Church v. Home Fashions International, LLC
Filing
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ORDER denying 27 Dft's Motion for Summary Judgment; granting in part and denying in part 28 Plfs' Motion for Summary Judgment. Unless the parties file a Notice of Settlement or Stipulation of Dismissal on or before 7/27/12, counsel shall appear for a Final Pretrial Conference on 7/31/12 and a trial on any remaining issues on 8/6/12. Signed by Magistrate Judge David Keesler on 7/19/12. (smj)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
STATESVILLE DIVISION
CIVIL ACTION NO. 5:10-CV-133-DCK
KEN E. CHURCH and
KEN E. CHURCH ENTERPRISES, LLC,
Plaintiffs,
v.
HOME FASHIONS INTERNATIONAL, LLC
Defendant.
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ORDER
THIS MATTER IS BEFORE THE COURT on Defendant’s “Notice Of Motion [For
Summary Judgment]” (Document No. 27) and “Plaintiffs’ Motion For Summary Judgment”
(Document No. 28). The parties have consented to Magistrate Judge jurisdiction pursuant to 28
U.S.C. § 636(c), and these motions are now ripe for disposition. Having carefully considered the
motions, the record, and applicable authority, the undersigned will deny Defendant’s motion, and
grant in part and deny in part Plaintiffs’ motion.
I. BACKGROUND
A. Statement Of Facts
Ken E. Church (“Plaintiff” or “Church”) was hired by Home Fashions International, LLC
(“Defendant” or “HFI”) in January 2008 as “a contract agent tied exclusively to” Westgate Home
Fashions (“WHF”), a trade name of Defendant, an affiliate of American Decorative Fabrics, LLC
(“ADF”). (Document Nos. 2-1, 27-1, 28-1). Specifically, Tom Carter (“Carter”) a representative
of ADF, and president of WHF, recruited Plaintiff and confirmed the terms of Plaintiff’s
employment in an email dated January 17, 2008 (the “Agreement”). (Document No. 27-1, p.1;
Document No. 28-1, p.20). The email from Carter with a subject line of “Agreement with ADF”
included the following:
My sincerest apologies for not getting this in writing to you sooner. . . . I have
outlined below the agreement for your records.
Short-Term Compensation guarantee of 10,000.00 per month for a period of
18 months.
Additional health insurance/disability payment of 12,000 annually to
be paid 1,000.00 per month for 18 months.
You will receive a check once a month for 11,000.00.
Expenses
All expenses are to be covered by ADF including travel miles
(excluding travel from home to office)
...
An office (when we lease/purchase building) will be supplied
to you by ADF
Job Outline
Your role would be that of a contract agent tied exclusively to WHF
in charge of sales and key account management.
You would manage additional sales representation and or
key-account executives.
You would be responsible for the compensation of any
support personnel you would need in order to run your sales
organization. (i.e. assistant, etc.)
We would confer and agree on any support personnel
decisions.
As discussed, you will be heavily involved in all product
decisions, company direction, marketing efforts, etc.
Long-Term Compensation
Commissions
Commissions will be based on profitability of the items sold.
Commissions should range from 2% to 5% based on gross
margin.
You will receive an over-ride ranging from .5% to 1% for any
“key account executives” you hire based on the profitability
of the account.
The profitability of the account is based on the
average gross margin of the units sold and can be
adjusted based on fluctuations in product assortment.
(Document No. 28-1, p.19).
2
In addition, an article in Furniture Today, dated March 24, 2008, provided in pertinent part
that “David Li, owner and CEO of HFI, a $160 million company based in Shanghai, has named Tom
Carter president of Westgate and has hired industry veteran Ken Church to head sales, marketing
and customer relations for the upholstery line.” (Document No. 28-1, p.20). David Li (“Li”)was
quoted as saying “I’m very excited to have Carter and Church launch and lead my furniture
business....” Id. On April 30, 2012, the parties filed “Stipulations” (Document No. 23) which
included a statement affirming the parties’ January 2008 employment agreement: “Defendant
agreed to pay Ken E. Church a guaranteed compensation of $10,000.00 per month, plus $1,000.00
a month for health insurance/disability for 18 months. Part of his compensation also included
reimbursing Ken E. Church for his expenses, excluding travel from home to office.” (Document No.
23, p.1).
Soon after being hired, and pursuant to the recommendation of Carter, Plaintiff set up Ken
E. Church Enterprises, LLC. (Document No. 27-2, p.17; Document No. 28-2, p.6). The parties
have stipulated that Plaintiff assigned his right for payment of any and all compensation to Ken E.
Church Enterprises, LLC, without objection from Defendant, and that Ken E. Church Enterprises,
LLC was properly joined to this lawsuit with Defendant’s consent. (Document No. 23, p.1).
Plaintiff anticipated that he would be helping in all areas of Westgate’s furniture division and
would take instructions from Carter and Li, or other upper management employees with HFI.
(Document No. 29, p.2; Document No. 28-2, p.2). Apparently, Carter indicated to Plaintiff that he
would lead the sales, marketing and customer relations divisions of HFI, and that Carter would
depend on him for advice and assistance in all areas of manufacturing and furniture sales.
