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Thompson v. Paul G. White Tile Company, Inc.

United States District Court, D. New Hampshire

August 28, 2019

Shaun Thompson, Plaintiff
v.
Paul G. White Tile Company, Inc., Defendant

          ORDER

          STEVEN J. McAULIFFE UNITED STATES DISTRICT JUDGE.

         Shaun Thompson brings this action against his former employer, Paul G. White Tile Company (“WTC”), seeking damages for wrongful termination (count one) and unlawful non-payment of wages (count two). See generally N.H. Rev. Stat. Ann. (“RSA”) ch. 275. WTC moves to dismiss both claims advanced in Thompson's complaint, saying they fail to state the essential elements of viable causes of action. See Fed.R.Civ.P. 12(b)(6). Specifically, WTC asserts that: (a) Thompson's wage claim is barred by the statute of frauds; and, therefore, (b) “if there is no basis, due to the application of the statute of frauds, for the [wage claim], there can be no wrongful termination claim springing from it.” Defendant's Reply Memorandum (document no. 6) at 4. For the reasons discussed, defendant's motion to dismiss is denied.

         Standard of Review When ruling on a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the court must “accept as true all well-pleaded facts set out in the complaint and indulge all reasonable inferences in favor of the pleader.” SEC v. Tambone, 597 F.3d 436, 441 (1st Cir. 2010). Although the complaint need only contain “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), it must allege each of the essential elements of a viable cause of action and “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face, ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation and internal punctuation omitted).

         Background

         Liberally construing the factual allegations of the complaint in Thompson's favor - as the court must at this juncture - the relevant background is as follows. In August of 2016, WTC hired Thompson as the Division Manager of its Newmarket, New Hampshire division. The terms of his employment contract were oral; they were not reduced to writing. He alleges that he was promised an annual base salary of $185, 000 plus a “commission of 10% of the gross profits made by the Newmarket division.” Complaint at para. 6. While the precise conditions under which Thompson's commission would be earned (and paid) are unclear, it is fair to infer that the parties contemplated paying Thompson his commission on an annual basis. So, for example, he would be paid for the commission earned during fiscal year 1 at some point in year 2 (after the company's gross profits for year 1 had been fully calculated). The court will also assume that the terms of Thompson's employment agreement with WTC provided that, should his employment terminate for any reason (whether initiated by him or by WTC), Thompson would be entitled to ten percent of the gross profits earned by the Newmarket division proportional to the time worked in that year. So, if he quit or was fired prior to the close of a fiscal year, he would nevertheless be entitled to a prorated share of 10 percent of the gross profits earned by his division.[1]

         The complaint does not discuss what, if any, commission Thompson earned (or was paid) for his work during 2016. The problems between the parties seem to have arisen toward the end of 2017. Thompson says he and WTC disputed the amount to which he was entitled for that year, and he ultimately agreed to accept (and WTC paid him) $20, 000. Toward the end of 2018, he claims the parties again disputed how much commission he had earned for that year. And, says Thompson, in order to avoid paying him any commission at all for that year, WTC unlawfully terminated his employment on December 29, 2018. WTC did not pay him a commission for 2018 and, according to Thompson, it also failed to properly pay the salary he earned during his final weeks of work at the company.

         Discussion

         WTC asserts that both of Thompson's claims - that is, his wage claim and his wrongful termination claim - are barred by New Hampshire's statute of frauds. See RSA 506:2. Broadly speaking, the statute of frauds renders oral contracts that cannot be performed within one year unenforceable.

         The parties agree that Thompson was an employee-at-will. Typically, at-will employment agreements can be terminated by either party for any lawful reason (or without reason) at any time. Such agreements may, then, be completed without breach within one year. Consequently, it is well established that at-will employment agreements are not subject to the statute of frauds. See, e.g., Toomire v. Town & Country Janitorial Servs., 2002 DNH 034, 2002 WL 140648, at *7 (D.N.H. Jan. 31, 2002); Ives v. Manchester Subaru, Inc., 126 N.H. 796, 799 (1985).

         But, says WTC, its (alleged) promise to pay Thompson an annual commission of ten percent (10%) of the company's gross profits is within the scope of the statute of frauds. According to WTC, because Thompson's commission could only be calculated at some point after the close of each fiscal year, that calculation necessarily could not be completed within one year of the date on which the parties entered into their employment agreement.

A bonus or incentive compensation payable to Plaintiff based upon the full calendar year profitability for 2017, from an agreement entered in August 2016, could only be calculated after December 31, 2017. This is 18 months after hire. The calculation of the annual profitability for 2018, which could not be performed until after December 31, 2018, is even more attenuated - [30] months after the oral promise.

         Defendant's Memorandum (document no. 4) at 8.

         Given the lack of evidence concerning the details of Thompson's employment agreement with WTC - in particular, the conditions under which he would earn his commission - it cannot be determined that his complaint fails to state a viable claim. Typically, the statute of frauds does not apply to oral commission agreements with employees at will when those agreements contemplate payment of commissions earned during the period of employment. That is true even if payment of the commission may be made beyond one year. So, for example, under New York's statute of frauds:

[W]hen the employment relationship is terminable within a year and the measure of compensation has become fixed and earned during the same period, the sole obligation to calculate such compensation will not bring the contract ...

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