Battaglia v. Clinical Perfusionists, Inc.

RODOWSKY, Judge. Here we construe Maryland’s Wage Payment and Collection Law (the Act), Maryland Code (1991, 1994 Cum.Supp.), §§ 3-501 through 3-509 of the Labor and Employment Article (LE). The Act provides, inter alia, for a private right of action for certain violations, in which up to three times the ³⁵⁴ compensatory recovery may be awarded, together with counsel fees. § 3-507.1. As explained below, we shall hold that where the employer breaches an employment contract by terminating the employment after the employee’s services had commenced, but where the employer timely pays the wages at the agreed rate for the work performed prior to termination of the employment, the private right of action does not lie.

On October 3, 1991, the appellant, Dorothy Battaglia (Battaglia), and the appellee, Clinical Perfusionists, Inc. (CPI), entered into a written contract whereby Battaglia was to train to become, and perform services as, an on-call autotransfusion technician. 1 It seems to be conceded that the parties contemplated that the services would be performed in Monmouth Medical Center in Longbranch, New Jersey. 2 The contract provided for an annual salary of $17,000 payable in biweekly installments. On November 7, 1991, CPI notified Battaglia that her services were no longer desired. CPI paid Battaglia for services rendered up to November 8, 1991 and paid her two weeks severance pay. Battaglia filed a two-count complaint in the Circuit Court for Anne Arundel County alleging in Count I breach of her employment contract and in Count II a violation of the Act. 3 ³⁵⁵ Trial was to a jury.

At the close of evidence the trial court granted Battaglia’s motion for judgment on Count I as to liability, finding that CPI’s termination of Battaglia’s employment constituted a breach of contract. The jury awarded Battaglia $16,300 on Count I and $36,000 on Count II. The court thereafter granted, as to Count II, CPI’s motion for judgment notwithstanding the verdict. Battaglia appealed to the Court of Special Appeals, and we issued certiorari on our own motion prior to consideration of the matter by the intermediate appellate court.

The parties agreed that it would be unnecessary to transcribe the record of the trial for this appeal. We infer that the trial court construed the provision in the written contract concerning notice by CPI of termination of employment to be limited to a notice given at least two weeks prior to, but effective only as of, an anniversary of the contract. CPI has not appealed the judgment against it on Count I. Consequently the construction of the notice provisions of the contract is not before us. The sections of the Act that are most relevant to the parties’ arguments are set forth below. “§ 3-501.

Definitions. (c) Wage. — (1) ‘Wage’ means all compensation that is due to an employee for employment. ³⁵⁶ (2) ‘Wage’ includes: (i) a bonus; (ii) a commission; (iii) a fringe benefit; or (iv) any other remuneration promised for sendee.” “§ 3-502. Payment of wage. (a) Pay periods. — (1) Each employer: (i) shall set regular pay periods; and (ii) except as provided in paragraph (2) of this subsection, shall pay each employee at least once in every 2 weeks or twice in each month.... ” “§ 3-505.

Payment on termination of employment. Each employer shall pay an employee or the authorized representative of an employee all wages due for work that the employee performed before the termination of employment, on or before the day on which the employee would have been paid the wages if the employment had not been terminated.” Prior to October 1, 1993 Md.Code (1991), LE § 3-507 was the exclusive civil enforcement mechanism in the Act. It provides for initial informal mediation by the Commissioner of Labor and Industry. Id. § 3-507(a)(1).

Thereafter, with the consent of the employee, the Attorney General may bring an action on the employee’s behalf, id. § 3-507(a)(2), in which “the court may award the employee an amount not exceeding 3 times the wage.” Id. § 3-507(b)(1). The private remedy which Battaglia seeks to enforce was added to the Act as § 3-507.1 by Chapter 578 of the Acts of 1993, effective October 1, 1993. 4 1993 Md.Laws at 2869. This section reads: “§ 3-507.1. Action to recover unpaid wages.

(a) In general. — Notwithstanding any remedy available under § 3-507 of this subtitle, if an employer fails to pay an ³⁵⁷ employee in accordance with § 3-502 or § 3-505 of this subtitle, after 2 weeks have elapsed from the date on which the employer is required to have paid the wages, the employee may bring an action against the employer to recover the unpaid wages. (b) Award and costs. — If, in an action under subsection (a) of this section, a court finds that an employer withheld the wage of an employee in violation of this subtitle and not as a result of a bona fide dispute, the court may award the employee an amount not exceeding 3 times the wage, and reasonable counsel fees and other costs.” 5 The circuit court granted CPI judgment on Count II at the conclusion of a colloquy with Battaglia’s counsel. As we interpret that colloquy the circuit court considered § 3-505 to control Count II. The court reasoned that CPI had not violated the Act because, under the plain language of § 3-505, CPI had paid “all wages due for work that the employee performed before the termination of employment.” Battaglia argues that CPI breached the contract and “nowhere in the contract is the employer released from its obligation to pay the wages promised for the term of one year.” Appellant’s Brief at 6.

