### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 18

- 260 9
A DRIEL O SORIO , Plaintiff

- Appellant ,

v.

T HE T ILE S HOP , LLC , Defendant

- Appellee

.

____________________ Appeal from the United States District Court for the Northern District of Illinois , Eastern Division

. No. 15 C 15

— Matthew F. Kennelly
, Judge

.

____________________
A RGUED D ECEMBER 3, 2018

— D ECIDED S EPTEMBER 23, 2019

____________________

Before S YKES , B ARRETT , and S T

. E VE , Circuit Judges

. S YKES , Circuit Judge

. Anyone who has worked in a commissioned sales position knows that earnings are unpredictable. Commissions often fluctuate from one pay period to the nex t

. The Tile Shop, LLC, a specialty retailer of ceramic and stone tile, uses a compensation system designed to smooth the earnings of its commissioned sales staff

. The Tile Shop pays a semi monthly “draw” of $1,000 ($24,000 annually) even if a sales associate earns less than that amount in2 No. 18

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commissions du ring th e pay period

. The Tile Shop reconciles and reco ver s any shortfall between actual earned commissions and the $1,000 draw in subsequent pay periods, but only from commission s in excess of $1,000

. For ten months Adriel Osorio sold tile and related products for The Tile Shop , first in Illinois and then in New Mexico . His earnings reflect ed the ebb and flow of sales

. W hen business was slow and his commissions totaled less than $1,000 in a pay period, The Tile Shop paid him the guaranteed $1,000 and reconciled the difference in later pay periods when his commissions exceeded $1,000

. He quit in July 2014.
Months later Osorio filed this class actio n alleg ing that The Tile Shop’s “recoverable draw” system violates the Illinois Wage Payment and Collection Act ( “ IWPCA ” or “the Act” ) and its implementing regulations

. As relevant here, t he regulatory scheme prohibit s employers from deduct ing more than 15 % from an employee ’ s wages per payc heck as repay ment for previous cash advance s

. Osorio ’s suit claimed that The Tile Shop ’s compensation system functions as a series of cash advances and his former employer deducted more than 15 % of his wages at various points to recoup previous draw payments. Ruling o n cross

- motions for summary judgment , the district judge held that The Tile Shop ’s compensation system does not involve “ cash advances ,” so no violat ion of Illinois law occurred

. We affirm, though on a different r ationale

. The Act prohibits “deductions by employers from wage s or final compens ation” unless specified conditions are met. 820 I LL

. C OMP

. S TAT . 115/9 (2018). The r ules for repayment of cash advances are found in the regulations , but the thresholdNo. 18

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question is whether The Tile Shop’s draw reconciliations are “deductions” from wages or final compensation . They are not. The reconciliations determine the employee’s gross wages before tax withholding and other deductions ar e made

. I. Background
The Tile Shop , LLC , sells tile and related material s and accessories . It operates 128 retail sto res across 31 states . E ach
store employs a manager, one or two assistant managers, and a staff of sales associates. Sales associates and assistant managers are primarily responsible for s ales

. The Tile Shop pays its sales associates and assistant managers pursuant to a “ Sales Associate Pay Plan

. ” The company gives prospective employees a copy of the plan with its offer letter. Portions of the plan have been revised over the years , but the material terms have not changed. The plan explains how the company compensates its sales staff , primarily through commissions but also with bonuses on sales of certa in products and periodic incentives. The Tile Shop pays employees on a semimonthly basis.

C ommission incom e naturally var ies from pay period to pay period depending on sales volume, the profitability of products sold, and the specific circumstances at the store in question

. To pro vide a stable and reliable income , The Tile Shop guarantees its sales staff a minimum of $1,000 for each semi monthly pay period , for an annual salary of at least $24,000

. If an employee earn s less than $1,000 in commissions in a pay period, The Tile Shop reconciles and recovers the difference in subsequent pay periods , but only against commission earnings in excess of the guaranteed minimum

.4 No. 18

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The $1,000 “ draw ” count s toward gross wages for purposes of payroll an d income tax es , and it is prorated if the employee does not work the full pay period. An employee’s first three pay periods are essentially a gra ce period

. The Tile Shop pays the guaranteed $1,000 and does not seek to recover any shortfall in actual commissions

. Beginning with the four th pay period, The Tile Shop reconciles any commission shortfalls below $1,000 against future com missions exceeding $1,000 in subsequent pay perio d s until recovered in full

