THOMAS v. H&R BLOCK EASTERN ENTERPRISES (January 12, 2011)
Amorita Thomas worked as a seasonal tax preparer for H&R Block for the 2005-06 and the 2006-07 tax seasons. Her employment agreement provided for two different types of compensation. First, she was paid hourly. Second, she was eligible for compensation at the end of the tax season to the degree that the sum of several identified amounts exceeded her total hourly income for that season. Those other amounts included incentives for products sold, return clients, and number of returns prepared. The returns prepared number was based on fees collected. Thomas received her hourly wages on a biweekly basis but did not receive her seasonal compensation until sometime in May of each year, even though she stopped working several weeks earlier. Thomas brought suit against H&R Block pursuant to Indiana's Wage Payment Statute, which requires "wages" to be paid within 10 days after they are earned. Then-Judge Hamilton (S.D. Ind.) granted summary judgment to the defendant. Thomas appeals.
In their opinion, Judges Flaum, Ripple, and Evans affirmed. The Court noted that it was its obligation to apply the law of Indiana, as the Indiana Supreme Court has or would determine. The only issue on appeal was whether Thomas’ seasonal compensation amounted to “wages" in the Indiana Wage Payment Statute. Although the term is not defined in that particular statute, Indiana courts have looked at the definition in the Wage Claims Statute and the Indiana Supreme Court's decision in Highhouse. Considering that, the Court found the answer dependent on several factors. Compensation is less likely to be considered "wages" if: a) it is linked to a contingency, b) it would be hard to calculate and pay it within the statutory period, c) is not directly related to hours worked, and d) is paid in addition to other compensation. In this case, the Court found that each of those factors weighed against Thomas: a) the amount of the compensation for returns prepared is contingent on collections, b) evidence in the record indicates it would be almost impossible to calculate and pay the compensation within 10 days, c) the compensation was not directly related to hours worked, and d) the compensation was paid in addition to her hourly wages. Thus, the compensation is not "wages" under Indiana law. The Court rejected Thomas' request to certify the question to the Indiana Supreme Court in light of Highhouse and the fact that any decision of the state court would have limited application, given the unique compensation scheme.