January 19, 2011
Last week, both the Seventh Circuit and the Indiana Court of Appeals issued decisions dealing with
I.C. § 22-2-5-1, et seq., Indiana's Wage Payment Statute. This post will address the Seventh Circuit's decision in
Thomas v. H&R Block Eastern Enterprises, Inc., 630 F.3d 659 (7th Cir. 2011), Case No. 10-1482, decided on January 12, 2001. The Indiana Court of Appeals's case is discussed
here. In this case, the central question was whether compensation that H&R Block paid to its employees were wages under the Wage Payment Statute.
less..
The Wage Payment Statute requires that employers pay "wages" within ten days after they are earned. The statute does not define "wages," which forces courts to engage in a multi-factor test to determine whether a particular form of compensation qualifies as "wages" under the statute.
When the plaintiff was employed by H&R Block, it based its employee's compensation on both an hourly wage and on what it called "end-of-season" (“EOS”) compensation. An employee was eligible for EOS compensation only if the sum of various specified amounts exceeded the aggregate gross hourly wages paid to her during the tax season. The plaintiff sued H&R Block under the Wage Payment Statute, alleging that it failed to pay EOS compensation within ten days after it was earned. H&R Block moved for summary judgment and the district court granted that motion.
On appeal, the plaintiff asked that the Court certify the issue to the Indiana Supreme Court, but the Court refused, stating that it was unnecessary "to certify such a fact-specific question," because it was unlikely to have far-reaching precedential effect for others."
Addressing the merits, the Court described the multi-factor test that Indiana courts use when determining whether a particular form of compensation is a "wage" under the Wage Payment Statute. It noted that "the substance of the compensation, and not its label," defines whether it qualifies as "wages" under the statute and held that the EOS compensation did not qualify as "wages." It relied upon the following facts to reach this conclusion:
First, Thomas's EOS compensation was "dependent on other factors than [her] efforts," since a portion of the EOS compensation was based on the contingency of collecting from customers. Not to mention, Atkinson's testimony indicates that it was at least difficult, if not impossible, to calculate EOS compensation within the ten-day period, and the Sheet, providing that H&R Block would pay EOS compensation on a date after the expiration of the tenday period, "or as soon thereafter as is reasonable under the circumstances," demonstrates the parties' understanding and expectation that the calculation and payment of the EOS compensation would likely take more than ten days. Second, Thomas's EOS compensation was not directly related to the time she worked. Since EOS compensation was partially based on collections, Thomas theoretically could have worked for an entire tax season without earning any EOS compensation. Third, H&R Block paid EOS compensation annually, at the end of every tax season, and not on a regular, periodic basis. Finally, as explained in more detail below, H&R Block paid Thomas an hourly wage in addition to EOS compensation.
There are a few practice pointers to take from this case. First, if you want a federal court to certify a question to the Indiana Supreme Court, then you need to describe why the Indiana Supreme Court's decision would have a far-reaching precedential effect. Second, when trying to define compensation as a "wage" under the Wage Payment Statute, do not rely on labels -- look to the substantive factors the courts consider when making that determination.
Lessons:
- Your chances of having a question certified to the Indiana Supreme Court increase if you can argue that the result will have a far-reaching precedential effect.
- The Indiana Wage Statute doesn't define wage and courts use a multi-factor test to determine whether a particular form of compensation is a "wage."
Trackback Address :: http://www.indianalawupdate.com/trackback/117
