Amorita N. Thomas v. H&R Block East ( 2011 )


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  •                               In the
    
    United States Court of Appeals
                    For the Seventh Circuit
    
    No. 10-1482
    
    A MORITA N. T HOMAS, on behalf of Herself and
    all others similarly situated,
                                          Plaintiff-Appellant,
                                  v.
    
    H&R B LOCK E ASTERN E NTERPRISES, INC.,
    
                                                     Defendant-Appellee.
    
    
                  Appeal from the United States District Court
          for the Southern District of Indiana, Indianapolis Division.
                 No. 1:08-CV-667—David F. Hamilton, Judge.
    
    
    
        A RGUED O CTOBER 20, 2010—D ECIDED JANUARY 12, 2011
    
    
    
    
      Before F LAUM, R IPPLE, and E VANS, Circuit Judges.
       F LAUM, Circuit Judge. Amorita Thomas (“Thomas”)
    sued her employer, H&R Block Eastern Enterprises, Inc.
    (“H&R Block”), under Indiana’s Wage Payment Statute,
    IND. C ODE § 22-2-5-1 et seq. (2010), for paying its end-of-
    season (“EOS”) compensation more than ten days after
    it was earned. The district court granted H&R Block’s
    motion for summary judgment based on a finding that
    2                                            No. 10-1482
    
    EOS compensation did not constitute “wages” under
    Illinois statutory law. At issue is whether H&R Block’s
    EOS compensation is a wage under Indiana law, and
    thus whether it is subject to the Wage Payment Statute,
    which requires employers to pay “wages” no more than
    ten days after they are earned. Both Indiana and federal
    case law provide guidelines for answering this question.
    In light of those guidelines, we affirm.
    
    
                         I. Background
      Since neither party argues that the district court con-
    sidered evidence it should not have or neglected to con-
    sider evidence it should have, we recite the facts that
    the district court provided in its opinion granting sum-
    mary judgment to H&R Block. See Wragg v. Vill. of
    Thornton, 
    604 F.3d 464
    , 466 (7th Cir. 2010).
      Thomas began working for H&R Block as a seasonal
    employee in 2004. She worked only during tax season
    (typically from December through mid-April). In both
    2006 and 2007, she entered into a Tax Professional Em-
    ployment Agreement (“Employment Agreement”) with
    H&R Block and worked as a Tax Professional II, responsi-
    ble for preparing clients’ tax returns and offering other
    financial products and services H&R Block provides.
      Thomas was eligible for two forms of compensation as
    a Tax Professional II. First, pursuant to her Employment
    Agreement, she received an hourly wage and was
    eligible for overtime. She received her hourly wage in a
    timely manner on a bi-weekly basis during both 2006
    No. 10-1482                                            3
    
    and 2007. Second, she was eligible for EOS compensation.
    H&R Block’s Compensation Information Sheet (“Sheet”)
    explained the terms and conditions of the EOS compensa-
    tion. Thomas was eligible for EOS compensation only
    if the sum of various specified amounts exceeded the
    aggregate gross hourly wages paid to her during the
    tax season (an amount which excluded hourly wages
    for certain training exercises). The specified amounts
    included, among other things, a few dollars for each
    product Thomas sold during the tax season, client re-
    tention incentives when a customer whom Thomas
    served the prior tax year returned to H&R Block, and a
    fee for each tax return she prepared, where the fee
    was based on “fees charged to the client and collected by
    H&R Block during the Tax Season.” 2006 Compensation
    Information Sheet Part 1, ¶ 4 (emphasis added); 2007
    Compensation Information Sheet Part 1, ¶ 4 (emphasis
    added). Tax Professionals were to be credited for tax
    returns paid through April 21, 2006, and April 18, 2007,
    and all hours worked and wages earned through
    April 21, 2006, and April 20, 2007. The Sheets provided
    that EOS compensation would be paid by May 12,
    2006, and May 14, 2007, “or as soon thereafter as is rea-
    sonable under the circumstances.” 2006 Compensation
    Information Sheet Part 6, ¶ 3; 2007 Compensation Infor-
    mation Sheet Part 5, ¶ 4.
      Thomas was eligible for EOS compensation in 2006
    and 2007. Thomas could view daily snapshots of her
    accumulated compensation during the tax season, but
    the reports did not include all of the data necessary to
    calculate the amount of her EOS compensation.
    4                                               No. 10-1482
    
