Labor & Employment Law Daily Wrap Up, WAGE-HOUR—CLASS ACTIONS—E.D. Wis.: Court preliminarily approves $17.5 million settlement stemming from changes to commission plan, (Oct 14, 2025)

By Ronald Miller, J.D.

Once the court has entered the final order and the funds have been received, payments will be distributed within 14 days to each class member not excluded.

A federal district court in Wisconsin granted preliminary approval of a $17.5 million settlement for a Rule 23 class action in which salespersons employed by Johnson Controls alleged that the employer’s changes to its commission plan resulted in the cancellation of backlogged commissions and a breach of contract. In determining that it would be likely able to certify the class for purposes of judgment on the proposal, the court concluded that the four prerequisites of Rule 23(a) were met. Further, it concluded that “questions of law or fact predominate” over individual claims and a class action is superior to other methods for fair and efficient adjudication (Novin v. Johnson Controls, Inc., No. 24-cv-46-pp (E.D. Wis. Oct. 7, 2025)).

Commission plan. On February 8, 2024, a group of salespersons employed by Johnson Controls filed an amended complaint alleging that the employer had altered its Commission Plan in Fiscal Year 2024 (FY24), resulting in the cancellation of backlogged commissions, a breach of the employment agreement and the covenant of good faith and fair dealing, and unjust enrichment. The salespersons also alleged violations of various state wage payment statutes.

Settlement. The parties filed their settlement agreement on September 1, 2025. The salespersons also asked the court for an order granting preliminary settlement approval and certifying a Rule 23 class for purposes of settlement administration.

Within 45 days of a court order approving settlement, the employer must pay $17,500,000 to be allocated as follows: $50,000 for the contingency and ongoing cost fund; $12,053,000 for the class settlement fund; $147,000 for service payments to the class representatives ($7,000 each to the individual plaintiffs); and $5,250,000 for attorneys’ fees and costs (30 percent of the fund). The participating members have agreed to release all claims known or unknown arising out of the implementation of the FY24 Sales Plan. Payments to the named plaintiffs and class members will be allocated and distributed according to the payment schedule that accompanied the motion.

Any member objecting to the fairness of the agreement must file the objection with the court by the date on the notice (30 days after distribution) and must provide the identity of all attorneys representing the objector who will appear. Anyone wishing to exclude themselves from the class must submit a request no later than 30 days from the distribution of the notice.

Preliminary approval of settlement. In granting preliminary approval, the court noted that the plaintiffs have been adequately represented by counsel who have significant experience representing complex class and collective actions. The parties have negotiated at arm’s length, engaging in two sessions with a mediator. They also engaged in a full-day session with a JAMS mediator who is experienced in complex wage and hour disputes and class actions. As part of the mediation, the defendant provided data and information to the plaintiffs’ counsel, who created and provided a damages model to the employer.

Method of distribution. The proposed allocation provides for a baseline award of $300 and further allocates the settlement based on the total backlog accrued and canceled by the defendant for each class member, less any subsequent bridge payments received by that person. The total settlement fund constitutes 54.92 percent of the calculated $31,862,721.40 contract damages with the bridge payments. Once attorneys’ fees, costs, the reserve fund and service awards are deducted, the remaining fund of $12,053,000 constitutes approximately 37.65 percent of the total contract damages. Each class member with damages less than $796.88 will receive a minimum payment of $300 for the release of their claims.

Attorneys’ fees. The plaintiffs’ counsel represent that they accepted the case on a contingency basis and that there was a risk of no recovery. The plaintiffs’ counsel has agreed to reduce the typical fee request to a recovery of 30 percent. In addition, the plaintiffs’ counsel has agreed to include in that amount all costs and expenses (estimated to be $50,000).

Equitable distribution. The settlement is structured in a way that distributes the funds equitably based on the individual members’ calculated backlog at the time defendant announced the change in the commission structure. The amounts due are offset by bridge payments made to that individual member. Class members entitled to more than $796.88 will recover around 37.65 percent of their calculated damage.

Certifying class under Rule 23(a). The court considered whether it “will likely be able to... certify the class for purposes of judgment on the proposal.” The plaintiffs represent that there are 1,784 members of the Rule 23 class, including themselves. Given the size and location of the named plaintiffs and class members, it would be administratively untenable to join each individual class member. Thus, numerosity was met.

The plaintiffs have also satisfied the commonality requirement. Common questions exist about whether (1) the annual commission plans created a contractual relationship between the defendant members of the Rule 23 class governing the terms and conditions of their pay in exchange for work; (2) the cancelation of the accrued backlog for members of the Rule 23 class at the beginning of FY24 was a valid exercise of the defendant’s discretion or constituted a breach of contract; and (3) the defendant is entitled to a partial offset of damages as a result of subsequent bridge payments made to the class.

Typicality requirement. The typicality requirement was met because the claims of the named plaintiffs, who represent the class, and the claims of the class members all arise from the same allegations. The plaintiffs’ counsel represented that they have significant experience representing complex class and collective actions. Further, the representative plaintiffs do not appear to have any conflicting interests and have suffered the same alleged injury as other class members. Thus, the court was satisfied that representation has been adequate to date.

Rule 23(b)(3) requirements. In addition to meeting class certification requirements under Rule 23(a), the proposed class must satisfy the requirements of one of the three subsections of Rule 23(b). The plaintiffs focus on Rule 23(b)(3), which allows for certification when “questions of law or fact predominate” over individual claims and a class action is superior to other methods for fair and efficient adjudication.

The breach of contract claim includes elements that are common to the class. The plaintiffs allege that they had a valid, enforceable contract with the employer such that the employer would pay commissioned salespersons a commission or incentive under the commission sales incentive plan. The existence of that plan as to all plaintiffs is common to the class. So too is the alleged breach of that contract that allegedly occurred when the defendant rolled out the FY24 plan retroactively to the plans that had been in effect in prior years and eliminated the backlogged commissions that the plaintiffs and others had earned under the prior plan. Damages for class members can be calculated by looking to the backlog and offsetting by the bridge payments made since the cancelation.

Superiority of class action. The class resolution is superior because, except for the claims of thirteen individuals who have filed separate litigation, the proposed class will resolve approximately 99.3 percent of potential claims. The plaintiffs represent that hundreds of the putative class members had fewer than $1,000 in damages, and that the median class member has a potential recovery around $11,000. The small amount at stake for those individuals makes the class action a superior method of resolving the claims.

Accordingly, the court certified the class under Rule 23(b)(3) for settlement purposes.

The case is No. 24-cv-46-pp.

Judge: Pepper, P.

Attorneys: Brad Kenneth Thoenen (HKM Employment Attorneys) for Daniel Novin. Bernard J Bobber (Ogletree, Deakins, Nash, Smoak & Stewart) for Johnson Controls Inc.

Companies: Johnson Controls, Inc.

Cases: WageHour ClassActions ContractClaims StateLawClaims RemediesDamages Procedure WisconsinNews