(Document No. 29, p.2; Document No. 28-2, pp.1-3).
During the first 11-12 months of his employment with HFI, Plaintiff reported to Carter and
3
saw him almost daily in an office provided by Carter in downtown Hickory, North Carolina.
(Document No. 27-2, p.15; Document No. 28-2, p.6). Carter acknowledges in his testimony that
Plaintiff worked in Hickory for HFI, and that he worked with him there for a time. (Document No.
28-1, p.10). Carter could not exactly recall how often Church was in the Hickory office, but
suggested it was weekly. Id.
Plaintiff had to have his travel approved by Carter, and pursuant to the Agreement he would
have to “confer and agree on any support personnel decisions.” (Document No. 27-2, p.16;
Document No. 28-1, p.19; Document No. 28-2, p.14). Plaintiff contends in his affidavit, and
Defendant has failed to refute, that he participated in a wide variety of duties and responsibilities
unrelated to sales, all under Carter’s direction. (Document No. 28-2, pp.3-5; Document No. 29,
p.3).
According to Defendant, “[t]he Agreement remained in effect for 12 months, during which
time, Defendant paid the foregoing $11,000 per month to Church LLC, except for the initial
payment in the amount of $11,000 that was paid to Church, and reimbursed Church LLC for all of
the travel expenses of Church as submitted and approved by Defendant.” (Document No. 27-1, p.2;
see also, Document No. 27-2, pp.25-26). In December 2008, Carter informed Plaintiff that
Defendant intended to terminate Plaintiff, and/or at some point soon thereafter told him that there
would be a new agreement that would supersede the parties’ original Agreement. (Document No.
29, p.4; Document No. 28-2, p.5; Document No. 27-2, p.22).
Plaintiff has consistently asserted in his briefs, affidavits, and deposition testimony that he
never received a proposal to change the terms of the Agreement and never agreed to change his
compensation. (Document No. 29, p.4; Document No. 27-2, p.22; Document No. 28-2, p.5;
Document No. 30, p.1). Plaintiff states in his most recent affidavit that he “was never terminated
4
by the Defendant or advised, either verbally or in writing, my compensation was changed.”
(Document No. 30, p.1). Defendant’s motion for summary judgment contends that “[e]ffective
January 1, 2009, Church and Defendant orally changed the Agreement by eliminating the guaranteed
monthly amount of $10,000, by eliminating the monthly amount of $1,000 for medical/disability
and agreeing to compensate Church on a commission basis only.” (Document No. 27-1, pp.2-3).
However, Defendant has offered no factual support for its contention that the parties “orally changed
the Agreement.” Id.
In or about January 2009, Carter’s duties and responsibilities with HFI changed and he was
ultimately terminated. (Document No. 29, p.4; Document No. 28-2, p.5). Plaintiff, however,
continued to work for Defendant under the instruction and supervision of Jean Brown (“Brown”),
who worked for HFI for over four years. Id. Brown was HFI’s Chief Operating Officer, and worked
on a daily basis with Plaintiff. (Document No. 28-4). She “assumed he was an employee for HFI
and not an independent contractor” and “treated him like a management level employee.” Id. While
working with Brown, Plaintiff’s duties and responsibilities “included a wide variety of management
level responsibilities that were more than sales and marketing related duties.” Id. “During the
approximate 6 months [Brown] worked with Ken Church on a full time basis, [she] was aware he
was not being paid the guaranteed salary that HFI agreed to pay him” and she “attempted on several
occasions to get him paid, but [she] was unsuccessful.” Id.
On or about July 7, 2009, after 18 months working with Defendant, Plaintiff became Chief
Operating Officer of the Lake Hickory Country Club. (Document No. 29, p.5; Document No. 27-2,
p.32; Document No. 28-2, pp.5-6). Plaintiff continued some sales duties and responsibilities related
to the furniture division up until the spring market of 2010, when he terminated his involvement
with HFI. (Document No. 29, p.5; Document No. 28-2, pp.6). Defendant contends that it paid all
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of the commissions earned by Plaintiff to Church LLC through February 2010, and that its furniture
manufacturing business was soon thereafter terminated. (Document No. 27-1, p.3).
B. Procedural History
Plaintiff filed his “Complaint” (Document No. 2-1) against Defendant on August 11, 2010,
in the Superior Court of Caldwell County, North Carolina. The Complaint asserts causes of action
for breach of contract and violation of the North Carolina Wage and Hour Act, N.C.Gen.Stat. § 9525.1 et seq. (Document No. 2-1). Defendant filed a “Notice Of Removal” (Document No. 2) with
this Court on September 9, 2010.
On October 15, 2010, the parties filed their certification of initial attorney’s conference and
consent to jurisdiction of a United States magistrate judge. (Document Nos. 5 and 6). The
undersigned issued a “Pretrial Order And Case Management Plan” (Document No. 7) on October
18, 2010. The “Pretrial Order...” included the following deadlines: discovery - July 13, 2011;
mediation - August 1, 2011; motions - August 15, 2011; and trial - January 2012. (Document No.
