Moholt v. Dooney & Bourke, Inc.
Filing
49
Opinion and Order - Dooney's Motion for Summary Judgment (Dkt. #35 ) is granted in part and denied in part. Defendant's motion for summary judgment against Plaintiff's Additional Nordstrom Commissions claim (Plaintiff's First Claim for Relief, Wage Claim Part One) is granted. Defendant's motion for summary judgment against Plaintiff's Nordstrom Rack claim (Plaintiff's First Claim for Relief, Wage Claim Part Two) is granted in part and denied in part as follows: Plaintiff's Nordstrom Rack claim may proceed only with regard to Plaintiff's claim for the first month's commission earned in February 2009 relating to shipments made to the Nordstrom Rack. Defendant's motion for summary judgment against Plaintiff's Second Claim for Relief (statutory penalty) is denied. Defendant's motion for summary judgment against Plaintiff's Third Claim for Relief (Breach of Contract) is granted. Signed on 11/19/2014 by Judge Michael H. Simon. (mja)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
RON MOHOLT,
Plaintiff,
Case No. 3:13-CV-01026-SI
OPINION AND ORDER
v.
DOONEY & BOURKE, INC.,
Defendant.
Judy Danelle Snyder, LAW OFFICES OF JUDY SNYDER, 1000 S.W. Broadway, Suite 2400,
Portland, OR 97205; Grant Yoakum, GRANT YOAKUM ATTORNEY AT LAW, 5895 Jean
Road, Lake Oswego, OR 97035. Of Attorneys for Plaintiff.
Scott G. Seidman and Colin Love-Geiger, TONKON TORP LLP, 1600 Pioneer Tower, 888
S.W. Fifth Avenue, Portland, OR 97204; Thomas J. McAndrew, THOMAS J. MCANDREW &
ASSOCIATES, One Turks Head Place, Suite 205, Providence, Rhode Island, 02903. Of
Attorneys for Defendant.
Michael H. Simon, District Judge.
Defendant, Dooney & Bourke, Inc. (“Defendant” or “Dooney”), moves for summary
judgment against all claims asserted by Plaintiff, Ron Moholt (“Plaintiff” or “Moholt”). For the
following reasons, Dooney’s motion for summary judgment is granted in part and denied in part.
PAGE 1 – OPINION AND ORDER
STANDARDS
A party is entitled to summary judgment 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 moving party has the burden of establishing the absence of a genuine dispute
of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The court must view the
evidence in the light most favorable to the non-movant and draw all reasonable inferences in the
non-movant’s favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir.
2001). Although “[c]redibility determinations, the weighing of the evidence, and the drawing of
legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a
motion for summary judgment,” the “mere existence of a scintilla of evidence in support of the
plaintiff’s position [is] insufficient . . . .” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255
(1986). “Where the record taken as a whole could not lead a rational trier of fact to find for the
non-moving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986) (citation and quotation marks omitted).
BACKGROUND1
Dooney is a Connecticut-based company that designs, manufactures, and sells high-end
handbags and other merchandise. Moholt is an Oregon resident who worked selling handbags
and other merchandise for Dooney. In approximately November 2000, Dooney hired Moholt,
classifying him as an independent contractor and paying him solely on a commission basis.
Dooney terminated its relationship with Moholt in March 2012. There was no written agreement
between Moholt and Dooney that defined Moholt’s position or his commission structure.
Moholt’s relationship with Dooney was terminable “at will” by either party.
1
For purposes of summary judgment, the parties have stipulated to these facts.
PAGE 2 – OPINION AND ORDER
Moholt served as a non-exclusive sales representative for Dooney in its Pacific Northwest
region. Moholt sold Dooney’s fashion handbags and related merchandise to accounts in his
assigned geographic territory, which initially included such department store chains as
Nordstrom, Meier & Frank, and Bon Marché. Moholt earned net commissions for each year in
the following amounts: $5,136 for the partial year 2000; $70,171 in 2001; $76,660 in 2002;
$125,493 in 2003; $293,828 in 2004; $220,375 in 2005; $337,665 in 2006; $217,683 in 2007;
$125,208 in 2008; $89,137 in 2009; $32,369 in 2010; $62,369 in 2011; and $41,571 for the
partial year 2012. A “net commission” is a commission after adjustment for any sales with
“chargebacks.” A chargeback typically would result when a customer returned to Dooney a
portion of the product shipped to that customer and Dooney accepted that return. Shipments net
of accepted returns are referred to as “net shipments.”
During Moholt’s tenure, Dooney made a portion of its sales through persons, such as
Moholt, whom Dooney classified as independent contractors. During the period covered by
Moholt’s lawsuit, Dooney also had employees who performed sales responsibilities for Dooney’s
accounts. These employees worked out of Dooney’s corporate headquarters in Connecticut and
performed other non-sales functions.
The actual sales work that the Dooney employees performed differed little, if any, from
the work performed by the sales representatives who were characterized as independent
contractors. The place of performance and the method of compensation, however, differed.
During Moholt’s tenure, Dooney compensated sales representatives who were characterized as
independent contractors solely through a net commission on shipments to the customers’
locations (known as “doors”) located in the independent contractor’s geographic territories,
generally at a five percent commission rate, but sometimes lower. For example, if an
PAGE 3 – OPINION AND ORDER
independent sales representative was classified as a “sub-representative” on a particular
customer’s account, he or she would receive only a two percent commission on net shipments
made into his or her territory, and the other three percent commission would be paid to the
primary independent sales representative for that particular account.
With regard to Dooney’s employees who serviced retail accounts, Dooney typically
compensated those employees with only a one percent commission rate on net shipments, while
also paying those employees a base salary and certain benefits. With only two exceptions, the
individuals who were characterized as sales employees worked at Dooney’s headquarters and
used Dooney-provided equipment.
During his tenure with Dooney, Moholt worked some of the time out of his home office
in Oregon, for which he took a personal tax deduction. Moholt typically got up at 6:00 a.m. and
began work on his home office computer in his pajamas and robe. Moholt decided when to work
from home and when to travel, such as whether and when to visit store locations or customer
buying offices, or to meet with prospective new customers. Moholt’s work-related travel
included: (1) attending meetings with customers that Moholt personally arranged; (2) attending
meetings with Dooney’s management and staff at times and locations set by Dooney;
(3) attending “Market Week” in New York City several times each year, during which Moholt
and other sales representatives would also travel to Dooney’s headquarters in Connecticut to
meet with Dooney’s management and staff; and (4) attending or presenting seminars scheduled
with key accounts. Moholt scheduled his own time off for vacation and personal days. Dooney
set no formal sales quotas for Moholt. Dooney did not provide performance reviews either for
independent sales representatives (like Moholt) or for any employees who performed sales
functions. Dooney issued Internal Revenue Service (“IRS”) W-2 forms to the people whom it
PAGE 4 – OPINION AND ORDER
classified as employees and issued IRS 1099 forms to the people, like Moholt, whom it classified
as independent contractors.
During Market Week in New York, which occurred about four or five times each year,
Dooney would preview the collections for each fashion season, first to the sales representatives
and then to the customers. Market Week is an industry-wide activity at scheduled times each
year when buyers from Macy’s, Nordstrom, Dillard’s, and other similar retailers travel to New
York for prearranged presentations by Dooney and Dooney’s competitors. On Monday of a
given Market Week, Dooney would show its new handbag collections to the sales representatives
at Dooney’s corporate headquarters in Connecticut. Moholt contends that attendance on these
days was mandatory, and for purposes of summary judgment Dooney does not dispute Moholt’s
contention. On Tuesday through Thursday of a given Market Week, Dooney’s sales
representatives would show the collections to the buyers from their respective territories, at
spaces arranged by Dooney in New York City. On Friday of a given Market Week, some of the
sales representatives would be invited to reconvene in Dooney’s headquarters in Connecticut to
discuss the buyers’ reactions to different collections and colors, so that Dooney could prepare a
sales forecast and begin to schedule manufacturing. Moholt, however, was never invited to these
Friday meetings. Instead, Moholt completed his sales forecasts while in New York City, before
returning to Oregon.
