Business employee recoupment: AT&T CORP. V. FOWLER (COA 9/14/2007)

AT&T CORP. V. FOWLER
BUSINESS LAW: CHARGE BACKS, COMMISSIONS 

2006-CA-000402
PUBLISHED: REVERSING AND REMANDING
PANEL: PAISLEY PRESIDING; STUMBO, VANMETER CONCUR
COUNTY: FRANKLIN
DATE RENDERED: 09/14/2007

AT&T Corporation appeals from orders of the Franklin Circuit Court finding that AT&T’s policy of recouping the commissions of its employees, Brian K. Fowler and Richard R. Grant, pursuant to their compensation agreement, violated the provisions of Kentucky Revised Statutes (KRS) 337.060, which prohibit employers from deducting losses due to default of customer credit, or nonpayment for goods or services received by the customer, from the wages of their employees.  The circuit court also awarded attorney’s fees and costs to Fowler and Grant. On cross-appeal, Fowler and Grant argued the circuit court erred in failing to award them liquidated damages. 

COA reversed circuit court finding that the recovery of the commissions by AT&T violated the terms of the statute.

KRS 337.060 generally prohibits employers from recovering their losses from employees’ wages.   Under the terms of the Compensation Plan, the appellees agreed that their commissions would be debited under certain circumstances, namely, if an account stopped paying within a twelve month period.  However, even though the commissions were wages, the fact that they were recouped by the employer did not violate KRS 337.060. Under the plain language  of KRS 337.060(1), an employer may not withhold any part of the wage agreed upon.

For these reasons, the portion of the Franklin Circuit Court order of September 26, 2005, ordering a return of the Darwin commissions to Fowler and Grant is reversed. The portion of that order denying the appellees/cross-appellants’ claim for liquidated damages hereby affirmed. The portion of the order of February 1, 2006, ordering the payment of reasonable attorney’s fees, costs, and prejudgment interest to the appellees/cross-appellants is reversed. The portion of that order denying the appellees/cross-appellants’ request for interest pursuant to KRS 360.010 is affirmed.  This matter is remanded to the Franklin Circuit Court with directions for further remand to the Office of Workplace Standards for a determination as to whether the amounts recouped were properly calculated.

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