7).
Plaintiff’s motion to join Ken E. Church Enterprises, LLC (“Church LLC”) as a plaintiff in
this matter, consented to by Defendant, was allowed on April 15, 2011. (Document Nos. 9 and 10).
On July 26, 2011, Plaintiffs reported that the parties’ attempt to mediate a settlement was
unsuccessful. (Document No. 11).
On November 2, 2011, nearly four (4) months after the discovery deadline and nearly three
(3) months after the motions deadline, Defendant filed motions to compel discovery and to extend
the discovery deadline. (Document Nos. 11-13). The motions for discovery were denied in part and
granted in part, resulting in Plaintiff being allowed to conduct some limited discovery. (Document
No. 17). The undersigned observes that in briefing the above motions Plaintiff failed to file a reply
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brief, or notice of intent not to reply, and the Court thus cited Local Rule 7.1(E) which governs the
time frames for filing responses to motions and for replies. Id.
On May 1, 2012, the undersigned held a Final Pretrial Conference in preparation for a trial
on May 7, 2012. Based on that conference, as well as the parties’ pretrial briefs, the undersigned
found that this matter was not yet ripe for a jury trial. (Document No. 26). “Rather, it appears that
there are legal issues to be considered by the Court that the parties only recently fully recognized,
and that the Court may benefit from additional discovery and/or motions practice related to these
questions of law.” Id. The undersigned then revised the case deadlines, allowing each party to
conduct a deposition (which neither side had done to date) and allowing the parties an extended
period of time to file dispositive motions (which neither side had done to date either). Id. Trial was
rescheduled for August 6, 2012. Id.
On June 14-15, 2012, the parties filed timely cross motions for summary judgment.
(Document Nos. 27-28). Plaintiffs then filed a “...Memorandum Of Law In Opposition To
Defendant’s Motion For Summary Judgment” (Document No. 31) on July 2, 2012;
and
“Defendant’s Reply...” (Document No. 32) was filed on July 11, 2012.
Defendant has failed to file any response to “Plaintiffs’ Motion For Summary Judgment”
(Document No. 28), or request an extension of time for such filing, and the time to do so has lapsed.
See Local Rule 7.1 (E).1 As such, the pending motions for summary judgment are now ripe for
disposition.
1
On or about July 11, 2012, Defendant’s counsel sent a letter to the undersigned
acknowledging that he had not filed, and did not intend to file, a response to Plaintiff’s motion.
(Document No. 33). Defendant’s counsel suggests that Defendant’s motion for summary
judgment be considered as a response to Plaintiff’s motion for summary judgment. Id.
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II. STANDARD OF REVIEW
The standard of review here is familiar. Summary judgment shall be granted “if the movant
shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed.R.Civ.P. 56(a). The movant has the “initial responsibility of informing
the district court of the basis for its motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,
which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986) (internal citations omitted). Only disputes between the parties
over material facts (determined by reference to the substantive law) that might affect the outcome
of the case properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). A dispute about a material fact is “genuine” only if the evidence is such that
“a reasonable jury could return a verdict for the nonmoving party.” Id.
Once the movant’s initial burden is met, the burden shifts to the nonmoving party. Webb
v. K.R. Drenth Trucking, Inc., 780 F.Supp.2d 409 (W.D.N.C. 2011). The nonmoving party
opposing summary judgment “may not rest upon the mere allegations or denials of his pleading, but
... must set forth specific facts showing there is a genuine issue for trial.” Anderson, 477 U.S. at
248. In deciding a motion for summary judgment, a court views the evidence in the light most
favorable to the non-moving party, that is, “[t]he evidence of the non-movant is to be believed, and
all justifiable inferences are to be drawn in his favor.” Anderson, 477 U.S. at 255. At summary
judgment, it is inappropriate for a court to weigh evidence or make credibility determinations. Id.
When considering cross-motions for summary judgment, a court evaluates each motion
separately on its own merits using the standard set forth above. See Rossignol v. Voorhaar, 316
F.3d 516, 522 (4th Cir. 2003); accord Local 2-1971 of Pace Int'l Union v. Cooper, 364 F.Supp.2d
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546, 554 (W.D.N.C. 2005). Both Plaintiffs and Defendant have moved for summary judgment, and
the Court will analyze each motion in turn.
III. DISCUSSION
A. Defendant’s Motion For Summary Judgment
Defendant seeks an Order granting summary judgment in its favor through its “Notice Of
Motion” (Document No. 27) and “Memorandum Of Law In Support Of Summary Judgment”
(Document No. 27-1). Defendant makes four “points” in support of its motion.
1. North Carolina Wage and Hour Act
First, Defendant asserts that Plaintiff was not an employee covered by the North Carolina
Wage and Hour Act, N.C.Gen.Stat. § 95-25.1 et seq. (the “Act”). (Document No. 27-1, pp.4-6).
