Employment Law

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

By James Rubin, Esq.

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.

Full post as published by Maryland Employment Law on December 19, 2008 (boomark / email).