Blood v. Columbus US, Inc.
Panel: Wright, Reed, James R. Eyler (Senior Judge, Specially Assigned), JJ. Wright, J. 181 This appeal follows denial of Brian Blood's ("Blood") Claim of Lien for Unpaid Wages in the Circuit Court for Frederick 41 County. 1 After an evidentiary hearing, the circuit court extinguished 182 Blood's Claim of Lien against Columbus US, Inc., ("Columbus"), appellee, and granted Columbus's request for an order denying the Claim of Lien. Blood now appeals to this Court, and presents the following question for our review, which we have reworded for clarity: 2 Did the circuit court err in ruling that Blood's contractual remuneration compensation did not qualify as "wages" under the Maryland Wage Payment and Collection Act? For reasons to follow, we answer this question in the negative and affirm the judgment.
BACKGROUND The present case arises from a contractual dispute between Blood and his former employer, Columbus. Blood was the joint owner of an IT 3 business, in which Columbus purchased an interest during the late 1990's and which Columbus purchased in full, in 2004. On January 4, 2004, Blood entered into a Vice President Contract ("VP Contract") with Columbus. At issue in this dispute is Blood's and Columbus's interpretation of Section 10 of the VP Contract, which describes the Non-Competition Clause.
Section 10 states in relevant part: 10.4 In exchange for clause 10.1 excluding 10.1a limitation [ 4 ] (ref. Appendix 2), the Company shall pay remunerations equal to 100% of the VP's fixed salary, as stated in Appendix 183 2, upon the Company's termination of the [VP's] Contract. The remuneration shall be paid in equal monthly installments over the period in which the non-competition clause applies. 10.4a In exchange for clause 10.1 incl. 10.1a (ref. Appendix 2), the Company shall pay remunerations equal to 50% of the VP's fixed salary, as stated in Appendix 2, upon the Company's termination of the [VP's] Contract.
The remuneration shall be paid in equal monthly installments over the period in which the non-competition clause applies. 10.5 Where the VP violates [the non-compete] the VP shall be obliged to pay liquidated damages equal to six monthly fixed salary installments. When this clause is violated, one infringement is equal to each calendar month or part thereof in which violation takes place. Where the Company of Columbus's loss exceeds the liquidated damages, the VP shall be held liable for damages. 10.8 The Company may waive its rights under this non-competition clause, and thus its obligation to pay remuneration, by written notice to the VP. The notice shall be given no more than 14 42 days after the Company has notified the VP of the termination of his employment, or has received the VP's notice of resignation.
(Emphasis added). On June 1, 2015, Blood provided Columbus with six months' notice of his resignation, and he resigned from his position on December 1, 2015. 5 At the end of that month, Blood wrote to the Managing Director of Columbus that, because "Columbus did not notify [him] within 14-days of [his] notice of resignation that [it] was waiving the non-competition clause," he was entitled to receive 100% of his fixed salary pursuant to Section 10.4 of the VP Contract. In January of 2016, counsel for Blood and Columbus exchanged letters regarding their interpretation of Section 10.4 of the VP Contract. Columbus argued that 184 Section 10.4 only applied to Columbus's termination of Blood, not Blood's voluntary termination. 6 Conversely, Blood maintained that he was entitled to the non-compete remuneration. 7 On April 19, 2016, Blood sent Columbus a Notice to Employer of Intent to Claim Lien for Unpaid Wages alleging that Columbus did not timely and regularly pay him wages due and owed under Section 10.4 of the VP Contract through April 1, 2016. 8 Blood claimed that Columbus owed him at least $53,333.32 in unpaid wages. 9 On May 16, 2016, Columbus filed a complaint for an order denying Blood's Claim of Lien for Unpaid Wages arguing that, because Blood's remuneration was conditioned on a covenant not to compete, it was not recoverable under the Wage Payment Act. 10 185 On June 20, 2016, Blood responded to Columbus's complaint, arguing that "[Section] 10.8 of the contract clearly contemplate[d] that the payments [were] payable even after [Blood's] resignation," and that the payments were akin to those at issue in Aronson & Co. v. Fetridge , 181 Md. App. 650 , 957 A.2d 125 (2008).
