Opinion ID: 182625
Heading Depth: 2
Heading Rank: 1

Heading: “Wages” Under Indiana Law

Text: We review de novo a district court’s decision to grant summary judgment, “construing all facts and inferences in the light most favorable to the party opposing the motion. We will affirm if the summary judgment record shows that ‘there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.’ ” Bio v. Fed. Express Corp., 424 F.3d 593, 596 (7th Cir. 2005) (citing FED. R. C IV. P. 56(c)). When addressing a question of state law while sitting in diversity, “our task is to ascertain the substantive content of state law as it either has been determined by the highest court of the state or as it would be by that court if the present case were before it now.” Woidtke v. St. Claire Cnty., Ill., 335 F.3d 558, 562 (7th Cir. 2003) (internal quotation marks and citation omitted). If the state’s highest court has yet to rule on an issue, “decisions of the state appellate courts control, unless there are persuasive indications that the state supreme court would decide the issue differently.” Research Sys. Corp. v. ISPOS Publicite, 276 F.3d 914, 925 (7th Cir. 2002). No. 10-1482 7 Indiana’s Wage Payment Statute, IND. C ODE. § 22-2-5-1 et seq., requires employers to pay their employees’ “wages” within ten days of the date they are earned, and allows employees to recover damages and attorney fees from employers who pay late. See IND. C ODE. §§ 22-2-5- 1, -2; Naugle v. Beech Grove City Schs., 864 N.E.2d 1058, 1063 (Ind. 2007). Because the W age Paym ent Statute does not define “wages,” Indiana courts look to the closely-related Wage Claims Statute, which defines wages as “all amounts at which the labor or service rendered is recompensed, whether the amount is fixed or ascertained on a time, task, piece, or commission basis, or in any other method of calculating such amount.” IND. C ODE § 22-2-9-1(b); see Highhouse v. Midwest Orthopedic Inst., P.C., 807 N.E.2d 737, 739 (Ind. 2004). As a preliminary matter, “[t]he name given to the method of compensation is not controlling. Rather, we will consider the substance of the compensation to determine whether it is a wage and, therefore, subject to the Wage Payment Statute.” Kopka, Landau & Pinkus v. Hansen, 874 N.E.2d 1065, 1072 (Ind. Ct. App. 2007). The Indiana Supreme Court explained that a particular form of compensation is a wage under the Indiana Wage Payment Statute if “it is compensation for time worked and is not linked to a contingency such as the financial success of the company.” Highhouse, 807 N.E.2d at 740 (internal quotation marks and citations omitted); see also id. at 739 (accepting the lower court’s test of wages, which provided that “a bonus is a wage if the 8 No. 10-1482 bonus directly relates to the time that an employee works, is paid with regularity, and is not dictated by the employer’s financial success”). Applying this standard, Indiana courts consider a variety of factors to guide their determination of whether compensation similar to EOS compensation constitutes a wage. First, Indiana courts are more likely to find compensation a wage if it is “not linked to a contingency.” Naugle, 864 N.E.2d at 1067 (quoting Highhouse, 807 N.E.2d at 740); see also Harney v. Speedway SuperAmerica, 526 F.3d 1099, 1105 (7th Cir. 2008) (same). For example, compensation based on the performance of a company is less likely be deemed a wage. See, e.g., Highhouse, 807 N.E.2d at 740. Similarly, compensation is less likely to be a wage if it is contingent on a company’s collection efforts. See Hansen, 874 N.E.2d at 1074 (“It only takes one reason, however, and here, as in Highhouse, the disputed compensation was tied to collection rather than billing.”); see also Highhouse, 807 N.E.2d at 740 (“[B]ecause Highhouse’s bonus was based on collections for his services, not billings, substantially more than ten days after the services were performed might well be needed before the bonus amounts can be calculated.”). The Indiana Supreme Court explained that payment contingent on factors outside of an employee’s or employer’s control “is not consistent with the time constraints imposed by the Wage Payment Statute.” Highhouse, 807 N.E.2d at 740; see also Harney, 526 F.3d at 1106. Relatedly, the Indiana Supreme Court explained that compensation is less likely to constitute a wage when it is difficult to calculate and pay within ten days after it was earned. See No. 10-1482 9 Highhouse, 807 N.E.2d at 740; see also Harney, 526 F.3d at 1106. Thus, although parties cannot contract out of the Ten-Day Rule, Indiana courts consider whether the compensation agreement calls for payment more than ten days after it was earned when determining whether compensation is difficult to calculate and pay within the ten-day