By Pension and Benefits Editorial Staff
Because an employee’s managers knew he was terminally ill, his suggestion that he use vacation leave to extend his employment period into the following year may have been enough to trigger the employer’s obligation to start a dialogue with him about the availability of FMLA leave for that period, held a federal district court in Michigan, finding a trial necessary to resolve questions of whether the employer interfered with his FMLA rights when a manager encouraged him to make a clean break and retire at the end of the year instead. There was also a triable issue on whether the employer waived a contractual condition precedent that the employee had to be employed during the following year’s bonus payment period to receive his bonus, so his breach of contract claim also survived. However, the court rejected his assertion that the contractual requirement was unconscionable. His state-law disability discrimination claim also failed.
Sales incentive plan. The employee was an account manager, eligible for an annual bonus under the employer’s Incentive Sales Compensation Plan (ISCP). Under the ISCP, a participating sales employee is entitled to a bonus primarily calculated as a percentage of net revenue achieved by the employee in a calendar year. To receive payment, a participant must be employed during the "measurement period" (calendar year) and the "payment period." The payment period runs from January 1 through March 31 of the following year. The employee received bonuses for 2013, 2014, and 2015.
Cancer diagnosis, retirement. In 2015, the employee was diagnosed with a brain tumor. In August 2016, he met with the company chairman to discuss retirement, expressing concern over his old age and cancer. He also had a conversation with the company president in December 2016. Although he had accrued vacation days and had suggested using them to extend his employment into 2017, he was encouraged not to use them. He retired as of December 31, 2016.
Bonus denied. When April 2017 arrived, and he had not received his bonus check (which would have been about $142,000), he contacted the employer to complain that in one of his meetings prior to resigning, the employer should have reminded him that if he stayed until the end of the first quarter of 2017, he would have been eligible for the bonus.
The employer never responded, and the employee filed suit alleging breach of contract, unjust enrichment, promissory estoppel, and violations of the FMLA, the Michigan Persons with Disabilities Civil Rights Act (PWDCRA), and the Michigan Sales Representative Commission Act (SRCA). The employer moved for summary judgment.
Payment period requirement not unconscionable. The employer argued that the breach of contract claim should fail because the ISCP contains unambiguous eligibility requirements that include being employed with the company during the payment period, which the employee plainly did not meet for the 2016 bonus. He argued that the "payment period" requirement was procedurally and substantively unconscionable and that it was an unenforceable condition precedent, which the employer waived when it interfered with the employee’s effort to use his accrued vacation days and his FMLA leave entitlement to extend his employment into the payment period. The court found that the requirement that he work there during the payment period to receive the bonus was not unconscionable; it merely aligned the employer’s interest in retaining talented employees and the employee’s interest in building on his bonus for the following year.
But condition precedent may be unenforceable. But the court sided with the employee on his second theory, finding case law to support an argument that the requirement was a condition precedent that the employer could not enforce because it interfered with the employee’s effort to satisfy it. The employee could not have use accrued vacation time to satisfy the employment requirement through March 31 because he did not have sufficient time, and regardless, vacation could not be rolled over to the next year. However, the employee could potentially have used FMLA leave, which would have extended his employment to the payment period in 2017 and satisfied the condition precedent.
Breach of contract and FMLA claims. The employer argued that the employee did not ask for FMLA time, but the court held that the conversations between the employee and employer in late 2016 provided enough information to the employer to trigger its responsibility under the FMLA. The employer knew the employee was terminally ill with brain cancer and he had asked management about using vacation leave; so, the employer knew he was seeking leave for health-related reasons. Consequently, his FMLA interference claim and the breach of contract claim for his bonus would go to trial.
Other claims. The employer asserted that it could not have violated Michigan’s SRCA because the ISCP bonus is not a "commission" as defined under the statute, and even if it were, the SRCA states that a contract between a principal and a sales representative determines when a commission becomes due. The court agreed, because Michigan courts distinguish commissions from bonus plans that allow for incentive pay after a certain quota is met and the ISCP required employees to meet a quota before becoming eligible for a bonus. The employee’s promissory estoppel and unjust enrichment claims also failed, because the parties had a valid contract.
The employee claimed that the employer violated the PWDCRA by denying him his bonus but not denying a bonus to similarly situated non-disabled employees. For example, some bonus checks for 2016 were paid before March 31, 2017, and on one occasion, the employer paid a bonus to an employee who left the company before the end of the payment period. But the employer explained that the employee in question was fired for poor performance and signed a release which required the employer to pay his bonus. The court agreed that those conditions kept the employee from being a comparator. It also agreed that the payment of bonuses before March 31 did not amount to arbitrary noncompliance with the employment rule. And the employee produced no evidence that his disability was the real reason he was not awarded a bonus. Therefore, his PWDCRA claim failed.
SOURCE: Sienkiewicz v. Creative Techniques, Inc., (E.D. Mich.), No. 2:17-cv-12705-DML-RSW, October 18, 2018.
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