Wednesday, December 04, 2013

Maryland Court of Appeals Will Review Employment Contract Case. (Update: Affirmed).

   The Maryland Court of Appeals granted certiorari in Spacesaver Systems v. Adam.   The case involves a dispute between family members in a family-owned business.  All of the family members signed identical employment agreements that contained a provision the defined "cause."   The company terminated Adam.   She sued.  

  The issues at trial was whether the company had the right to terminate her without cause and the length of the employment contract.    The trial court ruled that the written employment agreement created a lifetime employment contract that could only be terminated for cause, death or disability.   The trial court awarded Adam back pay through the date of trial ($255,868.20) and expressed no opinion as to whether Adam could continue to sue for breaches of contract for unpaid wages into the future.

  The Court of Special Appeals modified the trial court's rulings on one key point.  Adam's contract was not a lifetime contract, but a "continuous contract terminable for cause."  Lifetime contracts may require special consideration such as when the employee provides a substantial benefit other than his or her services.  According to the Court of Special Appeals, Maryland Courts have not yet decided whether special consideration is required or exactly what special consideration would be sufficient consideration.  But, because the Court decided Adam's contract was not a lifetime contract, the Court did not address the issue.

Recently, the Court of Appeals granted cert. on the five issues set forth below.  The fact pattern gives the Court of Appeal an opportunity to clarify the at will presumption, "for-cause" contracts, and life term contracts (including what special consideration may be needed to support them).

1) Under MD Law, is there a distinction between a lifetime employment contract and a “continuous for-cause contract,” both terminable for any reason by employee and only for cause by employer, such that each should have different amounts and degrees of proof and different consideration required? 

2) Where an employment contract contains no provision addressing duration of employment, must the contract be clear, specific and definite that the parties intended to create continuous and indefinite employment, terminable only for cause? 

3) Where an employment contract contains no provision addressing the duration of employment, does a “for-cause” provision transform the contract to one providing employment for life where there is no “special consideration” to establish a contract for lifetime employment? 

4) Is this Court’s dicta in Towson University v. Conte, 384 Md. 68, 862 A.2d 941 (2004) suggesting that a “just cause” provision transforms “at-will” employment into employment terminable only for cause inconsistent with this Court’s holding in Suburban Hospital v. Dwiggins, 324 Md. 294, 596 A.2d 1069 (1991) that employment contracts of an indefinite duration create “at-will” employment and remain so even if that agreement sets forth some bases that provide the employer cause for termination? 

5) Does the presence of a “for cause” provision in an employment contract transform at-will employment to lifetime employment terminable only for cause?

Update:  The Court held oral argument in the case on June 5, 2014.

Update #2:  The Court of Appeals affirmed   and held Adam's contract was not a lifetime contract, but a "continuous contract terminable for cause."   No special consideration was needed because Adam’s Employment Agreement contained an express for-cause provision in

Wednesday, October 30, 2013

Maryland Department of Labor Publishes Maryland Wage Lien Act Forms

In my last post, I outlined a new tool Marylanders have to collect unpaid wages.  The Maryland Wage Lien Act, allows an employee to place a lien on an employer's property if the employer fails to pay wages. The Act has two basic steps.  

First, the employee must give the employer notice of the intent to file a wage lien.  The Maryland Department of Labor published a form setting forth the proper notice.  The form as you might expect ask the employee to fill in blanks for the name of the employer, amount of unpaid wages, and the property subject to the lien.  The form also contains a paragraph informing the employer how to contest the lien (by filing a lawsuit).

Second, if the employer disagrees with the lien claim, the employer must file a lawsuit within 30 days (since the Act only went into effect October 1, 2013, as of this writing I am aware of no lawsuits having been filed).  The Maryland Department of Labor published a model of such a lawsuit.  The model lawsuit does not contain much information and is mostly space for the employer to describe why the wages are not owed.  If such a lawsuit is filed, the Court must conduct a hearing within 45 days to determine whether the lien is valid (and whether the award attorney's fees).