During one Market Week several years ago, Dooney’s President, Peter Dooney,
communicated to the sales representatives that they were to dress in appropriate business attire
for that Market Week. Peter Dooney used words such as “crisp and clean” or “black and white”
to describe this requirement. Moholt always dressed appropriately for whatever function he was
attending. Moholt was responsible for showing Dooney’s merchandise to the buyers in his
PAGE 5 – OPINION AND ORDER
territory; for obtaining commitments from these buyers on styles, volumes, and delivery
schedules; for negotiating with customers to extend delivery windows when products could not
be shipped within the original schedule; for monitoring inventory at his “doors” and obtaining
reorders; and for providing any follow-up services the customers required.
Moholt and the other non-exclusive, independent sales representatives were allowed to
represent other products, and some did so. Moholt represented a hosiery line from another
manufacturer early in his tenure with Dooney, but that ended in or before 2002. Because of
acquisitions, consolidations, and business failures, as well as changes in how manufacturers now
do sales, most, if not all, of Dooney’s non-exclusive, independent sales representatives currently
represent only Dooney.
Moholt paid all of his own expenses during his tenure with Dooney. Moholt’s expenses
included mileage, hotel, and meal expenses for travel, and home office expenses, such as a
computer that Dooney required Moholt to purchase, as well as other office supplies. Moholt also
employed at his own expense as many as five independent contractors who worked for Moholt as
merchandisers. Moholt’s merchandisers visited the “doors” in Moholt’s assigned territory to set
up displays and check stock for reorders. Moholt paid his merchandisers and issued IRS 1099
forms to them. In addition, Moholt paid employment taxes, local business taxes, and the
employer’s side of social security taxes both for himself and for the independent contractors (the
merchandisers) who worked for him.
Dooney required all independent sales representatives to purchase the same type of
computer, which Dooney configured with proprietary software that allowed the sales
representatives to access Dooney’s databases. During his tenure, Moholt was told he would not
be reimbursed for the cost of this computer. In fact, Moholt never submitted any claim for
PAGE 6 – OPINION AND ORDER
reimbursement for any of his expenses, and no reimbursement was ever paid to Moholt by
Dooney.
For every year that Moholt was a Dooney sales representative, he filed a personal IRS
1040 tax return form, including Schedule C, Profit and Loss. This was a change in Moholt’s tax
status from when he was classified as an employee for another company before joining Dooney
in 2000. After becoming affiliated with Dooney in November 2000, Moholt deducted all of his
business expenses “off the top,” rather than as miscellaneous itemized deductions on
Schedule A, which would have limited his deductions to amounts greater than two percent of his
adjusted gross income. Moholt used the same accountant during his tenure with Dooney that he
used before beginning his affiliation with Dooney. After Moholt began working for Dooney,
Moholt’s accountant filed Moholt’s tax returns showing Moholt’s income as being received from
a sole proprietorship, rather than as wages. Moholt’s accountant did this because Moholt
received an IRS form 1099 from Dooney showing miscellaneous income, rather than a W-2 form
showing wages and because Moholt was responsible for all of his own expenses, including
paying the merchandisers whom Moholt hired as independent contractors to work for him.
Dooney’s independent sales representatives, including Moholt, regularly recruited new
accounts for Dooney, which retained the final authority for deciding whether to approve a new
account. Dooney set the wholesale prices for its products, and sales representatives had no
authority to negotiate a different price for any customer. Dooney also had sole authority for
authorizing a credit to a customer. When Dooney authorized a credit, a chargeback would result
in the sales representative losing his or her commission to the extent of the chargeback.
All of Moholt’s electronic communications with the Dooney accounts that he served were
done using his personally owned cell phone and computer, unless he was in the Dooney
PAGE 7 – OPINION AND ORDER
showroom in New York City or in Dooney’s corporate headquarters in Connecticut. Dooney
provided a voicemail box and email address for Moholt on Dooney’s central server to allow
customers the convenience of leaving messages for Moholt in a dedicated location. Moholt
accessed his voicemail and email using his own cell phone or computer. Dooney also provided
its sales representatives with Dooney-branded badges for their merchandisers to wear when
visiting customer stores.
Dooney developed a set of best practices based on what some of the most successful sales
representatives were doing. Among these best practices was a schedule for how often
merchandisers should visit individual stores to ensure that displays were properly set up and to
check on inventory for reordering, based on the volume of Dooney sales each store generated
(the greater the volume, the more frequent the visits). Under these best practices, Dooney paid
Moholt a bonus to be given to the merchandisers he employed if they fulfilled the standards
established by Dooney.
Nordstrom has long been one of Dooney’s most important customers because of the
influence it exerts in fashion retailing. Nordstrom was one of the major Dooney accounts that
Moholt serviced. As with several larger national and regional customers of Dooney’s, Nordstrom
was a “shared account” that was serviced by more than one person affiliated with Dooney.
Moholt was responsible for the Nordstrom “doors” in the Pacific Northwest and Hawaii. Bill
Tripodi, also classified by Dooney as an independent contractor, was the sales representative
responsible for the Nordstrom “doors” in California and Arizona. During Moholt’s tenure,
Dooney generally paid Moholt a five percent commission on net shipments to the Nordstrom
“doors” located in his territory, and Dooney paid Tripodi a five percent commission on net
shipments to the Nordstrom “doors” in Tripodi’s territory.
PAGE 8 – OPINION AND ORDER
The Nordstrom Rack, Inc. (“Nordstrom Rack” or the “Rack”) is Nordstrom’s “discount
arm.” For many years, Nordstrom urged Dooney to sell to the Nordstrom Rack. And for many
years, Dooney resisted because it was more profitable for Dooney to sell its discounted
merchandise through Dooney’s own retail outlet stores. In 2009, however, Dooney began selling
to the Nordstrom Rack. The Nordstrom Rack became a “house account” for one of Dooney’s
employees. That employee asked Moholt to provide support service for shipments made to the
Nordstrom Rack stores located in Moholt’s territory, which Moholt did for three selling seasons,
from spring 2009 to fall 2010. In this lawsuit, Moholt seeks one half of his regular commission
rate, or two and one-half percent, on net shipments that Dooney made to the Nordstrom Rack in
Moholt’s territory during this period. This amount totals $33,130.68. Moholt’s first month of
claimed “Nordstrom Rack commissions” is February 2009, and Moholt seeks $2,147.60 for net
shipments by Dooney to the Nordstrom Rack made that month, based on a commission rate of
two and one-half percent.
During Moholt’s tenure, Dooney sold to discounters Marshalls, T.J. Maxx, and Stein
Mart, in addition to the Nordstrom Rack. In most instances, Dooney did not pay commissions on
sales to discounters, but it did pay a reduced commission of two and one-half percent to Bob
Goodwyn, also classified by Dooney as an independent contractor, on sales made to Stein Mart
for a period of time after Goodwyn brought in the Stein Mart account.
No one at Dooney ever told Moholt that he would be paid commissions at two and onehalf percent, or at any other rate, on shipments to the Nordstrom Rack in his territory. Moholt
says that he did not know that he would not receive Nordstrom Rack-related commissions until
the second month of his servicing the Nordstrom Rack, March 2009. Moholt continued to service
PAGE 9 – OPINION AND ORDER
the Nordstrom Rack account, however, because he believed it was a condition of his ability to
retain the Nordstrom account, for which he did receive commissions.
After Dooney ended its relationship with Moholt in 2012, Bill Tripodi became the
Nordstrom account independent sales representative for the entire United States. In spring 2013,
Dooney restructured its system of paying Nordstrom commissions. As part of this restructuring,
Dooney began paying Tripodi a commission of one percent on net shipments to the Nordstrom
Rack nationally. Bob Goodwyn and another Dooney sales representative also began to receive
commissions on sales to the Nordstrom Rack. Dooney made this change retroactive to January 1,
2013.
