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Anthony Pontecorvo’s history as a Motorola cell phone salesman between 1990 and 2000 is a vivid example of an employer experimenting with new salary-plus-commission incentives to adjust for changing technology and markets. His state court suit for breach of contract and unjust enrichment aims to show that, even though Motorola’s contracts preserved sweeping powers to change compensation, it went too far when it reduced or eliminated residual commissions retroactively. His lawyer, Thomas E. Farver, of Hamden’s Farver & Heffernan, doesn’t mince words. “Motorola got the salespeople to work their tails off to build a book, and as soon as they did that said, ‘You’re doing too well. We’re going to cut your rates, we’re going to cut your incentives.’” The company took the view that “they were just sales staff; we can play with them,” Farver maintained. New Haven Superior Court Judge Thomas J. Corradino isn’t completely convinced that’s the case, but he’s not dismissing it either. Last month, he denied Motorola’s motion for summary judgment, sending the case toward trial. Motorola’s lead lawyer, Lynn A. Kappelman, of Boston’s Seyfarth Shaw, sees a much different picture. She said cell phone sales in the 1990s are “a textbook example” of a fast-changing market and sweeping technological changes. When the technology was new, high-end phones cost $1,000 or more. They were a corporate item — not today’s ubiquitous toys of mall-going teens. Salespeople like Pontecorvo primarily earned commissions on hardware, as well as phone “lines,” and a percentage of each client’s usage bill, as quarterly residual commissions. After his first four months at a training salary of $18,000 a year, Pontecorvo went to a $3,600 draw plus commissions. A new compensation plan, started in 1992, paid $100 for each phone and service package, plus 5.25 percent of clients’ usage. His key customers then included Lego Systems and Hartford Steam Boiler Insurance. By 1997, while cell phones’ popularity grew, their prices, size and per-minute costs shrank. So did Motorola’s commission system. That year it substituted a bonus of $2 per phone at target thresholds of 250, 500, and each subsequent thousand phones sold. Residual commissions were cut to 3 percent for the first 50 of a salesperson’s pre-1997 customers. In 1999, Motorola eliminated all residual commissions on usage. By then, Pontecorvo’s base salary was $20,000 — until the entire sales force was eliminated in 2000. He didn’t sue for wrongful termination, and acknowledged in depositions that Motorola had the right to change compensation formulas going forward. But Pontecorvo contends the company could not retroactively reduce the existing residual commission plans based on his clients’ usage. Motorola disagreed, and sought a summary judgment ruling. Corradino’s opinion denying that motion noted that, although an at-will employee can be fired at any time for no reason, an employer can’t promise to pay a certain wage and then unilaterally decide to pay less for work already done. Along the same lines, ongoing commissions present a unique problem, he wrote. While they can encourage an aggressive sales force in highly competitive industries, when business goes bad, “there is pressure on companies to try to reduce their obligation to pay commissions even when they have been earned under a sales contract.” Corradino said he could find no Connecticut precedent on point, and took the opportunity to posit his own rule of fair notice: “[W]here a company seeks to bar commissions earned under a plan it instituted as an incentive to its sales force it should explicitly state in that plan that commissions earned thereunder can be retroactively reduced or barred at the company’s discretion or for certain reasons that are spelled out.” The cost of compliance, he wrote, is minimal — printing a paragraph in a contract or employee manual. It’s certainly not enough for an employer to blur over the problem, invoke the employment-at-will doctrine, then hammer at the theme that the employee was never promised his compensation would remain unchanged, the judge warned. Maybe setting forth an absolute rule goes too far, Corradino noted, adding that it should be left to the jury to decide whether the employer gave fair warning of retroactive compensation cuts. “It will have an interesting job,” he wrote, since the language of Motorola’s contracts could be read either way. “I think this is breaking ground in this area of law,” Farver said. “If you write your contract in enough detail, to explain what happens when your [profit] margins aren’t what you anticipated, that’s one thing. But to say you can write a contract that says we can do whatever we want, when we want, just goes over the edge.” Motorola’s Kappelman said the judge enunciates how an employer would properly “manage employees’ expectations, and he wasn’t ready to say whether Motorola had sufficiently done so.”

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