Defendant argues that the Act is inapplicable to Plaintiff because: (1) he unilaterally amended the
Agreement to have his compensation paid to Church LLC, which as a matter of law is not an
individual and thus cannot be an employee; and/or (2) he lacks standing because § 94-25.14 of the
Act “exempts those employees working in an outside sales capacity.” Id.
In response, Plaintiff contends that he never “assigned any of his employment duties or
obligations” to Church LLC; he only assigned his right to receive compensation to Church LLC.
(Document No. 31, pp.1-2). Defendant does not argue, or cite any authority to support, that an
individual assigning a right to receive compensation is then no longer eligible to be considered an
employee under the Act. Moreover, the uncontroverted facts show that Plaintiff formed the LLC
at the suggestion of Defendant’s president, Tom Carter, and without objection by Defendant. See
Document No. 23, p.1; Document No. 27-2, p.17).. There is also no dispute that it was Plaintiff
Ken Church, and not Church LLC, that worked for Defendant.
Next, Defendant argues that certain factors support a conclusion that Plaintiff “was not an
9
employee of Defendant, but an independent contractor outside sales representative.” (Document
No. 27-1, pp.5-6). There is no material conflict as to the facts of the employment relationship.
Rather, the pertinent question is whether those facts support a finding that Plaintiff was an
independent contractor or employee.
Resolution of factors as “to whether an employment relationship or
an independent contractor relationship was created” is “a question of
law.” Cilecek v. Inova Health System Servs., 115 F.3d 256, 261 (4th
Cir. 1997). Merely because employee and independent contractor
status is each supported by certain factors does not bar entry of
summary judgment.
Farlow v. Wachovia Bank, 259 F.3d 309, 313 (4th Cir. 2001)
The undersigned notes that Defendant has failed to cite any authority supporting his claim
that the factors he identifies show that Plaintiff was not an employee of Defendant. Id. The Court,
however, observes that according to North Carolina caselaw there are generally eight factors which
indicate classification as an independent contractor:
The person employed (a) is engaged in an independent business,
calling, or occupation; (b) is to have the independent use of his
special skill, knowledge, or training in the execution of the work; (c)
is doing a specified piece of work at a fixed price or for a lump sum
or upon a quantitative basis; (d) is not subject to discharge because
he adopts one method of doing the work rather than another; (e) is
not in the regular employ of the other contracting party; (f) is free to
use such assistants as he may think proper; (g) has full control over
such assistants; and (h) selects his own time.
McCown v. Hines, 140 N.C.App. 440, 443 (2000) (quoting Hayes v. Elon College, 224 N.C. 11, 16
(1944). “No one factor is determinative.” Id.
The undersigned finds some of the factors identified by Defendant helpful to its argument;
but others actually support Plaintiff’s position. (Document No. 27-1, pp.5-6). The key factors
identified by Defendant include the following:
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1. “Church is not referred to as an employee in the Agreement.” (Document No. 27-1, p.5).
This is certainly true, but this fact offers little support for a finding that Plaintiff was not an
employee. Conversely, the Agreement does not identify Plaintiff as an outside sales representative
or independent contractor either. (Document No. 28-1, p.19). The Agreement does refer to Plaintiff
as “a contract agent tied exclusively to WHF in charge of sales and key account management . . .
heavily involved in all product decisions, company direction, marketing efforts, etc.” Id.
2-3. Defendant notes that Plaintiff did not have taxes withheld from his paycheck and did
not “complete or submit to Defendant an Internal Revenue Service Form W-4.” (Document No. 271, p.5). The undersigned agrees that this fact is typically indicative of an independent contractor.
However, it also appears that Defendant failed to submit a 1099 form. See Farlow v. Wachovia
Bank, 259 F.3d 309, 312 (4th Cir. 2001) (“Form 1099 is used for reporting the income of nonemployees, and the W-2 form is used for reporting the income of employees.”)
Plaintiff argues that this factor is not determinative, and that in its assertion Defendant
actually admits that Plaintiff was “paid a guaranteed and regular wage.” (Document No. 31, p.3).
Plaintiff further states that Defendant “glossed over” the equally important factor of whether
Plaintiff was doing a specified piece of work at a fixed price, a lump sum, or on a quantitative basis.
Id.
4. “Church admitted . . . that based on his experience an ‘independent contractor was
responsible for his own expenses, whereas an employee benefitted from company benefits and office
space and equipment....’” (Document No. 27-1, p.5). The uncontroverted evidence, including the
Agreement itself, shows that Defendant did reimburse Plaintiff’s expenses, supplied him an office,
and even provided business cards. See (Document No. 28-1, p.19; Document No. 23; Document
No. 28-2, p.5; Document No. 27-2, p.27); see also, Farlow, 259 F.3d at 314 (business cards are
11
“identifying marks that would normally be provided to employees”). This factor favors a finding
that Church was an employee of HFI.
5. “Church paid for his own health care and disability insurance.” (Document No. 27-1,
p.5). While correct, this factor is mitigated by the undisputed fact that part of Plaintiff guaranteed
compensation was to receive an “additional health insurance/disability payment of 12,000 annually
to be paid 1,000.00 per month for 18 months.” (Document No. 28-1, p.19).