Moholt contends that he should have been classified as an employee for the period
January 1, 2007 through March 2012.2 Based on this contention, Moholt seeks $198,828 in
“expense” reimbursements. The parties agree for purposes of summary judgment that, if Moholt
had been an employee, he would have been reimbursed certain expenses or received certain
benefits. He also would have been paid a lower sales commission by Dooney.
DISCUSSION
A. Moholt’s First Claim for Relief (Unpaid Wages)
1. Wage Claim – Part One (“Additional Nordstrom Commissions”)
Moholt titles his First Claim for Relief “Unpaid Wages.” Moholt then divides that claim
into two parts. For his “Wage Claim – Part One,” Moholt contends that he is entitled to be paid
commissions for sales activities involving certain shipments of Dooney product to Nordstrom,
Inc. during the period January 2007 through March 2012. Although Dooney paid Moholt
2
Moholt does not contend that any particular event relevant to this lawsuit occurred as of
January 1, 2007. Instead, this date appears to be used solely for purposes of applying a six-year
statute of limitations. Moholt filed his lawsuit in state court on May 31, 2013. Dooney then
timely removed the case to federal court.
PAGE 10 – OPINION AND ORDER
commissions for sales activities related to many shipments of Dooney product to Nordstrom, Inc.
during this period, Moholt contends that he was entitled to certain additional Nordstrom
commissions. The parties refer to this contention as Moholt’s claim for “Additional Nordstrom
Commissions.” After Dooney moved for summary judgment, Moholt conceded that summary
judgment is appropriate against his claim for Additional Nordstrom Commissions. Accordingly,
summary judgment is granted in favor of Dooney and against Moholt on his First Claim for
Relief, Wage Claim – Part One, relating to Additional Nordstrom Commissions.
2. Wage Claim – Part Two (“Nordstrom Rack Claim”)
For his “Wage Claim – Part Two,” Moholt contends that he is entitled to be paid
commissions for sales activities involving shipment of Dooney products to the Nordstrom Rack
during the period February 2009 through March 2010. The parties refer to this contention as
Moholt’s “Nordstrom Rack Claim.” Moholt seeks approximately $33,131 in commissions, which
is calculated at a commission rate of two and one-half percent multiplied by $1,325,227 in total
orders shipped to the Nordstrom Rack during the relevant period. Dooney moves for summary
judgment against Moholt’s Nordstrom Rack Claim. Moholt opposes this motion.
Dooney classified and treated Moholt as an independent sales representative. Dooney
argues, without opposition by Moholt, that Oregon does not have any law expressly governing
how manufacturers are required to compensate independent sales representatives. In addition,
argues Dooney, even if Moholt should have been classified as an employee, nothing in Oregon
or federal wage law requires an employer to pay a commission on every sale made by a sales
employee. Moholt offers nothing to the contrary.
Dooney argues that regardless of whether Moholt was an independent contractor or an
employee, it is undisputed that Moholt’s relationship with Dooney was terminable “at will” by
either party. Dooney further argues that no one from Dooney ever told Moholt that he would be
PAGE 11 – OPINION AND ORDER
paid commissions on sales or shipments made to any discounter, such as the Nordstrom Rack.
Dooney adds that Moholt admits that he knew at least after the first month of providing service
to the Nordstrom Rack, which he began doing in February 2009, that he would make no
commissions on sales to that business and Moholt nevertheless continued to do the work.
In its motion, Dooney relies upon Albrant v. Sterling Furniture Co., 85 Or. App. 272, 726
P.2d 201 (1987). In that case, the Oregon Court of Appeals held that if an employer may
terminate an at-will employee at any time,
[i]t follows that an employer may also modify the employment
contract so long as the modification applies only prospectively. An
employe[e] impliedly accepts such modifications by continuing
employment after the modification. Page v. Kay Woolen Mill Co.,
168 Or. 434, 439, 123 P.2d 982 (1942); see also Mail-Well
Envelope Co. v. Saley, 262 Or. 143, 152, 497 P.2d 364 (1972).
Albrant, 85 Or. App. at 275 (footnote omitted); see also Duncan v. Office Depot, 973 F.
Supp. 1171, 1177 (D. Or. 1997) (holding that an employer has the right to modify the terms and
conditions of an at-will relationship prospectively at any time).
In response, Moholt makes two arguments. First, Moholt argues that he had a reasonable
contractual expectation that Dooney would pay him commissions for the sales and services he
provided on the Nordstrom Rack account. Moholt bases this expectation, in part, on Dooney’s
practice of paying commissions to Moholt at rates between two and one-half percent and five
percent, depending on various factors, since Moholt began his affiliation with Dooney in
November 2000. Moholt adds that his expectation was also based on his knowledge that Dooney
previously had paid Bob Goodwyn commissions for his sales and service to the discount retailer
Stein Mart. Second, Moholt argues that under Oregon law every contract contains an implied
covenant of good faith and fair dealing and that there are genuine issues of material fact
PAGE 12 – OPINION AND ORDER
regarding whether Dooney acted in good faith in not paying Moholt any commissions on sales
and shipments made to the Nordstrom Rack.
The parties agree that Moholt began working for Dooney as a sales representative in
November 2000. Stipulation of Facts, ¶ 1. Whether Moholt was properly classified as an
independent contractor (as Dooney contends) or should have been classified as an employee (as
Moholt contents) is not relevant to Moholt’s Nordstrom Rack Claim. The parties also agree that
during Moholt’s tenure, sales representatives who were classified as independent contractors
were paid a commission “generally at a 5% rate, but it was sometimes lower.” Stipulation of
Facts, ¶ 5. The parties further agree that “[t]here was no written agreement between Moholt and
Dooney & Bourke to define Moholt’s position or the commission structure.” Stipulation of Facts,
¶ 1. And the parties agree that their relationship was terminable at will. Stipulation of Facts, ¶ 11.
Moholt states in his declaration that Dooney instructed him in 2009 to assist in making
sales to the Nordstrom Rack account. Moholt complied and, he states, expected to be paid for
that work. As he explains in his declaration: “When I performed work for Dooney at Nordstrom
Rack, I expected to be compensated for that work.” Decl. of Ron Moholt, p. 7, ¶ 24 (Dkt. 43).
Moholt adds:
My expectation that I would receive a Nordstrom Rack
commission was based on my knowledge of a Dooney policy or
practice of paying “half commission” or 2.5% on “close-out” or
“discounted” items, i.e. at Stein [M]art and T.J. Maxx. Due to the
historic delay by Dooney in making commission adjustments, I
was not alarmed that commission for my work on the Nordstrom
Rack account did not immediately appear on my paycheck. I knew
that sales representative Bob Goodwyn had been paid for his work
at the Stein [M]art stores, another retail discounter similar to
Nordstrom Rack, so I was aware of the precedent within Dooney
for paying commission on discount retailers. I persisted in my
attempts to be paid my commissions for work on Nordstrom Rack
until I was terminated from employment by Dooney.
Id. at ¶25.
PAGE 13 – OPINION AND ORDER
Moholt began performing work on the Nordstrom Rack account in February 2009, and he
expected to receive his first month of Nordstrom Rack commissions for that work shortly
thereafter. Stipulation of Facts, ¶ 31. When Dooney issued Moholt’s commission statement in
March 2009, during Moholt’s second month of his involvement with the Nordstrom Rack,
Moholt learned that Dooney would not be paying any commissions to him on sales or shipments
made by Dooney to the Nordstrom Rack; Moholt, however, continued to serve the Nordstrom
Rack account because “he believed it was a condition of his ability to retain the Nordstrom
account,” for which he was paid commissions. Id. at ¶ 33. The Nordstrom account is a different
Dooney account than the Nordstrom Rack account.
