Hoffeld v. SHEPHERD ELECTRIC CO.

ADKINS, J. Under section 3-505 of the Maryland Wage Payment and Collection Law (MWPCL), codified at Md.Code (1991, 1999 Repl.Vol., 2006 Supp.), § 3-501 et seq. of the Labor and Employment Article (LE), employers must pay “all wages due for work that the employee performed before the termination of employment.” In Medex v. McCabe, 372 Md. 28, 41-42 , 811 ¹⁸⁷ A.2d 297 (2002), the Court of Appeals held that this law may not be circumvented by an employment agreement that explicitly conditions payment of earned commissions on continued employment. Appellant Calvin Hoffeld asks us to hold that his former employer’s unwritten commission policy is another unenforceable attempt to circumvent this law, if not on the face of the policy, then as it has been applied. The salient features of the policy that Hoffeld challenges are as follows: (1) Customers submit purchase orders, but typically specify a later date on which they want the product shipped. (2) Customers are invoiced on the same day a shipment is made.

(3) Commissions are payable when products on the purchase order are shipped and invoiced. (4) Commissions are determined on the basis of “margin,” which is the difference between the cost of the product and the price at which it is sold, with both figures being set as of the date on which the product is shipped and invoiced. (5) Commissions are paid to the sales representative who is assigned to the customer account on the shipping and invoicing date, so that sales representatives do not receive commissions on shipments made after their employment terminates. Hoffeld contends that this last aspect of appellee Shepherd Electric Co.’s “fulfilled order” commission policy violates the MWPCL by conditioning payment of earned commissions on continued employment.

Following a bench trial, the Circuit Court for Baltimore County disagreed, finding that Hoffeld did not earn commissions when purchase orders were submitted, but rather when goods were shipped and invoiced, so that he did not prove that he earned the commissions in question during his employment. From judgment in favor of Shepherd, Hoffeld raises four issues for our review: ¹⁸⁸ I. Did the trial court fail to apply properly the Wage Payment Collection Law as set forth in case law[,] thus permitting Appellee to illegally condition payment of commissions on continued employment?

II

Did the trial court err in finding there was a written contract of employment that contained all terms of employment despite uncontroverted testimony that there was actually an oral agreement with terms that Appellee was to be paid on particular pieces of business of jobs that Appellant secured for Appellee?

III

Did the trial court err in validating and endorsing Appellee’s dealings with regard to the other employees’ commissions that were in. contravention of the Wage Payment Collection Law as well as being of no relevance to the instant action?

IV

Did the trial court err in not applying the “procuring cause doctrine” despite evidence that showed the Appellant’s efforts and services were the primary, proximate, and procuring cause of business for the Appellee? We find no error and affirm the judgment. FACTS AND LEGAL PROCEEDINGS 1 . Shepherd is a Maryland corporation engaged in the business of supplying wholesale and retail electrical supplies for commercial use.

Customers include contractors who competitively bid for projects that require electrical supplies offered by Shepherd. The company employed Hoffeld as an outside sales representative from 1994 through January 16, 2003, the date of Hoffeld’s voluntary resignation. During that time, Hoffeld was one of Shepherd’s top outside salesmen in terms of commissions earned. ¹⁸⁹ Outside Sales Representative Duties Hoffeld’s primary job was to service customer accounts assigned to him, by “grow[ing] the customer, to generate new business, to entertain them.” He coordinated with Shepherd’s inside sales representatives and other departments to act as the company’s service liaison to that customer. Hoffeld’s duties included calling on contractors two to three times a week in an effort to develop opportunities for Shepherd to bid on customer requirements and to maintain good working relations on existing jobs.

Among his regular activities were visiting job sites and offices, obtaining building plans for projects on which customers intended to bid, and hosting company representatives for meals and outings such as fishing trips, NASCAR events, golf games, and even trips to Florida. In addition to developing new business, Hoffeld was required to handle any issues concerning business in progress with the customer. These duties included dealing with change orders and problems concerning items already shipped. Stewart Vogel, Shepherd’s president, testified that, at the time of trial, Shepherd employed 30-40 inside salespersons and 11 outside salespersons.

In contrast to an outside salesman, an [ijnside salesperson would be somebody that sits behind a desk and orders — well, he would quote material, and if he was successful ... in a quote, he would be given an order. He would proceed with the order, enter the order, and from that point on, there is tons of things that could be done, expediting, [returns], change orders. You know, there is tons of stuff he could get involved with before the job is finished out. Dave Pulías, Shepherd’s former vice president for sales and purchasing who hired and supervised Hoffeld while he was with the company, explained that [t]he way the system is set up ... [is] for outside people to develop a relationship that generates business and inside people to capture business handling the business process, ... and hopefully ... we keep the customer, and inside ¹⁹⁰ people keep generating business, and the relationship is now with the house....

