Geysen v. Securitas Security Services USA, Inc.
Geysen v. Securitas Security Services USA, Inc.
Opinion
This consolidated appeal 1 presents the question of whether an at-will employment agreement, providing that an employee's commissions will not be paid unless the employer has invoiced commissionable amounts to the client prior to the employee's termination, is contrary to public policy and a violation of General Statutes (Supp. 2016) § 31-72. 2 The defendant, Securitas Security Services, USA, Inc., appeals from the stipulated judgment of the trial court in favor of the plaintiff, Kevin Geysen, on his wage statute claim and the trial court's underlying ruling holding that this commission provision was contrary to public policy. Additionally, the plaintiff cross appeals claiming, inter alia, that the trial court improperly granted the motion to strike counts two and three of the complaint alleging breach of the implied covenant of good faith and fair dealing and wrongful termination in violation of public policy, respectively. We agree with the defendant that the trial court improperly determined that the commission provision violated public policy and constituted a violation of § 31-72. With regard to the plaintiff's cross appeal, we hold that count two of the plaintiff's complaint alleging breach of the implied covenant of good faith and fair dealing should not have been stricken but that count three alleging wrongful discharge was properly stricken. Accordingly, we reverse in part the judgment of the trial court. 3
The following procedural history and facts are relevant to this appeal. The defendant is a security services company that provides various protection services to industrial and commercial clients. These services are marketed through employees hired as business development managers (managers) who solicit new business from prospective and existing customers. In August, 2005, the defendant offered the plaintiff an at-will position as a manager. The defendant's offer letter, which the plaintiff signed in September, 2005, provided that the plaintiff's compensation was a weekly base salary and commissions on contracts he procured. 4 The offer letter referenced and mirrored the defendant's 2003 sales incentive plan, which was in effect at the time the plaintiff commenced his employment.
The defendant subsequently amended its sales incentive plan effective December 23, 2006, and revised the commission provision at issue. Section II, part C of the 2006 sales incentive plan regarding sales eligibility requirements provides that "[ c]ommission is only paid once work has been performed and invoiced to the client. Upon termination of services to the client all commissions cease, except that commission will be paid up through and including the final invoice. Upon the [ manager's ] termination of employment, all commissions cease, except that any commissionable amounts that have been invoiced [ to the client ] prior to the [ manager's ] [ t]ermination [ d]ate, as defined in [s]ection IV.D, will still be paid commission as part of final pay to the [ manager ]." (Emphasis added.)
From 2005 to 2008, the plaintiff worked as a manager, on behalf of the defendant, marketing new and supplemental security services to new and existing customers. Based on the applicable sales incentive plan, once the contract was executed and the sales eligibility requirements were satisfied, including invoicing to the client, the plaintiff was entitled to commission payments without having to perform any other work.
On May 22, 2008, Thomas R. Fagan, the defendant's regional vice president for human resources, hand delivered a memorandum to the plaintiff terminating his employment. The memorandum explained that the defendant had conducted an investigation into improper business activities that had resulted in significant risk exposure to the defendant and, as a result of the investigation findings, the defendant was terminating the plaintiff's employment effective May 22, 2008.
On August 18, 2009, the plaintiff filed a complaint alleging that the defendant violated § 31-72, breached his employment contract by violating the implied covenant of good faith and fair dealing, and wrongfully discharged him in violation of public policy. The plaintiff alleged that the defendant's reasons for his termination "were false and a pretext for nonpayment of owed commissions." The defendant moved to strike count two, alleging breach of the implied covenant of good faith and fair dealing, and count three, alleging wrongful discharge in violation of public policy. Relying on Burnham v. Karl &
Gelb, P.C.,
Before trial, the parties agreed that "the plaintiff's claim hinges on whether or not the language in the defendant's sales incentive plan, which provides that the right to commissions ceases upon the plaintiff's termination of employment, is enforceable." Therefore, the trial court agreed to decide the enforceability question and, in order to facilitate the trial court's determination, the parties entered into a stipulation of facts dated March 1, 2012. 6
The trial court determined that, because the plaintiff's right to commissions was not contingent upon his providing any further services to the defendant's customers, he had fully earned his commissions when his employment was terminated. Thus, the trial court found that since the provision in the sales incentive plan deprived him of those earned commissions, resulted in forfeiture of wages, and applied even to an employee who is terminated for no cause, the provision was unenforceable because it "violate[d] two public policies: the first, which strongly favors the payment of wages, and the second, which disfavors forfeitures."