      Payroll processing for the final pay periods’ hourly
    wages occurred on April 22, 2006, and April 21, 2007,
    respectively. The payroll processes were completed on
    April 23, 2006, and April 22, 2007, and the payroll was
    mailed to ADP, which printed and mailed Thomas’s
    payroll checks, on the same day. Employee checks were
    available for deposit on April 26, 2006, and April 25, 2007.
      Information was entered into H&R Block’s Financial
    Information Network (“FIN”) between April 24 and 26,
    2006, and April 23 and 25, 2007. Next, on April 26, 2006,
    and April 25, 2007, bookkeepers and managers began
    entering EOS compensation information into the FIN.
    The deadlines for entering all of the compensation infor-
    mation into the payroll system were May 1, 2006, and
    May 1, 2007. The Employee Compensation Reports
    were created on the same days. Reconciliation periods
    began on May 1, 2006, and May 2, 2007, and payroll
    processing for EOS compensation began on May 4, 2006,
    and May 4, 2007. ADP mailed compensation checks on
    May 8, 2006, and May 9, 2007, with issue dates of May 10,
    2006, and May 11, 2007. Thomas received her EOS com-
    pensation via direct deposit on May 10, 2006, and May 11,
    2007.
      For the 2006 tax season, H&R Block calculated EOS
    compensation for roughly 78,000 professionals in the
    United States and actually paid compensation to
    roughly 54,000 tax professionals, 1,426 of whom worked
    in Indiana. For the 2007 tax season, H&R Block cal-
    culated EOS compensation for roughly 80,000 tax profes-
    sionals in the United States and actually paid compensa-
    No. 10-1482                                           5
    
    tion to roughly 56,000, 1,437 of whom worked in Indiana.
    H&R Block calculated and processed EOS compensa-
    tion payments on an expedited basis, which required
    significant overtime. JoAnn Atkinson, the director of
    H&R Block’s administrative center, testified that she
    believed it would be impossible to have calculated
    and paid EOS compensation within ten days of the close
    of the tax seasons. Atkinson testified that she did not
    know how long it would have taken to process pay-
    ments for Indiana tax professionals if Indiana had been
    done first.
      Indiana’s Wage Payment Statute requires employers
    to pay “wages” within ten days after they are earned.
    IND. C ODE § 22-2-5-1. Pursuant to this the statute,
    H&R Block timely paid Thomas her hourly wages. The
    parties agree that Thomas’s EOS compensation was
    calculated correctly and on the schedule that H&R
    Block promised, and that H&R Block paid Thomas’s
    2006 and 2007 EOS compensation more than ten days
    after it was earned. Accordingly, if EOS compensa-
    tion constitutes wages, Thomas’s 2006 and 2007 EOS
    compensation was late, rendering her eligible for
    statutorily-provided liquidated damages and attorney
    fees. See IND. C ODE § 22-2-5-2.
      Thomas sued H&R Block for violating the Wage
    Payment Statute, alleging that it failed to pay EOS com-
    pensation within ten days after it was earned. H&R
    Block moved for summary judgment on the ground
    that EOS compensation is not a wage under Indiana’s
    Wage Payment Statute, and thus that it is not subject to
    6                                               No. 10-1482
    
    the Ten-Day Rule. Thomas moved for class certification
    before the motion for summary judgment, but the
    district court stayed the class certification issue so it
    could first decide the motion for summary judgment. The
    district court granted H&R Block’s motion. Thomas
    appeals from that decision.
    