It is all about their relationship and billing relationships. It is not about the specific things they do as far as processing anything. As a result of this business model, Pulías testified, outside salesmen did not see most of the orders placed by their assigned customers. Because “[t]he outside people were to develop the relationship and generate specific business or atmosphere for them to do business with us, ... in a lot of cases, ... the flow of business came from the customer to the inside [sales] staff.” Thus, although “[s]ometimes [a purchase order] came through outside people, ... in general, it came directly to our inside people.” Both inside and outside salespersons had significant continuing responsibilities after purchase orders were submitted.

Vogel testified that the outside salesperson is the company’s established “conduit” to the customer, through which information provided in whole or in part by the inside salesperson is communicated at all stages of business. For example, [i]f you were on an account, Enterprise Electric, and they asked you a question about a large job that you had a PO on, you would take down the notes, take the information down, take it back to Shepherd, our headquarters. You would get together with the internal people and you guys would work it out, and you, as the outside salesperson, would get back to the customer or you would have the inside salesperson get back to the customer____[I]f I told Enterprise that, ... I’m sorry, but you have got to totally refer to the inside person, I don’t think they would have any respect for me.

I don’t think I would be welcome there. Shepherd’s customers specify when the products listed on each purchase order are to be shipped. Consequently, there is usually an interval between the date on which a purchase order is submitted and the date on which the ordered materials are shipped and invoiced. We shall refer to this as the “order interval.” Order intervals varied from a matter of days ¹⁹¹ to months, sometimes even years, depending on the nature of the project and purchase order.

During the order interval, the Shepherd salesperson assigned to that account continues to service both the customer and the order, through shipment, delivery, invoicing, and payment. Change orders occurred frequently, and were to be expected on large purchase orders and projects. For example, Hoffeld was involved, post-purchase order, in dealing with manufacturers from whom Shepherd was ordering materials specified in his customer’s purchase order and in “value engineering” adjustments. 2 In addition, outside sales representatives assisted with troubleshooting, including expediting, billing, return, warranty, credit, and collection issues. According to Vogel, Hoffeld personally involved him “on numerous occasions” with post-purchase order problems, for example, obtaining his approval for write-offs or credits back to one of Hoffeld’s assigned accounts as a result of “problems on the jobs[.]” Carmen Grieves, Shepherd’s controller, testified that she frequently worked with Hoffeld in resolving payment issues, and that Hoffeld was directly involved in post-purchase order returns and credits on the same jobs for which he was claiming post-termination commissions.

Commission Policy And Practices Throughout Hoffeld’s employment with Shepherd, he was paid entirely on the basis of gross margin, which is “the difference between cost and sales.” This arrangement was individually negotiated by Hoffeld and Pulías, and memorialized in two handwritten memos that Pulías wrote at the time he hired Hoffeld. The agreement reflected that Hoffeld ¹⁹² planned to work one or two days each week, and that he would be initially assigned only to the L.H. Cranston account, which was one of the “house accounts” that Pulías himself had been servicing while he also performed his sales management duties. The business plan was for Hoffeld to take over the Cranston account in an effort to grow that business, because he had done considerable work with that company during his career. The deal was slightly different than Shepherd’s employment arrangements with other outside salesman, in that Hoffeld did not receive a draw or other salary, and earned commissions at the higher rate of 20% of margin for the first 18 months, with a monthly expense account of $250, and 15% of margin thereafter.

According to Hoffeld, he preferred this arrangement because he always worked solely on commissions in his prior positions with Shepherd’s competitors over the preceding 30 years. There was no dispute on the question of when and how commissions were to be calculated. In accordance with longtime Shepherd practice, the amount of a commission is determined as a percentage of margin on the date that an order is shipped, which is also the date that order is invoiced. Pulías and Hoffeld agreed that margins cannot be calculated earlier, based for example on the initial purchase order, because changes are commonly made to the order and/or margins during the order interval.

According to Vogel, on any “big job, there is usually something” that requires the attention of the outside sales representative during the order interval between the purchase order date and the shipping/invoicing date. Carmen Grieves, Shepherd’s controller who handles all payroll and accounting responsibilities, testified that each month, on the 25th in accordance with industry practice, Shepherd issues sales and commissions reports that list all products that were shipped and invoiced in the preceding month. The reports list the figures necessary to calculate commissions, ¹⁹³ including merchandise total and gross margin, but do not reflect purchase orders received during that period. Grieves explained that sales commissions are calculated on the gross margins of shipped items as of the invoicing date, and then calculated and entered by hand on a commission schedule prepared by Grieves or under her supervision.

