November 30, 2020

Volume X, Number 335

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Unexpected Side Effect: Breach of Contract Claims Related to COVID-19 Commissions

Now in its 29th week, the Barnes & Thornburg Wage & Hour Practice Group’s COVID-19 related workplace litigation tracker has now analyzed 605 complaints filed across the United States, in 12 different categories. This week’s spotlight is on a category of COVID-19 related workplace complaints that have arisen in the context of businesses seeing increased revenue as a result of the pandemic.

Two such cases were brought by commission-based employees working in sectors of the economy that have experienced a boost in demand due to the pandemic: healthcare and sales of cleaning products. In both cases, the employees allege they earned large commissions in the first half of 2020 due to pandemic-related revenue, but that their employers have refused to give them their proper share of the windfall.

In Patterson v. SerVaas, the plaintiff was executive vice president of sales for a manufacturer of cleaning products. The plaintiff’s contract provided for a base salary, and 24 percent of any increase in sales in each “semester” (i.e., the first and second six months of the calendar year). Sales of the defendant’s product from March through June 2020 skyrocketed, due to the COVID-19 pandemic. However, the plaintiff alleges that the defendant took the position that it would not credit all of the sales from March through June towards the plaintiff’s commission because the pandemic, and not the plaintiff’s sales skills, was responsible for the increase. The defendant proposed to average the amount of sales from January and February, and to extrapolate from that average for the remainder of the semester (i.e. through June). The plaintiff objected to this proposal, insisting on being credited for the entirety of the sales increase, and sued the defendant for breach of contract.

In Bhaghani v. Round Table Medical Consultants, the plaintiff was a call center employee for the defendants, who own emergency room clinics. The plaintiff claims that he was supposed to receive $3 per patient that he referred to the clinics. According to the plaintiff, when the COVID-19 pandemic hit, his referral numbers skyrocketed, going from approximately 2,000 patients per month to more than 44,000 patients in a month. He claims that for the month of July, he is owed referral fees of $134,235, plus additional amounts for August and September, which the defendants refused to pay. Consequently, he sued the defendants for breach of contract. 

While the COVID-19 pandemic has depressed many sectors of the economy, some businesses, such as healthcare facilities, delivery services, and manufacturers of cleaning products, are seeing increased demand. All businesses, including those experiencing revenue growth, would do well to continue paying employees any compensation owed. Should a business choose to do so, it may want to later reevaluate or renegotiate commission structures. If in doubt, seek guidance from your labor and employment attorney.

© 2020 BARNES & THORNBURG LLPNational Law Review, Volume X, Number 325
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Associate

Caroline represents employers in a range of actions involving harassment, retaliation, discrimination, wrongful termination, and wage and hour claims, including class actions.

Beyond litigation and agency representation, Caroline counsels senior management on day-to-day human resources and employee relations issues, including wage and hour compliance, disciplinary and performance counseling, reasonable accommodation, termination decisions, internal complaints and investigations, and employee classifications. She also assists with reviews and updates to company handbooks, policies...

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Anthony Glenn Employment lawyer Barnes Thornburg
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Anthony K. Glenn is an associate in Barnes & Thornburg's Indianapolis office and is a member of the Labor and Employment Law Department.

Anthony has experience counseling clients on a number of issues concerning both traditional labor and employment law, such as termination decisions, medical leave management, disability accommodation, workplace discrimination, and wage and hour issues, as well as union avoidance and management of a collective bargaining relationship. He also has experience with the litigation process in federal and state employment agencies...

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Mark Wallin, Attorney, BT, Chicago, Labor Employment
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In order to provide the best counsel, Mark Wallin believes it is his role to understand his clients’ business needs so he can help them determine what resolution will provide the most benefit. His keen ability to understand his clients’ practical concerns allows him to advise on the best path to successfully resolve issues – whether through traditional litigation or negotiated resolution.

In the course of his practice, Mark has focused on providing the highest-level of service to his clients and building long-term relationships. Specifically, he defends employers in a wide range of...

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Peter J. Wozniak Barnes Thornburg Chicago  Labor Employment
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Pete Wozniak is a vigorous advocate who strives to help his clients navigate issues that can be fraught with challenges as painlessly and efficiently as possible. He is a candid and personable counselor, offering his clients direct advice by leveraging his deep experience performing a broad range of outcome critical functions for complex labor and employment matters.

Pete represents clients across a number of industries, including transportation and logistics, restaurants, retail, manufacturing, and temporary staffing. Handling a number of high profile matters, he identifies the...

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