Hewlett-Packard has successfully appealed a decision that forced the company to pay an award of over $600,000 to one of its retrenched sales specialists.
The employee, Corinna Chin Shu Hwa, took HP to court over a contractual dispute in which she claimed the company owed her sales incentives for bringing in new business.
The dispute hinged on the term “new end-user customer” and its precise definition.
“The case concerns the interpretation of a new Sales Incentive compensation metric that HP introduced in 2012, called the New Business Metric (NBM),” said
Julia Yeo, employment law specialist at Clyde & Co.
The firm introduced the NBM and sent a set of written implementation guidelines to staff via email ahead of the rollout.
These guidelines defined “new business” as either a “new end-user customer”, “new application,” and/or a “new area for the existing end-user customer”.
While at HP, Chin made concerted efforts to sell the firm’s latest server systems to NETS, an existing client which was using HP’s older server models and which eventually moved over to IBM instead.
However, the move wasn’t cut and dry and, while IBM was setting up their systems for NETS, the firm remained on HP’s servers.
“Prior to concluding the deal, the employee sought for management's confirmation whether the deal fell within the definition of ‘new business’ but could not obtain any definitive confirmation from the management,” Yeo said.
Chin was eventually able to convince NETS to drop IBM and move back to HP. She submitted the claims form which was approved by her country sales manager but rejected by the regional head. The case was then taken to court.
“Chin argued that the delay of the management in answering her query was proof of the ambiguity of the term,” Yeo said.
In August, Judicial Commissioner Edmund Leow ruled in favour of Chin, agreeing that the NETS contract fell under “new business”. HP was told to pay her the $600,000 in sales incentives.
This judgment was appealed by HP with the Court of Appeals overturning the initial decision last Thursday (31 March).
“The Court of Appeal ruled that the delay of HP internal management in coming to a conclusion whether the ‘win-back’ qualified as a ‘new business’ was not indicative of ambiguity,” Yeo said.
For HR practitioners watching this case, there are two lessons to be learned. First, there is the matter of communication.
“As with the roll-out of any new policy, there are bound to be some questions on its application and scope,” Yeo said. “What perhaps contributed to the escalation of the dispute was that the HP internal management failed to answer the staff’s queries definitively.”
This then led to Chin concluding that the deal fell within the offered guidelines or at least that it would be treated as such.
The other takeaway from this case is the importance of clear, unambiguous language in all policies and contracts, she added.
“A perfectly drafted document is obviously the Holy Grail for drafters but short of unambiguously clear contractual language, setting out the contractual purpose and the context of the policy or contract in the document would be helpful markers to resolve any dispute.”
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