A U.S. District Court judge in Rhode Island has found that a sales professional could bring a misrepresentation claim against her former employer for allegedly allowing her to believe certain transactions she closed would count toward incentive bonuses that it subsequently denied.
Plaintiff Mary Beth Ryder worked for defendant Pearson Education as a business development manager. Under her sales incentive plan, if she met a certain revenue target, she would be entitled to a bonus to be received in two “rollover” installment payments over the next two years, so long as she met her sales goals both of those years as well.
The plan also stated that Pearson had unilateral discretion to determine bonus eligibility under the agreement.
Ryder earned a bonus in 2014. But in 2016, Pearson refused to pay her the second installment of the rollover payment, claiming she did not qualify because part of her 2016 earnings were based on a “legacy” deal she was already working on a year earlier that did not count toward her 2016 goals.
It also denied her a 2016 bonus by claiming that part of another transaction she closed did not count toward her goals for that year.
According to Ryder, management directed her to keep working on both transactions, leading her to reasonably believe they would count toward her 2016 goals, while knowing that they would not.
Pearson argued in response that Ryder did not show justifiable reliance on any alleged representations, given the employer’s unfettered discretion to interpret the incentive plan as it saw fit.
Judge John J. McConnell Jr. disagreed.
“Viewing the evidence in a light most favorable to the nonmovant, Ms. Ryder, the Court finds that a reasonable jury could find that Pearson intentionally or negligently misrepresented the inclusion of the [legacy] deal and part of the [other] deal toward Ms. Ryder’s signings goal,” McConnell wrote in denying Pearson’s motion for summary judgment. “It is thus a jury question whether this nondisclosure, negligently or intentionally, led Ms. Ryder to detrimentally believe that she was on target to meet her 2016 signings goal when in fact she was not.”
McConnell did, however, grant summary judgment to Pearson on Ryder’s breach of contract and Wage Act claims, as well as discrimination and retaliation claims stemming from her termination.
The 37-page decision is Ryder v. Pearson Education, Inc.
Chip Muller of Barrington, who represents the plaintiff, said he was pleased that the misrepresentation claims could proceed.
“The judge found that in the breach-of-contract context, the employer may indeed have a lot of discretion, but that doesn’t preclude a fraud claim or a negligent misrepresentation claim.”
— Chip Muller of Barrington, counsel for plaintiff
“I think it’s important because a lot of employers in many contexts — not just the bonus and commission context — promise bonuses, rewards and remuneration and then reserve discretion,” he said. “The judge found that in the breach-of-contract context, the employer may indeed have a lot of discretion, but that doesn’t preclude a fraud claim or a negligent misrepresentation claim.”
That provides significant protection for workers, who should be able to trust the representations and promises of their employers, he continued.
“Employers can’t mislead their employees, even if they reserve the right to do so in their contract,” Muller said.
Pearson’s attorney, Benjamin R. Davis of Boston, said he and his client were pleased with McConnell’s “strong ruling in our favor” on the contract, wage and discrimination/retaliation claims.
“[We] are confident that the remaining counts are also without merit,” he said.
‘At the discretion of management’
Pearson, which sells education materials to large companies and universities, hired Ryder as a business development manager in late 2013.
The role subjected Ryder to sales goals established by Pearson’s incentive plan.
Ryder’s 2014 plan, which she received that June, stated that she could earn up to $250,000 annually in commissions and bonus and that any earnings above $125,000 would be payable in two equal “rollover” installments over the following two years, provided she achieve her sales goals both of those ensuing years.
The incentive plan also stated that subsequent years’ targets would be “at the discretion of management” and that management had full and final discretion to interpret the plan.
In 2014, Ryder worked on a team under manager Mark Wheeler and had a goal of at least $4 million in “signings,” defined as the estimated value of all products and services a customer contractually promised to buy in the future.
The plaintiff generated more than $17 million in signings that year, which earned her $250,000 in commissions for meeting her goal and made her eligible for another $284,000 over the next two years as rollover payments as long as she met 2015 and 2016 targets.
Ryder exceeded her 2015 sales goal and, accordingly, received that year’s installment of her 2014 rollover payment bonus.
At the end of 2015, Pearson eliminated the “Wheeler team” in a downsizing and reassigned Ryder to the so-called “AGC” team. At that time, Ryder was working on two 2015 Wheeler deals, known as the “BS/A” deals, for existing Pearson clients.
Ryder’s new supervisor, Leeane Fisher, authorized her to keep working on those deals throughout 2016, though Ryder allegedly was unaware that would not count toward her 2016 signings goal.
In July 2016, Fisher gave Ryder a negative performance review, complaining about Ryder’s communication and handling of certain administrative tasks while comparing her unfavorably to a male counterpart.
A month later, Fisher assigned Ryder a new deal to work on, known as the “GARP” deal, which was apparently considered a “dog.”
Fisher allegedly knew that month that a large portion of Ryder’s work on that signing also would not count toward her 2016 goals, since GARP had been an active Pearson account for five years, but apparently did not tell Ryder.
In September 2016, with approval of Pearson management, Ryder closed the BS/A deal for $3.4 million.
Three months later, Ryder closed the GARP deal, which was initially calculated at $1.4 million but later reduced to $818,000 when Pearson decided not to count revenue Pearson had received from that account for sales the prior year.
As a result, while Ryder believed she had signed more than $4 million in new business in 2016, Pearson gave her credit only for the $818,000, leaving her ineligible for a 2016 bonus or for her second rollover payment from her 2015 bonus.
Ryder challenged the decision internally. She also filed a discrimination charge with the Rhode Island Commission for Human Rights in 2017, alleging she was treated differently from a similarly situated male employee and that her performance improvement plan was discriminatory in light of her apparent attention-deficit/hyperactivity disorder.
In the summer of 2017, Pearson terminated Ryder. The executive who made the decision allegedly knew of the pending charge at the time.
Ryder subsequently filed suit in U.S. District Court, bringing contract, wage and misrepresentation claims regarding the bonuses while bringing discrimination and retaliation claims regarding her termination.
Pearson moved for summary judgment on all counts.
McConnell found that Ryder could not sustain her contract claims given the “final decision authority” the employer retained as to sales incentive plan interpretation.
He also granted summary judgment to Pearson on the discrimination and retaliation claims that stemmed from Ryder’s placement on a performance improvement plan, the denial of the bonuses, and the termination.
“Viewing the evidence in a light most favorable to Ms. Ryder, the Court finds that there is no evidence in the record that suggests that Pearson’s reason for each adverse employment action was a pretext for gender discrimination,” McConnell said.
Meanwhile, the judge found that Ryder had no Wage Act claim because, under Rhode Island law, a bonus does not constitute a “wage.”
He did, however, find that Ryder alleged sufficient facts for her misrepresentation claim to proceed.
“While the language of the 2016 [sales incentive plan] states that Pearson’s finance department had the discretion to interpret the 2016 SIP regardless of statements made by personnel to the contrary, which Pearson argues precludes Ms. Ryder’s reliance on the actions of her superiors, Ms. Ryder did not see the final 2016 SIP, with this language, until November 2016,” McConnell observed. “Until that point, Ms. Ryder was operating under the direction of her supervisors [who] authorized her to keep working on the BS/A deal and the GARP deal and neither of whom indicated these deals would not count toward her 2016 signings goal until it was too late for Ms. Ryder to change course.”
Accordingly, McConnell concluded, summary judgment should be denied on those counts.