Osorio v. The Tile Shop, LLC

Filing 101

MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 3/31/2016: For the reasons stated in the accompanying decision, the Court grants Osorio's motion for leave to file a second amended complaint [dkt. no. 92]. Tile Shop is directed to file an answer to the second amended complaint by no later than April 15, 2016. The case is set for a status hearing on 4/20/2016 at 9:00 a.m. (mk)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

ADRIEL OSORIO, on behalf of himself
and all similarly situated persons,
Plaintiff,
vs.
THE TILE SHOP, LLC,
Defendant.

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Case No. 15 C 15

MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Adriel Osorio alleges that during the time he worked for The Tile Shop, LLC, he
was required to work 50–55 hours per week but was not paid overtime compensation in
violation of the Fair Labor Standards Act (FLSA) and the Illinois Minimum Wage Law
(IMWL). He also alleges that Tile Shop made unauthorized deductions from his
paycheck in violation of the Illinois Wage Payment and Collection Act (IWPCA), 825
ILCS 115/9.
The Court granted Tile Shop's motion for partial judgment on the pleadings on
Osorio's IWPCA claim in November 2015. See Osorio v. The Tile Shop, No. 15 C 15,
2015 WL 7688442, at *4 (N.D. Ill. Nov. 27, 2015) ("Osorio 1"). The Court subsequently
denied Osorio's motion for reconsideration. See Osorio v. The Tile Shop, No. 15 C 15,
2016 WL 316941 (N.D. Ill. Jan. 28, 2016) ("Osorio 2"). Osorio now seeks leave to file a
second amended complaint to assert a modified version of his IWPCA claim. For the
reasons stated below, the Court grants Osorio's motion.

Discussion
The IWPCA prohibits an employer from deducting earned wages from an
employee's compensation except under certain particular circumstances. Deductions
are permitted only where they are "(1) required by law; (2) to the benefit of the
employee; (3) in response to a valid wage assignment or wage deduction order; [or] (4)
made with the express written consent of the employee, given freely at the time the
deduction is made." 1 820 ILCS 115/9. In his first amended complaint, Osorio alleged
that Tile Shop violated the IWPCA because it entered into an agreement to pay wages
and then made deductions from those wages without his freely given express written
consent. See Am. Compl., dkt. no. 55, ¶¶ 48–52.
Osorio attached to his complaint a copy of a letter offering him employment and
referring to Tile Shop's "Salesperson Pay Plan and Policy." The Pay Plan that Osorio
signed in September 2013, a copy of which Tile Shop submitted in its motion for partial
judgment on the pleadings, states in relevant part:
All full time sales representatives' compensation is comprised of
commissions earned on Net Sales gross profit dollars, Spiffs earned on
Net Sales dollars, and periodic incentives. If compensation earned during
a pay period is less than $1,000.00 dollars, the employee will be paid the
difference as a recoverable draw. This draw will be recovered from future
compensation in excess of $1,000.00 on the following pay periods until
paid in full. The pay period draw amount of $1,000.00 is based on an
annual amount of $24,000.00.
Def.'s Ex. A, dkt. no. 56-1, at 1. Osorio's first amended complaint alleged that this
compensation scheme led Tile Shop to make unlawful deductions from his earned
wages.

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There are also exceptions, not relevant here, for deductions made by government
entities. See 820 ILCS 115/9(5)–(6).
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In their briefs arguing over Tile Shop's motion for partial judgment on the
pleadings, the parties directed the Court's attention to portions of the Illinois
Administrative Code containing regulations implementing the IWPCA. In its order
granting Tile Shop's motion for partial judgment on the pleadings, the Court concluded
that by signing the Pay Plan attached to his offer of employment, Osorio gave advance
authorization of the wage deductions at issue. Osorio 1, 2015 WL 7688442 at *4. The
Court relied, in part, on a provision of the Administrative Code to which neither side had
devoted much attention. Although Osorio had classified the deductions as wage
deductions in his amended complaint, the Court observed that the deductions in this
case looked like the recoupments of cash advances described in section 300.750 of title
56 of the Administrative Code. That provision states that "[i]f a cash advance is to be
repaid through payroll deductions, both the employer and the employee must sign an
agreement specifying the amount of the advance, the repayment schedule, and the
method of repayment." 56 Ill. Admin. Code 300.750. The Court found that the Pay Plan
did just that and that Osorio's agreement to the Plan's terms qualified as "express
written consent of the employee, given freely at the time the deduction [was] made,"
within the meaning of 820 ILCS 115/9. Osorio 1, 2015 WL 7688442 at *4.
In his motion for reconsideration, Osorio argued that the Pay Plan he signed was
not an agreement to repay a cash advance, for two reasons. First, he argued that any
such agreement must be memorialized in documents executed at the time the employer
advances money and at the time the employer makes a recoupment. Second, Osorio
argued that even if one document were enough to serve as an "agreement" under the
regulation, this particular agreement would be invalid under section 300.800 of the