6. “Church traveled extensively for Defendant outside North Carolina on sales business.”
(Document No. 27-1, pp.5-6). Defendant offers no other comment how this factor supports its
position. The record also shows that Defendant did at least some travel for management level
business meetings. (Document No. 27-2, pp.26-27). For example, Plaintiff traveled to New York
to meet with Defendant’s owner, David Li, and discuss changes to the furniture management
organization. Id.
7. “Church did not have an office at Defendant’s factory in Taylorsville, North Carolina.”
(Document No. 27-1, p.6). Again, this factor is accurate, but of minimal value to Defendant. The
undisputed evidence is that Plaintiff worked at an office in Hickory, North Carolina, about twenty
miles from Taylorsville, at the instruction of Carter, which was provided by and at least partially paid
for by Defendant. Moreover, the Agreement provided that “[a]n office (when we lease/purchase
building) will be supplied to you by ADF.” (Document No. 28-1, p.19).
8. From January 2009 through February 2010, Church was paid solely sales commissions.
Id. This factor is also not disputed, and is, at least in part, the basis for Plaintiffs’ lawsuit.
9. “Church incurred and was reimbursed for his travel expenses as an outside salesman.” Id.
As noted above, Plaintiff incurred and was reimbursed for all his expenses incurred on behalf of HFI
or conducting HFI business. See (Document No. 28-2, p.5).
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The undersigned is not persuaded that the assignment of Plaintiff’s compensation to an LLC,
or its list of factors, support a finding that Plaintiff was not covered by the Act. On the whole, the
factors Defendant chooses to focus on actually tend to support a finding that Plaintiff was an
employee. Therefore, Defendant’s first “point” does not support a judgment that Plaintiff was not
covered by the North Carolina Wage and Hour Act. To the contrary, Defendant’s factors, the factors
discussed in McCown, along with “the parties’ beliefs about their relationship, the economic realities
of the relationship, and the extent of Defendant’s control over Plaintiff” support a finding that
Plaintiff was an employee of Defendant. Morrison v. Saco Industries, Inc., 2997 WL 148926 at *3
(M.D.N.C. Jan. 16, 2007) (citing Farlow, 259 F.3d at 313-16).
In Morrison, the Court concluded that there was a genuine dispute of material fact that
precluded summary judgment. Id. In Farlow, however, the Fourth Circuit opined that
The facts with respect to the employment relationship are not
materially in conflict. Resolution of factors as “to whether an
employment relationship or an independent contractor relationship
was created” is “a question of law.” Cilecek v. Inova Health System
Servs., 115 F.3d 256, 261 (4th Cir. 1997). Merely because employee
and independent contractor status is each supported by certain factors
does not bar entry of summary judgment. Whether a person is an
employee depends on the common law of agency definition of
employee. Cilecek, 115 F.3d at 259, 261-63.
Farlow, 259 F.3d at 313. The Fourth Circuit explained its conclusion that the plaintiff was an
independent contractor, rather than an employee of the defendant as follows:
Upon review of all of these factors, it is clear that, although some may
weigh in favor of a finding that Farlow was an employee, the vast
majority of them, including the most significant, weigh in favor of the
conclusion that Farlow was an independent contractor. We place
greater weight on: 1) the financial relationship between the parties in
which she was paid not a salary but only in response to her bills, for
services actually rendered; 2) the financial relationship between the
parties in which Wachovia did not withhold or pay any taxes that are
incident to an employment relationship; 3) the financial relationship
13
between the parties in which Farlow did not receive employee benefits
such as medical and life insurance; 4) Farlow's filing of income tax
returns under a self-employed status; 5) the express intent of the
parties as indicated in the contract Farlow signed labeling her as an
independent contractor; 6) that Farlow did not work exclusively for
Wachovia during her working relationship with it; and (7) that
Wachovia exercised no control over the manner of her work. These
factors demonstrate that Farlow exercised independence from
Wachovia.
Id. at 316.
Here, the undersigned is particularly persuaded by depositions of record, as well as the
affidavits of Church and Brown, that show that Plaintiff believed he was an employee of HFI and that
he was treated as such by Defendant. Although Plaintiff did seem to have a fair amount of autonomy,
it is clear in the Agreement and elsewhere, that he had to have approval of Carter or others regarding
personnel decisions. (Document No. 28-1, p.19). Furthermore, the undisputed facts indicate that
Plaintiff worked closely with Carter and Brown on many aspects of Defendant’s business, and that
his duties were more akin to an upper management employee than an outside sales agent. See
(Document No. 28-1, p.7) (Carter testified that he hired Church as a “higher level employee”) and
(Document No. 28-4, p.1) (Brown stated that she “treated him like a management level employee”).
Additionally, Plaintiff went to work exclusively for Defendant in exchange for a guaranteed
monthly salary for 18 months. (Document No. 28-1, p.19). Plaintiff asserts, and there is no evidence
to the contrary, that he fulfilled his commitment. (Document No. 27-2, p.32); see also (Document
No. 27-2, p.13) (“I was contracted for a period of 18 months to WHF, which meant I could not sell
merchandise, work for other competitive companies during that 18-month period of time and still
receive their payment”). After 18 months, Plaintiff became general manager for the Lake Hickory
Country Club, but apparently continued to work on a few projects for Defendant. (Document No.
