Appellate Court of Maryland Affirms Individual-Owner Liability and Explains Availability of Extra Damages for Overtime Violations

 In Morales v. Bryant Concrete Construction, the Appellate Court of Maryland outlined a roadmap for overtime claims in Maryland.  That roadmap is that Plaintiffs should pursue their remedies against the individual owners of small business and should seek exemplary damages and attorney's fees.   

   The Court first held that a 51% owner of a concrete company could be individually liable for overtime violations.  This owner claimed she only provided "back-office" support, though she admitted she had the power to hire and fire, and set employee pay.  (The Trial Court had dismissed out this owner).   

  Second, the Court found an employer can be liable for double damages under the Maryland Wage and Hour Law.  It can only avoid these additional damages if the employer can prove it acted in good faith and had reasonable grounds for believe its actions did not violate the wage laws.  (The Trial Court had declined to award the additional damages).   In the end, the Appellate Court did not decide whether double damages were appropriate but ordered a re-trial (given its finding that the 51% owner could be on-the-hook)..

  Notably, the overturned trial verdict was for about $14,000.  Now, the case will be re-tried. Undoubtedly, the lawyers for the Plaintiffs will seek to recover their attorney's fees for both trials and the appeal.  Through the appeal, the Plaintiffs' were already claiming $173,461.53 for fees and costs.  

The moral of the story is that it rarely makes sense for an employer to try an overtime claim.  

Varying Independent Contractor Tests Apply to Maryland Employees

Employees in Maryland enjoy our broad array of worker protection statutes.  Employees may qualify for sick leave and parental leave.  They can sue for overtime and lost wages (and may be eligible for triple damages).  They may be eligible for unemployment.  Employers, of course, are required to withhold income and payroll taxes for their employees.

Independent contractors get bupkis (nothing).  They likely have to pay self-employment tax.

This disparity in rights creates an incentive for employer to push individuals toward being classified as independent contractors. 

But, could you be an employee for one purpose and an independent contractor for another?   The answer is, "yes."  That is because there are different independent contractor tests for different statutes.

The broadest test is called the "ABC" test because all three prongs of the test must be met.  It applies to claims for unemployment and the Maryland Workplace Fraud Act (which only applies in the construction and landscaping industries).  To be an independent contractor under this test the employee must be:

• free from control and direction;
• performing work in his or own business or occupation; and
• either (i) performing work that is different than the business of the person for whom the work is performed; or (ii) performing the work in a different location than the person for whom the work is performed.

A narrower "economic realities" test applies to most other Maryland statutes.  This flexible approach focuses on whether the worker is economically dependent on the business to which he renders.  It looks at 

• the degree of control that the employer has over the manner in which the work is performed;
• the worker's opportunities for profit or loss dependent on his managerial skill;
• the worker's investment in equipment or material, or his employment of other workers;
• the degree of skill required for the work;
• the permanence of the working relationship; and
• the degree to which the services rendered are an integral part of the putative employer's business.

Though similar to the economic realities test, the IRS and the NLRB have their own tests as well.  What should one do to navigate this forest of varying and multi-factored tests?  Of course, my advice on this is to seek some professional advice.  You might be surprised that you qualify as an employee for one purpose but not another.

  

Choice of Law Provision Likely Unenforceable If It Causes a Maryland Employee to Forfeit Earned Wages

Choice of Law provisions are common in employment contracts and pay plans.  They state that the parties choose that a certain state's law (i.e., New York, New Jersey) will apply should there ever be a dispute over the meaning of the contract or pay plan. 

Maryland has several employee-favorable worker protection statutes, including the Maryland Wage Payment and Collection Law ("MWPCL").  The MWPCL allows employees to collect earned commissions and allows for triple damages if wages are withheld in bad faith. 

One could see how an employer might want to avoid the MWPCL.  One way an employer could do that is through a Choice of Law provision.  The employer could say, "This pay plan will be interpreted in accordance with Laws of New York [or some other law.]"  For many years, Court in Maryland enforced these provisions.

But in a case called, Cunningham v. Feinberg, the Maryland Court of Appeals stated the Maryland Legislature signaled that the policy underlying the MWPCL was so important that it could not be waived through a choice of law provision.  A good example of the effect this has had is this decision in Blanch v. Chubb & Sons, in which a Judge reversed herself on the application of a Choice of Law Provision because of Cunningham.

Bottom line, if you work in Maryland, the MWPCL applies to you.

Maryland's Highest Court Rules That Triple Damages are Recoverable for Unpaid Overtime

I have long tracked the debate over whether triple damages are recoverable for overtime under the Maryland Wage Payment and Collection Law.   Maryland's highest Court, the Court of Appeals, put the issue to bed in Muriel Peters v. Early Healthcare Giver, Inc.  The Court ruled (as predicted) that triple damages are recoverable for unpaid overtime.   The Court ruled that way because in 2010 the Maryland General Assembly amended the law to add the word "overtime" to the definition of wages. Several Federal Court decisions, nonetheless, held that triple damages were not recoverable if they were never promised to the employee.  The Maryland Court of Appeals rejected those cases and held triple damages are available for unpaid overtime.

