International Business Machines Corp. (IBM) hired Niels Jensen in 2000 as a software sales representative. In 2001, IBM presented a new “Software Sales Incentive Plan” (SIP) at a conference for its sales employees. A brochure given to the attendees stated, “[T]here are no caps to your earnings; the more you sell, ***the more earnings for you.” The brochure outlined how the plan worked and referred the employees to the “Sales Incentives” section of IBM’s corporate intranet for more details. Jensen was given a “quota letter” that said he would be paid $75,000 as a base salary and, if he attained his quota, an additional $75,000 as incentive pay. In September, Jensen closed a deal with the U.S. Department of the Treasury’s Internal Revenue Service that was worth over $24 million to IBM. Relying on the SIP brochure, Jensen estimated his commission to be $2.6 million. IBM paid him less than $500,000, however. Jensen filed a suit in a federal district court against IBM, contending that the SIP brochure and quota letter constituted a unilateral offer that became a binding contract when Jensen closed the sale. In view of these facts, consider the following questions.
(a) Would it be fair to the employer in this case to hold that the SIP brochure and the quota letter created a unilateral contract if IBM did not intend to create such a contract? Would it be fair to the employee to hold that no contract was created? Explain.
(b) The “Sales Incentives” section of IBM’s intranet included a clause providing that “[m]anagement will decide if an adjustment to the payment is appropriate” when an employee closes a large transaction. Jensen’s quota letter stated, “[The SIP] program does not constitute a promise by IBM to make any distributions under it. IBM reserves the right to adjust the program terms or to cancel or otherwise modify the program at any time.”How do these statements affect your answers to the above questions? From an ethical perspective, would it be fair to hold that a contract exists despite these statements?