Zachary Short worked for Elliott Equipment Company from April 2012 until March 2014, when he voluntarily quit his job. Short was hired to sell garbage trucks to private entities and local governments. Elliott paid him an annual base salary of $35,000 plus a $15,000 draw against commissions for the first year.
When he joined the company, he signed a document called "Commission Policy and Territory Agreement,” which stated that "[a]ll commissionable new equipment sales with profit levels up to 25 percent will be paid a commission of 1 percent of the new equipment sales price not including the new chassis portion of the sale if applicable."
Elliott assigned Short to Missouri, where he pursued the city of Columbia as a potential customer. The company had sold the city one truck two years before Short began his employment, but it had no ongoing relationship with the city. Thanks to Short’s efforts—submitting bids and placing orders—the city purchased nine trucks from Elliott, none of which had been delivered to the city by the time Short left the company.
Two months after Short’s departure, DaLena Elliott, wife of the company owner, Gene Elliott, and payroll officer, sent an email to Gene and company vice president Rick Vanwassenhove asking, "So was the final decision to pay [Short] for 50 percent commission on ALL City of Columbia sales? Looks like they're starting to come through in May." Vanwassenhove, who approved all commissions, responded, "I would wait and see how much his mistakes end up costing us after all is said and done before paying if up to me.” For his part, Gene responded in agreement with Vanwassenhove.
Short’s replacement, Patrick Wisor, delivered the trucks to the city as they arrived throughout the summer of 2014. However, due to the fault of the manufacturer or Short, a number of trucks had problems. As a result, Wisor spent many days dealing with these complications so the city would accept the trucks and pay the balances due on them.
In June 2014, DaLena emailed Vanwassenhove asking "what [he] would like to pay out to Patrick Wisor on the prior sales he's assisted with that were Zac Short's and also what [he] would like [her] to extend to Zac for those sales prior to his depart[ure]." Vanwassenhove told her to pay Wisor half of the normal commission Short would have received, adding "I am finding things out about [Short] since he left that are of low honor and integrity. I would not pay him another dollar at this point." Based on the company's calculation, the 1 percent commission on the trucks amounted to $8,332. Of that, Wisor was paid $3,577. No action was taken with the remaining $4,755.
The following month, Short emailed Vanwassenhove asking "how things were coming with the trucks [he] sold to Columbia,” adding, "I was expecting to have received some commission from something by now. Let me know." Three days later, Vanwassenhove responded, "We will not be paying commission for the items which you started the sales process on but did not finish all the way through the completion and equipment delivery stage."
Thereafter, Short exchanged emails with various company personnel. In an August 18 message, Gene informed Short he did not "think [Short was] owed one cent." Among the reasons he gave included that "[p]art of the sales process is to follow through with everything that has to do with the sale" and salesmen "are not paid a commission until all those things are done," that he "failed to turn in the bid [to the city of St. Louis] or turned it in late" and that he was "trying to sell [a private hauler] a piece of equipment that was coming from somewhere other than Elliott."
Copies of the message went to Vanwassenhove and DeLena. Almost immediately, Vanwassenhove responded to Gene and DaLena with the following: “It is really a simple thing if anyone else ever asks if they will get commission for items sold while they were our salesman of record . . . If you sell it, it gets delivered and we get paid before the salesman quits then the salesman should be paid commission for it. Sound correct?”
DaLena responded to Vanwassenhove's email stating, “Sounds good to me. Also, I think that is only fair to those stepping into these deals and having to help finalize or deliver them. If the money was that important to [Short], then he should have been more dedicated to EEC to finish his ‘relationship’ with these customers to the final payment was made. We can't start rewarding employees for leaving us and in my opinion that is what he is essentially asking us to do.”
Short filed suit in the Iowa District Court for Polk County (Des Moines), alleging that Elliott owed him unpaid commissions. In response, Elliott denied Short had earned any commission and filed a counterclaim maintaining Short had breached an oral contract as part of his employment obligations by failing to timely submit bids to the city of St. Louis, which had damaged the company to the extent of $60,000.
A month later, the company sent each of its salespersons an "addendum to all salesmen sales contracts and territory agreements." From then on, commissions would be paid only if a salesperson fully performed the “sales process” before employment at Elliott ended. By "sales process," the company said it meant all of these tasks:
filled out quote or bid, received the order or PO, ordered the equipment to the specification, coordinated with the chassis dealer the delivery to our manufacturer, answered any questions our manufacturer has, received the equipment from the manufacturer, check that the equipment met all specifications, made any adjustments to the equipment that needed to be done, coordinated delivery to the customer, delivered and trained the customer, any trade-ins are delivered to [Elliott’s] location, made sure the trade-in is in "same condition" as traded for and payment has been received and paid in full.
