to obtain his express consent to the waiver of his rights under the statute; since it failed to do so, plaintiff contends the policy cannot apply to him.

In Leodori, the employer included an arbitration provision in its employee handbook requiring all employees to waive their statutory rights to a jury trial or other judicial process in the event of any dispute with the company. Id. at 297-98. Plaintiff signed a form acknowledging receipt, but did not sign a separate form expressly agreeing to the arbitration provision. Ibid. The Supreme Court held that the arbitration provision was unenforceable because the plaintiff never explicitly agreed to waive a statutory right. Id. at 305-07.

The motion judge distinguished the facts at hand from those presented in Leodori finding Eastern's post-termination policy did not violate any statute or public policy thereby not requiring the company to obtain plaintiff's express consent to the post-termination commission arrangement. We agree.

Plaintiff argues that Eastern's policy violated the WPL, which provides in pertinent part,

[W]henever an employee quits, resigns, or leaves employment for any reason, the employer shall pay the employee all wages due not later than the regular payday for the pay period during which the employee's . . . cessation of employment . . . took place, as established in accordance with [N.J.S.A. 34:11-4.2] . . . . [N.J.S.A. 34:11-4.3 (emphasis added).]

Commissions are included in the statute's definition of wages. N.J.S.A. 34:11-4.1. Wages must be paid at least twice each month, and must be paid not more than ten working days after the end of the pay period. N.J.S.A. 34:11-4.2. Any employment agreement that violates the WPL "shall be deemed to be null and void." N.J.S.A. 34:11-4.7.

In 1996, the Department of Labor adopted N.J.A.C. 12:55-2.4(a), "a new rule [that] sets forth the procedure for the time and mode of final wage payment by the employer following the termination or voluntary leaving of an employee as set forth at N.J.A.C. (sic) 34:11-4.2." 28 N.J.R. 4160(a) (September 16, 1996). Pursuant to that regulation, "[a]ll final payment of wages following the . . . voluntary leaving of employment shall be completed within 10 days from the end of the work period for which such wages are earned . . . ." N.J.A.C. 12:55-2.4(a).

The Legislature has failed to describe when "all wages" become "due" for purposes of the WPL. Whenever the employee receives "direct monetary compensation . . . determined on a time, task, [or] piece" basis, N.J.S.A. 34:11-4.1(c), the wages obviously become due whenever the time is expended, the task is completed or the piece becomes finished. The actual time by which the employer must make payment to the employee is then dictated by the above-cited statutory and regulatory scheme.

Plaintiff contends the issue is no less clear with respect to commission compensation. However, plaintiff concedes that he was not entitled to payment on the commissions at issue unless and until Eastern was actually paid by its customers for the order. He concedes that in the interim, orders could be cancelled or modified, thus affecting the amount or even the existence of any commission. Under this scenario, we are hard-pressed to see how the commission on any particular sale can be a "wage" that is "due" prior to defendant's termination.

In trying to construe legislation, the actual language of the enactment ordinarily is the "best indicator" of legislative intent. Simon v. Cronecker, 189 N.J. 304, 327 (2007)(citing

DiProspero v. Penn, 183 N.J. 477, 492 (2005)). "We ascribe to the statutory words their ordinary meaning and significance" and "if the legislation's purpose is clearly stated, we need look no further." Ibid.

Given the regulatory requirement to pay the employee his wages within ten working days of the last date of the applicable pay period, in this case, the last date of employment, it would appear that the entire legislative scheme simply does not apply to the payment of post-termination commissions. If the statute were interpreted to apply to post-termination commissions, the employer would arguably be required to make payment to the employee within ten days of his last date of employment. Since the consummation of the commission sale may never take place, or may take place weeks or months after the employee's last work period with the company, and may be ultimately subject to modifications or amendments, such a requirement would be both unfair and unworkable.

We have noted, "[U]nless expressly provided by the [WPL], employers may not withhold or divert any portion of an employee's wages." Rosen v. Smith Barney, Inc., 393 N.J. Super. 578, 585 (App. Div.), certif. denied, 192 N.J. 481 (2007).*fn5 In this respect, we conclude that these sections of the WPL only obligate the employer to pay all wages due to its employees at the date of termination, and, they must be paid within the timeframes required by statute or regulation. Any agreement, express or implied, that runs contrary to these requirements creates a cause of action for violation of the WPL. Winslow v. Corporate Exp., Inc., 364 N.J. Super. 128, 136 (App. Div. 2003).

However, the WPL does not curtail the ability of the parties to contract regarding a term of employment that does not violate the law. For example, in Winslow, we noted the employer was free to contractually change the commission structure previously in place, provided it did so with notice and after "afford[ing] [the employee] an opportunity to decide whether he wished to continue working at a reduced rate of compensation." Id. at 139 (citing Nolan v. Control Data Corp., 243 N.J. Super. 420, 430-32 (App. Div. 1990)). The failure to provide such notice, however, ran afoul of the WPL and thus provided the plaintiff with a cause of action under the statute. Id. at 136.

Here, however, no statutory mandate was violated because the post-termination commissions were not wages due at the time plaintiff decided to voluntarily terminate his employment with Eastern. Because plaintiff had no express statutory right to post-resignation commissions under the WPL, Eastern was free to set the terms of compensation without the need of express written acceptance by plaintiff.

