Opinion ID: 223097
Heading Depth: 4
Heading Rank: 2

Heading: Compensation based on recruitment numbers

Text: To support an FCA false statement, the Complaint also alleges that Corinthian awards salary increases on the basis of recruitment numbers, in violation of HEA's incentive compensation ban. Defendants argue that Corinthian's recruiter compensation policy, as alleged, falls within the DOE Safe Harbor Provision and does not as a matter of law violate the HEA. As discussed above, the Safe Harbor Provision allows institutions to pay semi-annual salary increases to recruiters only if any adjustment is not based solely on the number of students recruited, admitted, enrolled, or awarded financial aid. 34 C.F.R. § 668.14(b)(22)(ii)(A) (emphasis added). The Complaint does not expressly use the word solely in alleging that Corinthian awards promotion salary increases on the basis of recruitment numbers. Nonetheless, it does allege that the increases in salary are based on and depend on the number of students that the recruiter signs up. It then refers to the Corinthian Compensation Program, which is attached to the Complaint as Exhibit A. [4] The Program can be summarized as follows: 1. Only those employees with a rating of at least Good are eligible for promotions. 2. Assuming that an employee is eligible for a promotion, the salary increase for which the employee is eligible is determined by the greater of (1) the minimum of the salary range for the position to which they are being promoted (category 1); and (2) a percentage salary increase related to how successful that recruiter has been in the previous six-month period (category 2). 3. The category 2 increase that corresponds to a particular employee is determined by the number of net starts achieved in that six-month period, combined with his overall performance rating (Good or Excellent) for that period. At first glance, then, it appears that Corinthian's promotion and salary increase system does not rely solely on recruitment numbers, but also takes into account whether the employee receives an overall performance rating of Good or Excellent. On this basis, Corinthian argues that its method of awarding salary increases does not violate the HEA. The mere inclusion of this performance rating in Corinthian's Compensation Program, however, does not allow us to conclusively determine whether its method of awarding salary increases falls within the Safe Harbor Provision. At this stage, we have no information as to the basis on which a Good versus Excellent performance rating is assigned to a Corinthian recruiter. Without an understanding what an employee must do to achieve a rating of Good, we cannot determine whether the rating is based upon substantive requirements that are separate and distinct from recruitment numbers. [5] If, for example, recruiter performance ratings are awarded on the basis of the number of students that a recruiter enrolls, then this rating system would not in fact provide an additional basis on which compensation decisions are made. Under such a system, Corinthian would, in essence, make adjustments to recruiter salaries based solely on the number of students enrolled by that recruiter. Interpreting the Safe Harbor Provision so that it covers such a system would directly undermine the HEA express prohibition on incentive payment based directly or indirectly on success in securing enrollments, see 20 U.S.C. § 1094(a)(20). Moreover, [w]hen construing a statute or regulation, we look to the whole law, and to its object and policy, not simply to a single sentence or member of a sentence. Owner-Operator Indep. Drivers Ass'n, Inc. v. Swift Transp. Co., Inc., 632 F.3d 1111, 1115 (9th Cir.2011) (internal quotation marks and citation omitted). The plain language of a regulation ... will not control if clearly expressed administrative intent is to the contrary or if such plain meaning would lead to absurd results. Webb v. Smart Document Solutions, LLC, 499 F.3d 1078, 1085 (9th Cir. 2007) (internal quotation marks and citation omitted). If the performance rating of at least Good requires an employee merely to fulfill basic performance requirements that are expected of any employee (such as showing up on time), then construing the Safe Harbor Provision so that these ratings serve as an independent basis for compensation increases would lead to an absurd result. Under such a system, educational institutions could entirely circumvent the HEA incentive compensation ban by simply formalizing, through a performance rating system, the basic requirements expected of any employee, that is, the requirements of employment itself. [6] Allowing the Safe Harbor Provision to shield such a program from HEA's recruiter compensation requirements would render meaningless the purpose or objective of the statute. Owner-Operator Indep. Drivers Ass'n, 632 F.3d at 1115. Relators do not allege any facts regarding the meaning or basis of the Good versus Excellent performance ratings included in the Compensation Program attached to the Complaint. As a result, while it is certainly possible that Corinthian's Compensation Program falls outside the Safe Harbor Provision (thereby rendering false Corinthian's certification of HEA compliance), the Complaint falls short of stating a plausible claim for relief. This deficiency, however, can readily be cured, and Relators are therefore entitled to amend.