It could have been the case that employer nightmares are made of—but the 7th Circuit Court of Appeals saved the day. Interpreting Indiana law, the federal court ruled that employees have just two years to sue over disputed sales commissions, not the 10 years a former employee argued for.
Recent case: Roger Knutson worked as a salesman for UGS and claimed he was due commission payments going back many years. At the heart of the dispute was his former employer’s written commission “Compensation Program.”
Knutson claimed that since the compensation program was written, it was a contract under Indiana law. Indianans have up to 10 years to file claims relating to ordinary written contracts. But UGS argued that Indiana also has a two-year statute of limitations for all actions related to the terms and conditions of employment.
The 7th Circuit Court of Appeals agreed. It concluded that a 10-year limit would encourage disgruntled former employees to carry on vendettas against their former employers, writing that “an employee should not be encouraged to spend 10 years threatening suit ... he should get on with his life.” (Knutson v. UGS, No. 07-2959, 7th Cir., 2008)
Final note: There is still some question over whether Indiana law allows employees who work under written employment contracts (for example, noncompete agreements) to have up to 10 years to sue. In this case, there was no signed agreement—just a published compensation plan describing how commissions were to be calculated.
Always have experienced counsel draft or review compensation plans, employment contracts and other contracts. Your lawyer can best make sure they protect your company’s interests.
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