Opinion ID: 2218201
Heading Depth: 2
Heading Rank: 3

Heading: group c

Text: Members of Group C claim they were told at some point after they were hired that they would receive seven percent commissions forever. Group C plaintiffs also argue that defendant breached the express terms of their employment contracts by changing the payment system to award a flat rate upon the sale of each renewal policy. Again, we disagree. When analyzing employment contracts, it is important to keep in mind that parties begin the relationship with complete freedom. Toussaint, supra, p 600. An employer retains its managerial powers and prerogatives unless they are limited by contract. As Justice GRIFFIN stated in Bullock, supra, pp 519-520, [a]n employer's intention to give up permanently a right so fundamental as the ability to make changes in its method of compensation is not to be lightly inferred. (GRIFFIN, J., concurring in part and dissenting in part.) Our inquiry must focus on the intent of the parties and whether they intended to bind themselves to a seven percent renewal commission permanently. In deciding whether mutual assent existed to permanently freeze the renewal commission, we employ an objective test, looking to the expressed words of the parties and their visible acts. Goldman v Century Ins Co, 354 Mich 528, 535; 93 NW2d 240 (1958); Stark v Kent Products, Inc, 62 Mich App 546; 233 NW2d 643 (1975). It is proper to consider the circumstances at the time the asserted contracts were made to determine the intent of the parties. W J Howard & Sons, Inc v Meyer, 367 Mich 300; 116 NW2d 752 (1962); Miller v Stevens, 224 Mich 626; 195 NW 481 (1923). This is especially true in oral contracts where the parol evidence rule does not impair consideration of extrinsic facts. Redinger v Standard Oil Co, 6 Mich App 74; 148 NW2d 225 (1967). Upon reviewing the circumstances of the alleged promises to Group C, we find as a matter of law that mutual assent was lacking. At the time of hiring, members of Group C were in the same position as members of Group A. No promises were made regarding the duration of the commission plan, yet plaintiffs in both Groups A and C accepted employment. Group C alleges that after accepting employment, defendant made extraordinary contractual promises that the commission system would be in place forever. However, it is not at all clear from the statements allegedly made to members of Group C that defendant intended to bargain away its right to change the method of compensation. The meaning of the statements could be interpreted in several ways falling short of a contractual commitment. The statements could have been intended to bolster morale and enhance employee pride in the company. It is also possible the statements were merely stated opinions of management representatives that the company would not change its commission rate. Another possible interpretation is that the statements were designed as assurances by management that in the foreseeable future, there were no rate changes planned. Whether the statements rise to contractual obligations depends on the context and circumstances in which the statements were made. In analyzing the parties' intent, we note that the record does not reflect that any negotiations took place between plaintiffs and defendant. All indications are that the comments were isolated. Also, we find the term forever is inherently vague. If the parties had negotiated the duration of the compensation plan, it is unlikely they would have characterized the agreement with such a precatory expression. Furthermore, in the employment context, this Court has been reluctant to accept terms which connote permanent or lifetime employment at face value. In Lynas v Maxwell Farms, 279 Mich 684; 273 NW 315 (1937), the Court determined that absent distinguishing features or consideration in addition to services to be performed, a contract for permanent employment should be interpreted to be terminable at the will of either party. Although Lynas deals with discharge as opposed to compensation terms, a contract which forever restricts an employer's right to change compensation has the same effect of permanently tying an employer's hands on a term of employment. We note that nothing was offered by plaintiffs in addition to their continued employment that would reasonably prompt defendant to make such extraordinary contractual commitments. [10] We are persuaded that it defies logic to believe that defendant would intend to bind itself to a specified renewal commission on the basis of isolated statements when plaintiffs had already accepted employment without the benefit of durational guarantees with regard to compensation. It also defies logic that defendant would enter into these commitments after, as opposed to before, being hired. It is more reasonable to believe that defendant would legally obligate itself to such a promise before hiring in order to attract an employee or induce acceptance of employment. In the case of Group C, we can perceive no manifest reason for defendant to offer a permanently fixed rate on renewals. We also find it relevant to our inquiry into mutual assent to examine the changes in the compensation and commission system with regard to sales representatives in the years leading up to the employment of plaintiffs. In 1940, defendant adopted a seven percent commission for all representatives. [11] In 1958, the commission for out-state salespersons was changed to seven and one-half percent. From 1962 to 1976, most salespersons were hired pursuant to the Accrued Commission Plan, which is the system applicable to this case. In 1963, a merit commission plan was adopted which allowed a salesperson to earn more or less than seven percent on the basis of the individual's productivity. This plan was discontinued after nine months. In 1964, defendant established a high-risk insurance company, but rather than base commissions on the higher premiums, defendant paid commissions on the basis of the lower premiums of the standard company. However, this plan was discontinued after a short while. Throughout the 1960s and 1970s, defendant made several changes in its compensation and commission plan for membership sales. These changes made throughout the years suggest that it is unlikely that defendant would permanently guarantee a particular renewal policy. The numerous recent fluctuations show the company's changing compensation program and demonstrate that it was unreasonable for members of Group C to maintain any belief that their commission plan was to be locked in permanently. For these reasons, we find that in objectively reviewing the circumstances of this case, there was no mutual assent to establish seven percent renewal commissions permanently. We are persuaded that defendant did not intend to bargain away its right to make adjustments in its compensation plan.