. Notably, this r econcil iation formula determine s gross wages for purposes of payroll and income taxes and any other applicable deductions. An e mployee who leaves the company r eceive s a draw payment during his final pay period of employment even though he will not make additional sales

. The Tile Shop do es not require reimbursement of an outstandin g draw balance at the end of employment

. The Tile Shop employed Osorio as a sales associate in an Illinois store from September 2013 until February 2014 and as an assistant manager in a New Mexico store from F eb ruary to July 2014. His pay schedule reflects The Tile Shop ’s system of draws and r econciliations. For example, Osorio’s total compensation for the second pay period in December and first pay period of January included draw payment s. The Tile Shop recovered the difference after Osorio’ s strong performance to end January. In total, Osorio received $2,038.47 in recoverable draw compensation during his employment , and $1,141.46 was reconciled against subsequent commissions and incentive payments. When he le ft the company, he did not have to repay the balance.
I n January 2 015 Osorio filed this class

- action law suit against The Tile Shop alleging violations of the federal FairNo. 18

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Labor Standards Act, the IWPCA , and the Illinois Minimum Wage Law. T he district judge g ranted The Tile Shop ’s motion for partial judgment on the pleadings with respect to Osorio’s IWPCA claim

. His original complaint alleged that the company did not have his written authorization to recoup the draw payments . The judge ruled t hat he had authorized the recoupment by signing the pay plan attached to his offer of employment.
Osorio sought reconsideration, but t he judge de clined to revisit his decision

. Osorio later moved to amend his c omplaint to recharacterize the IWPCA claim as a chall enge to impermissible re coupments of “ cash advances. ” The judge granted the motion

. Osorio then moved for class certification on the reformulated IWPCA claim
, propos ing the following definition of the class : All persons employed in a Tile Shop retail store in the State of Illinois, except store managers, who had a deduction made to a paycheck received at any time from January 2, 2005 [,] up toand including the date of trial, in order to recoup a cash advance where the deduction was in excess of 15% of the g ross pay received in that paycheck.
This definition correlate d to Osorio ’s new legal theory, which rest ed on the Act’s implementing regulations

— more specifically , a n administrative rule providing that “[n]o cash advance repayment agreement shall provide fo r a repayment schedule of more than 15% of an employee’s gross wages or final compensation per paycheck.” I LL

. A DMIN

. C ODE tit. 56, § 300.800 (2018)

. T he judge granted the class

certifi cation motion.6 No. 18

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The parties then filed cross

- motions for summary judgment on the IWPCA claim

. T he judge granted The Tile Shop ’s motion and denied Osor io’s . He determin ed that the claim “h inge[d] on the question

... whether [The] Tile Shop ’s ‘recoverable draw’ system is a cash advance repayment ag reement.” He then examined the pay plan in detail and found one aspect particularly compelling : a departing employee receive s a draw in his final paycheck even if he make s less than $1,000 in commission s , and he is not required to pay it back . “Because the undisputed facts establish that [The] Tile Shop does not always require repayment of draws,” he concluded, “they do not constitute cash advance s .” The parties settled the FLSA and Illinois Minimum Wage Law claims, and the judge entered final judgment on t he IWPCA claim. Osorio appealed.
II. Discussion
We review a summary judgment de novo, construing evidence and drawing inferences in favor of the nonmoving party. Barefield v. Vill age of Winnetka , 81 F.3d 704, 708 (7th Cir. 1996).
The IWPCA prohibits “deductions by employers from wages or final compensation ” unless certain conditions are
met. § 115/9. As we’ve explained, the Act’s implementing regulations establish requirements for deductions from wages pursuant to a “cash advance repayment agreement,” one of which is the 15 %

- per

- paycheck limitation. I LL

. A DMIN

. C ODE tit. 56, § 300.800. In the district court, The Tile Shop made two arguments in opposition to Osorio ’s reformulated IWPCA claim. T he first was that the draw reconciliations areNo. 18

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not “deductions from wages or compensation” within the meaning of the Act. The second was that the draw system does not involve “cash advances” within the meaning of the regulations. The judge agreed with The Tile Shop ’s second argument, holding t hat the draws are not cash advances

. On appeal The Tile Shop r eiterate s both arguments

. W e find the first inquiry dispositive. The IWPCA is triggered only if the draw reconciliation s constitute “deduction s

... from wages or final compensation

. ” The Act broadly defines “wages” as “any compensation owed an employee by an employer pursuant to an employment contract or agreement between the 2 parties.” 820 I LL

. C OMP

. S TAT

. 115/2 (2018)