period. See, e.g., Highhouse, 807 N.E.2d at 740 (“An employer may not escape the Act by obtaining the employee’s agreement that wages are not payable within the statutorily prescribed times. But the provision for annual payments lends support to the view that both parties recognize that frequent calculation and payment was difficult if not impossible.”); Hansen, 874 N.E.2d at 1074 (“[H]ere, as in Highhouse, payments were made on a schedule—i.e., monthly—indicating that more frequent calculation and payment in compliance with the Wage Payment Statute’s ten-day rule would have been difficult, if not impossible.”). Second, related to the first factor, Indiana courts also consider whether the compensation “directly relates to the time that an employee works.” Highhouse, 807 N.E.2d at 739; see also Naugle, 864 N.E.2d at 1067 (“[A] bonus is a wage if it is compensation for time worked and is not linked to a contingency such as the financial success of the company.” (quoting Highhouse, 807 N.E.2d at 740)); McCausland v. Walter USA, Inc., 918 N.E.2d 420, 426 (Ind. Ct. App. 2009); Hansen, 874 N.E.2d at 1072 (“[I]f compensation is not linked to the amount of work done by the employee or if the compensation is based on the financial success of the employer, it is not a ‘wage.’ ”). 10 No. 10-1482 Third, Indiana courts consider whether wages are paid on “a regular periodic basis for regular work done by the employee.” Hansen, 874 N.E.2d at 1072 (quoting Gress v. Fabcon, Inc., 826 N.E.2d 1, 3 (Ind. Ct. App. 2005)); see also Highhouse, 807 N.E.2d at 739. Thus, when a particular form of compensation is paid annually, it is less likely to be considered a wage. See, e.g., Manzon v. Stant Corp., 138 F. Supp. 2d 1110, 1114 (S.D. Ind. 2001). Fourth, Indiana courts consider whether the compensation in question is paid in addition to wages. In Gress, for example, an employee was paid on both a salary and commission. 826 N.E.2d at 2. He was eligible to receive commission payments on a monthly basis; these payments represented advances on his commissions that he was required to return if his projects were less profitable than anticipated. Id. The court held that the commission payments were not “wages,” even though they were paid monthly, because the commission program was based on the profitability of each salesperson’s individual projects, and thus “[t]he payment of commissions was not directly linked to the amount of work performed,” and because of “the length of time involved in determining the final commission,” which made it “impossible . . . to know what Gress was owed within ten days.” Id. at 4. In Prime Mortgage USA, Inc. v. Nichols, 885 N.E.2d 628 (Ind. Ct. App. 2008), the Court of Appeals of Indiana expressly indicated that whether commissions are paid in addition to salary is relevant to determining whether commissions are “wages.” In Nichols, the court No. 10-1482 11 noted that Indiana courts generally treat commissions as wages. 885 N.E.2d at 664. It held that commissions were “wages” where, other than car allowance and continued monthly payments of an annuity, the employee’s compensation was composed solely of commissions, was paid on a regular, monthly basis, and could be calculated immediately. Id. at 663-65. It issued its holding in spite of the fact that the commissions were contingent on the employer’s financial success. Id. at 663-64. But it explained that the commission “was not an amount in addition to her normal compensation; [the commission] was her normal compensation.” Id. at 664 (emphasis added). In distinguishing Gress, the court in Nichols explained that “Nichols’s compensation could be determined immediately,” and that “the employee in Gress received a base salary plus commission, while Nichols received only a commission.” Id. at 664. Gress and Nichols indicate that Indiana courts consider, at least to some extent, whether a particular type of compensation is an employee’s sole form of compensation, or whether it is paid in addition to a more regularly-paid salary. Guided by these factors, we conclude that the EOS compensation is not a wage under the Wage Payment Statute. First, Thomas’s EOS compensation was “dependent on other factors than [her] efforts,” since a portion of the EOS compensation was based on the contingency of collecting from customers. Naugle, 864 N.E.2d at 1067; see also Highhouse, 807 N.E.2d at 740; Hansen, 874 N.E.2d at 1074. Not to mention, Atkinson’s testimony indicates that it was at least difficult, if not impossible, to calculate 12 No. 10-1482 EOS compensation within the ten-day period, see Highhouse, 807 N.E.2d at 740; Hansen, 874 N.E.2d at 1074, and the Sheet, providing that H&R Block would pay EOS compensation on a date after the expiration of the tenday period, “or as soon thereafter