The Court in Peters also held:

• A judge or jury must first find that the employer withheld the employee's wages in bad faith before awarding additional -- up to triple -- damages to the employee; 
• There is no outright presumption in favor of an award of enhanced damages; 
• The employer has the initial burden to prove it withheld wages in good faith.  The burden then shifts to the employee who must ultimately persuade the judge or jury that the employer withheld the wages in bad faith; and
• The maximum award the plaintiff can receive is three times the unpaid wages.  If the employee is owed $1 in wages, the maximum he or she can recover is $3 (there had been an argument that he or she should be able to recover $4 -- the owed wages plus triple damages).     

Q. Does the Maryland Wage Payment and Collection Law permit triple damages for overtime? (Update: Yes)

A.  I believe that the answer is yes (and wrote about why I think that is case).  A case pending before the Maryland Court of Appeals will likely provide a final answer.  The case is Muriel Peters v. Early Healthcare Giver, Inc.   The Court in Peters agreed to review the following three questions:

1) Are overtime wages recoverable under the MD Wage Payment and Collection Law (MWPCL)?

2) In a bench trial, is it an abuse of discretion to fail, without explanation, to award treble damages under the MWPCL where there is no claim of bona fide dispute?

3) Should any award of up to treble damages under MWPCL be made in addition to the award of unpaid wages?

The above questions suggest that the trial court awarded overtime wages but did not award the triple damages permitted by the Maryland Wage Payment and Collection Law (but did not explain why).  The Court of Appeals held oral argument on April 29, 2014.  The employer did not participate (probably because it did not have the money to retain a lawyer).  The Court of Appeal had many questions about how it could award triple damages in the absence of a trial court finding that the overtime wages were withheld in bad faith.  To me, that suggests the Court will remand the case back to the trial court to decide that issue and explain the rationale for its decision.
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8/19/14 -- Update the Court ruled that triple damages are recoverable for unpaid overtime and remanded the case to the Circuit Court to decide whether to award such damages in this case.

Maryland Law Increasing Minimum Wage Also Provides for Liquidated (or Double) Damages

    The Federal law governing the minimum wage and overtime is the Fair Labor Standards Act ("FLSA").  Maryland has its own minimum wage and overtime law, called the Maryland Wage and Hour Law ("MWHL").  Under the FLSA, a plaintiff claiming unpaid wages can collect the amount owed plus an equivalent amount as liquidated damages.  The plaintiff thus can collect double damages.  Under the MWHL, a plaintiff could only collect the wages owed (single damages).  As a result, most plaintiffs have historically brought their claims under the FLSA. Most FLSA claims end up in Federal Court.

   That is likely to change.  The law eventually raising Maryland's minimum wage to $10.10 also states that Court can shall award liquidated damages for a violation of the MWHL.  An employer can avoid liquidated damages if it can show it acted in good faith and reasonably believed that the wages paid to the employee were not less than the MWHL requires.  The law takes effect July 1, 2014.  As a result, more overtime and minimum wage cases will end up in Maryland State Courts.

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.

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.

         

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.

Maryland Employees: Do Not Lose Earned Wages When You Change Jobs

I have written many times about the Maryland Wage Payment and Collection Law, the basic law that protects employee wages.  The Law states that employees are entitled to the wages that they earned. If an employer fails to pay earned wages, it could be liable for triple damages and attorney's fees.

Below are examples of earned wages that can be recovered in Wage Payment and Collection Law cases.

Commissions. A series of favorable Maryland decisions (reviewed here) state that if an employee performs the work necessary to earn a commission, he is entitled to it -- even if he or she has left the company

Bonuses. Did you do everything you could possibly do to earn the bonus? If so, you probably earned it and are owed it.

Severance. If severance is promised to entice an employee to take a job or to reward an employee for years of service, it likely falls under the category of earned wages.

Straight wages.  Did your employer just fail to pay?  You are owed your wages.

Overtime:  A recent amendment  includes overtime in the Law's definition of wages.

The Law can be enforced in three ways:

1.  You can file a lawsuit.  I recommend you consult a Maryland Employment attorney before doing so.

2.  You can file an administrative complaint with the Maryland Department of Labor (DLLR).  Instructions on how to file such a complaint can be found on the DLLR website.  

3. You can file a criminal complaint for a willful violation.  A warning:  I have not yet seen a criminal wage violation prosecuted.   My impression is that such claims are rarely prosecuted (since they are left to the civil process).

NOTE: Beginning in October 2013, Maryland employees can place a lien on their employer's property under the   Maryland Wage Lien Act.

Q: How many times has the Montgomery County Domestic Worker Law been enforced?

A:  Once

Since 2008, Montgomery County, Maryland, has a Domestic Worker Law.  The Law requires that a family who employs a domestic worker have a written employment contract with that worker.  The Law is enforced by the Office of Consumer Protection.  The Office may seek a civil penalty of not more than $1,000.00 for each violation, and additional damages, restitution, or any other available legal or equitable relief.

