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New Commissions Case issued by Court of Special Appeals

By James Edward Rubin

The Court of Special Appeals recently issued Hoffeld v. Shepherd Electric Co. There, Mr. Hoffeld worked for a wholesale and retail electrical supplier as an outside salesman. Shepherd Electric paid Mr. Hoffeld solely on commission. Shepherd Electric did not pay a commission until an order was shipped and invoiced. Mr. Hoffeld had continuing responsibilities from the date a customer indicated its intent to purchase through the date of delivery and invoice. Specifically, business requirements for a customer?s particular project frequently evolved in terms of the nature, amount, and/or prices of the goods specified, inevitably requiring adjustments to the original purchase order. Such changes required Mr. Hoffeld to perform additional work throughout the order interval, continuing those duties until the order is actually shipped. When Mr. Hoffeld quit, Shepherd Electric transferred his accounts to a new representative who received the entire commission at issue.

Mr. Hoffeld contended he was entitled to commission on several purchase orders that were not invoiced and/or shipped until after his termination. Shepherd Electric contended the commission was not earned until invoiced and paid.

The Court of Special Appeals ruled that the trial court did not commit clear error in finding that sales were made and commissions were earned when the orders were shipped and invoiced. According to the Court, commissions were not linked to the arbitrary factor of employment, but to a reasonable job requirement, i.e., Mr. Hoffeld?s continuing service to a customer. Of particular importance to the Court of Special Appeals was the fact that Shepherd Electric did not keep the commissions at issue, but paid them to another salesperson who assumed Mr. Hoffeld?s accounts. Notably, in Hoffeld, the Court of Special Appeals stated Shepherd Electric?s policy was properly scrutinized to ensure that it has not been used to circumvent the MWPCL. Indeed, an employer may not terminate an employee as pretext to avoid paying commissions. Such act would violate the Wage Payment and Collection Law.

Full post as published by Maryland Employment Law on November 28, 2007 (boomark / email).