On or about July 1, 2016, Blood sent Columbus a second Notice to Employer of Intent to Claim 43 a Lien for Unpaid Wages that were allegedly due on May 1, 2016, and June 1, 2016. Columbus failed to file a complaint in the circuit court within the mandatory 30 days. 11 On August 15, 2016, Blood recorded the wage lien against Columbus pursuant to Md. Code (1991, 2016 Repl. Vol.), Labor and Employment Article ("L & E") § 3-1103(b)(1). After Columbus became aware of the recorded wage lien, it filed a Petition to Extinguish a Recorded Wage Lien on August 19, 2016, which was later amended to a Complaint to Extinguish Recorded Wage Lien.
The case came before the circuit court on September 2, 2016, for an evidentiary hearing on Columbus's Complaint Requesting an Order Denying Defendant's Claim for a Lien for Unpaid Wages. At the hearing, Blood's counsel maintained that because the VP Contract did not state that Blood's remunerations would cease if he violated the non-compete, it did not constitute a quid pro quo , and fell within the scope of the Wage Payment Act. Conversely, Columbus's counsel maintained that Section 10 of the VP Contract was a quid pro quo because it conditioned payment on Blood's non-competition. Thus, Columbus argued, Blood's reliance on our decision in Aronson was misplaced because in that case the employee's deferred compensation was not conditioned on a non-compete since the employer determined the compensation every year.
In making its findings, the circuit court addressed whether Blood's remuneration fell within the scope of the Wage Payment 186 Act and found it did not. 12 In reviewing whether Blood's remuneration was similar to the remuneration in Stevenson v. Branch Banking And Trust Corp. , 159 Md. App. 620 , 861 A.2d 735 (2004), or Aronson, the court determined that the language of "in exchange for" contained in the VP Contract rendered it a quid pro quo . The case was distinguishable from the compensation agreement in Aronson because "the compensation owed was for the employee's services completed prior to termination." (Emphasis added). The court also contrasted Blood's compensation from the disputed compensation in Medex v. McCabe , 372 Md. 28 , 811 A.2d 297 (2002), because Blood's remuneration was tied to his non-competition for a period of time following termination, and therefore, was not a "wage." The circuit court held that the prevailing Maryland case law dictated that Blood's remunerations were not "wages," and it denied Blood's claim for a Wage Lien and extinguished his Wage Lien. 13 Additional facts will be added as they become relevant to our analysis. STANDARD OF REVIEW Where an order appealed from "involves an interpretation and application of Maryland statutory and case law, [we] must determine whether the [circuit court's] conclusions are 'legally correct' under a de novo standard of review." Walter v. Gunter , 367 Md. 386 , 392, 788 A.2d 609 (2002).
Additionally, the interpretation of contracts is a question of law for the court. Calomiris v. Woods , 353 Md. 425 , 434, 727 A.2d 358 (1999). 44 187 Generally, on appeal of an action tried without a jury, such as here, we are bound by the circuit court's findings of fact unless they are clearly erroneous. Md. Rule 8-131(c) ; see also Cunningham v. Feinberg , 441 Md. 310 , 321-22, 107 A.3d 1194 (2015). We typically afford no deference to the circuit court's legal determinations and conclusions of law, reviewing them de novo .
See Shih Ping Li v. Tzu Lee , 437 Md. 47 , 57, 85 A.3d 144 (2014). These legal determinations and conclusions of law also apply to the interpretation of contracts. Sy-Lene of Washington, Inc. v. Starwood Urban Retail , 376 Md. 157 , 163, 829 A.2d 540 (2003). As the circuit court's determination of whether Blood's remuneration compensation was a "wage" was conditioned on the interpretation of the Wage Payment Act by Maryland's appellate courts, we review its decision de novo .
