Jottings By An Employer's Lawyer

Friday, July 01, 2005

Pay It Back - Texas Supreme Court to Salesman

This one can't be blamed on Judge Priscilla Owen, who no longer sits on the Texas Supreme Court, although some of her recent critics would no doubt like to, as it represents yet another victory for employer against an employee. Maybe as I sit wearily contemplating the hearings (and the inevitable build up to those hearings) over Justice O'Connor's replacement, I am too much jaundiced by the carping that has gone over judicial opinions in the recent past, often by those who appear to not have read or understood the opinion they are lambasting. Maybe this decision will just be seen as I view it - common sense.

The situation was this - a salesman gets a commission for a million dollar sale. After the commission is paid, the sale is cancelled. According to the commission agreement, the commission would have to be repaid out of his future commissions, or if the sales person terminated their employment after the sale was cancelled, they would have to repay the commission. The rub here, the sale was cancelled first, then the employer resigned. Since that precise scenario was not spelled out in the agreement, the sales person argued he should keep the money and the company argued he should repay it.
The trial court said give it back, the intermediate appellate court said he could keep it, and today in SAS Institute, Inc. v. Breitenfeld, (Texas 7/1/05) [pdf] the Texas Supreme Court looked at this key wording:

If a bonus payment is made to a sales rep and subsequently, sales order(s) that were part of the bonus calculation are cancelled, refunded, or the invoice is credited, sales credit for the cancelled sales will be deducted from the sales rep's current sales credit. At the end of the sales year, if an overpayment in bonus has been made, the overpayment will be deducted from bonuses earned in 2003.

If a sales rep terminates employment with SAS Institute and subsequently, sales order(s) that were part of the bonus calculation are cancelled, refunded, or the invoice is credited, the sales rep will be required to pay back to SAS Institute the portion of the bonus that was paid based upon the cancelled sales.

Without hearing oral argument, the Court made the common sense deduction from this language that, "the clear intent of the agreement is that a bonus is only owed on a completed, uncancelled sale." The result -- he has to pay it back.
Yep, it's another Texas Supreme Court victory for employer over an employee, but maybe, just maybe, those decisions come out that way, because they are right.

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