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Guercio v. Production Automation Corp.

June 24, 2003


Hennepin County District Court File No. CT01007566

Considered and decided by Anderson, Presiding Judge, Schumacher, Judge, and Willis, Judge.


1. Where an employee continues employment with knowledge of new or changed conditions, the new or changed conditions may become a contractual obligation. By staying on the job when free to leave, the employee supplies the necessary consideration for the offer made by the employer.

2. Independent consideration must exist to validate a non-compete agreement entered into after the original employment contract.

3. Under Minn. Stat. § 541.07 (5) (2002), actions to recover wages, including commission amounts, must be commenced within two years.

The opinion of the court was delivered by: G. Barry Anderson, Judge

Affirmed in part, reversed in part, and remanded


In this employment dispute, appellant challenges summary judgment arguing that genuine issues of material fact exist indicating that (a) respondent Production Automation Corporation (PAC) breached its employment contract with appellant by lowering commission rates from 50% to 40%, (b)áPAC breached its contract with appellant by failing to pay him commissions after his termination, (c) PAC breached implied and express covenants of good faith and fair dealing, (d) the statute of limitations does not bar appellant's claims, (e) PAC violated the Minnesota whistleblower statute by refusing to rehire appellant after he reported PAC to the Department of Health, and (f)árespondent Jay Martin tortiously interfered with appellant's employment contract. We affirm in part, reverse in part, and remand.


On March 29, 1993, PAC hired appellant as a sales representative in its electronic-distribution business. At that time, PAC was owned by Tom Martin and had only two sales representatives. Appellant prepared a letter agreement dated April 7, 1993, ultimately signed by Tom Martin that outlined the details of appellant's employment agreement with PAC. The letter agreement provided that appellant would receive a salary of $3,500 per month until "sales have grown and sustained sales levels such that commissions * * * exceed salary." At that point, appellant would receive a commission of 50% of the profit from sales that he made and no longer receive a monthly salary.*fn1 Appellant moved to commission-based compensation after working for approximately six to eight months.

On April 26, 1993, appellant signed a second agreement with PAC that contained a non-compete clause. The document also included a provision that stated that appellant would not be paid commissions for amounts PAC received after his termination. This document did not recite any consideration for the new terms of appellant's employment.

In early 1998, respondents Jay Martin and Steve Block purchased PAC from Tom Martin. The new owners decided to change the compensation structure for all sales representatives, including appellant. Under the revised compensation plan, all salespersons received a 40% commission on certain PAC items, rather than the previously paid 50%. In addition, sales of certain lines of products for which commissions were not previously paid would now result in commissions of 10% to 15%.

Throughout his employment at PAC, appellant kept a database of his client contacts on his home computer. Appellant testified that the database included both his contacts developed while working for PAC and also prospective customers that he had identified from past employment. Starting in approximately 1996 or 1997, PAC began requesting that appellant turn over this database. After the ownership changed hands in 1998, Jay Martin repeatedly demanded that appellant turn over the database, claiming that it was PAC's property. Appellant disagreed and refused to turn it over. Finally, on July 29, 1998, appellant's employment with PAC was terminated. Appellant testified that Jay Martin said to him, "If you give us the database, we'll hire you back on the spot. But you are simply terminated." A few weeks later, while retrieving his personal effects from his office, appellant discussed his employment situation with Jay Martin and turned over the database. Nevertheless, PAC refused to rehire appellant.

In mid-July of 1998, appellant filed an anonymous complaint with the Minnesota Department of Health reporting that PAC permitted smoking in the workplace. The department, by letter dated July 31, 1998, notified the company of violations of state law. PAC, therefore, received notice of the anonymous complaint between the time appellant was terminated and PAC's refusal to rehire him a few weeks later. Appellant believes that PAC refused to rehire him because appellant reported PAC's state-law violations.

Appellant brought the present suit against PAC and its co-owners, alleging numerous causes of action. The district court entered summary judgment in favor of respondents on all issues on January 2, 2002, and this appeal followed.


Did the district court properly enter summary judgment in favor of respondents?


On an appeal from summary judgment, we ask two questions:á(1) whether there are any genuine issues of material fact and (2) whether the district court erred in its application of the law.á State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).

A motion for summary judgment shall be granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that either party is entitled to a judgment as a matter of law.á On appeal, the reviewing court must view the evidence in the light most favorable to the party against whom judgment was granted.á

Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993) (citation omitted). A genuine issue of material fact exists when the nonmoving party presents evidence that creates a doubt as to a factual issue that is "probative with respect to an essential element of the nonmoving party's case to permit reasonable persons to draw different conclusions."á DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997).

A. Reduction of commissions from 50% to 40%

Appellant first argues that as a matter of law PAC breached its employment contract with him by reducing appellant's commissions from 50% to 40%. The district court held that because appellant was an at-will ...

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