On October 16, 2014, the parties stipulated to a judgment in favor of the plaintiff for unpaid commissions pursuant to § 31-72, but preserved their respective rights to appeal. The defendant appealed from the stipulated judgment and the plaintiff cross appealed. We now turn to the merits of those appeals.
I
We first address the defendant's claim that the commission provision was not void on public policy grounds and, therefore, the failure to pay the plaintiff's commissions was not a violation of § 31-72. We begin by setting out the applicable standard of review and relevant legal principles. "Although it is well established that parties are free to contract for whatever terms on which they may agree ... it is equally well established that contracts that violate public policy are unenforceable.... [T]he question [of] whether a contract is against public policy is [a] question of law dependent on the circumstances of the particular case, over which an appellate court has unlimited review." (Citations omitted; internal quotation marks omitted.)
Hanks v. Powder Ridge Restaurant Corp.,
Brown v. Soh,
"There is a strong public policy in Connecticut favoring freedom of contract.... This freedom includes the right to contract for the assumption of known or unknown hazards and risks that may arise as a consequence of the execution of the contract. Accordingly, in private disputes, a court must enforce the contract as drafted by the parties and may not relieve a contracting party from anticipated or actual difficulties undertaken pursuant to the contract, unless the contract is voidable on grounds such as mistake, fraud or unconscionability.... If a contract violates
public policy, this would be a ground to not enforce the contract.... A contract ... however, does not violate public policy just because the contract was made unwisely.... [C]ourts do not unmake bargains unwisely made. Absent other infirmities, bargains moved on calculated considerations, and whether provident or improvident, are entitled nevertheless to sanctions of the law.... Although parties might prefer to have the court decide the plain effect of their contract contrary to the agreement, it is not within its power to make a new and different agreement; contracts voluntarily and fairly made should be held valid and enforced in the courts." (Citations omitted; emphasis omitted; footnote omitted; internal quotation marks omitted.)
Schwartz v. Family Dental Group, P.C.,
If the commission provision at issue acts to negate the wage statutes, however, the provision violates public policy. See
Parente v. Pirozzoli,
We have held that § 31-72 "does not embody substantive standards to determine the amount of wages that are payable but provides penalties in order to deter employers from deferring wage payments once they have accrued. Section 31-72 is, therefore, a remedial statute rather than one creating independent substantive
rights.... [This] interpretation of § 31-72 supports the notion that the wage statutes, as a whole, do not provide substantive rights regarding
how
a wage is earned; rather, they provide remedial protections for those cases in which the employer-employee wage agreement is violated. The wage agreement is not dictated by the statutes; instead, it is the integrity of that wage agreement that is protected by the statutory provisions." (Citation omitted; emphasis in original; internal quotation marks omitted.)
Mytych v. May Dept. Stores Co.,
"In
Mytych
[
v. May Dept. Stores Co.,
supra,
With these applicable legal principles in mind, we now address whether the commission provision in the present case violates public policy and the wage statutes. The court in
Mytych
clearly addressed the timing of wage accrual and left the determination of this matter to the employment agreement. See
Mytych v. May Dept. Stores Co.,
supra,
In
Mytych v. May Dept. Stores Co.,
supra,
On the basis of our review of Connecticut law and the public policy of freedom of contract reflected in our common law, we do not believe that this commission provision on its face "negate[s] laws enacted for the common good" or is "designed to evade statutory requirements...." (Internal quotation marks omitted.)
Parente v. Pirozzoli,
supra,
We conclude, therefore, that the contract provision providing that commissions will be paid only if the work had been invoiced prior to termination of the employee does not violate public policy and is enforceable. Because the plaintiff was not due his commissions under the express and enforceable terms of his agreement with the defendant, and the agreement does not violate public policy, we hold that there was no violation of the wage statutes.