A recent Washington Post article noted that the Office has only sought to enforce the law once.  According to the article:

Take the law passed in 2008 requiring residents to offer domestic workers a written contract. At the time, Council member Roger Berliner (D-Potomac-Bethesda) said he was worried about “whether we would be deemed to be the nanny government of all time.” 

Still, the bill passed unanimously. 

Since then, it’s been enforced once.

How Much Does an Entry-Level Maryland Wage and Hour Investigator Make?

$28,434 - $44,520.




There are three ways to enforce the Maryland Wage Payment and Collection Law, the Law that allows Maryland employees to recover earned but unpaid wages.  The three ways are:

1. By filing a civil lawsuit; 
2. By filing a criminal complaint for a willful violation (I have never seen this done successfully); and
3. By filing a claim with the Maryland Department of Labor (the "DLLR").  The DLLR may assign an investigator to investigate your claim.  As mentioned, the DLLR currently is hiring an investigator and is offering a salary of  $28,434 to $44,520.  

Q: What amount of fines has Maryland collected under the Workplace Fraud Act of 2009?

A:  Zero.


  I have written about the Maryland Workplace Fraud Act of 2009 in the past.  The law was subject to intense disagreement between the Maryland Department of Labor and the Maryland Chamber of Commerce.  The Law  grants to the Maryland Department of Labor the authority to investigate the misclassification of employees as independent contractors in the construction and landscaping industries. The Act allows an employer who misclassifies an employee but does not do so knowingly to come into compliance within 45 days without penalty. Employers who "knowingly" misclassify employees, however, may be subject to a penalty of up to $5,000 per misclassified employee. 


A recent fiscal note to an amendment to the Act states the following about its enforcement:

As of December 2011, DLLR’s Task Force on Workplace Fraud had conducted  660 investigations under the Workplace Fraud Act, and issued 12 citations, which  translates into a 98% compliance rate.  The task force collected $33,000 in civil fines  from employers for failing to provide employment records in a timely fashion, but it has  not assessed fines for misclassification because the cited employers have either come into compliance or have their cases still pending.

Arbitration of Employment Disputes in Maryland

I am pursuing more and more employment law cases in arbitration right now than I ever have in my career.  Arbitration is an alternative to Court.  In arbitration, the parties "choose" to have their disputes heard by an arbitrator (often a retired Judge or an experienced lawyer), rather than a judge or jury.

I am certain that my personal experience of an uptick in arbitration is common among employment lawyers.  Several Maryland and U.S. Supreme Court decisions allow employers to make their employees "agree" to waive their right to a jury and to pursue class actions as a condition of employment.  Employers generally prefer arbitration because of a belief that it is private, cheaper, and more employer-friendly than the court system.

In my experience, arbitration is  more expensive than court for the employer because the employer often must pay the costs associated with arbitration.   Hence, the employer has to pay its own lawyer and the arbitrator's fee.  Also, arbitration is  not always private.  Also, I have had some good success in arbitration.   Finally, when the employee is the one being sued, employers either forget about an arbitration or regret having made the employee sign an arbitration agreement as a condition of employment.  


  

Department of Labor Issues A New App to Track Overtime

Q:  What are the three most important rules in employment law?
A:   Document, Document, Document.

The Department of Labor issued an app to document overtime.  The app acts as a time clock. You press a button when you start working, then you press a button when you stop working.  You enter your hourly rate.  The app then calculates your wages and overtime.  You can email a report of your time to help you follow the three most important rules of employment law:  document, document, document. 

Ticket Office Employees v. Washington Redskins

Dirty Labor Laundry On-Line

Want to know if your employer is a serial labor law violator? Check The U.S. Department of Labor - Enforcement Data . There, you can search by to see if your employer has previously violated USDOL-enforced labor laws (like the Family and Medical Leave Act and the federal minimum wage and overtime law).

Employees of Large Retail Employers Entitled to Breaks beginning in March 2011

Back in 2007, I wrote that adult Maryland Employees are not entitled to breaks.

As a result of a new Maryland law that takes effect in March 2011, certain Maryland employees must be given breaks.  The law only applies to retail establishmentswith 50 or more employees and excludes wholesalers and restaurants.

Triple Damages for Overtime Starting October 1, 2010.

Q:  What might you receive if your employer withholds overtime wages in bad faith?

A:  Triple damages and attorney's fees (starting October 1, 2010). 

The Maryland General Assembly clarified that the Maryland Wage Payment and Collection Law's definition of wages includes overtime.  As such, you might be able to collect three times the amount owed under the Maryland Wage Payment and Collection Law.

Redskins Workers Fight For Their Right to Rights

Click here for a brief write up of the ticket workers' case against the Redskins.  It is focused on the fact that the Redskins required my clients to sign arbitration clauses as a condition of employment.  I have written about such clauses several times on this blog.