Osorio v. The Tile Shop, LLC
Filing
222
MEMORANDUM OPINION AND ORDER signed by the Honorable Matthew F. Kennelly on 3/23/2018: For the reasons stated in the accompanying Memorandum Opinion and Order, the Court grants Tile Shop's motion for partial summary judgment on the IWPCA claim (Count 2) [dkt. no. 191] and denies Osorio's cross-motion for partial summary judgment on that claim [dkt. no. 215]. The case is set for a status hearing on April 2, 2018 at 9:30 a.m. to discuss what, if anything, remains to be done in the case to bring it to a conclusion. (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.
)
)
)
)
)
)
)
)
)
)
Case No. 15 C 15
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge:
Plaintiff Adriel Osorio, a former employee of The Tile Shop, LLC, has sued Tile
Shop for failing to comply with the overtime pay requirements of the Fair Labor
Standards Act (FLSA) (Count 1) and the Illinois Minimum Wage Law (Count 3). Osorio
also has alleged that Tile Shop violated the Illinois Wage Payment and Collection Act
(IWPCA) by making excessive deductions from his paycheck and the paychecks of
other Tile Shop employees (Count 2). This Court granted Osorio's motion for class
certification with respect to the IWPCA claim in December 2016. See Osorio v. The Tile
Shop, LLC, No. 15 C 15, 2016 WL 7491810 (N.D. Ill. Dec. 30, 2016). Tile Shop has
moved for summary judgment on the IWPCA claim, and Osorio has filed a cross-motion
for partial summary judgment on the same claim. For following reasons, the Court
grants Tile Shop's motion for partial summary judgment on the IWPCA claim and denies
Osorio's cross-motion for partial summary judgment.
Background
A.
Factual background
The Tile Shop is specialty tile retailer. From September 2013 until February
2014, Osorio worked as a sales associate at one of Tile Shop's Illinois stores. He
worked as an assistant manager at another Tile Shop store in New Mexico from
February to July 2014. The other class members are persons currently or formerly
employed in Tile Shop stores in Illinois (except as store managers) who had certain
types of deductions made from their paychecks from January 2, 2005 onward.
Tile Shop sales associates and assistant managers earn commissions on the
products they sell. Although these commissions are supplemented by various incentive
payments, they are the primary form of compensation for Tile Shop's sales associates
and most assistant managers. Tile Shop calculates its employees' compensation on a
semi-monthly basis and pays them accordingly. If a sales associate or assistant
manager earns less than $1,000 in a pay period, Tile Shop pays that employee the
difference as what it calls a "recoverable draw." Def.'s Statement of Undisputed
Material Facts (SUMF), App. Tab 2 (Behrman Decl.), Ex. C, at 4. If, for example, a
sales associate's commission and incentive income for a particular pay period adds up
to only $900, Tile Shop pays the employee a $100 draw "to bring his or her total
compensation for the pay period to $1,000." Behrman Decl. ¶ 18. Tile Shop then
reconciles the $100 draw against future compensation in excess of $1,000 per pay
period, theoretically leaving the employee with a guaranteed $1,000 per pay period. In
practice, however, for Osorio's pay period ending on December 15, 2013, Tile Shop
recovered $247.74 from only $1,247.73 in earnings, leaving him $.01 short of $1,000 for
2
that period. See Behrman Decl., Ex. E.
Although Tile Shop has revised portions of its Pay Plan during the relevant
period, the terms that are material to this lawsuit have not changed. The Pay Plan
provides the following explanation of how Tile Shop compensates its sales
representatives:
All full time sales representatives' compensation is comprised of
commissions earned on Net Sales gross profit dollars, Spiffs
[bonuses on sales of certain products] earned on Net Sales dollars,
and periodic incentives. If compensation earned during a pay period
is less than $1,000.00 dollars [sic], 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.
Behrman Decl., Ex. C, at 4.
Both parties agree that the commission income "may vary significantly from pay
period to pay period, from a few hundred dollars or less to several thousand dollars,"
depending on a number of variables including sales volume, the profitability of products
sold, and the circumstances of the particular store where the employee works.