. But neither the statute n or the implementing regulations define the term “deductions,” nor h as any court defined the term as used in the Act

. The Tile Shop relies on Cohan v. Medline Indus tries , Inc. , 843 F.3d 660 (7th Cir. 2016) , but that case does not inform the analysis here

. In Cohan two employees claim ed that their employer, Medline , violated the IWPCA by making illegaldeductions from their commissions without written authorization. Id. at 661. The plaintiffs challenged two aspects of the company’s pay structure. First, Medline calculated a salesperson ’ s net growth in sales on a month

- over

- month basis, and if a salesperson had negative net growth for an account, th at result ed in a negative commission. Second, the commission calculation included a “carryover” component such that a salesperson with a negative overall territory sales growth in one month was required to cover th at loss with any positive sales growth in subsequent months. Id. at 663

– 64.
We rejected the plaintiffs’ claim because Medline ’s c ompensation p lan “clearly and unambiguously provided for8 No. 18

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negative growth being taken into account when calculating commissions .” Id. at 667 (emphasis added). That final word is key

— the challenged aspects of the Medline plan dealt with calculating the underlying commissions

. T his case , in contrast, d oes not challenge how The Tile Shop calculat es commissions. We return, then, to the question whether the draw reconciliations are “deductions ... from wages or final compensation.” Although the Act does not define “deduction,” if a statutory term has “ a settled legal meaning, [Illinois] courts will norma lly infer that the legislature intended to incorporate the established meaning.” People v. Johnson , 995 N.E.2d 986, 988 (Ill. 2013). In the payroll context, a deduction refer s to “ an amount of money that is taken by an employer from an employee ’ s pay, for income tax, insurance, etc.” See Payroll Deduction , C AMBRIDGE B USINESS E NGLISH D ICTIONARY , https://dictionary.cambridge.org/us/dictionary/english/ payroll

- deduction (last visited September 18 , 201 9 ). Another dictionary similarly defines the term: “[ T he] amount withheld by an employer from [an] employee ’ s earnings. It typically includes income tax, national insurance or socialsecurity contributions, and may also include group insurance or pension fund contributions

... .” See Payroll Deduction , Business Dictionary.com , http://www.business dictionary .com/ definition/payroll

- deduction.html last visited September 18 , 201 9 ). In other words, as used in this particular context , the term “deduction” refers to withholdings from an employee’s earnings, not the em ployer’s method of determining an employee’s earnings

. Related statutory provisions confirm this understanding

. In Illinois , as elsewhere, a word appearing “ more than onceNo. 18

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in a statute is presumed to have been used by the legislature with the same meaning each time, absent an indication that a different meaning was intended.” Baker v. Salomon , 334 N.E.2d 313, 316 (Ill. App. Ct. 1975); see also A NTONIN S CALIA & B RIAN A. G ARNE R , R EADING L AW : T HE I NTERPRETATION OF L EGAL T EXTS 170

– 73 (2012)

. In section 115/10 of the Act
, Illinois requires employers to “furnish each employee with an itemized statement of deductions made from his wages for each pay period.” 820 I LL

. C OMP

. S TAT . 115 /10 (2019) (emphasis added)

. And the implementing regulations prohibit deductions for certain expenses, such as for training or educational courses, I LL

. A DM IN

. C OD E tit. 56, § 300.780 (2019) ; damaged property , id. § 300. 82 0 ; and uniforms required by the employer, id. § 300.840, “unless the employee’s express written consent is given freely at the time the deduction is made.” Under section 115/ 10 and the regulations , the term “deduction” is used as a term of art to refer to exp ressly stated categories of expenses withheld from an employee’s pay. Considered in context, the term “deduction s ” as used in the Act refer s to withholdings from an employee’s gross wages , not the formula used to calculate an employee’s gross wages

. This p oses an insurmountable obstacle for Osorio

. The draw

- reconciliation system is part of The Tile Shop’s formula for calculating a sales associate’s semimonthly commission earnings

. It is not a deduction from the sales associ ate’s wages or final compensation

. Osorio’s paystub confirms this understanding : the draw payments and reconciliations appea r as line items under “ Earnings, ” not under

“ Deductions. ” To borrow a n accounting phrase , the draw reconciliation is made “above the line ” to calculate the10 No. 18

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employee’s gross wages before withholding for taxes and other applicable deductions are made.
Because the draw reconciliations are not “deductions ... from wages or final compensatio n” within the meaning of section 115/9, The Tile Sho p’s compensation system does not violate the IWPCA.
A FFIRMED