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Anderson v. Equitable Life Assurance Soc.

JANUARY 31, 1974.




APPEAL from the Circuit Court of Cook County; the Hon. JAMES E. STRUNCK, Judge, presiding.


This appeal is from a judgment in favor of defendant denying "Incentive Compensation" to plaintiff which he claims is due him from defendant, his former employer. The trial court also denied attorney's fees to plaintiff which were sought on the authority of Ill. Rev. Stat. 1971, ch. 13, par. 13.

Plaintiff began his job as a group insurance representative for defendant in June, 1970. He was to sell and service new and existing group life, health and pension insurance accounts. According to his own testimony, plaintiff earned a salary of approximately $10,600 a year and was entitled to additional compensation under an "Incentive Compensation Program" which had been put into effect by defendant and became a part of plaintiff's employment contract. Plaintiff having resigned his position effective November 1, 1971, claims incentive compensation for the first ten months of 1971.

The "Incentive Compensation Program" provides that group representatives of a certain salary grade (such as plaintiff's) are eligible for incentive compensation based on individual performance during the calendar year. The program specifically provides that such compensation will be computed on an annual calendar basis, taking into consideration several rather complicated factors which are not in dispute and are not determinative of the result in this case.

The sole issue stems from an additional clause in the program entitled "Termination of Active Employment." It provides:

"If an individual leaves the full-time salaried employ of the Society [defendant] prior to December 31 of any year, except for reasons of death, retirement, military duty or to enter into agent's contract with the Society or one of the Society's General Agents, he will not be eligible for incentive compensation in that year."

While the parties differ slightly as to plaintiff's computation of the incentive compensation he is claiming, the basic question is whether he is entitled to something or nothing.

Plaintiff testified that the amount due him represented about twenty per cent of his salary, and that he would not have taken the job with defendant if he had not believed that he would receive this incentive compensation. He also testified that when he voluntarily left defendant on November first, he went to work for Canada Life Assurance Company as district manager, receiving an increase in salary of $2500 per year, the use of a company car, and a guaranteed yearly bonus. It was established at trial that plaintiff had been given a copy of defendant's "Incentive Compensation Program" while he was working for defendant, and that he was specifically informed of the consequences in issue here, namely, that if he quit his job with defendant before December 31 (two months later), he would lose the incentive compensation to which he would otherwise become entitled.

• 1 However, plaintiff argues that the salient characteristic of the Program is that the incentive payments are based on the salesman's production, not the length of his employment. Consequently, he argues that the Program was merely a deferred commission plan, under which his compensation was earned when the clients' orders were obtained, even though he might not complete that employment year. He relies rather heavily on Reiss v. El Bauer Chevrolet Co. (1968), 96 Ill. App.2d 266, 238 N.E.2d 619, in which some employees sued their former employer for its failure to pay a "yearly service bonus" based on sales made. That court said the evidence showed that

"the amount claimed due was not a gratuitous bonus but an amount due and owing based upon work produced by the plaintiffs in excess of a stated amount and accumulated on a monthly basis." 96 Ill. App.2d at 271.

Appellant seeks to use Reiss to demonstrate the difference between a "bonus" or "gratuity" and wages earned by way of a "deferred commission," and to place the instant situation in the latter category. Reliance is also placed on a comment by Williston concerning commission salesmen:

"* * * in the case of a salesman working on a commission basis, it is reasonable to assume that his compensation has been earned when he has procured the customer's orders although he does not complete his term of employment." Williston on Contracts, 3d Ed., sec. 1017C.

Williston notes further, however, that "the usages of business furnish the best guide for interpreting such contracts."

The factual situation in Reiss is not parallel to that in this case, and therefore lacks the authority ascribed to it by plaintiff. In Reiss, salesmen sought to recover sums of additional compensation they contended were due under an oral contract of employment. The contract provided for payment of a commission on each car sale with an additional "yearly service bonus." The bonus was figured annually after the corporation's fiscal year end, which was July 31. To qualify for the bonus, the employee was required to be in the employ of defendant on July 31, of each year. The salesmen involved left their jobs after July 31, 1966. Apparently their claim covered fiscal years 1964, 1965 and 1966. The manager testified that he had told the employees prior to the end of fiscal year 1964 that in order to qualify for the yearly service bonus, the salesmen must be employed by the corporation on the date the yearly service bonus checks were actually delivered in September of each year. The plaintiffs conceded this point as to 1966 but not as to the two prior years. The court found in favor of the plaintiffs, holding that the contract of employment was executed at the end of the fiscal year, and that all that remained to be done by the employer after that date was to make payment of the bonuses due. In the instant case, plaintiff did not remain in defendant's employ through the end of the year. Also, he was well aware of the substance of his employment contract, particularly the clause in the "Incentive ...

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