Community Telecommunications Corp. v. Loughran

• Decision Date: 21 December 1994
• Docket Number: Docket No. K,No. 7094,7094
• Parties: COMMUNITY TELECOMMUNICATIONS CORP. v. Joseph A. LOUGHRAN. DecisionLawen-94-401.
• Court: Maine Supreme Court

Page 373

651 A.2d 373

COMMUNITY TELECOMMUNICATIONS CORP. v. Joseph A. LOUGHRAN.

Decision No. 7094.

Law Docket No. Ken-94-401.

Supreme Judicial Court of Maine.

Argued Nov. 15, 1994.

Decided Dec. 21, 1994.

Malcolm L. Lyons (orally), Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Benjamin Townsend, Portland, for plaintiff.

Mark Horton, Verrill & Dana, Portland, Todd S. Brilliant, New England Legal Foundation, Boston, for amici curiae.

Gordon H.S. Scott (orally), Eaton, Peabody, Bradford & Veague, P.A., Augusta, for defendant.

Before WATHEN, C.J., and ROBERTS, GLASSMAN, CLIFFORD, RUDMAN, and LIPEZ, JJ.

ROBERTS, Justice.

Community Telecommunications Corporation (CTC) appeals from a judgment entered in the Superior Court (Kennebec County, Chandler, J.) in favor of Joseph A. Loughran in the amount of $93,576. CTC argues that the trial court improperly applied 26 M.R.S.A. § 626 (Supp.1994) because (1) Loughran's commissions were not wages within the meaning of the statute and (2) if they were, the statutory penalty should not apply to the amount withheld to recover loans or advances made pursuant to Loughran's employment agreement. Because we agree with CTC's second contention, we modify the judgment and, as modified, affirm.

I.

The basic facts on appeal are undisputed. Loughran was employed by CTC from 1985 through January 1991, selling telecommunications systems and service agreements. In 1988 Loughran signed an employment agreement that provided for a returnable draw of funds in the amount of $500 per week. The contract characterized the draws as loans to the employee against expected commission earnings. CTC was to collect the draws to a zero balance at least once a year and at the end of Loughran's employment. ¹

Pursuant to the contract, CTC regularly withheld a portion of the commissions earned by Loughran, crediting those commissions against the outstanding balance owed to CTC. Loughran testified that he received periodic statements reflecting this activity in his draw account. Although he never signed any statement acknowledging the specific balance of his account, Loughran does not dispute that he owed CTC $19,124 at the end of his employment.

In 1988 Loughran sold large equipment and service contracts to the City of Portland and Guy Gannett Publishing Company. Because the two sales were unusually large, Loughran sought assurances from his immediate superior, Harold Purdy, that he would receive the usual commission percentage. Purdy agreed that Loughran would get the standard 8% commission. Moreover, Purdy agreed that Loughran was entitled to immediate payment of the commission, not only on the equipment sale, but also on the ten-year service contracts. The arrangement departed from the usual practice pursuant to which salespersons would receive commissions on service contracts in annual installments, as the customer renewed the contract. Because CTC was facing financial difficulty, Loughran agreed to take his service contract commissions in the usual manner, subject to the condition that he could demand the entire amount at any time. CTC paid Loughran commissions immediately on the equipment sold to the City of Portland and Guy Gannett Publishing. ²

On December 17, 1990, Loughran demanded his entire commission on the two service contracts. On January 15, 1991, CTC rejected his demand and terminated his employment. Citing the employment agreement, it also informed him that he would be responsible for bringing his draw account to a zero balance.

CTC sued Loughran in the District Court to recover the $19,124 outstanding balance on his draw account. Loughran removed the case to the Superior Court and counterclaimed pursuant to 26 M.R.S.A. § 626 ³ for the unpaid commissions plus penalties and attorney fees. At the trial the court found in favor of CTC on its claim for the balance of Loughran's draw account. ⁴ The court also found that CTC owed Loughran $30,224 in commissions on the two service contracts pursuant to Loughran's agreement with Purdy. The court trebled the amount due to Loughran prior to deducting the amount due to CTC.

In a motion to amend the judgment, CTC argued that section 626 allowed it to withhold the outstanding balance of Loughran's draw account. In CTC's view, the employment agreement was sufficient evidence of the advances to Loughran within the meaning of section 626. Accordingly, it maintained that $19,124 should have been deducted from the amount awarded to Loughran prior to trebling. The Superior Court denied the motion on the ground that the employment agreement did not contain evidence of a specific amount. On appeal CTC contends that the trial court erred in concluding that the commissions are wages and that the employment agreement was insufficient evidence of a $19,124 loan or advance to Loughran. We review the trial court's interpretation of the statute for errors of law. See Fraser v. Barton, 628 A.2d 146, 148 (Me.1993).

II.

CTC contends that commissions are not wages within the meaning of section 626. We disagree. A broad definition of wages to include commissions is in keeping with the protective purpose of the act. Moreover, our view is in keeping with authority from several other jurisdictions. See, e.g., Hofer v. Polly Little Realtors, Inc., 543 P.2d 114, 116 (Co.App.1975); Licocci v. Cardinal Assocs., 492 N.E.2d 48, 56 (Ind.App.1986); Brown v. Navarre Chevrolet, Inc., 610 So.2d 165, 169 (La.Ct.App.1992); Hekker v. Sabre Constr. Co., 265 Or. 552, 510 P.2d 347, 351 (1973).

CTC also contends that it was entitled to deduct the balance of Loughran's draw account. Section 626 generally requires employers to pay employees the full amount of wages due on completion of employment. The statute provides, however, that employers may deduct any loan or advance against future earnings or wages that is "evidenced by a statement in writing signed by the employee." Id. The question presented, therefore, is whether the 1988 employment agreement signed by Loughran is sufficient evidence of a loan or advance to Loughran against future wages. We answer that question in the affirmative.

The purpose of section 626 is to provide a broad guarantee of prompt payment of wages to all employees on termination. See L.D. 547, Statement of Fact (115th Legis.1991). Mindful of the Legislature's broadly protective...