Behrman Decl. ¶ 16. "By paying employees a draw, The Tile Shop ensures that its
sales personnel receive a guaranteed minimum compensation even during pay periods
when sales were lower." Id. ¶ 19; see also Pl.'s Resp. to Def.'s SUMF ¶ 21 (admitting
Tile Shop's statement except to the extent that the use of the term "draw" implies it is
not a cash advance under the IWPCA). The draws in question count as part of an
employee's gross wages and are subject to payroll and income taxes. A Tile Shop
employee may receive a draw during his last pay period of employment, even though he
is not expected to make additional sales or render other future services to Tile Shop. If
3
an employee has an outstanding draw balance at the end of his employment, Tile Shop
does not require reimbursement of that sum.
B.
Procedural background
The procedural history of this case provides context for the present decision. In
his first amended complaint, Osorio alleged that Tile Shop violated the IWPCA, 820
ILCS 115/9, by making deductions from his paycheck to recoup earlier draws without
obtaining his express written authorization. Am. Compl. ¶¶ 49-53. In November 2015,
the Court granted Tile Shop's motion for partial judgment on the pleadings with respect
to Osorio's original IWPCA claim, finding that Osorio sufficiently authorized the
deductions in question by signing the Pay Plan attached to his offer of employment.
See Osorio v. The Tile Shop, LLC, No. 15 C 15, 2015 WL 7688442, at *3-4 (N.D. Ill.
Nov. 27, 2015). In granting Tile Shop's motion, the Court observed that the deductions
at issue looked like recoupments of cash advances, although the parties had not
characterized them as such. In light of this apparent similarity, the Court also evaluated
the sufficiency of the agreement under section 300.750 of title 56 of the Illinois
Administrative Code, which imposes specific requirements on agreements regarding
repayment of cash advances through payroll deductions. Id. at *4. Ultimately, the Court
concluded that the signed Pay Plan provided valid, express authorization—both under
the IWPCA, 820 ILCS 115/9, and under 56 Ill. Admin. Code 300.750—for Tile Shop to
recoup prior draws from Osorio's paycheck. Id.
Osorio subsequently filed a motion for reconsideration, which the Court denied in
January 2016. See Osorio v. The Tile Shop, LLC, No. 15 C 15, 2016 WL 316941 (N.D.
Ill. Jan. 28, 2016). In its January 2016 opinion, the Court clarified that, whether or not
4
the Pay Plan Osorio signed was in fact an agreement to repay cash advances through
later payroll deductions, it was sufficient to provide express written authorization for the
deductions in question. Id. at *1-2.
In March 2016, the Court granted Osorio leave to file a second amended
complaint in which he asserted a modified version of his IWPCA claim. See Osorio v.
The Tile Shop, LLC, No. 15 C 15, 2016 WL 1270435 (N.D. Ill. Mar. 31, 2016).
Specifically, Osorio sought to recharacterize the deductions at issue as repayments of
cash advances. In granting Osorio's motion for leave to amend, the Court noted that it
had not previously decided whether Tile Shop's draws constituted cash advances but
rather had merely observed that the Pay Plan appeared to contemplate something like
the repayment of a cash advance. Id. at *2-3. The Court concluded that the issue of
whether Tile Shop's draws were actually cash advances (and, consequently, whether
the deductions to recover those draws were actually recoupments of cash advances)
required additional factual development. Id. at *3.
Osorio filed his second amended complaint in April 2016. In it, Osorio
specifically alleges that Tile Shop made excessive deductions from his paycheck to
recoup previously-paid cash advances, in violation of 56 Ill. Admin. Code § 300.800,
which is a regulation implemented under the IWPCA that imposes a per-paycheck
deduction limit on cash advance repayment agreements. 2d Am. Compl. ¶¶ 49-54.
Discussion
Tile Shop has moved for summary judgment on Osorio's IWPCA claim. Tile
Shop advances four separate arguments in support of its motion. First, Tile Shop
asserts that the IWPCA does not apply because it only regulates deductions from
5
wages, and the deductions at issue are not deductions from wages. Tile Shop also
argues that its Pay Plan complies with the IWPCA because Osorio expressly consented
to the deductions and they are not repayments of cash advances subject to section
300.800's deduction limit. Tile Shop argues, in the alternative, that the cash advance
repayment regulations exceed the Illinois Department of Labor's statutory authority
insofar as they apply to the agreement set forth in the Pay Plan. Lastly, Tile Shop
contends that the IWPCA independently authorizes deductions made for the benefit of
employees and that the deductions at issue are made for its employees' benefit.