DISCUSSION I. The Applicability of the Maryland Wage Payment Act to the Non-Compete Provision The crux of Blood's argument was, and is, that his remuneration compensation under the VP Contract qualified either as a "fringe benefit" or "any other remuneration promised for service." Blood argues that his VP Contract was the same as the non-compete compensation we held were "wages" under the Wage Payment Act in Aronson. Conversely, Columbus contends that Blood's remuneration compensation is a quid pro quo , similar to the severance package at issue in Stevenson . While the Maryland Lien for Unpaid Wages Law does not define "wage," the Maryland Wage Payment and Collection Act provides further guidance. 14 The Maryland Wage Payment and Collection Act was intended "to provide a 188 vehicle for employees to collect, and an incentive for employers to pay, back wages." Medex v. McCabe , 372 Md. 28 , 39, 811 A.2d 297 (2002). The Wage Law, in L & E § 3-501(c)(1), defines the term "[w]age" to mean "all compensation that is due to an employee for employment." L & E § 3-501(c)(2) adds that a "[w]age" includes: (i) a bonus; (ii) a commission; (iii) a fringe benefit; or (iv) any other remuneration promised for service." This right to compensation vests only when an employee "ha[s] performed all the work necessary to earn the [compensation] before termination ." Medex , 372 Md. at 37 , 811 A.2d 297 ; see also Whiting-Turner v. Fitzpatrick, 366 Md. 295 , 304-05, 783 A.2d 667 (2001) (emphasis added).
The Court of Appeals has established a bright line test, stating that once a "bonus, commission or fringe benefit has been promised as part of the compensation for service, the employee would be entitled to its enforcement as wages." Whiting-Turner , 366 Md. at 305 , 783 A.2d 667 . And "it is the exchange of remuneration for the employee's work that is crucial to the determination" of whether that compensation is a "wage." Medex , 372 Md. at 36 , 811 A.2d 297 (emphasis added). Thus, if Blood's remuneration was in "exchange" for work performed before termination, or as a result of employment, it will fall under the scope of the Act. See Whiting-Turner , 366 Md. at 303 , 783 A.2d 667 ; Stevenson , 159 Md. App. at 644 , 861 A.2d 735 .
We begin our analysis of this issue by examining two cases the parties rely on to support their positions. Although the parties 45 are misguided in arguing that this case fits neatly with either Stevenson or Aronson , the interpretation of "wages" and the Wage Payment Act in both cases necessarily frames our analysis. In Stevenson , we considered whether an employee could recover wages from a Termination Compensation provision under the Wage Payment Act when an employment agreement explicitly conditioned Compensation on a non-compete covenant. Stevenson , 159 Md. App. at 645 -47 , 861 A.2d 735 .
The Employment Agreement stated, "if Employee breaches [the non-compete in] section 4(a) of this Agreement during the period [s]he is receiving Termination Compensation, Employee 189 will not be entitled to receive any further Termination Compensation [.]" Id. While we found that a severance benefit, based on the length or nature of an employee's service, and promised upon termination, might be recoverable under the Act, we concluded that Stevenson's Termination Compensation compensated her for two years that she would not be working with her employer. Id. at 644-45 , 861 A.2d 735 . Specifically, the Employment Agreement stipulated that if Stevenson competed with her employer, she would not be entitled to receive any further Termination Compensation, creating an explicit quid pro quo .
Id. at 646 , 861 A.2d 735 . In Aronson , we considered whether an employee who had involuntarily terminated could recover wages from a Terminating Employee Compensation ("TEC") under the Wage Payment Act. 181 Md. App. at 668 -72 , 957 A.2d 125 . Section 9(a) of the Employment Agreement stated, "[p]ursuant to this Agreement, whenever [Fetridge] shall be entitled to receive [TEC], he ... shall be entitled to receive payment of an amount equal to [his] Deferred Compensation Account[.]" Id. at 658, 957 A.2d 125 . Although the Agreement contained a covenant not to compete for a period of three years, we found that the remunerations were not like the quid pro quo in Stevenson .
Fetridge's employer argued that the TEC was conditioned on Fetridge's compliance with the covenant not to compete. Id. at 666 , 957 A.2d 125 . Aronson cited Stevenson , arguing that "a payment conditioned on a covenant not to compete is not recoverable under the Wage Law," even if the employee did not violate the covenant. Aronson was asserting that Fetridge's Agreement was like that in Stevenson because the TEC was "subject to a setoff right." Id.
Aronson believed that its right to setoff converted the TEC into post-termination compensation, rendering it beyond the scope of the Wage Law. Id. at 666-67 , 957 A.2d 125
This is a preview of Blood v. Columbus US, Inc.. About 50% of the opinion remains. Read the complete opinion in RecordCite.