    
                           II. Analysis
    A. “Wages” Under Indiana Law
      We review de novo a district court’s decision to grant
    summary judgment, “construing all facts and inferences
    in the light most favorable to the party opposing the
    motion. We will affirm if the summary judgment record
    shows that ‘there is no genuine issue as to any material
    fact and that the moving party is entitled to judgment as
    a matter of law.’ ” Bio v. Fed. Express Corp., 
    424 F.3d 593
    ,
    596 (7th Cir. 2005) (citing FED. R. C IV. P. 56(c)).
      When addressing a question of state law while sitting
    in diversity, “our task is to ascertain the substantive
    content of state law as it either has been determined by
    the highest court of the state or as it would be by that
    court if the present case were before it now.” Woidtke v. St.
    Claire Cnty., Ill., 
    335 F.3d 558
    , 562 (7th Cir. 2003)
    (internal quotation marks and citation omitted). If the
    state’s highest court has yet to rule on an issue, “decisions
    of the state appellate courts control, unless there are
    persuasive indications that the state supreme court
    would decide the issue differently.” Research Sys. Corp. v.
    ISPOS Publicite, 
    276 F.3d 914
    , 925 (7th Cir. 2002).
    No. 10-1482                                               7
    
      Indiana’s Wage Payment Statute, IND. C ODE. § 22-2-5-1
    et seq., requires employers to pay their employees’
    “wages” within ten days of the date they are earned,
    and allows employees to recover damages and attorney
    fees from employers who pay late. See IND. C ODE. §§ 22-2-5-
    1, -2; Naugle v. Beech Grove City Schs., 
    864 N.E.2d 1058
    ,
    1063 (Ind. 2007). Because the W age Paym ent
    Statute does not define “wages,” Indiana courts look to
    the closely-related Wage Claims Statute, which defines
    wages as “all amounts at which the labor or
    service rendered is recompensed, whether the amount
    is fixed or ascertained on a time, task, piece, or com-
    mission basis, or in any other method of calculating
    such amount.” IND. C ODE § 22-2-9-1(b); see Highhouse
    v. Midwest Orthopedic Inst., P.C., 
    807 N.E.2d 737
    , 739
    (Ind. 2004).
      As a preliminary matter, “[t]he name given to the
    method of compensation is not controlling. Rather, we
    will consider the substance of the compensation to de-
    termine whether it is a wage and, therefore, subject to
    the Wage Payment Statute.” Kopka, Landau & Pinkus v.
    Hansen, 
    874 N.E.2d 1065
    , 1072 (Ind. Ct. App. 2007).
      The Indiana Supreme Court explained that a particular
    form of compensation is a wage under the Indiana
    Wage Payment Statute if “it is compensation for time
    worked and is not linked to a contingency such as the
    financial success of the company.” Highhouse, 807 N.E.2d
    at 740 (internal quotation marks and citations omitted);
    see also id. at 739 (accepting the lower court’s test of
    wages, which provided that “a bonus is a wage if the
    8                                              No. 10-1482
    
    bonus directly relates to the time that an employee
    works, is paid with regularity, and is not dictated by the
    employer’s financial success”). Applying this standard,
    Indiana courts consider a variety of factors to guide
    their determination of whether compensation similar
    to EOS compensation constitutes a wage.
       First, Indiana courts are more likely to find compensa-
    tion a wage if it is “not linked to a contingency.” Naugle,
    864 N.E.2d at 1067 (quoting Highhouse, 807 N.E.2d at
    740); see also Harney v. Speedway SuperAmerica, 
    526 F.3d 1099
    , 1105 (7th Cir. 2008) (same). For example, compensa-
    tion based on the performance of a company is less
    likely be deemed a wage. See, e.g., Highhouse, 807 N.E.2d
    at 740. Similarly, compensation is less likely to be a wage
    if it is contingent on a company’s collection efforts. See
    Hansen, 874 N.E.2d at 1074 (“It only takes one reason,
    however, and here, as in Highhouse, the disputed compen-
    sation was tied to collection rather than billing.”); see
    also Highhouse, 807 N.E.2d at 740 (“[B]ecause High-
    house’s bonus was based on collections for his services,
    not billings, substantially more than ten days after the
    services were performed might well be needed before
    the bonus amounts can be calculated.”). The Indiana
    Supreme Court explained that payment contingent on
    factors outside of an employee’s or employer’s control
    “is not consistent with the time constraints imposed by
    the Wage Payment Statute.” Highhouse, 807 N.E.2d at
    740; see also Harney, 526 F.3d at 1106. Relatedly, the
    Indiana Supreme Court explained that compensation is
    less likely to constitute a wage when it is difficult to
    calculate and pay within ten days after it was earned. See
    No. 10-1482                                                 9
    
