Auge v. Fairchild Equipment, Inc.

Background

Todd D. Auge sued Fairchild Equipment, Inc., alleging breach of contract and violations of the Minnesota Payment of Wages Act. The parties filed cross-motions for summary judgment, which asks whether the undisputed evidence requires judgment as a matter of law without a trial.

Auge worked for Fairchild as a field sales manager beginning in April 2013. He signed a 2013 commission plan and later signed a 2017 commission plan that took effect on April 1, 2017. The plans addressed commissions for equipment, rentals, parts, and services, as well as vacation time and some business expenses.

Auge claimed that Fairchild underpaid him on a JCB equipment transaction involving Birds Eye Foods, including by paying a 25 percent commission instead of the 30 percent he claimed and by excluding a $115,503.66 residual hold and an approximately $41,000 warranty reserve from the gross-profit calculation. He also sought commissions on five rental-purchase-option transactions, other equipment and rental transactions, parts and service sales, $400 in expenses, and $2,883.60 for unused vacation time. He claimed that these failures also violated Minnesota wage-payment statutes.

Contract claim

The court held that the 2017 commission plan governed the JCB transaction because the equipment was invoiced and shipped in June 2017, after the 2017 plan took effect. The court relied on undisputed evidence that commissions were earned after equipment was invoiced and shipped, including Auge’s deposition testimony. The court rejected Auge’s later declaration to the extent it contradicted his earlier sworn testimony. Because the 2017 plan set the commission at 25 percent, Fairchild did not breach the plan by paying that rate.

The court also held that Fairchild did not breach the 2017 plan by excluding the residual hold and warranty reserve from the initially recognized gross profit. The plan provided for commissions on gross profit booked in 2017 and later commissions on gross profit booked in subsequent years. The court found that Fairchild’s calculation was consistent with the plan and with its communications to Auge that those amounts would be recognized later.

As to the five rental-purchase-option transactions, the court held that the 2017 plan required the customer to purchase the rented equipment before a commission was earned. Four transactions had not resulted in a purchase before Auge resigned. The fifth resulted in a sale, but Fairchild lost money on it, so there was no gross profit on which to calculate a commission. The court further held that, even if the 2013 plan applied to some transactions, its language was ambiguous and the undisputed evidence established that commissions were paid only when the customer later purchased the equipment. Auge therefore was not entitled to commissions on any of the five transactions.

For several other transactions, Fairchild had sent Auge checks covering commissions it undisputedly owed, but Auge refused to accept them. The court held that the tendered payments defeated his breach-of-contract claims for those amounts. For a December 2016 rental, the evidence showed that the commission owed was $117 rather than the $819 Auge claimed, and Fairchild had also tendered that amount. Auge offered no argument or evidence supporting his claim for a May 2017 rental, which the 2017 plan generally excluded.

The court rejected Auge’s claim for parts and service commissions because Fairchild had changed its aftermarket sales program in 2016, informed its Minnesota sales employees that those commissions would no longer be paid, and Auge did not dispute that evidence. The court also rejected his claim for $400 in business expenses because he had not submitted the required expense report and had refused Fairchild’s tendered payment.

Finally, the court held that Auge had not shown a contractual right to payment for unused vacation time. The employee handbook said employees who failed to give two weeks’ notice would not receive payment for unused vacation, but the handbook also disclaimed any intent to create an employment contract. The 2017 commission plan stated that Auge was eligible for 120 hours of vacation in 2017 but did not require payment for unused accrued vacation time. The court therefore found no contractual breach.

Minnesota Payment of Wages Act claims

The court granted Fairchild summary judgment on Auge’s claim under Minnesota Statutes section 181.14, which requires payment of wages or commissions earned and unpaid when an employee resigns. The court concluded that most disputed commissions had not been earned. Although Fairchild had not promptly paid four commissions it undisputedly owed, it later tendered those amounts after Auge demanded payment. Under the statute, that tender prevented liability for those payments or related penalties.

The court also granted Fairchild summary judgment on Auge’s claim under Minnesota Statutes section 181.03. That provision prohibits an employer from changing the method, timing, or procedures for paying commissions earned through the employee’s last day if the change delays or reduces payment. The court found that Fairchild continued using the same general payment method, timing, and procedures after Auge resigned. It further found that reversing the initial deposit corrected an administrative error and did not reduce the amount properly owed. Any change in the commission-calculation method occurred before Auge resigned, so it could not violate section 181.03.

Disposition

Judge Wilhelmina M. Wright denied Todd D. Auge’s motion for summary judgment and granted Fairchild Equipment, Inc.’s motion for summary judgment. The court ordered that judgment be entered accordingly.