II
We now turn to the plaintiff's cross appeal from the trial court's grant of the defendant's motion to strike two counts of the complaint. "We begin by setting out the well established standard of review in an appeal from the granting of a motion to strike. Because a motion to strike challenges the legal sufficiency of a pleading and, consequently, requires no factual findings by the trial court, our review of the court's ruling ... is plenary.... We take the facts to be those alleged in the complaint that has been stricken and we construe the complaint in the manner most favorable to sustaining its legal sufficiency.... Thus, [i]f facts provable in the complaint would support a cause of action, the motion to strike must be denied.... Moreover, we note that [w]hat is necessarily implied [in an allegation] need not be expressly alleged.... It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted.... Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically." (Internal quotation marks omitted.)
Coppola Construction Co. v. Hoffman Enterprises Ltd. Partnership,
A
We analyze first the plaintiff's cross appeal seeking reinstatement of the breach of the implied covenant of good faith and fair dealing count. "[I]t is axiomatic that the ... duty of good faith and fair dealing is a covenant implied into a contract or a contractual relationship.... In other words, every contract carries an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement.... The covenant of good faith and fair dealing presupposes that the terms and purpose of the contract are agreed upon by the parties and that what is in dispute is a party's discretionary application or interpretation of a contract term."
11
(Citations omitted; internal quotation marks omitted.)
De La Concha of Hartford, Inc. v. Aetna Life Ins. Co.,
"To constitute a breach of [the implied covenant of good faith and fair dealing], the acts by which a defendant allegedly impedes the plaintiff's right to
receive benefits that he or she reasonably expected to receive under the contract must have been taken in bad faith.... Bad faith in general implies ... actual or constructive fraud, or a design to mislead or deceive
another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive.... Bad faith means more than mere negligence; it involves a dishonest purpose." (Citation omitted; internal quotation marks omitted.)
De La Concha of Hartford, Inc. v. Aetna Life Ins. Co.,
supra,
In
Magnan v. Anaconda Industries, Inc.,
Fortune
is particularly illustrative in our present case. In
Fortune,
under the express terms of an at-will employment contract, the plaintiff employee had received all the bonus commissions to which he was entitled when his employment with the defendant was terminated.
Fortune v. National Cash Register Co.,
supra,
The court in
Fortune
further stated that "[w]here the principal seeks to deprive the agent of all compensation by terminating the contractual relationship when the agent is on the brink of successfully completing the sale, the principal has acted in bad faith and the ensuing transaction between the principal and the buyer is to be regarded as having been accomplished by the agent.... The same result obtains where the principal attempts to deprive the agent of any portion of a commission due the agent. Courts have often applied this rule to prevent overreaching by employers and the forfeiture by employees of benefits almost earned by the rendering of substantial services." (Citation omitted.) Id., at 104-105,
Thus, although an employer may terminate the employee at will; see
Magnan v. Anaconda Industries, Inc.,
supra,
To be clear, an employer does not act in bad faith solely by refusing to pay commissions on sales invoiced after an employee's termination if that obligation is an express contract term. See
Magnan v. Anaconda Industries, Inc.,
supra,
In the present case, the trial court considered the plaintiff's claim that the covenant was breached to be essentially the same as a wrongful discharge claim. A breach of the implied covenant of good faith and fair dealing contract claim, however, is different than a wrongful termination claim because the former focuses on the fulfillment of the parties' reasonable expectations rather than on a violation of public policy.
13
As
articulated in
Wakefield v. Northern Telecom, Inc.,
supra,
"Where, however, a covenant of good faith is necessary to enable one party to receive the benefits promised for performance, it is implied by the law as necessary to effectuate the intent of the parties.... [
A contract
]
cannot be read to enable the defendant to terminate an employee for the purpose of avoiding the payment of commissions which are otherwise owed.
Such an interpretation would make the performance by one party the cause of the other party's [nonperformance]." (Emphasis added; citations omitted.) Accord
Arbeeny v. Kennedy Executive Search, Inc.,
We find the reasoning in Fortune, Wakefield and Arbeeny persuasive, and therefore, recognize the availability of a breach of the implied covenant of good faith and fair dealing contract claim when the termination of an employee was done with the intent to avoid the payment of commissions.
