Greg Gerber posted on March 18, 2010 13:23
RICHMOND, Va. -- The Fourth Circuit Court of Appeals ruled last week that Forest River could reduce commissions by 50 percent for employees who leave the company. But the court let stand a lower court decision that awarded triple damages to an employee after the company failed to pay commissions within 72 hours of termination.
According to information provided by eagle.com, David Gregory was employed by Forest River, Inc., as a commissioned salesperson from 2002 until he was terminated in July 2007. After his termination, he sued Forest River alleging the firm violated the West Virginia Wage Payment and Collection Act by failing to pay him all commissions due in a timely manner.
A lower court ruled in Gregory's favor and awarded him damages in the amount of $105,095.13 plus prejudgment interest. Forest River appealed that ruling.
West Virginia law requires that employees terminated by the company be paid all wages and commissions due to them within 72 hours of their departure. Forest River continued paying Gregory commissions through December 2007. The company argued that the orders had not yet shipped, and therefore, were not eligible for any commissions.
Forest River also claimed that because they are headquartered in Indiana, they were not "doing business" in West Virginia and, therefore, not subject to that state's employment law. However, the court ruled that since Gregory was representing the company and taking orders for RVs from his home in West Virginia, the company was engaged in business in the state for purposes of complying with compensation law.
The court also reviewed Forest River's policy of reducing commissions by 50 percent to employees who leave the company. Apparently, the company created a policy in 1996 outlining how commissions are paid, and Forest River amended that policy in 2005 to pay commissions when units are shipped, not when they are invoiced.
The court ruled that both Forest River and Gregory agreed to the terms of that policy as a condition of employment. Therefore, the company was justified in reducing Gregory's final commissions by 50 percent.
However, Judge Andre Davis dissented from the majority opinion saying he felt Forest River violated West Virginia law by paying Gregory half the standard wages "solely for the reason that Forest River fired him."
In his dissenting opinion, Davis wrote, "under West Virginia law, if Gregory completed his work selling the RVs under contract, Forest River cannot change his compensation merely because they fired him. The company should not be permitted to use its policy to circumvent the law."
By not paying the withheld commission to other employees who had to do the work necessary to process the orders Gregory took, Davis said Forest River earns a windfall when terminating a commission-based employee.
The case was returned to the lower court for further review.
To read the complete decision posted by Leagle.com, click here.