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Jensen v. IBM

United States Court of Appeals for the Fourth Circuit

May 25, 2006, Argued ; July 24, 2006, Decided

No. 05-1611


 [*384]  NIEMEYER, Circuit Judge:

Niels Jensen, a successful software salesman for IBM Corporation, commenced this breach of contract action against IBM for $ 2.1 million in additional commissions that Jensen claims he earned in 2001 under IBM's Software Sales Incentive Plan. The district court concluded that the plan did not create an enforceable contract obligating IBM to pay the commissions and granted summary judgment to IBM. For the reasons that [**2]  follow, we affirm.

IBM hired Jensen in 2000 as a software sales representative. He was hired as an at-will employee whose employment at IBM could be "ended by the employee or IBM at any time with or without cause." His compensation consisted of base pay plus variable pay, commissions, awards, and other forms of earnings designed to "attract, retain and motivate high-performing employees."

In 2001, IBM announced the 2001 Software Sales Incentive Plan ("the Sales Incentive Plan"), a unified compensation plan for all of its sales employees, and presented the plan to its employees at "e-Business University," an instructional conference for IBM employees. Jensen attended the conference with over a thousand other salesmen and there received a glossy brochure, entitled "Welcome to the fabulous world of your 2001 Software Sales Incentive Plan," which outlined the Sales Incentive Plan. The brochure trumpeted the simplicity and advantages of the new plan under which a salesman's commissions turn on his success in attaining his sales quota, instead of being calculated as a straight percentage of sales, as they had been before. Announcing its function, the brochure stated: "This booklet explains [**3]  the basic principles that guided design of the new plan, and provides information to help you understand how the plan works . . . for you and for IBM." Describing the concept of incentives, the brochure stated: "[B]ecause your sales plan is based on a self-funding model, there are no caps to your earnings; the more you sell, the more revenue and incremental profit for IBM; and the more earnings for you." The brochure described how the plan worked, set forth some rates, and provided a full example of how the income for a hypothetical software account manager is to be computed. It cautioned, however:

Disclaimer: This example is provided for illustration purposes only. Actual sales incentive payments will be different than the numbers displayed here. In cases of conflict between what is shown in this booklet and local documentation, local plan documentation prevails.

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454 F.3d 382 *; 2006 U.S. App. LEXIS 18516 **; 153 Lab. Cas. (CCH) P60,244; 24 I.E.R. Cas. (BNA) 1393


Prior History:  [**1]  Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. (CA-04-1316-1). Leonie M. Brinkema, District Judge.

Jensen v. IBM, 2005 U.S. Dist. LEXIS 48361 (E.D. Va., May 6, 2005)

Disposition: AFFIRMED.


Sales, incentive plan, commissions, quota, brochure, vested, terms, glossy, carve, documents, employees, Software, calculate, earnings, intranet, modify, amounts, transactions, conditions, principles, announced, binding contract, communicated, reserves, cancel

Contracts Law, Contract Modifications, General Overview, Labor & Employment Law, Employment Relationships, Employment Contracts, Formation & Letter Agreements, Contract Formation, Offers