Moholt testified in his deposition as follows:
Q.
How did you learn you weren’t getting paid commissions
on Nordstrom Rack?
A.
When the commissions come out.
Q.
So after the first commission statement came out and you
didn’t get paid from Nordstrom Rack, you knew that going
forward that you weren’t getting paid commissions on
Nordstrom Rack?
A.
From that point, yeah.
Q.
Did you seek an explanation for that?
A.
I asked to be paid.
Q.
What were you told? Well, first of all, who did you ask?
A.
Mr. Kinsley [Dooney’s Chief Financial Officer, Phil
Kinsley; Stipulation of Facts, ¶ 29].
Q.
Okay. You asked Phil Kinsley “I want to be paid on
Nordstrom Rack.” What commission rate did you tell him
you wanted to be paid?
A.
Half commission.
Q.
How did you come up with half commission?
PAGE 14 – OPINION AND ORDER
A.
Usually on closeouts or other things they would pay half
commission.
Q.
When you say “closeouts” are you talking about sales to
your regular customers?
A.
Every once in a while Dooney would offer accounts at
closeout or different kinds of products that are done and
that kind of stuff and the rep would be paid half
commission.
Q.
Did Mr. Kinsley respond to your question about getting
paid 2.5 percent commissions on Nordstrom Rack?
A.
He told me “We don’t pay discount,” “We don’t pay
commission on discounters and I cannot pay you.”
Q.
Okay. Did anyone at Dooney & Bourke ever communicate
to you that they had changed that position and were going
to pay commissions on Nordstrom Rack?
A.
You mean while I was there?
Q.
Yeah, while you were there.
A.
No, but I was still asking. I was doing all the work and stuff
and I kept on asking to get paid.
Q.
Nobody ever told you you were going to get paid, correct?
A.
No they did not.
Decl. of Judy Danelle Snyder, Ex. G, p. 27, Tr. 135:20-137:14 (Dkt. 42-7).
Viewing the evidence in the light most favorable to Moholt and giving Moholt the benefit
of all reasonable inferences, Moholt’s evidence is sufficient to show a genuine issue of material
fact regarding whether, when Dooney first asked Moholt to work on the Nordstrom Rack
account in early 2009, Moholt believed that he would be paid a “half commission” for that work
computed on sales made to the Nordstrom Rack. Dooney contends that Moholt’s servicing the
Nordstrom Rack was simply part of his job duties serving Nordstrom, for which he was paid a
full commission, but based only on sales made to Nordstrom and not to the Nordstrom Rack.
PAGE 15 – OPINION AND ORDER
With regard to Moholt’s first month working on the Nordstrom Rack account, there is a genuine
dispute concerning the terms of the parties’ agreement, requiring resolution by a jury. Thus,
Dooney’s motion for summary judgment is denied with respect to Moholt’s Nordstrom Rack
Claim for February 2009 commissions in the approximate amount of $2,147.60.
The situation changed, however, in March 2009. At that time, Moholt was expressly told
by Dooney’s Chief Financial Officer, Phil Kinsley, that Dooney would not pay Moholt any
commissions relating to shipments of product to the Nordstrom Rack. After that time, any work
that Moholt did relating to the Nordstrom Rack was performed by him without Dooney incurring
any legal obligation to pay Moholt anything beyond his regular commission structure related to
serving Nordstrom.
In an “at will” employment relationship, “an employer is free to set the terms and
conditions of the work and compensation and . . . the employee may accept or reject those
conditions.” Brett v. City of Eugene, 130 Or. App. 53, 57, 880 P.2d 937 (1994). “By continuing
to work for an employer after the employee is aware of a change in the employer’s policies, the
employee impliedly accepts the change in his or her employment contract.” Id. Thus, at least
after Moholt learned in March 2009 from Kinsley that Dooney would not be paying any
commissions relating to sales made to the Nordstrom Rack, Moholt’s continued work for
Dooney represents his implied acceptance of that policy.
Moholt’s second argument is based on the proposition that under Oregon law, every
contract contains an implied duty of good faith and fair dealing. Klamath Off-Project Water
Users, Inc. v. PacifiCorp, 237 Or. App. 434, 445, 240 P.3d 94 (2010). Moholt’s argument is
unavailing.
PAGE 16 – OPINION AND ORDER
Regardless of whether Moholt is properly classified as an independent contractor or as an
employee, there is no dispute that this relationship was terminable at will by either party. Thus,
either party may unilaterally modify the prospective terms of the relationship at any time without
becoming subject to a claim for breach of the duty of good faith. See Duncan, 973 F. Supp.
at 1177 (holding that because an employer has the “right to modify the terms and conditions of
[an at-will employment agreement] prospectively at any time,” the duty of good faith and fair
dealing is not breached when an employer unilaterally modifies the prospective terms of an
employment agreement). In addition, “it is only the objectively reasonable expectations of parties
that will be examined in determining whether the obligation of good faith has been met.” Tolbert
v. First Nat’l Bank of Oregon, 312 Or. 485, 494, 823 P.2d 965 (1991); see also Arnett v. Bank of
America, N.A., 874 F. Supp. 2d 1021, 1034-35 (D. Or. 2012) (discussing the evolution of the law
in Oregon concerning the implied covenant of good faith and fair dealing). 3 After speaking with
Dooney’s Chief Financial Officer, Mr. Kinsley, in March 2009, Moholt could not have held any
reasonable expectation that Dooney would be assuming any legal obligation to pay Moholt any
commissions related to the Nordstrom Rack account, at least unless and until Dooney expressly
communicated such a change in its policy—which it did not do during Moholt’s tenure.4
As stated above, Dooney’s motion for summary judgment on Moholt’s First Claim for
Relief, Wage Claim – Part Two, relating to Moholt’s Nordstrom Rack Claim, is denied to the
3
Although Moholt did not explicitly plead the duty of good faith and fair dealing in his
Complaint but raises it for the first time in opposition to Dooney’s motion for summary
judgment, the Court addresses the issue because “the duty is implied in every contract, and the
alleged breach of the duty is the same as the alleged breach of contract.” Duncan, 973 F. Supp.
at 1177.
4
The fact that Dooney changed its policy in the spring of 2013, after Moholt’s
termination in March 2012, and began paying commissions based on shipments made to the
Nordstrom Rack (Stipulation of Facts, ¶ 34) has no relevance to Moholt’s claim of a legal
entitlement to Nordstrom Rack commissions during his tenure.
PAGE 17 – OPINION AND ORDER
extent of Moholt’s demand for February 2009 Nordstrom Rack commissions in the approximate
amount of $2,147.60. Dooney’s motion for summary judgment is granted, however, on the
balance of Moholt’s First Claim for Relief, Wage Claim – Part Two, namely Moholt’s demand
for Nordstrom Rack commissions related to work that Moholt performed for that account
beginning March 2009.
B. Moholt’s Second Claim for Relief (Statutory Penalty for Unpaid Wages)
For his Second Claim for Relief, Moholt seeks a statutory penalty under Or. Rev. Stat.
§ 652.150 based on Dooney’s failure to pay the amounts sought in Moholt’s first claim. All that
remains for trial, however, concerning Moholt’s first claim is his Nordstrom Rack Claim (Wage
Claim – Part Two) to the extent of his demand for February 2009 Nordstrom Rack commissions
in the approximate amount of $2,147.60.
Or. Rev. Stat. § 652.150(1) provides for a penalty if, on termination of employment, “an
employer willfully fails to pay any wages or compensation of any employee whose employment
ceases.” This penalty is limited to 30 days’ wages. Or. Rev. Stat. 652.150(1)(a). This sub-section
also states: “as a penalty for the nonpayment, the wages or compensation of the employee shall
continue from the due date thereof at the same hourly rate for eight hours per day until paid or
until action therefor is commenced.” Or. Rev. Stat. 652.150(1) (emphasis added).5
By its own terms, the penalty provision in Or. Rev. Stat. 652.150 only applies to
employees, and not to independent contractors. Thus, for purposes of Moholt’s Second Claim for
Relief, the Court must decide whether Moholt is an employee or an independent contractor as a
matter of law or whether the facts require resolution by a jury.
