Powerpoint Presentation Statements Support Claim for Uncapped Commissions
An employee’s claims that his employer unlawfully “capped” his sales commissions was allowed to proceed, despite language in the governing Incentive Plan Letter (IPL) that the employer reserved the right to adjust the plan’s terms.
In Fessler v. IBM Corps., the employee’s IPL stated that it did not constitute a promise and that the employer could adjust the terms. Subsequent powerpoint presentations, however, repeatedly asserted that commissions would be uncapped, which was consistent with the employee’s past experience. When the employee received commissions lower than expected, he sued for fraud, among other things, on the grounds that if the employer told its salespeople that commissions are capped, its recruiting efforts would be hampered. Thus, the employer had a practice of telling salespeople that their commissions will be uncapped, and then capping certain high-commission deals.
Although the IPL contained a disclaimer that the employer reserved the right to adjust the plan, the 4th Circuit held that “a contractual disclaimer of reliance is not a prophylactic against a claim of fraud.” In this case, the 4th Circuit determined that a jury could find the powerpoint statements to be adjustments to the plan’s terms on which the employee reasonably relied. Thus, this case warns employers to be careful about making statements about compensation – whether in writing or orally, and formally or informally – that could be deemed to modify any existing compensation plans.