Short's lawsuit and Elliott's counterclaim proceeded to a trial before Judge Bradley McCall. Elliott offered two theories to support its contention that Short had not earned any commission on the sale of the nine trucks. First, Short had not completed the "sales process." At trial, each employee-witness of Elliott, including Gene, testified the company had never paid a commission for "just taking an order," as the company maintained Short had done. Several employees, including Gene and Vanwassenhove, testified as to how a commission was earned. Each witness referred to the items in the sales contract addendum, but all admitted that the new provisions were not created until after the lawsuit was filed. Moreover, Gene conceded having paid another salesperson partial commissions on sales he had started but not completed before he left.
Second, the company maintained that any commission Short had earned should be offset by the additional expenditures to fix problems with the trucks. Various employees testified the company incurred $13,000 in expenses, though later examination of the claimed amount showed approximately $1,000 of those costs were actually paid by outside manufacturers, and another approximately $2,500 was the amount Elliott "charged" for trips to Columbia by their in-house mechanics who were not reimbursed above their normal salary for the trips. Thus, evidence did support additional expenses totaling about $9,500 incurred by Elliott on the sale of the nine trucks.
Finally, the company insisted that whatever commission amount Short had earned would be more than offset by the extra costs. But that argument was undercut by the company’s own employees who testified they had never heard of the company using expenses to diminish or erase a commission. In fact, the company’s practice was to subtract the additional amount of fees from the profit with the salesperson receiving 1 percent of the reduced profit as their commission. For example, if a salesperson’s errors cost the company $5,000 in profit, the salesperson would not get the commission on that $5,000; the commission would be reduced by 1 percent of $5,000, or $50.
Following both parties' presentation of evidence, Judge McCall ruled that Short had earned a partial commission, noting he had cultivated a relationship with the city of Columbia, prepared and submitted the bid and achieved the initial sale of those trucks. As the judge found, he “continued to do many of those tasks [outlined as the 'sales process'] after the bid was accepted by the City of Columbia." He awarded Short $4,660 in unpaid commission. To reach that number, the court used the amount Elliott had determined was 1 percent of the profit, $8,332, and subtracted the amount already paid to Wisor ($3,577) and 1 percent of the amount of extra expenses incurred by Elliott Equipment ($95).
The trial court dismissed Elliott’s counterclaim against Short for several reasons: no evidence that Short breached any type of agreement by failing to hand deliver a bid to the city of St. Louis; no evidence why the bid, submitted via UPS, did not timely arrive in St. Louis; no evidence that, if the bid had been timely submitted, Elliott would have won the sale; and, last but not least, Iowa law does not allow employers to sue their employees for alleged failures to perform their responsibilities.
Short then filed a request for attorney’s fees, noting that state law says a successful employee must be awarded "court costs and usual and necessary attorney's fees incurred in recovering the unpaid wages or expenses.” Elliott opposed the application, but the court, after a hearing, ordered Elliott to pay Short $44,398 in attorney fees.
On appeal, Elliott maintained that, as the employer, it has the right to put conditions on a commission. Under Iowa law, an employer may indeed put constraints on how a commission is earned, but the question addressed by the appellate panel was whether Elliott had a practice of actually doing so.
“Elliott Equipment did not have a written policy about when a commission was earned or what the ‘sales process’ entailed until after this dispute arose,” the appeals court noted. “Additionally, Gene admitted he paid another salesman partial commissions even though that salesman did not complete the entire process. Emails between Gene, DaLena and Vanwassenhove establish that Elliott Equipment contemplated paying Short at least a partial commission in May 2014—a time when it already was clear Short had left without finishing the [process].” Neither party having contested how the trial judge calculated the award of unpaid commissions, the appeals court upheld the amount. But considerably more than $4,660 was at stake.
Elliott challenged the award of attorney fees as excessive. But Iowa judges have broad discretion in assessing attorney fees and costs against an employer that wrongfully withheld wages—whether or not the employer intentionally did so.
Elliott did not challenge the hourly rate charged by the plaintiff's attorneys, nor did it identify any itemized entries claimed to be duplicative or excessive. It did complain about the number of hours spent on the case by Short's attorneys arguing various motions. However, the appeals court noted that Elliott was unsuccessful prevailing on any motions—whether filed for itself or filed by Short. In particular, Elliott, while complaining about how much time Short’s attorneys spent, had resisted Short’s motion to conduct the trial in an expedited fashion. Moreover, Elliott attempted to minimize its role in the protracted litigation by pointing out that it offered to settle the claim. The company initially did offer Short $1,000 for a release from the lawsuit, but it never raised its offer or negotiated further.
The risk of stonewalling an employee's claim for unpaid wages fairly rests on the party best equipped to financially bear it— “the employer,” the opinion stated. “Having reviewed the record and finding no abuse of the district court's broad discretion in determining the amount of ‘usual and necessary’ fees, we affirm the district court's award of fees to Short.”
For good measure, the panel also ruled that Short was entitled to an additional award of attorney’s fees and costs he incurred in defending the appeal. The case is now back in district court where the judge will determine how much Short will be reimbursed.
Barry Shanoff is a Bethesda, Md., attorney and general counsel of the Solid Waste Association of North America.