December 3, 2018
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 15 C 15 - Matthew
F. Kennelly, Judge.
Sykes, Barrett, and St. Eve, Circuit Judges.
who has worked in a commissioned sales position knows that
earnings are unpredictable. Commissions often fluctuate from
one pay period to the next. The Tile Shop, LLC, a specialty
retailer of ceramic and stone tile, uses a compensation
system designed to smooth the earnings of its commissioned
sales staff. The Tile Shop pays a semimonthly
"draw" of $1, 000 ($24, 000 annually) even if a
sales associate earns less than that amount in commissions
during the pay period. The Tile Shop reconciles and recovers
any shortfall between actual earned commissions and the $1,
000 draw in subsequent pay periods, but only from commissions
in excess of $1, 000.
months Adriel Osorio sold tile and related products for The
Tile Shop, first in Illinois and then in New Mexico. His
earnings reflected the ebb and flow of sales. When business
was slow and his commissions totaled less than $1, 000 in a
pay period, The Tile Shop paid him the guaranteed $1, 000 and
reconciled the difference in later pay periods when his
commissions exceeded $1, 000. He quit in July 2014.
later Osorio filed this class action alleging that The Tile
Shop's "recoverable draw" system violates the
Illinois Wage Payment and Collection Act ("IWPCA"
or "the Act") and its implementing regulations. As
relevant here, the regulatory scheme prohibits employers from
deducting more than 15% from an employee's wages per
paycheck as repayment for previous cash advances.
Osorio's suit claimed that The Tile Shop's
compensation system functions as a series of cash advances
and his former employer deducted more than 15% of his wages
at various points to recoup previous draw payments.
on cross-motions for summary judgment, the district judge
held that The Tile Shop's compensation system does not
involve "cash advances, " so no violation of
Illinois law occurred. We affirm, though on a different
rationale. The Act prohibits "deductions by employers
from wages or final compensation" unless specified
conditions are met. 820 III. Comp. Stat. 115/9 (2018). The
rules for repayment of cash advances are found in the
regulations, but the threshold question is whether The Tile
Shop's draw reconciliations are "deductions"
from wages or final compensation. They are not. The
reconciliations determine the employee's gross wages
before tax withholding and other deductions are made.
Tile Shop, LLC, sells tile and related materials and
accessories. It operates 128 retail stores across 31 states.
Each store employs a manager, one or two assistant managers,
and a staff of sales associates. Sales associates and
assistant managers are primarily responsible for sales.
Tile Shop pays its sales associates and assistant managers
pursuant to a "Sales Associate Pay Plan." The
company gives prospective employees a copy of the plan with
its offer letter. Portions of the plan have been revised over
the years, but the material terms have not changed. The plan
explains how the company compensates its sales staff,
primarily through commissions but also with bonuses on sales
of certain products and periodic incentives. The Tile Shop
pays employees on a semimonthly basis.
income naturally varies from pay period to pay period
depending on sales volume, the profitability of products
sold, and the specific circumstances at the store in
question. To provide a stable and reliable income, The Tile
Shop guarantees its sales staff a minimum of $1, 000 for each
semimonthly pay period, for an annual salary of at least $24,
000. If an employee earns less than $1, 000 in commissions in
a pay period, The Tile Shop reconciles and recovers the
difference in subsequent pay periods, but only against
commission earnings in excess of the guaranteed minimum.
000 "draw" counts toward gross wages for purposes
of payroll and income taxes, and it is prorated if the
employee does not work the full pay period. An employee's
first three pay periods are essentially a grace period. The
Tile Shop pays the guaranteed $1, 000 and does not seek to
recover any shortfall in actual commissions. Beginning with
the fourth pay period, The Tile Shop reconciles any
commission shortfalls below $1, 000 against future
commissions exceeding $1, 000 in subsequent pay periods until
recovered in full. Notably, this reconciliation formula
determines gross wages for purposes of payroll and income
taxes and any other applicable deductions. An employee who
leaves the company receives a draw payment during his final
pay period of employment even though he will not make
additional sales. The Tile Shop does not require
reimbursement of an outstanding draw balance at the end of
Tile Shop employed Osorio as a sales associate in an Illinois
store from September 2013 until February 2014 and as an
assistant manager in a New Mexico store from February to July
2014. His pay schedule reflects The Tile Shop's system of
draws and reconciliations. For example, Osorio's total
compensation for the second pay period in December and first
pay period of January included draw payments. The Tile Shop
recovered the difference after Osorio's strong
performance to end January. In total, Osorio received $2,
038.47 in recoverable draw compensation during his