5
The parties have not briefed how, or even whether, this measurement might apply to
Moholt’s Nordstrom Rack Claim for February 2009 commissions if Moholt prevails on that
claim. This is not an issue, however, that needs to be resolved at this time.
PAGE 18 – OPINION AND ORDER
As opposed to claims brought under Or. Rev. Stat. Chapter 653, where the “economic
realities” test applies, for claims brought under Or. Rev. Stat. Chapter 652 the applicable test for
deciding whether a worker is an employee or an independent contractor is the “right-of-control”
test and not the “economic realities” test. See Slayman v. FedEx Ground Package System, Inc.,
765 F.3d 1033, 1042 (9th Cir. 2014), citing Cejas Commercial Interiors, Inc. v. Torres-Lizama,
260 Or. App. 87, 100-101, 316 P.3d 389 (2013).6 “Oregon’s right-to-control test requires courts
to weigh four factors: (1) direct evidence of the right to, or exercise of, control; (2) the furnishing
of tools and equipment; (3) the method of payment; and (4) the right to fire.” Id. at 1042
(quotation marks and citation omitted). “Direct evidence of the right to control is the most
important factor under Oregon law.” Id. In addition, “[t]he test for determining whether one is a
servant or an independent contractor is not the actual exercise of control—the actual interference
by the employer with the manner and method of accomplishing the result—but the right to
interfere.” Nordling v. Johnston, 205 Or. 315, 332, 283 P.2d 994 (1955).
Considering first the direct evidence of Dooney’s right to control Moholt’s manner and
method of accomplishing the result of making sales of Dooney’s product line, Moholt set his
own hours, chose to work out of his home office, determined what to wear (at least when he
wasn’t visiting customers), decided when and how frequently to contact customers, determined
whether to contact customers by telephone, email, or personal visit, and hired his own
merchandisers and decided how much to pay them. In addition, Moholt was allowed to, and for a
6
Without citing to any authority, Dooney asserts that the “economic realities” test applies
“for purposes of determining whether attorney’s fees or penalty wages are available for his wage
claims” under Moholt’s First and Second Claims for Relief. Def.’s Mot. for Sum. J. at p. 32 n.29
(Dkt. 35). The Court disagrees based on the statements in both Cejas and Slayman that the
“right-to-control” test applies to claims brought under Or. Rev. Stat. Chapter 652.
PAGE 19 – OPINION AND ORDER
time did, represent other product lines, at least when those lines were not in competition with
Dooney’s own products.
There is, however, also evidence of some control by Dooney. Moholt was required to
purchase a specific computer from Dooney and to use Dooney’s proprietary software for
managing the orders of Dooney product. In addition, Moholt was expected to be in New York
during Market Week four or five times each year and, at least when seeing customers during
Market Week, Dooney required Moholt to dress “clean and sharp” or “black and white.” Moholt
also was expected to attend in person or by telephone certain management and staff meetings at
times and locations set by Dooney. Moholt also was assigned by Dooney to a specific geographic
territory, the Pacific Northwest. Further, Dooney required Moholt to assist in the servicing of the
Nordstrom Rack account without receiving any additional compensation as a condition of
Dooney being able to continue to sell to and earn commissions from shipments to Nordstrom,
Inc. Dooney also retained final approval authority over any new customers that sales
representatives, including Moholt, brought to Dooney. In fact, on several occasions Moholt
brought prospective new customers to Dooney, and Dooney rejected them. In addition, sales
representatives were not authorized to grant discounts to customers without approval from
Dooney. Finally, Dooney retained sole authority to determine which customer returns to accept,
and this would affect the level of chargeback deductions from a sales representative’s
commissions.
Notwithstanding these indicia of control, other facts show that Dooney afforded Moholt
with extensive freedom and discretion in the manner and method of performing his work. On
balance, the “right to control” factor favors Dooney, but not unambiguously. See generally
Jenkins v. AAA Heating & Cooling, Inc., 245 Or. 382, 386, 421 P.2d 971 (1966) (“[T]he exercise
PAGE 20 – OPINION AND ORDER
of some limited control by the employer over the work being done will not necessarily make the
worker an employee rather than an independent contractor.”).
Considering next the factor, relating to the furnishing of tools and equipment, this factor
also favors Dooney, but again not unambiguously. Dooney provided Moholt with business cards,
name badges, a voicemail mailbox, and an email account. Moholt, however, furnished all of his
other tools and equipment. This included home office space, home office supplies, a cell phone,
postage, samples, and business gifts. In addition, Moholt hired and paid his own independent
contractors (the merchandisers) to help service customers in Moholt’s territory. Although
Dooney required Moholt to provide service to the customers in his territory, Dooney did not
require Moholt to do so by hiring others to perform that work. Moholt could have done it
himself. Further, although it seems unusual to speak of such independent sub-contractors as
Moholt’s “tools and equipment,” that is the role they served. Moreover, it is even more unusual
to consider that an employee may hire other people to assist (or even wholly perform) that
employee’s job duties and then expect the employer not only to continue to pay the employee’s
wages but also to be legally obligated to reimburse the employee for the wages and other
expenses of those other people. Yet, that is precisely what Moholt is seeking in this case.
Turning next to the “method of payment” factor, this factor either favors Dooney or is
neutral. Moholt agrees that under his arrangement with Dooney, which was in place from
November 2000 through March 2012, Moholt’s only compensation from Dooney was in the
form of a sales commission based on net shipments, generally at five percent, and that Moholt
would be responsible for paying all of his own expenses.7 Thus, how much Moholt earned was
7
Moholt has not claimed that Dooney violated any federal or state laws requiring the
payment of a minimum wage or overtime or unlawfully took any deductions from Moholt’s
compensation.
PAGE 21 – OPINION AND ORDER
largely within his own control, depending upon how hard he chose to work and how successful
his own sales abilities and efforts (and those of his merchandiser-independent contractors)
proved to be. Moholt received no salary, no benefits package, and no withholding of taxes from
Dooney.
The final factor concerns the right to fire, and this factor favors Moholt. The parties’
relationship was “at will,” meaning that either Moholt or Dooney could end the relationship at
any time and for any reason. Generally, a relationship that is terminable at will is consistent with
an employer-employee relationship. Oregon courts, however, have held that the right to fire is
not dispositive on the question of whether someone is an employee or an independent contractor.
See, e.g., Avanti Press v. Employment Dept. Tax Sec., 248 Or. App. 450, 472, 274 P.3d 190
(2012) (“We are not persuaded, however, that the right to fire is dispositive in this case.”); Schaff
v. Ray’s Land & Sea Food Co., 334 Or. 94, 106, 45 P.3d 936 (2002) (holding that a dealer was
an independent contractor, not an employee, notwithstanding that their relationship was
terminable at will); Jenkins, 245 Or. at 385 (affirming directed verdict holding that a salesman
who was the driver of an automobile that caused personal injury was an independent contractor
and not an employee of the defendant, notwithstanding the fact that the defendant and the
salesman could terminate their relationship “at any time, for any reason”).
“Whether an individual is an employee or an independent contractor is a legal
conclusion.” Schaff, 334 Or. at 99. Here, there is no genuine issue of any material fact, in the
sense of a historical or evidentiary fact. The question remains, however, whether a jury should be
permitted to draw inferences from these undisputed historical facts and thereby, for all practical
purposes, decide the legal question of whether Moholt was an employee or an independent
contractor.