Osorio has cross-moved for summary judgment. He asserts that Tile Shop's
draws are "cash advances" under the IWPCA and, for that reason, Tile Shop's recovery
of previously-paid draws from compensation in excess of $1,000 per month is subject to
the regulation governing cash advance repayment agreements. According to Osorio,
Tile Shop violated the IWPCA's limitation on cash advance repayment agreements by
making deductions that exceeded 15% of his gross wages (and those of other class
members) per paycheck.
Summary judgment is warranted where the moving party "shows that there is no
genuine dispute as to any material fact" and that party is "entitled to judgment as a
matter of law." Fed. R. Civ. P. 56(a). On cross-motions for summary judgment, the
Court will review each motion "construing all facts, and drawing all reasonable
inferences from those facts, in favor of the non-moving party." Laskin v. Siegel, 728
F.3d 731, 734 (7th Cir. 2013) (internal quotation marks and citation omitted).
The IWPCA prohibits employers from making deductions from their employee's
wages or final compensation unless the deductions are "(1) required by law; (2) to the
6
benefit of the employee; (3) in response to a valid wage assignment or wage deduction
order; (4) made with the express written consent of the employee, given freely at the
time the deduction is made," or are made by certain government entities for a particular
purpose. 820 ILCS 115/9. The IWPCA tasked the Illinois Department of Labor (IDOL)
with establishing rules "to protect the interests of both parties in cases of disputed
deductions from wages," including rules that impose "reasonable limitations on the
amount of deductions . . . which may be made during any pay period." Id. Pursuant to
its authority under the IWPCA, IDOL has promulgated a rule stating 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 practice that Osorio challenges in his second amended complaint was, in
fact, followed only after he gave "express written consent," and thus it does not run
afoul of the text of the IWPCA itself. 820 ILCS 115/9. Rather, the IWPCA violation
alleged in Osorio's second amended complaint is a violation of the 15% per paycheck
limitation that the IDOL regulation imposes on cash advance repayment schedules.
Under this regulation, Osorio's IWPCA claim—and the outcome of both parties' crossmotions for partial summary judgment—hinges on the question of whether Tile Shop's
"recoverable draw" system is a cash advance repayment agreement subject to section
300.800's 15% per paycheck limit.
The terms "cash advance" and "cash advance repayment agreement" are not
defined in the IWPCA or its implementing regulations. Nor has any court attempted to
define the terms as they are used in the IWPCA. Osorio urges the court to look to the
7
FLSA for guidance in interpreting the meaning of "cash advance." In particular, Osorio
points to a regulation under the FLSA that identifies one of the typical methods of
compensation for retail store employees as payment of a "straight commission with
'advances,' 'guarantees,' or 'draws.'" 29 C.F.R. § 779.413(a)(5). Osorio contends that
the FLSA regulation's treatment of draws and advances as interchangeable means that
Tile Shop's "draws" must be cash advances under the IWPCA, such that the
subsequent recovery of a draw constitutes repayment of a cash advance. This
argument is not persuasive. The FLSA regulation upon which Osorio relies does not
purport to define the terms "advance," "guarantee," or "draw." As its title "Methods of
compensation of retail store employees" indicates, the regulation is merely descriptive.
Id. All it does is outline a number of typical compensation structures for retail
employees. The fact that the regulation makes no distinction between "advance,"
"guarantee," and "draw" (and that it encloses each of these words in quotation marks)
suggests only that those three words are used interchangeably within the retail industry.
See also 29 C.F.R. § 779.416(a) (noting that the periodic payments described in section
779.413 "are variously described in retail or service establishments as 'advances,'
'draws,' or 'guarantees'"). There is no indication that those who drafted the IWPCA and
its implementing regulations intended to adopt the same equivalence.
When a term used in a statute is not otherwise defined by that statute, it "must
be given [its] ordinary and plain meaning." Sanders v. Jackson, 209 F.3d 998, 1000
(7th Cir. 2000). In this case, although Webster's Third New International Dictionary
does not define "cash advance" specifically, it defines an advance as "a furnishing of
something (as money or goods) before a return is received." Advance, Webster's Third
8
New Int'l Dictionary 30 (1993). Black's Law Dictionary likewise defines advance as
"[t]he furnishing of money or goods before any consideration is received in return."
