Friday, December 19, 2008

Promised Profits and Deferred Compensation Can be a Wage -- Triple Damages Awarded!

Accountant Kevin Fetridge worked at Aronson & Co. for over 25 years. Under Mr. Fetridge's employment agreement, if he was terminated, he would receive "Terminating Employee Compensation" (TEC), a form of severance pay. However, if Mr. Fetridge violated a non-compete agreemen, Aronson would be entitled to offset damages from the TEC.

Aronson argued that the TEC was not a "wage" under the Maryland Wage Payment and Collection Law because of the offset agreement.

The Court of Special Appeals rejected this argument. It held the TEC is a wage because Mr. Fetridge was allowed to receive the TEC, at least in part, even if he violated the covenant. This is important because it allowed Mr. Fetridge to collect under the triple damages provision in the Wage Payment and Collection Law.

Aronson also argued that the definition of a "wage" under the Law does not include a business's allocation of its profits because they are not directly tied to an employee's efforts. The Court held that the jury could find that the Deferred Compensation Account funds were "promised as compensation for work performed" under the terms of his agreement and were therefore a "wage."

Aronson also appealed the jury's award under the Wage Law which allows treble damages when wages are withheld in bad faith. Aronson argued that it withheld the payments because of a bona fide dispute over whether Fetridge violated the non-compete covenant. Aronson contended that it had a good faith basis to believe that Fetridge had violated the covenant by moving to a new firm and taking Aronson's clients with him.

The jury makes the determination about the existence of a bona fide dispute, the Court held. Reviewing the record, the Court affirmed that the jury had sufficient evidence to decide that Aronson did not have a "good faith basis" for refusing to pay Fetridge.

Monday, December 08, 2008

Attorney's Fees Available Under Maryland Wage Payment and Collection Law

Karl Clark sued his former employer, Programmers' Consortium, Inc., for unpaid wages. The Consortium paid Mr. Clark sporadically because of financial difficulties in the company. He ultimately sued his former employer under the Maryland Wage Payment and Collection Law.

Under the Law, if the court finds that employer withheld the wage of an employee and it was not as a result of a bona fide dispute, the court may award the employee treble damages and reasonable attorney's fees and other costs.

A jury found that the Consortium withheld wages and it was not as a result of a bona fide dispute between the parties. However, the jury did not grant any additional damages beyond the back wages. A major question on appeal was whether the judge could award attorney's fees when the jury did not award enhanced damages.

The Court of Special Appeals decided that there are two separate and independent determinations- one decided by the jury and the other by the judge:

  • The jury decides whether wages were withheld in the absence of a bona fide dispute.

  • The judge decides whether to award attorney's fees, regardless of whether the jury awarded any additional damages.

The decision is important, especially for plaintiffs, because it allows judges to award attorney's fees and costs, even if the jury does not find the absence of a bona fide dispute and/or does not award treble damages.

NOTE: The Maryland Court of Appeals is currently reviewing this decision.