Our conclusion that the denial of payment for post-termination commissions standing alone does not violate the WPL is bolstered by reference to the Sales Representatives' Rights Act, N.J.S.A. 2A:61A-1 to -8 (the SRRA), adopted by the legislature in 1990, some twenty-five years after enactment of the WPL. Because it only applies to a "[s]ales representative . . . other than an employee," N.J.S.A. 2A:61A-1(c), the SRRA is not applicable to the facts at hand. However, the SRRA explicitly requires the payment of post-termination commissions, providing that

When a contract between a principal and a sales representative to solicit orders is terminated, the commissions and other compensation earned as a result of the representative relationship and unpaid shall become due and payable within 30 days of the date the contract is terminated or within 30 days of the date commissions are due, whichever is later.

A sales representative shall receive commissions on goods ordered up to and including the last day of the contract even if accepted by the principal, delivered, and paid for after the end of the agreement. The commissions shall become due and payable within 30 days after payment would have been due under the contract if the contract had not been terminated. [N.J.S.A. 2A:61A-2.]

Thus, by enacting the SRRA, the Legislature saw fit to insure that independent sales representatives not only received their commissions after the termination of their contractual relationship, but also that payment was made to them essentially in accordance with that prior agreement. In doing so, the Legislature defined when a commission was due--whenever it was due under the parties' agreement--whether or not the contract was still in effect. This is obviously in sharp contrast with the WPL.

If the Legislature intended to accord the same statutory rights to an employee compensated on a commission basis, we assume it could have easily done so through modification of the express language of the WPL. Brodsky v. Grinnell Haulers, Inc., 181 N.J. 102, 112 (2004). The failure to do so, however, is entirely explainable because an employee, as opposed to an independent sales representative, generally continues to enjoy the benefits of employment right up until the date of termination. Medical benefits and vacation time, for example, continue to inure to the employee's benefit even while his commissions remain outstanding. Absent some independent contractual undertaking, however, the independent sales representative who is not employed by the company is only entitled to the commissions he has generated.

Even if Eastern's policy did not violate the WPL, plaintiff argues it could not be imposed unilaterally because it violates public policy in that it results in a forfeiture of monies to which he otherwise would have been entitled had he remained employed with defendant. We reject this argument.

In Rosen, supra, we upheld the provisions of a capital accumulation plan that specifically provided for a forfeiture of all rights to its deferred income if the employment were terminated prior to the applicable vesting period. 393 N.J. Super. at 581-82. We concluded that the provision was not against public policy in "view . . . of the employer's purpose and [the] reasonableness of [] utilizing a forfeiture provision." Id. at 593. We noted that the employer's "apparent intent to attract and retain employees and their continued loyal and faithful service," and its interest in maintaining its customer base, were valid purposes. Id. at 593-94. We further found that although the forfeiture provision may have inhibited an employee's decision to accept a new position and resulted in a financial windfall to the employer, those consequences did not violate public policy. Id. at 594.

We think the facts presented here are significantly different, present less of a hardship to the employee, and convince us that Eastern's commission policy does not violate public policy. First, whether the policy resulted in any forfeiture at all was something that was entirely within plaintiff's control. He decided when he wished to resign and, presumably, understood whether or not there were outstanding unpaid sales orders at the time. There is no evidence in the record that Eastern acted in bad faith or otherwise provoked plaintiff's resignation. Whether plaintiff's customers actually consummated the sale by paying Eastern was an additional factor that determined whether there were any monies at all subject to forfeiture.

Second, while it has been said that "equity abhors a forfeiture," "if parties choose to contract for a forfeiture, a court of equity will not interfere with that contract term in the absence of fraud, accident, surprise, or improper practice." Dunkin Donuts of Am., Inc. v. Middletown Donut Corp., 100 N.J. 166, 182 (1985)(citations omitted). Plaintiff dismissed any allegations of fraud against Eastern and the record certainly reveals that he was aware of the commission policy for at least a decade before resigning, thus he was not surprised. Since, as we noted above, the plaintiff's continued employment with full knowledge of these conditions formed a unilateral contract, we conclude that any forfeiture, if it existed, was the subject of the parties' contractual undertaking and did not violate public policy.

III.

We also agree with the motion judge's determination that plaintiff's equitable claims characterized as quasi-contract or quantum meruit cannot prevail.

It is well-recognized that the existence of an express contract bars any claims under an equitable theory of quasi- contract or quantum meruit. E. Paralyzed Veterans Ass'n. v. Camden, 111 N.J. 389, 410 (1988) (citingMosner v. Milner Hotels Inc., 6 N.J. 278, 280 (1951)); Kas Oriental Rugs, Inc. v. Ellman, 394 N.J. Super. 278, 286-87 (App. Div.), certif. denied, 192 N.J. 74 (2007). Here, Eastern's commission policy was an express contract term that precluded plaintiff's claims for quantum meruit and quasi-contract.

Moreover, plaintiff cannot recover under quasi-contract or quantum meruit because those equitable remedies apply only where a party confers a benefit to another with a reasonable expectation of payment. Weichert Co. Realtors v. Ryan, 128 N.J. 427, 437 (1992). In his reply brief, plaintiff argues that he had a reasonable expectation of payment based upon his disagreement with Eastern's policy and his refusal to acknowledge that it applied to him. However, plaintiff was fully aware that the policy applied to him and the other commissioned salespersons. He was fully aware of its consequences, and, in a sense, controlled the extent of any loss he claimed to have suffered as a result. In short, no reasonable factfinder could conclude that plaintiff believed the policy did not apply to him and that he would be paid merely because he disagreed with it.

Because the trial court correctly found that an express contract governed plaintiff's claim for post-resignation commission payments, its dismissal of plaintiffs implied contract claims based on theories of quasi-contract and quantum meruit was proper as a matter of law.

Affirmed.


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