Finally, the Maryland Department of Labor published a draft lien document.  If the employer does not contest the wages owed, the employee can file this lien in the Circuit Court where the employer owns property.

All of the forms are fairly simple documents.  Most lawyers will create their own more detailed documents.  Even the Maryland Department of Labor's website warns that the forms are subject to revisions.

Tuesday, July 30, 2013

Maryland Wage Lien Act - Powerful New Tool for Collecting Unpaid Wages.

The Maryland Wage Lien Act provides a powerful new tool to employees seeking to collect earned wages from employers.

Beginning October 1, 2013, Maryland employees can initiate a lien by providing "written notice" to their employers of unpaid wages.  If employers want to contest the lien, they must file a claim in Court providing a sworn statement setting forth all defenses.  The Court then only as 45 days to decide if the lien is appropriate.  Forty-five days is fast; a typical court case take months, if not years.  I am curious how the Courts will handle this new expedited procedure.

If the Court issues the lien, it can award attorney's fees to the employee.  It can award attorney's fees to the employer if the wage lien is brought in bad faith.  

The Act's definition of "employer" is broad and includes individuals who work in the employer's interest.  Under recent precedent, owners and some supervisors can be individually liable for unpaid wages.  Wages does not include owed commissions.   

A lien is like a judgment that attaches to property.  If the employer wants to sell his or her solely-owned real estate, if a wage lien is attached, the buyer will usually require the employer to satisfy the lien.  The lien also may give the lien holder priority if the employer declares bankruptcy.

The Maryland Department of Labor is tasked with issuing implementing regulations.   I will be keeping my eye out for them as they could have an important affect on  this new powerful wage collecting tool.   

H/t to the  Public Justice Center which pushed for the Act and published an excellent FAQ.


Friday, July 26, 2013

Q: How many wage theft claims were filed with the Maryland Department of Labor in FY 2012?

A: 887

Employee can collect unpaid wages in Maryland using the Maryland Wage Payment and Collection Law. There are three ways to enforce the Law:

1.  By filing a lawsuit.

2.  By filing an administrative complaint with the Maryland Department of Labor (DLLR).  There were 887 such claims filed in FY 2012.    

3. By filing a criminal complaint for a willful violation (though these claims are almost always left to the civil process).

DLLR will typically direct employees with larger claims to hire private lawyer.  A private lawyer will want to be compensated for his or her efforts; the DLLR serves the public without a fee.  

Thursday, July 25, 2013

Maryland Unemployment: Using Best Judgment is Not Misconduct

     I recently helped a client who had been denied unemployment benefits at the telephone interview stage.  Her employer claimed that she had committed a series of errors in handling complicated financial transactions.  The telephone examiner found my client had deliberately disregarded employer rules.

    At an in-person before the Heating Officer, we were able to establish that my client used her best judgment in handling the transactions. The employer was free to second-guess my client's judgment.   But that does not mean she should be disqualified from receiving unemployment benefits.  According to the Hearing Officer, "the claimant made reasonable, good faith efforts to process [the transactions] properly."  Thus, the claimant, my client, is entitled to benefits. 

Friday, March 08, 2013

Triple Damages for Overtime: an Update

  This post covers what I call "The Overtime Amendment" to the Maryland Wage Payment and Collection Law.  In 2010, the Maryland General Assembly added two words to the definition of wages under the Law. Wages now includes "overtime wages," which are eligible for triple damages.  Since the addition of those words, I have found only one reported decision from our State Court that addresses The Overtime Amendment (many Federal Courts have addressed it, a topic which I will cover in another post).  The case is Montgomery County v. Deibler.  

The issue in Deibler was whether the ability to earn overtime wages should be included in an employee’s “wage earning capacity” as defined by the worker’s compensation statute.   MD. CODE ANN., LAB. & EMPL. §9-615(a)(1).  The claimant suffered a knee injury that prevented him from working overtime.  To collect temporary disability benefits his post-disability wage earning capacity had to be less than his pre-disability wage earning capacity.  Montgomery County argued that the ability to earn overtime did not decrease the claimant’s wage earning capacity.

