Page 4 - John Hundley 2018

Actually dealing with a limited liability company, the panel in Benzakry noted that courts in
corporate veil piercing cases usually look at a longer list of factors, including failure to issue stock,
failure to observe corporate formalities, nonpayment of dividends, insolvency of the debtor
corporation, nonfunctioning of officers and directors, absence of corporate records, diversion of
assets from the corporation by or to a shareholder, and failure to maintain arms-length relations
among related entities.

In discussing only three factors in its opinion, the panel did not appear to establish a new rule for
LLCs. Rather, it appeared that the showing was so strong on the three discussed factors that the
others were unnecessary.

Major Wage Payment Act Award Affirmed

An employer that refuses to pay a departing employee the usual severance compensation
because he refuses to sign a release of claims under the Illinois Wage Payment & Collection Act (820
ILCS 115) may find itself liable for both.

That’s the message of Schultze v. ABN AMRO, Inc., 2017 IL App (1st) 162140, which affirmed a
trial court award of more than $2 million under the act.

In Schultze, the defendant had an established history of paying lucrative bonuses to top
executives, and the evidence indicated a bonus of $2 million to $5 million would have been
appropriate for the plaintiff for 2008. However, defendant gave plaintiff only $200,000, and
terminated his employment shortly thereafter. It offered him severance of $300,000 if he would sign a
release of, among other things, claims under the act. He replied that severance properly calculated
should be $375,000 and that he would not release his claims under the act. The employer refused to
pay any severance and paid only $200,000 of the bonus.

The appellate panel first dealt with ABN’s argument that the bonuses were discretionary and not
pursuant to an “employment contract or agreement.” It said that a formal contract is not required to
recover under the act, and that the term “agreement” in the act was “more expansive” than “contract.”
Reviewing the history of the bonus program and Schultze’s participation therein, it said “there was an
‘agreement’ and ‘unequivocal promise’ that Schultze’s compensation included a bonus and payment
of that bonus as part of Schultze’s compensation was not discretionary.”

The panel affirmed a $2 million award, which it termed “the minimum bonus commensurate with
[plaintiff’s] increased responsibilities and undisputed satisfactory performance.”

Turning to the severance, the panel said that “settlement of claims in the form of a release signed
by an employee relating to an employer’s violation of the act is not permissible.” It affirmed the trial
court award of $375,000 severance.

Leave to appeal to the Supreme Court has been denied.
Brenda\Sharp Thinking\#146.pdf
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