Turning to the allegations of the plaintiff's complaint in the present case, the plaintiff claims in relevant part that the defendant had "failed to pay commissions due to [the] [p]laintiff on certain sales made" and as such, the "[d]efendant's aforementioned conduct violated the implied covenant of good faith and fair dealing by failing to comply with [the] [p]laintiff's reasonable expectation that the [d]efendant would pay commissions earned by the [p]laintiff." These allegations focus on damages suffered due to the violation of the plaintiff's reasonable expectation regarding the payment of commissions.
15
If an employer can be shown to have interfered in bad
faith with an employee's
ability to secure his commissions, this would violate the reasonable expectation that his employer would not inhibit his ability to earn commissions he worked for under the contract. See
Empower Health, LLC v. Providence Health Solutions, LLC,
B
As to the plaintiff's wrongful discharge against public policy count, we agree with the trial court that it should have been stricken. "In
Sheets v. Teddy's Frosted Foods, Inc.,
[
"The question of whether a challenged discharge violates public policy ... is a question of law to be decided by the court...."
Faulkner v. United Technologies Corp.,
"In
Morris v. Hartford Courant Co.,
supra, [
"[W]e repeatedly have underscored our adherence to the principle that the public policy exception to the general rule allowing unfettered termination of an at-will employment relationship is a narrow one.... Consequently, we have rejected claims of wrongful discharge that have not been predicated upon an employer's violation of an important and clearly articulated public policy." (Citations omitted; internal quotation marks omitted.) Id., at 701,
In his reply brief, the plaintiff points us to the wage statutes and suggests that they espouse the important public policy in favor of the payment of wages, which the defendant contravened with his termination. Consistent with our conclusion in part I of this opinion, however, the wage statutes promote a public policy favoring the payment of
earned
wages. They should not be read to provide a broader public policy mandate than that which is represented. See
Daley v. Aetna Life & Casualty Co.,
As we have determined in this case that the commission provision provided is enforceable and does not violate the public policy embodied in § 31-72, the exercise of the defendant's at-will right to terminate the plaintiff does not violate statutorily based public policy. 16
We acknowledge that the plaintiff goes beyond statutorily based public policy in his complaint. The plaintiff alleges that his employment was terminated "as a pretext to deprive him of the just fruits of his labor" and that this violates "the public policy of justly compensating employees for their work." We believe, however, that the parameters of the public policy of this state with regard to the payment of wages is reflected in the wage statutes and that an employee cannot use the nonpayment of wages that have not accrued as the basis for a wrongful discharge claim. We leave it to the legislature to decide if it wishes to expand this public policy to include unearned wages in this context. See
Thibodeau v. Design Group One Architects, LLC,
supra, 260 Conn. at 715,
The judgment is reversed only with respect to the trial court's determination that the agreement violated public policy and § 31-72, and with respect to that court's granting of the motion to strike the count of the complaint alleging breach of the implied covenant of good faith and fair dealing, and the case is remanded with direction to deny the motion to strike that count of the complaint and for further proceedings according to law.
In this opinion the other justices concurred.
The defendant appealed, and the plaintiff cross appealed, to the Appellate Court from a stipulated judgment in favor of the plaintiff and against the defendant for unpaid commissions, but preserving their respective appeal rights. We transferred both the appeal and the cross appeal to this court pursuant to General Statutes § 51-199(c) and Practice Book § 65-1.
General Statutes (Supp. 2016) § 31-72 provides in relevant part: "When any employer fails to pay an employee wages in accordance with the provisions of sections 31-71a to 31-71i, inclusive, or fails to compensate an employee in accordance with section 31-76k or where an employee or a labor organization representing an employee institutes an action to enforce an arbitration award which requires an employer to make an employee whole or to make payments to an employee welfare fund, such employee or labor organization shall recover, in a civil action, (1) twice the full amount of such wages, with costs and such reasonable attorney's fees as may be allowed by the court, or (2) if the employer establishes that the employer had a good faith belief that the underpayment of wages was in compliance with law, the full amount of such wages or compensation, with costs and such reasonable attorney's fees as may be allowed by the court. Any agreement between an employee and his or her employer for payment of wages other than as specified in said sections shall be no defense to such action...."