PAGE 22 – OPINION AND ORDER
This question was discussed extensively in Schaff. As now-Chief Justice Balmer
explained, writing for the Court:
In summary, the foregoing discussion of this court’s case law
establishes that whether an individual is an employee or an
independent contractor for vicarious liability purposes is a question
of law. However, that legal conclusion ultimately depends on a
constellation of facts relating to the right to control. A jury or other
factfinder must render a verdict on an individual’s employment
status if the facts and any reasonable inferences that the jury could
draw from those facts support a conclusion that the putative
employer had the right to control the putative employee’s work
performance. See Wallowa Valley Stages, 235 Or. [594], 600, 386
P.2d 430 (jury selects between conflicting inferences in arriving at
general verdict). If the facts and any reasonable inferences that a
jury could draw from those facts would not support a conclusion
that the putative employer had the right to control the putative
employee’s work performance, then there is no triable issue of fact,
and a defendant is entitled to have the issue decided as a matter of
law. Jenkins, 245 Or. at 386. The court’s determination may come
in the form of a ruling on a motion for a directed verdict, as in
Jenkins, or a ruling on a motion for summary judgment, as here.
Id. at 103 (affirming summary judgment holding that dealer was an independent contractor rather
than an employee). The Oregon Supreme Court in Schaff also instructed that “the absence of
control may be found, as a matter of law, despite evidence of one or more of the subsidiary
factors.” Id. at 105. After considering all of the factors applicable under the “right to control”
test, which applies in claims brought under Or. Rev. Stat. Chapter 652, the Court finds that a
reasonable jury could draw from the undisputed facts either the conclusion that Moholt was an
independent contractor working for Dooney or that he was a Dooney employee. Dooney’s
motion for summary judgment is, therefore, denied on Moholt’s Second Claim for Relief.
C. Moholt’s Third Claim for Relief (Breach of Contract)
For his third claim for relief, Moholt alleges breach of contract. Moholt contends that
Dooney misclassified Moholt as an independent contractor rather than as an employee and then
breached a contractual obligation owed by Dooney to its employees to pay “employer share
PAGE 23 – OPINION AND ORDER
expenses” for Moholt throughout the course of Moholt’s employment with Dooney.8 The parties
refer this contention as Moholt’s “Claim for Expense Reimbursements or Employee Benefits.”
Moholt seeks approximately $198,678 for this claim. Dooney moves for summary judgment
against this claim, and Moholt opposes this motion.
Dooney argues that Moholt was properly classified as an independent contractor, that
even if Moholt was misclassified he has not suffered any loss from being classified as an
independent contractor rather than as an employee, and that Moholt’s claim is barred by the
applicable statute of limitations. Finally, as an additional defense, Dooney asserts the doctrine of
equitable recoupment. Dooney argues that under this doctrine, if Moholt were found to have
been improperly classified as an independent contractor, Dooney may reduce Moholt’s damages
resulting from that misclassification with any overpayment of commissions paid by Dooney,
beginning when Moholt first began his affiliation with Dooney in 2000. Moholt responds that if
any recoupment or offset were allowed to reduce his damages, it must be limited to the period of
Moholt’s claim, 2007-2012.
Although the parties sometimes refer to Moholt’s third claim as a “claim for expense
reimbursements or employee benefits,” Moholt’s Complaint labels this claim as one for “breach
of contract,” and Moholt does not rely upon any federal or Oregon statute to provide the legal
basis for his third claim. Thus, the Court analyzes Moholt’s third claim as alleging a breach of
contract under Oregon common law.
8
Some of the categories of “employer share expenses” for which Moholt seeks recovery
include automobile expenses, equipment, office expenses (including supplies), travel expenses
(including hotel and airfare), business gifts, merchandisers (the independent contractors hired by
Moholt to assist him), parking and tolls, postage, samples, telephone and internet, and home
office “rent.” Other categories of reimbursement sought by Moholt are “self-employment taxes”
and “Tri-Met” business taxes. See Stipulation of Facts, Exhibit 1 (Dkt. 33-1).
PAGE 24 – OPINION AND ORDER
1. First Principles Under Oregon’s Common Law of Contracts
Whether Dooney is liable to Moholt for breach of contract is a question to be decided
under contract law, and both parties treat this matter as governed by Oregon law. See Pltf’s.
Mem. Opp. Sum. J. at 16 (Dkt. 41). If Moholt was properly classified by Dooney as an
independent contractor, then contract law governs their relationship. But, even if Moholt were
not properly classified as an independent contractor and should have been considered as an
employee, then contract law still governs their relationship. That is because the relationship of
employer and employee is “basically one of contract.” Snow v. West, 250 Or. 114, 115, 440 P.2d
864 (1968).
In a lawsuit brought by a former employee against a former employer alleging breach of
contract, the Oregon Court of Appeals, in an opinion written by then-Court of Appeals Judge
Gillette, wrote:
What the complaint does allege is a straightforward breach of
contract claim. It sets out the existence of a contract, its relevant
terms, plaintiff’s full performance and lack of breach and
defendant’s breach resulting in damage to plaintiff. The complaint
is sufficient to state a claim under contract law principles.
Defendant seems to assume that something about the employment
nature of the contract changes the normal rules. Defendant is
incorrect. A breach of contract is a breach of contract, unless
specific statutes or public policies affect the contract in some
fashion. Defendant has shown no way in which they do so here.
Fleming v. Kids & Kin Head Start, 71 Or. App. 718, 721, 693 P.2d 1363 (1985). In Flemming,
the court also noted: “In the absence of statutory or public policy considerations, there is nothing
about being an employer that gives a contracting party rights that it would not have if it were the
buyer [or seller] of widgets instead of labor.” Id. at 723. In addition, unless there are defenses
under the statute of frauds (which are not applicable here), an oral contract is just as enforceable
as a written one, provided that the intent of the parties is ascertainable. See Langendorf United
PAGE 25 – OPINION AND ORDER
Bakeries, Inc. v. Moore, 327 F.2d 592, 596 (9th Cir. 1964) (“The reasonable intent of the parties
was ascertainable. Under such circumstances destruction of the contract for uncertainty is to be
avoided.”).
The proponent of an alleged contract has the burden of establishing both its existence and
its terms. Holdner v. Holdner, 176 Or. App. 111, 120, 29 P.3d 1199 (2001). In addition, “[i]n
determining whether a contract exists and what its terms are, we examine the objective
manifestations of intent, as evidenced by the parties’ communications and acts.” Id. at 120
(citation and quotation marks omitted).
Moholt and Dooney agree that an oral contract terminable at will existed between them.
In addition, Dooney does not deny Moholt’s full performance and lack of breach. Where the
parties disagree is in the identification of the essential terms of that contract and whether Dooney
breached any of those terms. The latter question will be relatively easy to answer after the former
question has been resolved. Finally, the parties disagree over the proper remedy, including any
offsets or recoupment that may be available to Dooney, in the event that Dooney is found to be
in breach. Thus, the Court turns next to identifying the contract’s essential terms.
2. The Contract’s Terms as Evidenced by the Parties’ Communications and Acts
As stipulated by the parties, in approximately November 2000, Dooney hired Moholt,
classifying him as an independent contractor and paying him solely on a commission basis. The
parties further agree that there was no written agreement defining Moholt’s position or his
commission structure and that the relationship between Moholt and Dooney could be terminated
at any time by either party. The parties also agree that Moholt paid all of his own expenses,
including employing at his own expense as many as five independent contractors (the
merchandisers) to help Moholt service the accounts for which he was receiving commissions
from Dooney. Although Moholt incurred substantial travel and home office expenses, Moholt
PAGE 26 – OPINION AND ORDER
never submitted any claims for reimbursement for any of his expenses to Dooney during his
tenure. Moreover, Dooney never paid or reimbursed or promised to pay or reimburse Moholt for
any of these expenses. In fact, at one point in their relationship, Dooney required that Moholt
purchase a computer from Dooney, and Dooney told Moholt that he would not be reimbursed for
its cost. Moholt purchased the computer and did not seek reimbursement. The relationship
between Dooney and Moholt continued in this manner for more than 11 years, until Dooney
terminated the relationship in March 2012.