Purchase orders are “never” seen in the accounting department, much less considered, in calculating commissions. Margins subsequently may be diminished by returns and warranty issues, in which case Shepherd adjusts the gross margin and takes a corresponding deduction against the commission paid on that product. Hoffeld neither disputes nor challenges these aspects of Shepherd’s commission policy. Rather, the feature about which Hoffeld complains is Shepherd’s practice of paying commissions to the outside sales representative who is assigned to the customer account on the date product is shipped and invoiced, rather than to the account representative who was assigned to that customer on the date the purchase order was submitted.

When a sales representative leaves Shepherd’s employ, the company reassigns the customers he serviced to another outside sales representative, who services the account during the order interval and after products are shipped and invoiced. In Hoffeld’s view, a commission is earned at the time Shepherd receives the purchase order, even if the amount of the commission cannot be determined until Shepherd ships and invoices. Shepherd disagrees, contending that the commission is not earned until an order is shipped and invoiced. Thus, when a sales representative procures a purchase order from one of his customers, but leaves Shepherd’s employ during the order interval, he receives no commission for purchase orders he helped to generate while servicing that account.

Instead, the entire commission is paid to the newly assigned account representative. Hoffeld routinely received a copy of his individual monthly reports. According to Grieves and Vogel, Hoffeld never com ¹⁹⁴ plained about receiving commissions only after products were shipped and invoiced. Grieves testified that Hoffeld was paid commissions on all shipments invoiced through January 16, 2003, the date he voluntarily left Shepherd’s employment.

She explained that, after Hoffeld left, commissions on the accounts he serviced were paid to other salesman from the day they were assigned to those accounts. Trial Hoffeld filed suit in the Circuit Court for Baltimore County, claiming commissions on specific purchase orders submitted before January 16, 2003, but shipped and invoiced thereafter. Trial focused on the related questions of when the parties considered a sale to be complete and a commission to be earned. Shepherd’s president testified that “the sale is not made until it is shipped and invoiced” because “too many changes ... can happen,” including complete cancellation of the purchase order. 3 For that reason, the company treats a sale as complete, and therefore the sale commission as having been earned, when the product is shipped and invoiced, rather than when a purchase order is submitted.

According to Vogel, “You have to pick a point. The whole industry does it this way.” On the question of when a sale was complete, Dave Pulías and Carmen Grieves testified that monthly sales reports showed only “what got shipped and invoiced.” Copies of such reports, including those recording sales and commissions generated by Hoffeld’s customers, were introduced into evidence. Neither these reports, nor invoices sent to customers, reflected when a purchase order was received. From Pulias’s perspective, ¹⁹⁵ the sale is completed when it is invoiced.

The sale is a long process. It starts with the purchase order, a contract. We have a sale, and then the process of shipping. We may have to order it or it could be an out-of-stock order from the factory.

To me, it is ... a completed sale, when I invoice it. It could continue on where he wants a return. It is still not complete. Once I have an order form, you give me an order form, a purchase order, I have a sale.

It just from this point on, it starts. As to when a commission was earned, however, Pulías testified on cross-examination that, “when we got an order in house as part of a contract,” he considered a commission to have been “earned ... in the sense that we know we are going to pay them commission, because it is an order assigned to that account, whoever it is.” He confirmed that, although he could not specifically recall whether any commissions were paid to Hoffeld on the basis of purchase orders that Cranston placed before Hoffeld started work with Shepherd, Hoffeld should have been given credit for shipments “unless the salesman that was there was still there.” According to Pulías, Shepherd did make some exceptions to its commission policy when responsibility for a particular customer transferred from one outside salesperson to another during the order interval. Pulías explained that “in a lot of cases,” the company “manually sometimes would take and give that guy a credit by manually moving it after we got the computer report ... if a salesman still worked for us.” “Otherwise, ... whoever was the salesman of record would have gotten paid.” On redirect, Pulías offered the following clarification of his testimony regarding when a commission was “earned”: If by earned, I knew who was going to get paid the commission, the person that was assigned that account, when they got the purchase order at the time. I assume he is going to get paid, so they earned it.

That is the context in which I use that. The trial court then asked for further clarification: ¹⁹⁶ The Court: The last thing you were saying is the commission was earned when the PO was received from the customer? [Pulías]: Well, I never — I was asked to use the word earned, so I kind of agree they earned it. It is not like we are not going to pay them commission. We know who has the account, so we get purchase orders, we are going to pay commission to that salesman that is assigned____[I]n that context, at the time we get purchase orders, I know who earned the commission.

I just don’t know how much or when it will get paid, and that is the way I interpret that usage____ The Court: You say he earned it when it came in. That is what I want to know. When did it come in? [Pulías]: There is no hard and fast rule. If I have a bunch of purchase orders in house, ready to be shipped or invoiced or I am going to ship next week, I could consider that business I have and have not invoiced yet, or I could consider it no sale until I invoice it____ I think it is a gray area.