27-2, pp.32-33).
14
The undersigned concludes that Plaintiff should be regarded as an employee pursuant to North
Carolina Wage and Hour Act.
2. Terminable Agreement
In its next point, Defendant asserts that the parties’ relationship was terminable at the will of
Defendant as of December 31, 2008. (Document No. 27-1, p.6). Defendant relies on Freeman v.
Hardee’s Food Systems, Inc., 3 N.C. App. 435 (1969), to support its contention that the Agreement
here was terminable at will because “no specific duration of employment was set out.” (Document
No. 27-1, pp.6-7). Defendant acknowledges it agreed to pay Plaintiff $11,000 per month for 18
months, but concludes that because the Agreement as a whole is “void of any terms with respect to
the duration or termination of the Agreement” Defendant could terminate the Agreement at will.
(Document No. 27-1, p.7).
In Freeman, the Court of Appeals held that “[a]n employment contract, such as the one in the
instant case, where the compensation is specified at a rate per year, month, week or day, but where
the duration of the contract is not specified, is for an indefinite period.” Freeman, 3 N.C.App. at 43738. The plaintiff in Freeman was promised a weekly salary rate for his first two years, but
“thereafter, all raises would be based upon merit and length of service.” Id. at 436.
In this case, although the compensation is specified at a rate per month, the Agreement clearly
stated that such monthly rate is “for a period of 18 months.” (Document No. 28-1, p.10). Unlike
Freeman, there is no indication in the Agreement that any salary would be paid after 18 months. At
most, the Agreement anticipates that Plaintiff might continue to receive commissions as long-term
compensation. Id. The undersigned does not, therefore, find that the parties’ contract here was for
an “indefinite period.” Moreover, Defendant has stipulated to the fact that it agreed to pay Plaintiff
“a guaranteed compensation of $10,000.00 per month, plus $1,000.00 a month for health
15
insurance/disability for 18 months.” (Document No. 23, p.1) (emphasis added).
Defendant argues that Church could be terminated at any time, and that it was within its rights
to terminate the Agreement and retain Church under a new agreement. (Document No. 27-1, p.7).
Defendant’s motion suggests that it exercised its right to terminate the Agreement at will and pay
Plaintiff strictly on commission as an independent sales person. Id. However, Defendant’s position
contradicts its contention that “Church and Defendant orally changed the Agreement....” (Document
No. 27-1, p.2). Moreover, Defendant’s argument is inconsistent with the sworn affidavit of Jean
Brown, its then Chief Operating Officer, whose affidavit supports a finding that Plaintiff continued
working for Defendant as “a management level employee” with duties beyond sales and marketing
activities. (Document No. 28-4). Brown also believed that Plaintiff continued to be entitled to his
guaranteed salary from January 2009 through July 2009. Id.
There is simply no evidence that the parties reached a new agreement. Defendant fails to
even allege when, where, why, who, or specifically how the parties orally changed the Agreement.
Defendant asserts that the Agreement was terminable at will as of December 31, 2008; however,
Defendant fails to point to any evidence regarding the significance of that date. In addition, even if
the relationship was terminable at will, Defendant has presented no evidence that it terminated the
relationship.
Instead, it appears that Defendant simply stopped paying the “guaranteed
compensation” of $11,000.00 per month to Plaintiff starting in or about January 2009.
Finally, the undersigned notes that the North Carolina Wage and Hour Act requires employers
to “[n]otify employees, in writing or through a posted notice maintained in a place accessible to its
employees, at least 24 hours prior to any changes in promised wages.” N.C.Gen.Stat. § 95-25.13(3).
As noted above, the undersigned finds the Act applicable to this employment relationship, and as
further noted, there is no evidence that Defendant provided any written or posted notice to Plaintiff
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about a change to his promised wages. Therefore, Defendant’s conduct violated the Act and
constituted a breach of contract.
3. Agreement Modification
Defendant next re-asserts that the parties modified their Agreement. (Document No. 27-1,
pp.7-8). In support, Defendant suggests that Plaintiff accepted a modification as of January 1, 2009,
because he worked on a commission basis only from then on. Id. There is no dispute that Plaintiff
continued to accept commission payments. As Defendant notes, Plaintiff testified that after January
2009, he could not just walk away from what he had put his heart and soul into. Id. Defendant fails
to add that Plaintiff contends that Brown kept telling him not to worry, it would get worked out,
apparently referring to his guaranteed monthly compensation. (Document No. 27-2).
Brown’s affidavit supports Plaintiffs. (Document No. 28-4). “During the approximate 6
months I worked with Ken Church on a full time basis, I was aware he was not being paid the
guaranteed salary that HFI agreed to pay him. I attempted on several occasions to try to get him paid,
but I was unsuccessful.” Id. The undisputed evidence supports Plaintiff’s position that he continued
working for Defendant with the belief or hope that the dispute over his wages would be resolved.