    Highhouse, 807 N.E.2d at 740; see also Harney, 526 F.3d
    at 1106. Thus, although parties cannot contract out of
    the Ten-Day Rule, Indiana courts consider whether the
    compensation agreement calls for payment more than
    ten days after it was earned when determining
    whether compensation is difficult to calculate and pay
    within the ten-day period. See, e.g., Highhouse, 807 N.E.2d
    at 740 (“An employer may not escape the Act by obtaining
    the employee’s agreement that wages are not payable
    within the statutorily prescribed times. But the provi-
    sion for annual payments lends support to the view that
    both parties recognize that frequent calculation and
    payment was difficult if not impossible.”); Hansen, 874
    N.E.2d at 1074 (“[H]ere, as in Highhouse, payments
    were made on a schedule—i.e., monthly—indicating that
    more frequent calculation and payment in compliance
    with the Wage Payment Statute’s ten-day rule would
    have been difficult, if not impossible.”).
      Second, related to the first factor, Indiana courts
    also consider whether the compensation “directly relates
    to the time that an employee works.” Highhouse, 807
    N.E.2d at 739; see also Naugle, 864 N.E.2d at 1067 (“[A]
    bonus is a wage if it is compensation for time worked
    and is not linked to a contingency such as the financial
    success of the company.” (quoting Highhouse, 807 N.E.2d
    at 740)); McCausland v. Walter USA, Inc., 
    918 N.E.2d 420
    ,
    426 (Ind. Ct. App. 2009); Hansen, 874 N.E.2d at 1072
    (“[I]f compensation is not linked to the amount of work
    done by the employee or if the compensation is based on
    the financial success of the employer, it is not a ‘wage.’ ”).
    10                                              No. 10-1482
    
      Third, Indiana courts consider whether wages are
    paid on “a regular periodic basis for regular work done
    by the employee.” Hansen, 874 N.E.2d at 1072 (quoting
    Gress v. Fabcon, Inc., 
    826 N.E.2d 1
    , 3 (Ind. Ct. App. 2005));
    see also Highhouse, 807 N.E.2d at 739. Thus, when a par-
    ticular form of compensation is paid annually, it is less
    likely to be considered a wage. See, e.g., Manzon v.
    Stant Corp., 
    138 F. Supp. 2d 1110
    , 1114 (S.D. Ind. 2001).
      Fourth, Indiana courts consider whether the compensa-
    tion in question is paid in addition to wages. In Gress, for
    example, an employee was paid on both a salary and
    commission. 826 N.E.2d at 2. He was eligible to receive
    commission payments on a monthly basis; these pay-
    ments represented advances on his commissions that
    he was required to return if his projects were less
    profitable than anticipated. Id. The court held that the
    commission payments were not “wages,” even though
    they were paid monthly, because the commission
    program was based on the profitability of each sales-
    person’s individual projects, and thus “[t]he payment
    of commissions was not directly linked to the amount
    of work performed,” and because of “the length of
    time involved in determining the final commission,”
    which made it “impossible . . . to know what Gress was
    owed within ten days.” Id. at 4.
      In Prime Mortgage USA, Inc. v. Nichols, 
    885 N.E.2d 628
    (Ind. Ct. App. 2008), the Court of Appeals of Indiana
    expressly indicated that whether commissions are
    paid in addition to salary is relevant to determining
    whether commissions are “wages.” In Nichols, the court
    No. 10-1482                                                 11
    