Based on the parties’ stipulations of fact, the Court finds that, looking only at the parties’
communications and acts, an oral agreement, terminable at will by either party, was reached
between Moholt and Dooney in approximately November 2000. The Court further finds that the
essential terms of this agreement were that Moholt would be classified and treated as an
independent contractor working as a sales representative for Dooney, that Moholt would be
responsible for all of his expenses, and that Dooney would pay Moholt solely on a commission
basis based on net shipments, generally at a commission rate of five percent but potentially lower
under certain circumstances.
Aside from the dispute concerning Moholt’s Nordstrom Rack claim, which is treated in
Moholt’s First Claim for Relief, both Moholt and Dooney complied with all of the essential
terms of their oral agreement, and Dooney terminated this “at will” relationship after 11 years in
March 2012. For purposes of Moholt’s Third Claim for Relief, Moholt alleges that Dooney
breached the parties’ oral agreement by failing to pay or reimburse Moholt certain expenses,
which Moholt calls “employer share expenses.” The Court finds, however, that, at least based on
the parties’ communications and acts, Dooney never promised to pay or reimburse Moholt for
these “employer share expenses” (or what Dooney sometimes calls Moholt’s claim for “expense
PAGE 27 – OPINION AND ORDER
reimbursements or employee benefits”). Thus, based solely on the parties’ communications and
acts, Dooney did not breach the parties’ oral agreement by failing to pay these expenses or to
reimburse Moholt for them.
3. Moholt’s Rose City Contract Theory
Moholt, however, does not appear to contend that Dooney ever expressly agreed to pay or
reimburse Moholt for the alleged “employer share expenses.” Instead, Moholt appears to be
making an “implied in fact” contractual argument, although without applying that label to his
argument. In his Complaint, Moholt alleges that he was an employee “as a matter of law,”
Complaint, ¶ 5, and his response in opposition to Dooney’s motion for summary judgment
attempts to support that conclusion. Moholt then presents his argument that under Oregon and
federal law, Dooney “misclassified” him as an independent contractor, when he should have
been classified as an employee. This is step one of Moholt’s “implied in fact” contract argument.
At step two of his argument, Moholt alleges, and offers some factual support, that
Dooney has paid some or all of the “employer share expenses” on behalf of those persons whom
Dooney has classified as employees. Moholt also alleges Dooney pays these “employer share
expenses” as part of a company plan or policy. See Complaint, ¶ 17. In fact, Dooney has
stipulated for summary judgment purposes that if it would have classified Moholt as an
employee, Dooney would have paid for many (but not all) of the expenses that Moholt claims as
“employer share expenses.” Stipulation of Facts, ¶ 15.
At step three of his argument, Moholt alleges that he “was aware” that Dooney paid
“employer share expenses,” or at least some of them, for sales representatives whom Dooney
classified as employees. See Complaint, ¶ 16. It is worth noting, however, that Moholt offers no
factual support for this specific allegation. In his declaration submitted in opposition to Dooney’s
motion for summary judgment, Moholt says nothing at all about any awareness he may have had
PAGE 28 – OPINION AND ORDER
about what expenses Dooney paid or didn’t pay for its employees. See Decl. of Ron Moholt
(Dkt. 43). Nevertheless, drawing all reasonable inferences in favor of a non-moving party, the
Court will assume that Moholt was generally aware of what Dooney paid for its employees to do
their jobs.
Based on these three premises, Moholt concludes, at step four, that Dooney’s “adoption”
of a plan or policy to pay “employer share expenses,” of which Moholt was aware, constitutes
“an offer of a unilateral contract to the employee.” Complaint, ¶ 17, citing Rose City Transit Co.
v. Portland, 271 Or. 593, 533 P.2d 339 (1975).
In Rose City, the Oregon Supreme Court held that the City’s adoption of a pension plan is
an “offer for a unilateral contract” and this plan “may be viewed as an offer to the employee
which may be accepted by the employee’s continued employment, and such employment
constitutes the underlying consideration for the promise.” Rose City, 271 Or. at 592-93
(quotation marks and citation omitted). The Oregon Supreme Court in Rose City identified three
elements required for employer liability under a pension plan under this theory:
For an employer to become liable under a pension plan, it must be
shown (1) that the employer has adopted a plan to pay retirement
benefits, (2) the employee knows of the plan, and (3) the employee
is eligible for benefits under the plan:
“* * * [W]here the employer has a fixed pension plan and the
employee knows of it and continues in the employment in the
honest belief that he will be the recipient of such plan, the
employee may enforce his right to a pension * * *.”
Rose City, 271 Or. at 593 (citation omitted) (alternation in original) (emphasis added).
Moholt appears to argue that Dooney’s obligation to its employees to pay the “employer
share expenses” has become one of the terms of Moholt’s implied-in-fact contact. If Moholt is
correct, it would follow that because Dooney did not pay for the alleged “employer share
expenses” (or reimburse Moholt for them), Dooney “breached the contractual obligation to pay
PAGE 29 – OPINION AND ORDER
employer share expenses for Plaintiff throughout the course of Plaintiff’s employment.”
Complaint, ¶ 18. There are two independently fatal flaws with Moholt’s argument.
a. Moholt offers no evidence that he held an honest belief that Dooney
would pay him for the claimed “employer share expenses”
In Staley v. Taylor, 165 Or. App. 256, 994 P.2d 1220 (2000), the Oregon Court of
Appeals explained the concept of an implied-in-fact contract. The court’s opinion, written by
then-Court of Appeals Judge Kistler, states:
An implied-in-fact contract is no different in legal effect from an
express contract. Restatement (Second) of Contracts § 4
comment a (1979). The only difference between them is the means
by which the parties manifest their agreement. In an express
contract, the parties manifest their agreement by their words,
whether written or spoken. Id. In an implied-in-fact contract, the
parties’ agreement is inferred, in whole or in part, from their
conduct. Id.
Staley, 165 Or. App. at 262.
Applying this concept in the context of Moholt’s theory under Rose City, the principle
that results is that: (a) for any employer who has a plan or policy to provide some benefit for all
employees; (b) where an employee is otherwise eligible for that benefit; and (c) where that
employee knows of the employer’s plan or policy and continues in the employment in the honest
belief that he or she will be the recipient of that benefit, then that benefit becomes a term of the
employment agreement. In fact, the continuation of the employment in the honest belief that the
employee will be the recipient of that benefit must be a condition precedent to the employer’s
liability (or a condition that must be satisfied before an obligation will be implied under Rose
City) because, as we have already seen, an employer is always free to modify the prospective
PAGE 30 – OPINION AND ORDER
terms of an “at will” employment relationship. See Brett, 130 Or. App. at 57; Duncan, 973 F.
Supp. at 1177.9
Moholt neither alleges nor offers any evidence to show that he ever he held an honest
belief that Dooney would pay for or reimburse Moholt for the “employer share expenses.” And
here any such inference that he did hold such a belief would not be reasonable in light of the
evidence, even when viewed in the light most favorable to Moholt. For more than 11 years,
Moholt himself paid for the expenses that are at issue, including hiring five independent
contractors. He was expressly told by Dooney that Dooney would not reimburse Moholt for the
computer that Dooney required Moholt to buy. And Moholt, in more than 11 years working for
Dooney, never asked Dooney to pay for any of these expenses (except possibly the computer,
and Moholt promptly was told that Dooney would not pay for it). Nor, in more than 11 years, did
Moholt ever submit to Dooney any request for reimbursement. Finally, Moholt’s own tax returns
claimed the benefit of Moholt having paid these expenses himself. These facts demonstrate that,
during his relationship with Dooney, Moholt never held the honest belief that Dooney would pay
for these “employer share expenses.” Thus, it was never part of the contract between Dooney and
Moholt, under either a theory of express contract or a theory of contract implied-in-fact, that
Dooney would have such an obligation. Accordingly, Dooney did not breach its contract with
Moholt by failing to pay the “employer share expenses,” and summary judgment in favor of
Dooney on Moholt’s Third Claim for Relief is appropriate.10
9
Dooney, however, would not be permitted to pay the expenses for some employees and
deny them for others, even prospectively, based upon an impermissible reason, such as unlawful
discrimination, but Moholt does not allege that he was treated differently based upon any
unlawful discrimination, retaliation, or discriminatory factor such as race, ethnicity, gender, age,
religion, disability, marital status, or sexual orientation or identity.