This position is consistent with Brown’s affidavit, and Defendant has failed to produce any evidence
to the contrary. See (Document 28-4).
Although there is evidence that Defendant was interested in modifying the Agreement, there
is no evidence that a new deal was ever agreed on or even presented to Plaintiff. (Document No. 272, pp.23-27, 33). Defendant’s lack of evidence belies its contention that there was a new agreement.
4. Payment Due
In its final point, Defendant asserts that Plaintiffs are not due unpaid salary or commissions
for any period under the Agreement. (Document No. 27-1, pp.8-9). Defendant acknowledges that
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it paid Plaintiff $11,000.00 a month for 12 months “before the guarantee term of the Agreement was
mutually terminated by Church and Defendant.” Id. Thus, Defendant again references a new
agreement purportedly reached by the parties, not a termination at will, but fails to offer any evidence
or allegation supporting such a claim.
The crux of Defendant’s final argument is that it paid Plaintiff’s commissions through January
2010 for all sales made by Church alone, and that it does not owe Plaintiffs payment of any other
commissions. (Document No. 27-1, p.9-10). Defendant contends that Plaintiffs did not hire any key
account executives during the relevant time period involved, January 2009 through January 2010.
Id. Defendant points to “Plaintiffs’ Responses to Defendant’s First Request To Produce” and argues
that Plaintiffs identified some sales people hired, but “failed to identify the name of a single key
account executive and failed to provide the addresses and contact numbers” of any of the people hired
by Plaintiffs. Id. As Defendant notes, Plaintiff later testified in his deposition that at least three of
the “sales people” he hired were key account executives. Id. (citing Document No. 27-2, p.15).
Plaintiff then testified that there was probably no difference between an individual sales
representative and a key account executive. Id.
Defendant further notes that the parties’ Agreement only refers to “key account executives.”
(Document No. 27-1, p.10) (citing Document No. 28-1, p.19). Defendant argues that Plaintiff should
be barred from now alleging he is entitled to commissions from three key account executives. Id.
Defendant also contends that even if Plaintiff did hire key account executives, he faces “the onerous
burden to prove the profitability of each such account and the agreed upon percentage thereof.” Id.
Defendant concludes that Plaintiff cannot prove the profitability of the account(s) as required by the
Agreement, and therefore summary judgment for Defendant is appropriate. Id.
In his response, Plaintiff only addresses the issue of whether he has the burden of establishing
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the profitability of the sales to establish the percentage of the commissions. (Document No. 31, p.5).
Plaintiff provides that all sales were made at the standard price and commissions are owed based on
the higher percentage (1%). Id. (citing Document No. 30). Plaintiff makes no argument that he
hired “key account executives” pursuant to the Agreement, or that he is owed commissions based on
the sales he made. Id.
Defendant’s reply reiterates that Plaintiffs are not claiming they are owed any commissions
based on sales by Church. (Document No. 32, p.4). In addition, Defendant asserts that Plaintiffs’
apparent claim for “override commissions on sales made by other sales representatives of Defendant”
must fail. (Document No. 32, p.5). Defendant argues that the Agreement that provided for override
commissions was terminated as of December 31, 2008, but even if it were applicable, it only provides
for an override commission “for any key account executive he hires based on the profitability of the
account.” Id. Finally, Defendant essentially argues that even if override commissions were owed,
Plaintiffs’ computations of the amount(s) owed is erroneous.
5. Conclusion
Based on the foregoing, the Court cannot find that Defendant is entitled to summary
judgment. Specifically, the undersigned concludes that the uncontroverted facts support a finding
that Plaintiff Ken E. Church’s employment with Defendant is covered by the North Carolina Wage
and Hour Act, and that the parties had a contract for guaranteed compensation for 18 months that was
breached by Defendant. In particular, Defendant has rested on the mere allegation that there was a
new agreement between the parties sometime prior to January 1, 2009, without referring to anything
in the pleadings, depositions, answers to interrogatories, the affidavits, or elsewhere, that supports
such an allegation. The Court is not persuaded that Defendant’s failure/refusal to pay the guaranteed
compensation for six months is evidence that the parties reached a new deal. Defendant’s motion for
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summary judgment as to its position that there was no employer-employee relationship, and no
breach of contract, will be denied.
As to Defendant’s claim that it does not owe any commissions, the undersigned finds the
factual record far less clear on this issue and is unable to conclude that there is no genuine issue of
material fact. As such, Defendant’s motion for summary judgment will be denied.
B. Plaintiffs’ Motion For Summary Judgement
“Plaintiffs’ Motion For Summary Judgment” (Document No. 28) contends that Plaintiffs are
“entitled to summary judgment as to all claims contained in the Complaint as a matter of law.”
Plaintiffs rely on the pleadings, discovery responses, deposition transcript of Tom Carter, and the
affidavits of Jean Brown and Ken E. Church to support their motion. (Document No. 28, p.1).