Advance, Black's Law Dictionary (10th ed. 2014). In Gennell v. FedEx Corp., No. 05 C
145, 2014 WL 1091148 (D.N.H. Mar. 19, 2014), the court examined the meaning of the
term "cash advance" in the context of a New Hampshire statute regulating employee
reimbursements for work-related expenses not paid for by wages or a cash advance
from the employer. Like the IWPCA, the New Hampshire statute did not define "cash
advance." Id. at 4. Based on the definition of "advance" in Black's Law Dictionary, the
court in Gennell observed that the term "cash advance" had an "expansive traditional
meaning" that was limited only by the requirement that the employer provide the
compensation "before the employee provides consideration." Id.
Courts also look to other provisions of the same statute to help determine a
term's intended breadth in the absence of a statutory definition. See Pine Top
Receivables of Ill., LLC v. Banco de Seguros del Estado, 771 F.3d 980, 983 (7th Cir.
2014); see also Robbins v. Bd. of Trs. of Carbondale Police Pension Fund, 177 Ill. 2d
533, 541, 687 N.E.2d 39, 43 (1997) ("[W]here a word or phrase is used in different
sections of the same legislative act, a court presumes that the word or phrase is used
with the same meaning throughout the act, unless a contrary legislative intent is clearly
expressed."). As Tile Shop notes in its motion, the IWPCA provides support for the
conclusion that a cash advance, as the term is used in the Act, is compensation paid to
an employee before that employee has provided consideration for it. Section 14.5(5) of
the IWPCA prohibits employers from linking payroll cards to "any form of credit
including, but not limited to, overdraft fees or overdraft service fees, a loan against
9
future pay, or a cash advance on future pay or work not yet performed." 820 ILCS
115/14.5(5) (emphasis added). In light of section 14.5(5)'s reference to "future pay or
work not yet performed" and the relevant dictionary definitions, the Court concludes
that, for purposes of the IWPCA, a cash advance is a payment made to an employee
before the employee has provided consideration. In the present circumstances, a cash
advance would be an advance on the employee's commissions for sales not yet made.
Viewed from one angle, there is a decent argument that this is what the "draws"
under Tile Shop's Pay Plan are. In a pay period when the employee's actual earnings
would be lower than $1,000, the company nonetheless pays him $1,000 in anticipation
of future earnings. Under ordinary circumstances, the employee does not get to keep
that money; he has to pay it back, or start paying it back, in the next pay period in which
his earnings exceed $1,000. That makes the part of the draw that brings the
employee's lower compensation during that period up to $1,000 look like a cash
advance.
This, however, is not dispositive of the point in the Court's view. Tile Shop points
to the fact that it does not attempt to recoup prior draws from employees who leave the
company and that it pays even an employee who is on the way out the minimum $1,000
for his final pay period, even if his actual earnings for that period are less than $1,000.
These features make the pay plan look like something other than a cash advance: if a
payor isn't going to ask for his money back, that doesn’t sound much like a loan (or an
advance).
Because the undisputed facts establish that Tile Shop does not always require
repayment of draws, the Court concludes that they do not constitute cash advances.
10
Rather, the best way to describe the draws is that they are an agreed-upon mechanism
for smoothing out dips in an employee's commission income in order to provide some
financial stability from paycheck to paycheck. The Court therefore concludes that Tile
Shop's pay plan does not run afoul of 56 Ill. Admin. Code § 300.800 despite the fact that
deductions from an employee's paycheck sometimes exceed that regulation's fifteen
percent cap.
Having concluded that summary judgment in Tile Shop's favor is warranted on
this basis, the Court need not address the alternative arguments offered by the parties
and grants summary judgment in favor of Tile Shop on the IWPCA claim.
Conclusion
For the foregoing reasons, the Court grants Tile Shop's motion for partial
summary judgment on the IWPCA claim (Count 2) [dkt. no. 191] and denies Osorio's
cross-motion for partial summary judgment on that claim [dkt. no. 215]. The case is set
for a status hearing on April 2, 2018 at 9:30 a.m. to discuss what, if anything, remains to
be done in the case to bring it to a conclusion.
________________________________
MATTHEW F. KENNELLY
United States District Judge
Date: March 23, 2018
11
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?