Relying on that premise, Battaglia asserts that § 3-502 controls, and not § 3-505. Section 3-502 requires an employer to pay to each employee that employee’s wages “at least once in every 2 weeks or twice in each month.” § 3-502(a)(l)(ii). Battaglia argues that CPI’s breach did not extinguish its obligation to pay wages, and that § 3-502 continues CPI’s duty to pay Battaglia’s wages every two weeks. Battaglia further asserts that § 3-505 deals only with “valid” terminations, i. e., those not effected by breach of contract, and that § 3-505 does not apply when there has been an “invalid” termination.

An “invalid” termination of an employment contract, in Battaglia’s reasoning, simply continues the ³⁵⁸ employment and the obligation to pay the agreed wages per § 3-502. Here, Battaglia submits that she continued to be available for autotransfusion duties if called upon so that CPI continued to be obliged to pay her wages. Battaglia concludes that CPI’s failure to pay the wages every two weeks violated § 3-502 and subjected CPI to § 3-507.1’s remedy of potentially trebling those wages which were withheld. We were advised at oral argument that the amount of the verdict on Count I reflects any adjustment that the jury might have made in applying the doctrine of avoidable consequences, sometimes called the duty to mitigate.

We were further advised that both parties assumed that, if the verdict on Count II had been allowed to stand, it would have been reduced by the amount of the verdict on Count I, in order to avoid a double recovery. Battaglia thereby treats as one and the same thing (1) the amount awarded for breach of the employment contract under Count I and (2) what § 3-507.1 refers to as the wage “withheld” that could be the factor to which a multiplier from zero up to and including three is applied in order to arrive at a verdict under Count II. 6 Battaglia’s arguments fail to distinguish between the employer’s power to terminate the employment relationship by breach of contract and the employer’s resulting and continuing liability for that breach of contract. The arguments fail to distinguish between the employer’s liability for failure to pay for work already done (“back wages”) and the employer’s liability for damages for the failure or refusal to pay the wages anticipated to be paid over the balance of the term of the breached employment contract. At common law, where, as here, the contract is entire, i.e., indivisible, and the employment has been terminated, back wages may be recovered either by claiming the value of the work performed (quantum meruit), or by including the back wages as part of a claim for ³⁵⁹ breach of the express contract.

Hippodrome Co. of Baltimore v. Lewis, 130 Md. 154, 157 , 100 A. 78, 79 (1917); Olmstead v. Bach, 78 Md. 132, 145 , 27 A. 501, 503 (1893); Keedy v. Long, 71 Md. 385, 390 , 18 A. 704, 705 (1889). The Act in § 3-507.1 adds additional incentives to either form of common law action. In the case before us, Battaglia seeks in Count II to characterize her Count I claim for contract damages for breach of the promise to pay wages in the future as a claim for wages, as such, based on her readiness and availability to perform the services of the employment, after its termination and throughout the balance of the period agreed to for employment. Conceptualizing the effect of the breach of an employment contract in this fashion is known as “constructive service.” It is a doctrine that “has been altogether repudiated both in England and in this country” for more than a century.

Olmstead v. Bach, 78 Md. at 150 , 27 A. at 505 . Olmstead involved a contract under which the plaintiff promised to render services as a cutter in the defendant’s merchant tailoring business for one year for which the defendant promised to pay a salary of $50 per week, payable weekly. The contract “was not fifty-two separate, independent contracts, but one indivisible agreement covering the period of a year and making provision for the weekly payment of wages.” 78 Md. at 143 , 27 A. at 502 . The defendant breached the contract by terminating the employment, but paid the plaintiff in full for the week ending April 9, during which the plaintiff was dismissed.

Prior to the action in the reported case, the plaintiff sued before a justice of the peace and obtained judgment for $50, the equivalent of the wage for the week ending April 16, which was paid. In the reported case the plaintiff again sued, seeking $250, the wages for the five weeks immediately following April 16. This Court held that the action was barred because of splitting of the cause of action on the indivisible contract. In an effort to avoid the legal conclusion that the prior suit had been one for breach of the contract of employment, the plaintiff argued that it was an action for wages.

This Court said: ³⁶⁰ “But it is insisted the pending suit is not for damages for dismissing the plaintiff, but that it is an action on the contract to recover the plaintiffs salary for the five weeks following the one for which a recovery had been had before the justice of the peace. And the right to recover this salary as salary and not as damages for a breach of the contract, is based upon the plaintiffs readiness and willingness to perform his work, and not upon his actual performance of it. In other words, he seeks to recover instalments of salary for work which he never performed, and to recover them merely because he was willing to perform it but was prevented from doing so. As thus presented, under a contract that is indivisible, and which covers a hiring for