10
The Court rejects Dooney’s argument that Moholt’s claim is barred by the six-year
statute of limitations applicable to contract claims in Oregon. If Dooney were contractually
PAGE 31 – OPINION AND ORDER
b. The distinction between an independent contractor and an employee is
not relevant to Moholt’s claim alleging breach of contract
The parties have stipulated that Dooney classified Moholt as an independent contractor,
rather than as an employee. Stipulation of Facts, ¶ 1. Step one of Moholt’s implied-in-fact
contract argument asserts that Dooney misclassified Moholt. As Moholt alleges, he was an
“‘employee’ as a matter of law.” Complaint, ¶ 5.
A fundamental issue that can arise in any working relationship is whether a person is an
employee or an independent contractor. The correct classification of such a person can have
significant consequences for that person, for that person’s principal or employer, or both. In
addition, where the correct classification matters, what the parties to the work relationship have
chosen to call themselves is not the determinative factor. What label the parties to such a
relationship have chosen for themselves is a relevant factor, but it is only part of a multi-factor
test, and the relevant test differs depending on the reason why such a classification matters. The
two tests most often employed are referred to as the “right-to-control” test and the “economic
realities” test. Moholt argues that the “economic realities” test should be used; Dooney argues
that the Court should employ the “right-to-control test.” For purposes of Moholt’s Third Claim
for Relief (unlike his Second Claim for Relief), neither test is relevant.
One area in which the correct classification matters concerns the potential liability of an
employer to a third party under the common law. In general, an employer is not responsible to
third parties for the actions of an independent contractor, whether such liability is alleged in tort
or in contract. For example, under Oregon tort law, an employee’s tortious conduct may create
obligated to reimburse Moholt for certain expenses, the fact that Moholt did not seek such
reimbursement for an expense incurred ten years ago (which claim would now be time-barred)
does not necessarily preclude him from seeking reimbursement for a different expense incurred
three years ago (which would not be time-barred). Whether Dooney might have a successful
waiver or laches defense, however, is not currently before the Court.
PAGE 32 – OPINION AND ORDER
vicarious liability on the part of the employer, but an independent contractor’s tortious conduct
causing injury to a third party generally will not. See Schaff, 334 Or. at 100 (applying the “right
to control” test when evaluating whether to impose liability on an employer for harm done to a
third party by a putative employee and finding no vicarious liability for the acts of an
independent contractor).
A second area in which the correct classification matters concerns an employer’s
obligation under federal and state statutory law to pay an employee at least a minimum wage, to
pay overtime when required, and not to take unauthorized deductions from an employee’s
paycheck. In Slayman, the Ninth Circuit explained the various tests to be applied, based on
statutory interpretation, when evaluating these issues under Oregon law. According to the Ninth
Circuit in that case, claims for unauthorized paycheck deductions under Or. Rev. Stat. § 652.610
are governed by Oregon’s “right-to-control” test, and claims for unpaid overtime wages under
Or. Rev. Stat. § 653.261 are governed by Oregon’s “economic realities” test. Slayman, 765 F.3d
at 1042. Similarly, in determining whether a worker is an “employee” to whom Oregon’s state
minimum wage law applies under Or. Rev. Stat. § 653.025(1), the applicable standard is the
“economic realities” test. See Cejas, 260 Or. App. at 97-100. The “economic realities” test is also
the relevant standard used by federal courts to determine “whether a worker is employed within
the meaning of the FLSA [Fair Labor Standards Act].” Id. at 95.
The correct classification between an employee and an independent contractor is also
significant in other contexts. For example, federal and state employment discrimination statutes
may apply to employees differently than they apply to independent contractors. There are also
differences in an employer’s statutory federal and state income tax withholding obligations,
application of federal and state family and medical leave laws, collective bargaining statutes,
PAGE 33 – OPINION AND ORDER
unemployment compensation laws, rights of access to personnel records, among others. But
Moholt has not alleged as part of his breach of contract claim any claim of statutory violation,
including any violations of minimum wage, overtime, or paycheck deduction laws.11
Instead, in his Third Claim for Relief, Moholt alleges only that Dooney breached its oral
contract. As explained above, Moholt offers no evidence that Dooney ever agreed to pay for or
reimburse him for any of these “employer share expenses.” Thus, there is no evidence of any
breach, which is fatal to Moholt’s claim for breach of contract.12
11
Moholt has alleged as part of his damages that he paid $25,805 in “self-employment
taxes,” which he would not have had to pay had he been classified by Dooney as an employee.
See Stipulation of Facts, Exhibit 1 (Dkt. 33-1). These damages, however, are not sought as part
of a statutory violation or right, but simply as part of Moholt’s claim of “breach of contract.” As
explained above, Moholt offers no evidence that Dooney ever contractually agreed to pay for or
reimburse Moholt for any “self-employment taxes.”
12
The Court declines at this time to resolve the parties’ dispute concerning Dooney’s
claim for equitable recoupment. Dooney argues that if Moholt were found to have been an
employee, rather than an independent contractor, then he was one since 2000. Dooney generally
paid Moholt a five percent commission, even though Dooney only paid its sales employees a one
percent commission, plus a base salary and other benefits. Dooney argues that the difference of
four percent is substantial, especially in Moholt’s earlier years. Dooney concedes that any
counterclaim for “excess” commissions paid before six years prior to the filing of the Complaint
would be time-barred, but Dooney seeks to reduce any damages it may owe to Moholt by the
amount of any net “excess” commissions paid during the entire 11-year relationship.
Both setoff and recoupment may be available as defenses for the purpose of reducing a
plaintiff’s claim. A setoff may be asserted for any claim, even one independent and unconnected
with a plaintiff’s cause of action, but a setoff is subject to a statute of limitations defense.
Recoupment, however, is not subject to a statute of limitations defense, but is “confined to
matters arising out of and connected with the transaction upon which the [plaintiff’s] action is
brought.” Rogue River Mgmt Co. v. Shaw, 243 Or. 54, 58-59, 411 P.2d 440 (1966). Here,
Dooney’s claimed recoupment going back to 2000 does not fit cleanly within the category of a
matter “arising out of and connected with the transaction upon which the action is brought”
because Moholt’s claimed transactions only go back to 2007. On the other hand, Dooney’s claim
also is not entirely “unconnected” to Moholt’s theory of his lawsuit.
PAGE 34 – OPINION AND ORDER
CONCLUSION
Dooney’s Motion for Summary Judgment (Dkt. 35) is granted in part and denied in part.
Defendant’s motion for summary judgment against Plaintiff’s “Additional Nordstrom
Commissions” claim (Plaintiff’s First Claim for Relief, Wage Claim Part One) is granted.
Defendant’s motion for summary judgment against Plaintiff’s “Nordstrom Rack” claim
(Plaintiff’s First Claim for Relief, Wage Claim Part Two) is granted in part and denied in part as
follows: Plaintiff’s “Nordstrom Rack” claim may proceed only with regard to Plaintiff’s claim
for the first month’s commission earned in February 2009 relating to shipments made to the
Nordstrom Rack. Defendant’s motion for summary judgment against Plaintiff’s Second Claim
for Relief (statutory penalty) is denied. Defendant’s motion for summary judgment against
Plaintiff’s Third Claim for Relief (Breach of Contract) is granted.
IT IS SO ORDERED.
DATED this 19th day of November, 2014.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge
PAGE 35 – OPINION AND ORDER
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