Nebraska Wage Payment and Collection Act Update – Can an Employer and Employee Contractually Define When a Commission Becomes Payable?

The Nebraska Supreme Court recently determined that an employer and an employee may contractually define when a commission becomes payable. In Coffey v. Planet Group, Inc., __N.W.2d__ (Apr. 4, 2014), the Court considered whether commissions are earned under an employee’s compensation plan for sales made by the employer after an employee, who was involved in the negotiating process, is no longer working for the company. The simple answer is no, as long as the compensation plan’s contractual terms prohibit it.

In the Planet Group case, a sales employee had been laid off, but projects he had worked on for the company, for which he would have earned a commission had he remained employed, were awarded to the company after the employee was laid off. The Court determined that the Nebraska Wage Payment and Collection Act (NWPCA), Neb. Rev. Stat. § 48-1229, controlled the outcome of the case. The Court found that the 2007 legislative amendments to the NWPCA allow an employer and employee to contractually define when a commission becomes payable. The compensation plan in this case did not permit the employee to earn commissions for work awarded to the employer after the employee had left the company. The contract said:

Commission Payment:

Commissions are paid at the end of the month following the month that contracts were approved, executed and received by Planet Group and down payments are received…75% of Commissions are paid upon signed contract, and the final 25% upon contract completion….The upfront commission portion is not fully “earned” until each contract is completed

…

Termination

A Participant who is terminated or resigns from employment with Planet Group the commission payments will cease…Commissions are deemed “earned” when a contact has been signed by the customer and the down payment under the contract has been received.

Ultimately, the Court determined that the compensation plan did not run afoul of the NWPCA and the compensation plan was upheld by the Court.

Additionally, the employee alleged the employer had acted in bad faith by terminating him but not agreeing to pay his commissions for sales made by the company as a result of the employee’s efforts while he was employed with the company. There was no formal employment contract between the employee and the employer. Thus, the Court noted that Nebraska’s principles of at-will employment applied. With at-will employment, an employer generally may terminate an employee for any lawful reason, at any time, unless the public policy exception applies.

Under Nebraska’s public policy exception, an employee can claim damages for wrongful discharge when the motivation for firing contravenes public policy. In determining whether public policy was violated, a court determines whether the employer’s conduct violated a constitutional, statutory, or regulatory provision or scheme (such as filing a workers’ compensation claim).

The Court ultimately decided that the NWPCA did not provide a basis for finding a violation of public policy in terminating an at-will employee. Moreover, there could have been no public policy basis for wrongful discharge in this case because the Court had already found the compensation contract allowed the employer to withhold commissions based upon payments to the employer received after an employee was terminated or had resigned.
It is important for employers to understand the complexities of Nebraska’s Wage Payment and Collection Act. Furthermore, if an employer has any employees who are compensated with commission payments, they must be aware of their obligations and rights under Nebraska Law.

For more information regarding compensation plans or the Nebraska Wage Payment and Collection Act, please contact Robert Seybert or any of the firm’s employment lawyers at rseybert@baylorevnen.com or 402-475-1075.