Thomas v. H & R Block Eastern Enterprises Inc.

• Decision Date: 12 January 2011
• Docket Number: No. 10–1482.,10–1482.
• Court: U.S. Court of Appeals — Seventh Circuit
• Parties: Amorita N. THOMAS, on behalf of Herself and all others similarly situated, Plaintiff–Appellant,v.H & R BLOCK EASTERN ENTERPRISES, INC., Defendant–Appellee.

630 F.3d 659

160 Lab.Cas. P 61,105

17 Wage & Hour Cas.2d (BNA) 120

Amorita N. THOMAS, on behalf of Herself and all others similarly situated, Plaintiff–Appellant,

v.H & R BLOCK EASTERN ENTERPRISES, INC., Defendant–Appellee.

No. 10–1482.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 20, 2010.Decided Jan. 12, 2011.

Ronald E. Weldy, Attorney (argued), Weldy & Associates, Indianapolis, IN, for Plaintiff–Appellant.Julianne P. Story, Attorney (argued), Husch Blackwell LLP, Kansas City, MO, for Defendant–Appellee.Before FLAUM, RIPPLE, and EVANS, Circuit Judges.FLAUM, Circuit Judge.

Amorita Thomas (“Thomas”) sued her employer, H & R Block Eastern Enterprises, Inc. (“H & R Block”), under Indiana's Wage Payment Statute, Ind.Code § 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 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 considered evidence it should not have or neglected to consider evidence it should have, we recite the facts that the district court provided in its opinion granting summary 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 Employment Agreement (“Employment Agreement”) with H & R Block and worked as a Tax Professional II, responsible 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 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 compensation. 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 retention 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 reasonable under the circumstances.” 2006 Compensation Information Sheet Part 6, ¶ 3; 2007 Compensation Information 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.

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 information 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 compensation 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 calculated EOS compensation for roughly 80,000 tax professionals in the United States and actually paid compensation to roughly 56,000, 1,437 of whom worked in Indiana. H & R Block calculated and processed EOS compensation 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 payments 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.Code § 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 compensation constitutes wages, Thomas's 2006 and 2007 EOS compensation was late, rendering her eligible for statutorily-provided liquidated damages and attorney fees. See Ind.Code § 22–2–5–2.

Thomas sued H & R Block for violating the Wage Payment Statute, alleging that it failed to pay EOS compensation 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 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.Civ.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. Clair 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. IPSOS Publicite, 276 F.3d 914, 925 (7th Cir.2002).

Indiana's Wage Payment Statute, Ind.Code § 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.Code §§ 22–2–5–1, –2; Naugle v. Beech Grove City Schs., 864 N.E.2d 1058, 1063 (Ind.2007). Because the Wage Payment 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 commission basis, or in any other method of calculating such amount.” Ind.Code § 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 determine 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....