That is all I am saying. The Court: Was there any discussion with Mr. Hoffeld as to at what point he earned the commission? [Pulías]: No.... The Court: If he left at some point before the job was billed or product was sent, had he earned the commission? [Pulías]: I guess that is subjective, Your Honor____ [T]hat is an issue I never considered or dealt with. So you know, I can’t answer that because I just never considered it....

The Court: Has the salesman done all the work necessary when the purchase order is received from a customer to earn the commission? [Pulías]: Up to that point, yes. Yes, if we have something in house, he is going to get a commission on that____I don’t know about the question about when he is gone.... [Sometimes on accounts we would re-assign in house, because we ¹⁹⁷ hired somebody and maybe we switched the account, ... and if a guy had orders in-house he had brought in or been involved in, we manually, in a lot of cases, calculated that commission and gave it to the original salesman who was on the account when the PO was generated, even though it hadn’t shipped____ In a lot of cases, it may have been something in process, half was billed out, so there are precedents for that. The Court: In those situations, did you split the commission with the new salesman assigned to the account or did the former salesman assigned to the account get the entire commission? [Pulías]: I don’t remember. It was on a case by case basis.

It is possible over all the years we may have split something. The Court: That sounds to me like that wasn’t any particular agreement. It was just— [Pulías]: Right. It was something we did.

They no longer had the account. They no longer got paid under the account. The Court: So is any of this the issue as to whether a salesman had become entitled to a commission for a purchase order? Was that ever discussed with a salesman, communicated to a salesman as part of an employment agreement? [Pulías]: I never discussed it until now, to be honest____ The Court: And if I understood your testimony, there really was no — certainly no spoken agreement as to at what point Mr. Hoffeld would become entitled to the commission? [Pulías]: No, not to phrase it that way, no.

(Emphasis added.) Hoffeld admitted that he was aware of Shepherd’s policy from the outset of his employment. He explained that this “was the arrangement with any electrical distributor I worked for. You either had the account in your name and you were getting the commission or somebody else was getting it.” Hoffeld understood the policy to mean that he started receiv ¹⁹⁸ ing commissions on materials shipped to Cranston from the moment he was assigned to that account, but could not say specifically whether he received commissions on Cranston shipments under purchase orders that had been submitted before he started working at Shepherd. Nevertheless, Hoffeld also testified that he believed that his commission was “earned” when Shepherd received a purchase order from one of his customers.

The trial court inquired at length about the foundation for Hoffeld’s belief: The Court: What is the basis for your understanding? Why is that what you believe? [Hoffeld]: My job was to increase business with L.H. Cranston and other accounts that they subsequently assigned to me. When I received that purchase order, I did all that I was supposed to do, get the order for Shepherd, instead of it going to [a competitor]---- The Court: Was there anything said at the beginning of your employment between you and any officer of Shepherd regarding when you earned the commission or when the commission was due? [Hoffeld]: Probably the second part of the question, it was due when it was shipped. In other words, my ... monthly commission would be calculated on what was shipped that particular month up to the closing date.

The Court: When did you have any conversation about that? [Hoffeld]: It might have been part of my original contract as to how ... they generated their — when did I get paid, do I get paid initially____I am assuming that would have been on my initial conversation with them, with Mr. Pulias. In other words, when do I get paid? We pay every two weeks, but once a month we settle up. They take the draw that they had given you for two preceding weeks and deduct that from what your commission [is] for that month.

You get the difference in your pay check — ¹⁹⁹ The Court: Did you have any conversation about when you earned the commission? [Hoffeld]: No. I don’t remember specifically. In all fairness, I had been in the business already at that point in time probably 30 years. That is how everybody is paid____ The Court: So it was your understanding you would not be paid until the product was shipped and invoiced by Shepherd? [Hoffeld]: That is correct. The Court: And you knew that because of both your conversation with Mr. Pulías and because that is what the industry does? [Hoffeld]: Yes, sir.

The Court: You believed that you had actually earned the commission prior to the time that product was shipped? [Hoffeld]: Yes, sir.... The Court: But there was no conversation regarding when it was that you actually earned the commission? [Hoffeld]: No.... The Court: ... There was nothing in writing between you and Shepherd about when you earned the commission or when you would be paid? [Hoffeld]: No, sir....

The Court: Again, to go back to the next question about the basis of understanding when you believe you earned your commission, nobody said anything, that was just what you assumed? [Hoffeld]: Yes, sir. (Emphasis added.) At the conclusion of the bench trial, the trial court ruled that Hoffeld failed to prove that he earned the disputed commissions before his employment ended, and therefore failed to prove that Shepherd violated the MWPCL. Hoffeld noted this timely appeal. ²⁰⁰ DISCUSSION As a result of Shepherd’s commission policy, Hoffeld complains, outside sales representatives are denied commissions they have earned on purchase orders generated by work performed before termination. In his view, that is what happened to him.

He was