To divine the meaning of the phrase “wage earning capacity,” the Court looked at how the General Assembly defined wages throughout the Labor and Employment Article, including in the MWPCL (before the Overtime Amendment).  According to the Court, the meaning of the word “wage” in each of the statutes “includes a wide range of employment remunerations, including overtime compensation.”  423 Md. at 72 “[T]o read ‘wage’ more narrowly to exclude overtime compensation (as the County would have us do) would produce a ‘farfetched, absurd or illogical result[] which would not likely have been intended by the enacting body.’” Id., quoting, Kilom v. State, 394 Md. 168, 177, 905 A.2d 306, 311 (2006).  According to the Court, the Overtime Amendment clarified the existing definition of wages, which had always included overtime. 423 Md. at 70 n.6.  

The takeaway:  overtime is collectible under the Law and is subject to triple damages.

Thursday, March 07, 2013

Vague Claims of Stolen "Pricing Knowledge" Do Not Support Maryland Uniform Trade Secret Act Claims

  I often defend employees accused of non-compete violations.  Tacked on to these claims are often alleged violations of the Maryland Uniform Trade Secrets Act (link to law review article).  The Act allows a Court to award fees to an employer if it prevails (but apparently no reported decision has ever done so according to the article.)

Proving information is truly a trade secret is no easy task. In Structural Preservation Systems v. Andrews,  the employer alleged that its former employees stole its “pricing structure, pricing knowledge and research, and established customer relationships."  The Maryland Federal District Court (Judge Marvin Garbis) ruled, however, that the employer's allegation were too vague to form a valid claim for a violation of the Act.  The Court relied on the Act's definition of trade secret.   To qualify for protection, the information must "derive independent economic value . . . from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use."  Pricing information is rarely a trade secret because it is rarely a secret (since prices are shared with customers).    Ultimately, the Court dismissed the employer's trade secret claims.      

Wednesday, March 06, 2013

Proposed Bill Would Require Maryland Employers To Provide Mandatory Sick Leave

Current Maryland State Law does not require that employer provide paid or unpaid leave.  Bills introduced in the Senate (SB698) and the House (HB735) would require employers to provide paid sick leave. An employee would earn at least 1 hour of paid sick leave for every 30 hours an employee works up to 7 days of sick leave per year.  The laws would allow employees to care for themselves and most dependents.  The Maryland Chamber of Commerce opposes the legislation; while workers' rights groups support it.  The Fiscal Note provides a good summary of the proposed law.

Of course, some employees (who work for employers with 50 or more employees) are guaranteed at least 12 weeks of unpaid leave for some illnesses under the Federal Family and Medical Leave Act.  Also, the Maryland Flexible Leave Act states that if an employer (with more than 15 employees)  already offers paid  leave, it must allow an employee to use it to care for a sick family member.  Other laws may require an employer to allow an employee to use leave as an accommodation for a disability.   The reality is, however, that most low wage and part-time employees get no sick leave.        

Wednesday, February 06, 2013

Proposed Senate Bill Would Void Non-Competes For Employees Eligible for Unemployment

   A lot of what drives non-compete disputes (and litigation) is the unclear and fluid nature of the law that applies to such agreements.  Written agreements are not always enforced according to their letter.  Instead, non-compete agreements are measured by standards developed through case decisions.  For example, for a non-compete agreement to be enforceable it must be directed at a legitimate and protectable business interest.  The uncertainty over what is legitimate and what is protectable often becomes the center of a dispute, which can only be decided by a Court.

A proposed senate bill would change, but not necessarily make better, the above state of the law.  Senate Bill 51  would void non-compete agreements that apply to employees eligible for unemployment.  A Chicago lawyer, Kenneth J. Vanko, persuasively argues that the bill would not end the battle but move it  from the Courts to the Office of Unemployment Appeals, which is already quite crowded.

The bill recently received an unfavorable report from the Senate Finance committee.  As such, it is unlikely to become law.