    noted that Indiana courts generally treat commissions
    as wages. 885 N.E.2d at 664. It held that commissions
    were “wages” where, other than car allowance and con-
    tinued monthly payments of an annuity, the employee’s
    compensation was composed solely of commissions,
    was paid on a regular, monthly basis, and could be cal-
    culated immediately. Id. at 663-65. It issued its holding
    in spite of the fact that the commissions were contingent
    on the employer’s financial success. Id. at 663-64. But it
    explained that the commission “was not an amount in
    addition to her normal compensation; [the commission]
    was her normal compensation.” Id. at 664 (emphasis added).
    In distinguishing Gress, the court in Nichols explained
    that “Nichols’s compensation could be determined im-
    mediately,” and that “the employee in Gress received
    a base salary plus commission, while Nichols received
    only a commission.” Id. at 664. Gress and Nichols indicate
    that Indiana courts consider, at least to some extent,
    whether a particular type of compensation is an em-
    ployee’s sole form of compensation, or whether it is paid
    in addition to a more regularly-paid salary.
      Guided by these factors, we conclude that the EOS
    compensation is not a wage under the Wage Payment
    Statute. First, Thomas’s EOS compensation was “depend-
    ent on other factors than [her] efforts,” since a portion of
    the EOS compensation was based on the contingency of
    collecting from customers. Naugle, 864 N.E.2d at 1067;
    see also Highhouse, 807 N.E.2d at 740; Hansen, 874 N.E.2d
    at 1074. Not to mention, Atkinson’s testimony indicates
    that it was at least difficult, if not impossible, to calculate
    12                                             No. 10-1482
    
    EOS compensation within the ten-day period, see
    Highhouse, 807 N.E.2d at 740; Hansen, 874 N.E.2d at 1074,
    and the Sheet, providing that H&R Block would pay
    EOS compensation on a date after the expiration of the ten-
    day period, “or as soon thereafter as is reasonable
    under the circumstances,” demonstrates the parties’
    understanding and expectation that the calculation and
    payment of the EOS compensation would likely take
    more than ten days, see Highhouse, 807 N.E.2d at 740;
    Harney, 526 F.3d at 1106. Second, Thomas’s EOS compensa-
    tion was not directly related to the time she worked.
    Since EOS compensation was partially based on collec-
    tions, Thomas theoretically could have worked for an
    entire tax season without earning any EOS compensa-
    tion. See Gress, 826 N.E.2d at 4. Third, H&R Block paid
    EOS compensation annually, at the end of every tax
    season, and not on a regular, periodic basis. See, e.g.,
    Manzon, 138 F. Supp. 2d at 1114. Finally, as explained
    in more detail below, H&R Block paid Thomas an
    hourly wage in addition to EOS compensation.
      Thomas’s arguments on appeal are unavailing. First,
    she argues that EOS compensation is a wage because it
    is composed entirely of commissions, and because
    Indiana Code § 22-2-9-1(b) unambiguously includes
    “commission” in the definition of wages. To establish
    that EOS compensation represents commissions, she
    argues that testimony from H&R Block’s employee re-
    ferring to EOS compensation as a commission permits
    the inference, which we must accept on a motion for
    summary judgment, that the EOS compensation is a
    commission, and thus a wage. The fact that H&R Block
    No. 10-1482                                              13
    
    chose to pay commission at the conclusion of the tax
    season, she argues, does not transform it from a series of
    wage payments into a bonus. As general matter, however,
    the substance of the compensation, and not its label, guides
    our analysis. Hansen, 874 N.E.2d at 1072. Further,
    Thomas’s argument begs the question and ignores case
    law in both state and federal courts indicating that com-
    missions do not always constitute “wages.” See, e.g.
    McCausland, 918 N.E.2d at 424-46; Gress, 826 NE.2d at 4.
    We are in no position to apply the statutes without
    looking to case law interpreting them. See Woidtke, 335
    F.3d at 562 (“[O]ur task is to ascertain the substantive
    content of state law as it either has been determined by
    the highest court of the state or as it would be by that
    court if the present case were before it now.” (internal
    quotation marks and citations omitted)). In light of the
    authorities discussed above, Thomas’s argument fails.
      Consistent with her argument that her compensation
    was exclusively composed of commissions, Thomas
    advances the position that her salary was merely a draw
    on her commission. She, thus, argues that she did not
    receive a wage in addition to her EOS compensation.
    She relies on testimony from an H&R Block employee
    characterizing the hourly wage as a draw. Since EOS
    compensation is paid only to the extent that various
    specified amounts exceed hourly wages, it is possible
    for Thomas to argue that her salary was in part a draw
    on her commission. But she cannot suggest that her
    wages were completely drawn from her commissions:
    She could have earned no commission and still received
    14                                              No. 10-1482
    