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Administrative Code, which states that "[n]o cash advance repayment agreement shall
provide for a repayment schedule of more than 15% of an employee's gross wages or
final compensation per paycheck." 56 Ill. Admin. Code 300.800.
The Court did not address Osorio's argument under section 300.800 because it
determined that even if the Pay Plan was not an agreement to repay cash advances,
Osorio's agreement to the Plan "was sufficient to provide express written authorization
for the deductions at issue." Osorio 2, 2016 WL 316941 at *2. Because Osorio's
complaint classified Tile Shop's deductions as wage deductions rather than cash
advances, and because Osorio gave express written consent for these deductions
within the meaning of 820 ILCS 115/9, the Court denied Osorio's motion for
reconsideration. Id.
Osorio now seeks to amend his complaint to recharacterize Tile Shop's draws as
cash advance recoupments. In his proposed second amended complaint, Osorio
contends that the Pay Plan was an unlawful agreement to permit the recoupment of
cash advances in excess of 15% of his wages. He does not allege that the agreement
said this in so many words. Rather, he contends that pursuant to the Plan's general
authorization, Tile Shop deducted an amount equaling 19.855% of his paycheck on one
occasion and an amount equaling 47.194% of his paycheck on another. These
deductions, Osorio alleges, exceed the maximum legally authorized recoupment of cash
advances.
Tile Shop filed a memorandum in opposition to Osorio's motion. It argued that
the amendment was untimely and therefore unfairly prejudicial, but it has since
withdrawn that argument. Tile Shop's primary argument, and the one that the Court

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addresses in this decision, is that the amendment would be futile because Osorio's new
claim is legally deficient.
Tile Shop's futility argument centers on its contention that courts typically do not
consider "recoverable draws" like those to which Osorio agreed in the Pay Plan to be
cash advances. Tile Shop first notes that no federal or state court has yet addressed
whether draws against commission constitute cash advances under the Illinois
Administrative Code. It then points out that draws against commission are common
payment schemes that courts in other jurisdictions have declined to classify as cash
advances.
Osorio's first response to Tile Shop's argument is that at least one court in this
jurisdiction has determined what constitutes a cash advance: this one, in the Court's
order granting Tile Shop's motion for judgment on the pleadings. The Court disagrees;
it made no such finding. The Court concluded in Osorio 1, based on a reading of
section 300.750 standing alone, that "Osorio was in effect getting periodic cash
advances and then was being required to repay them." Osorio 1, 2015 WL 7688442, at
*4 (emphasis added). The only reference either party made to this section of the
Administrative Code was in a footnote in Osorio's surreply opposing partial judgment on
the pleadings. See Pl.'s Surreply, dkt. no. 64, at 2 n.2. Even then, the closest Osorio
came to asking the Court to deem the Pay Plan an agreement to repay cash advances
was saying, "in cases of cash advances that are recouped through later payroll
deductions, as here, employers are not only required to get written consent at the time
of the deduction or advance, the employer and employee must also both sign a consent
agreement to the deduction." Id. The Court was not asked to determine whether draws

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against commission are a type of cash advance recoupment, and it did not so decide.
Rather, the Court simply observed that Tile Shop's pay policy appeared to contemplate
a scheme similar to the one described in section 300.750.
The Court certainly understands that the language of Osorio 1 might have been
something less than a model of clarity. But the Court made clear in Osorio 2 that its
decision was premised on the proposition that by signing the Pay Plan, Osorio gave
express written authorization for the wage deductions he challenges. See Osorio 2,
2016 WL 316941 at *2 ("[E]ven if it was not an agreement to repay cash advances, the
Pay Plan Policy that Osorio signed was sufficient to provide express written
authorization for the deductions at issue."). Osorio argues that were the Court "to
reverse its prior holding that Defendant was providing cash advances, then the Court
would also be compelled to overturn its order granting [partial judgment on the
pleadings], as the Court's ruling on that motion was predicated on Defendant's conduct
being construed as cash advances." Pl.'s Mem., dkt. no. 98, at 13. But the Court did
not so hold, and its order on reconsideration clarified that its ruling dismissing the
IWPCA claim was premised upon Osorio's express agreement to the deductions, not on
the characterization of the amounts Tile Shop was recovering as "cash advances."
In short, there is no decision by any federal or state court regarding whether
commission draws like those at issue here constitute cash advances under the Illinois
Administrative Code. Tile Shop argues that draws against commission are not cash
advances because a payment is a cash advance only where an employee has provided
no consideration. It says that because Osorio gets the money as compensation for his
work, he has given consideration and is therefore not receiving a cash advance. Osorio

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contends that because he works on commission, he has not, at the time of the draws,
provided consideration for anything he is paid above and beyond what he earned by
making actual sales.
At this point in the litigation, of course, there has been no factual development
regarding how Tile Shop's payment plan works in practice. For this reason, and given
the absence of precedent regarding how the arrangement measures up under the
IWPCA, the Court believes that the legality of the arrangement is a matter better
addressed on summary judgment. The Court therefore declines to find Osorio's
amended claim futile but notes that Osorio cannot appropriately consider this an
endorsement of his legal theory.
Conclusion
For the foregoing reasons, the Court grants Osorio's motion for leave to file a
second amended complaint [dkt. no. 92]. Tile Shop is directed to file an answer to the
second amended complaint by no later than April 15, 2016.

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MATTHEW F. KENNELLY
United States District Judge
Date: March 31, 2016

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