as is reasonable under the circumstances,” demonstrates the parties’ understanding and expectation that the calculation and payment of the EOS compensation would likely take more than ten days, see Highhouse, 807 N.E.2d at 740; Harney, 526 F.3d at 1106. Second, Thomas’s EOS compensation was not directly related to the time she worked. Since EOS compensation was partially based on collections, Thomas theoretically could have worked for an entire tax season without earning any EOS compensation. See Gress, 826 N.E.2d at 4. Third, H&R Block paid EOS compensation annually, at the end of every tax season, and not on a regular, periodic basis. See, e.g., Manzon, 138 F. Supp. 2d at 1114. Finally, as explained in more detail below, H&R Block paid Thomas an hourly wage in addition to EOS compensation. Thomas’s arguments on appeal are unavailing. First, she argues that EOS compensation is a wage because it is composed entirely of commissions, and because Indiana Code § 22-2-9-1(b) unambiguously includes “commission” in the definition of wages. To establish that EOS compensation represents commissions, she argues that testimony from H&R Block’s employee referring to EOS compensation as a commission permits the inference, which we must accept on a motion for summary judgment, that the EOS compensation is a commission, and thus a wage. The fact that H&R Block No. 10-1482 13 chose to pay commission at the conclusion of the tax season, she argues, does not transform it from a series of wage payments into a bonus. As general matter, however, the substance of the compensation, and not its label, guides our analysis. Hansen, 874 N.E.2d at 1072. Further, Thomas’s argument begs the question and ignores case law in both state and federal courts indicating that commissions do not always constitute “wages.” See, e.g. McCausland, 918 N.E.2d at 424-46; Gress, 826 NE.2d at 4. We are in no position to apply the statutes without looking to case law interpreting them. See Woidtke, 335 F.3d at 562 (“[O]ur task is to ascertain the substantive content of state law as it either has been determined by the highest court of the state or as it would be by that court if the present case were before it now.” (internal quotation marks and citations omitted)). In light of the authorities discussed above, Thomas’s argument fails. Consistent with her argument that her compensation was exclusively composed of commissions, Thomas advances the position that her salary was merely a draw on her commission. She, thus, argues that she did not receive a wage in addition to her EOS compensation. She relies on testimony from an H&R Block employee characterizing the hourly wage as a draw. Since EOS compensation is paid only to the extent that various specified amounts exceed hourly wages, it is possible for Thomas to argue that her salary was in part a draw on her commission. But she cannot suggest that her wages were completely drawn from her commissions: She could have earned no commission and still received 14 No. 10-1482 the same hourly wage without having to repay H&R Block. Further, only a portion of Thomas’s hourly wages factored into calculating her EOS compensation. EOS compensation is, at least in part, a form of compensation that H&R Block paid in addition to hourly wages. Finally, Thomas argues that collecting on sales should not be considered a contingency for the purpose of determining whether compensation is a wage, and that Indiana case law to the contrary is incorrect. She first points to case law indicating that commissions are wages. See, e.g., J Squared, Inc. v. Herndon, 822 N.E.2d 633 (Ind. Ct. App. 2005). She next argues that Hansen misinterprets Highhouse when it cites to Highhouse as support for its holding that collection efforts can constitute a contingency for the purpose of determining whether a compensation is a wage. 874 N.E.2d at 1074. She further argues that collection efforts cannot constitute such a contingency because “commission” is in the statutory definition of wages, IND. C ODE A NN. § 22-2-9- 1(b), and there can be no commission until collec- tion is made. But Highhouse indicates that a company’s performance is merely one example of a contingency, 807 N.E.2d at 740 (“A ‘bonus’ is a wage if it is compensation for time worked and is not linked to a con- tingency such as the financial success of the company.” (emphasis added) (internal quotation marks and citations omitted)), and it expressly references the fact that “Highhouse’s bonus was based on collections for his services, not billings” in concluding that Highhouse’s bonus was not a wage. Id. at 740. The Indiana Supreme Court has not limited the relevant contingencies to busiNo. 10-1482 15 ness performance, and imposing such a limit would be contrary to Indiana case law.