Although § 31-72 was amended subsequent to the time the plaintiff filed his complaint in the present action; see Public Acts 2015, No. 15-86, § 2; those changes are not relevant to this appeal. For purposes of convenience, references herein are to the current revision of the statute that is codified in the 2016 Supplement.
The definition of "wages" under § 31-72 includes commissions. See General Statutes § 31-71a (3) (" '[w]ages' means compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation"). On appeal, the defendant does not challenge that these commissions were wages.
Due to our holding, we need not address the plaintiff's additional cross appeal issue concerning the trial court's denial of an award of double damages and attorney's fees pursuant to § 31-72. With regard to the plaintiff's discovery requests, the issue may be addressed on remand.
The parties do not dispute that the plaintiff procured the accounts at issue.
After this determination, the plaintiff amended his complaint to add a claim of unjust enrichment. The defendant then moved for summary judgment on the violation of § 31-72 count, however, the trial court denied the motion. The plaintiff claims that his unjust enrichment claim was part of the stipulated judgment entered in his favor. Because this claim is inadequately briefed and is not relevant to our determinations, we do not address this argument.
In the parties' stipulation, the plaintiff conceded that he understood the provision in the 2006 sales incentive plan, which provides that "[u]pon the [manager's] termination of employment, all commissions cease," to mean that he was not entitled to commissions on invoices executed after his termination date.
See General Statutes § 31-71e (permitting partial withholding of wages under certain circumstances).
We agree with the defendant that the plaintiff's claim that the 2006 sales incentive plan was not a contract is not preserved. Additionally, as we explain in part II A of this opinion, the implied covenant of good faith and fair dealing attaches to specific contract terms and if the sales incentive plan is not part of the agreement between the plaintiff and the defendant, the plaintiff's newly revived second count would not be available. We also note that the plaintiff signed the 2006 sales incentive plan and continued to work and receive compensation.
General Statutes § 31-71b (a)(1) provides in relevant part: "[E]ach employer, or the agent or representative of an employer, shall pay weekly all moneys due each employee on a regular pay day, designated in advance by the employer, in cash, by negotiable checks or, upon an employee's written request, by credit to such employee's account in any bank that has agreed with the employer to accept such wage deposits."
Although the plaintiff claims that the commission provision causes an unacceptable forfeiture of wages earned, we agree with the defendant that the trial court's reliance on our forfeiture jurisprudence in
Aetna Casualty & Surety Co. v. Murphy,
"Essentially [the implied covenant of good faith and fair dealing] is a rule of construction designed to fulfill the reasonable expectations of the contracting parties as they presumably intended. The principle, therefore, cannot be applied to achieve a result contrary to the clearly expressed terms of a contract, unless, possibly, those terms are contrary to public policy."
Magnan v. Anaconda Industries, Inc.,
The court in
Fortune v. National Cash Register Co.,
supra,
Under such a claim, termination is incidental, or a means, to accomplish the breach of the implied covenant of good faith and fair dealing. Cf., e.g.,
Empower Health, LLC v. Providence Health Solutions, LLC,
supra,
In
Wakefield v. Northern Telecom, Inc.,
supra,
The defendant claims that "the plaintiff did not allege that [he was fired] in order to deprive him of commissions that he might have earned at some unknown time in the future" due to the plaintiff's numerous assertions that the alleged commissions were "earned" and "due to him." Reading the complaint broadly, as we must, we find this argument unpersuasive. We believe that, although the plaintiff had not "earned" the commissions under the wage statutes, he may yet be able to demonstrate that he was nevertheless "owed" them because he was prevented from earning them due to the employer's breach of the implied covenant of good faith and fair dealing. In the present case, the plaintiff did allege that the defendant's "reasons for [his] termination were false and a pretext for nonpayment of owed commissions." (Emphasis added.)
Based on our discussion in part II A of this opinion, if an employer exercises the right to terminate in order to interfere in bad faith with an employee's ability to secure commissions, however, the employee's reasonable expectations would be violated and he or she can recover in contract.
Due to our determination, we need not address the defendant's argument, based on
Burnham v. Karl & Gelb, P.C.,
supra, 252 Conn. at 153,
Reference
- Full Case Name
- Kevin GEYSEN v. SECURITAS SECURITY SERVICES USA, INC.
- Cited By
- 54 cases
- Status
- Published