Plaintiffs first argue that Church was an employee of HFI. (Document No. 29, pp.6-10). For
reasons discussed above in considering Defendant’s motion, the undersigned agrees that Plaintiff was
an employee and that he is entitled to the protections afforded by the North Carolina Wage and Hour
Act.
Next, Plaintiff asserts that pursuant to the Act, Defendant was required to notify Plaintiff in
writing of any changes in his promised wages. (Document No. 29, p.10) ( citing N.C.Gen.Stat. § 9525.13) and (Murphy v. First Union National Bank, 152 N.C.App. 205, 208 (2002). Plaintiff further
asserts that Church was never provided with anything in writing which notified him that the terms
of his compensation were being changed. Id. To date, Defendant has failed to produce, or even
allege, any evidence that it gave notice to Plaintiffs, in writing or otherwise, that Plaintiff was being
terminated or that his compensation was being modified. As noted above, Defendant concedes that
it stopped paying Plaintiff’s guaranteed compensation under the Agreement, but kept paying
commissions.
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The elements of a claim for breach of contract are the existence of a
valid contract and a breach of the terms of that contract. See Johnson
v. Colonial Life & Accident Ins. Co., 173 N.C.App. 365, 369 (2005).
The intentions of the parties may be discerned from both their writings
and their actions. Arndt v. First Union Nat'l Bank, 170 N.C.App. 518,
522, 613 S.E.2d 274, 278 (2005). To be enforceable, the terms of a
contract must be sufficiently definite and certain. Lassiter v. Bank of
N.C., 146 N.C.App. 264, 269 (2001). A contract leaving material
portions open for future agreement is nugatory and void for
indefiniteness. Boyce v. McMahan, 285 N.C. 730, 734 (1974). In
addition to setting forth its terms with the requisite level of certainty,
to be enforceable a contract must contain an expression of mutual
assent, or a meeting of the minds. See Volumetrics Med. Imaging,
Inc. v. ATL Ultrasound, Inc., 243 F.Supp.2d 386, 400
(M.D.N.C.2003) (“There is no contract unless the parties thereto
assent, and they must assent to the same thing, in the same sense.”).
Cole v. Champion Enterprises, Inc., 496 F.Supp.2d 613, 621-22 (M.D.N.C. 2007)(internal citations
omitted).
The undersigned is convinced that uncontroverted evidence supports a finding that Plaintiff
is entitled to recover unpaid wages pursuant to the Act and Defendant’s breach of the parties’
Agreement. Based on the foregoing, and including the analysis of Defendant’s motion, the Court will
therefore grant Plaintiffs’ motion for summary judgment as to the claims for breach of contract and
violation of the North Carolina Wage and Hour Act.
Finally, Plaintiffs’ memorandum in support of the motion for summary judgment argues that
Plaintiff “is owed an additional amount of $24,467.50 for override commissions on sales made by
salesmen on behalf of Westgate and direct sales he made for which he was not compensated.”
(Document No. 29, p.11). As was true regarding Defendant’s motion, Plaintiffs fail to specifically
assert that Church hired “key account executives” pursuant to the Agreement. Moreover, Plaintiffs
have failed to provide sufficient and undisputed evidence that would allow this Court to conclude that
he is entitled to an award of commissions in the amount he now claims.
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As such, and as noted above, there appears to be a genuine issue of material fact on the issue
of commissions that is now ripe for trial. Therefore, Plaintiffs’ motion for summary judgment will
be granted as to claims for breach of contract and violation of the North Carolina Wage and Hour
Act, but denied to the extent Plaintiffs seek payment of unpaid commissions.
IV. CONCLUSION
The Court finds that the North Carolina Wage and Hour Act is applicable to the underlying
employment relationship and that Defendant breached the parties’ Agreement. At minimum,
Defendant is liable to Plaintiff for the six (6) months of guaranteed compensation of $11,000.00 per
month it failed to pay Plaintiff.
As discussed above, the Court finds that there is a remaining genuine issue of material fact
as to whether Plaintiff hired “key account executives” pursuant to the Agreement, and if so, whether
Plaintiff is owed any commission payments based on either Plaintiff’s or the key account executives’
sales activity for Defendant. At trial, if one is ultimately required, the Court will hear arguments
regarding the issue of commissions, and will further consider Plaintiffs’ requests for liquidated
damages and attorney’s fees.
IT IS, THEREFORE, ORDERED that Defendant’s “Notice Of Motion [For Summary
Judgment]” (Document No. 27) is DENIED.
IT IS FURTHER ORDERED that “Plaintiffs’ Motion For Summary Judgment” (Document
No. 28) is GRANTED in part and DENIED in part.
IT IS FURTHER ORDERED that unless the parties file a Notice Of Settlement or
Stipulation Of Dismissal on or before July 27, 2012, counsel for the parties shall appear for a Final
Pretrial Conference on July 31, 2012, and a trial on any remaining issues in this matter on August
6, 2012. The parties are directed to make the necessary preparations and filings in accordance with
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the “Pretrial Order And Case Management Plan” (Document No. 7).
SO ORDERED.
Signed: July 19, 2012
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