    the same hourly wage without having to repay H&R
    Block. Further, only a portion of Thomas’s hourly wages
    factored into calculating her EOS compensation. EOS
    compensation is, at least in part, a form of compensation
    that H&R Block paid in addition to hourly wages.
      Finally, Thomas argues that collecting on sales should
    not be considered a contingency for the purpose of deter-
    mining whether compensation is a wage, and that
    Indiana case law to the contrary is incorrect. She first
    points to case law indicating that commissions are
    wages. See, e.g., J Squared, Inc. v. Herndon, 
    822 N.E.2d 633
     (Ind. Ct. App. 2005). She next argues that Hansen
    misinterprets Highhouse when it cites to Highhouse
    as support for its holding that collection efforts can con-
    stitute a contingency for the purpose of determining
    whether a compensation is a wage. 874 N.E.2d at 1074.
    She further argues that collection efforts cannot con-
    stitute such a contingency because “commission” is in
    the statutory definition of wages, IND. C ODE A NN. § 22-2-9-
    1(b), and there can be no commission until collec-
    tion is made. But Highhouse indicates that a company’s
    performance is merely one example of a contingency,
    807 N.E.2d at 740 (“A ‘bonus’ is a wage if it is compensa-
    tion for time worked and is not linked to a con-
    tingency such as the financial success of the company.”
    (emphasis added) (internal quotation marks and cita-
    tions omitted)), and it expressly references the fact
    that “Highhouse’s bonus was based on collections for
    his services, not billings” in concluding that Highhouse’s
    bonus was not a wage. Id. at 740. The Indiana Supreme
    Court has not limited the relevant contingencies to busi-
    No. 10-1482                                               15
    
    ness performance, and imposing such a limit would
    be contrary to Indiana case law.
    
    
    B. Certification
      Thomas asks us to certify to the Indiana Supreme
    Court the question of whether the EOS compensation is
    a wage under Indiana law. When determining whether
    to certify a question, “[t]he most important considera-
    tion guiding the exercise of this discretion . . . is
    whether the reviewing court finds itself genuinely uncer-
    tain about a question of state law that is vital to a correct
    disposition of the case.” State Farm Mut. Auto. Ins. Co. v.
    Pate, 
    275 F.3d 666
    , 671 (7th Cir. 2001) (citations omitted).
    We have also explained that “certification is appropriate
    when the case concerns a matter of vital public concern,
    where the issue will likely recur in other cases, where
    resolution of the question to be certified is outcome
    determinative of the case, and where the state supreme
    court has yet to have an opportunity to illuminate a
    clear path on the issue.” Id. at 672 (citations omitted);
    see also 7th Cir. R. 52(a); Ind. R. App. P. 64 (providing
    that federal courts may certify a question of law to the
    Indiana Supreme Court when it appears that the case
    “presents an issue of state law that is determinative
    of the case and on which there is no clear controlling
    Indiana precedent”). We consider a variety of additional
    factors when determining whether to certify a question,
    see Pate, 275 F.3d at 671-72, but “[q]uestions that are
    tied to the specific facts of a case are typically not ideal
    candidates for certification. Thus, if certification would
    16                                              No. 10-1482
    
    produce a fact bound, particularized decision lacking
    broad precedential significance, certification is inappro-
    priate.” Harney 526 F.3d at 1101.
      This case does not warrant certification. First, it
    involves the interpretation of a compensation program
    that appears unique to H&R Block. Resolution of this
    case would unlikely “have a far-reaching precedential
    effect for others.” Id. Second, the Indiana Supreme Court
    has provided guidance on this issue that assists us in
    resolving this dispute, most recently in Highhouse. We
    decline to certify such a fact-specific question, especially
    in light of Indiana case law addressing issues similar to
    the issue this case presents.
    
    
                         III. Conclusion
      For the foregoing reasons, we A FFIRM the district court.
    
    
    
    
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