Boudreaux v. Hamilton Medical Group, Inc.

• Decision Date: 17 October 1994
• Citation: 644 So.2d 619
• Parties: 94-0879 La
• Court: Louisiana Supreme Court

Page 619

644 So.2d 619

94-0879 La. 10/17/94

Dr. James L. BOUDREAUX v. HAMILTON MEDICAL GROUP, INC.

No. 94-C-0879.

Supreme Court of Louisiana.

Oct. 17, 1994.

Rehearing Denied Nov. 17, 1994. ^*

Donlon Pugh, Charles J. Boudreaux, Jr., Pugh, Boudreaux & Shelton, Lafayette, for applicant.

Steven G. Durio, Timothy A. Maragos, Durio, McGoffin & Stagg, Lafayette, for respondent.

[94-0879 La. 1] MARCUS, Justice. ^**

Dr. James L. Boudreaux entered into an employment contract with the Hamilton Medical Group, Inc. (Hamilton), a professional corporation, on May 12, 1980, to practice medicine on behalf of the corporation. ¹ Section Four of the contract provided for Dr. Boudreaux's compensation:

COMPENSATION. For all services rendered by the Employee under this agreement, the Corporation shall pay the Employee such monthly salary as the Board of Directors may, from time to time, determine and/or evidence in the minutes of its meetings.

Section Twelve provided that the contract could be terminated by either party upon six months written notice. Unless so terminated the contract would be renewed automatically, on a year to year basis, on the conditions set forth therein.

Section Thirteen provided for compensation on termination of the contract by either party:

COMPENSATION ON TERMINATION. In the event that this contract is involuntarily or voluntarily terminated under the provisions of paragraph 11 or paragraph 12, the Employee shall receive, as additional compensation, a sum of [94-0879 La. 2] money equal to three times each Employee's average monthly income. Average monthly income shall be the monthly average calculated from the twelve month period of the taxable year which precedes the taxable year in which the Employee's employment is terminated.

This provision for compensation upon termination was found only in employment contracts of shareholder/physicians with Hamilton. Dr. Boudreaux was such a shareholder/physician of the corporation. Dr. Boudreaux was also on the Board of Directors of Hamilton.

By letter dated January 9, 1992, Dr. Boudreaux gave six months written notice of his intent to terminate his employment with Hamilton effective July 9, 1992. He was paid all sums due under Section Four of the contract. On July 9, 1992, Dr. Boudreaux made written demand upon Hamilton for the compensation provided under Section Thirteen of the contract. When Hamilton refused to pay, Dr. Boudreaux filed this suit on July 23, 1992, for the compensation under Section Thirteen of the contract, as well as penalties and attorney fees pursuant to La.R.S. 23:631 and 632 for failure to timely compensate an employee upon discharge or resignation for the amount then due. Hamilton claimed defenses to the payment of the compensation and further argued that La.R.S. 23:631 and 632 did not apply to the payment under Section Thirteen of the employment contract. The parties stipulated that if the additional compensation under Section Thirteen was owed by Hamilton to Dr. Boudreaux, that amount would be $34,812.

After hearings on the matter the trial judge found that the compensation under Section Thirteen of the employment contract was owed and that the payment constituted a "wage" under La.R.S. 23:631 and 632. ² The trial judge awarded $34,812 representing compensation due under the employment agreement and awarded an [94-0879 La. 3] additional sum of $34,812 representing a penalty of ninety days wages together with attorney fees in the amount of $5,388.51 pursuant to La.R.S. 23:632. Hamilton appealed. The court of appeal affirmed, finding Hamilton liable to Dr. Boudreaux for $34,812 under Section Thirteen of the contract. It also affirmed the trial judge's finding that penalties and attorney fees were owed under La.R.S. 23:632 but vacated the penalty award of $34,812 and remanded the matter to the trial court to take evidence on the amount of penalty wages due. ³ On application by Hamilton, we granted certiorari to review the correctness of that decision. ⁴

The issue presented for our review is whether La.R.S. 23:631 and 632 providing for assessment of penalties and attorney fees for failure to timely pay an employee upon termination of employment apply to the payment of "Compensation on Termination" set forth in Section Thirteen of the employment contract between Dr. Boudreaux and Hamilton.

La.R.S. 23:631 and 632 provide in pertinent part:

§ 631. Discharge or resignation of employees; payment within three days after termination of employment

A. Upon the discharge or resignation of any laborer or other employee of any kind whatever, it shall be the duty of the person employing such laborer or other employee to pay the amount then due under the terms of employment, whether the employment is by the hour, day, week, or month, not later than three days following the date of discharge or resignation.

B. In the event of a dispute as to the amount due under this Section, the employer shall pay the undisputed portion of the amount due as provided for in Subsection A of this Section. The employee shall have the right to file an action to enforce such a wage claim and proceed pursuant to Code of Civil Procedure Article 2592.

§ 632. Liability of employer for failure to pay; attorney fees

Any employer who fails or refuses to comply with the provisions of R.S. 23:631 shall be liable to the employee either for ninety days wages at the employee's daily rate of pay, or else for full wages from the time the [94-0879 La. 4] employee's demand for payment is made until the employer shall pay or tender the amount of unpaid wages due to such employee, whichever is the lesser amount of penalty wages. Reasonable attorney fees shall be allowed the laborer or employee by the court which shall be taxed as costs to be paid by the employer, in the event a well-founded suit for any unpaid wages whatsoever be filed by the laborer or employee after three days shall have elapsed from time of making the first demand following discharge or resignation. [Emphasis supplied]

These statutes, being penal in nature, must be strictly construed and their provisions yield to equitable defenses. Mitchell v. First National Life Insurance Co. of La., 236 La. 696, 109 So.2d 61, 63 (1959); Clevy v. O'Meara, 236 La. 640, 108 So.2d 538, 539 (1959). The statutes refer to "wages" and subject the employer to the payment of penalties and attorney fees if the wages are not paid timely. In Mason v. Norton, 360 So.2d 178, 180 (La.1978), we stated that these statutes are designed to compel prompt payment of wages upon an employee's discharge or resignation. The term "wages" is defined as money that is paid or received for work or services, as by the hour, day or week. Webster's New Universal Unabridged Dictionary 1604 (1992). In La.R.S. 23:631, the "amount due under the terms of employment" is modified by the phrase "whether the employment is by the hour, day, week, or month, ..." We have held that this phrase in La.R.S. 23:631 "whether the employment is by the hour, day, week, or month" refers to the pay period for the compensation. Mason v. Norton, 360 So.2d at 180. In Stell v. Caylor, 223 So.2d 423, 426 (La.App. 3d Cir.), writ refused, 254 La. 778, 226 So.2d 770 (1969), the court stated:

[T]he inclusion in the statute of the words "whether the employment is by the day, week or month" seems clearly to signify that only amounts due as wages are contemplated. Otherwise these words would be superfluous. If the statute is intended to cover all amounts due by the employer to the employee, regardless of whether they are wages, there is no need for the statute to specify the pay periods of wages.

Since the phrase in La.R.S. 23:631 "any amount then due under the terms of employment" is modified by the phrase "whether the employment is by the hour, day, week, or month" (pay period), it is [94-0879 La. 5] obvious that "the amount then due under the terms of employment" set forth in La.R.S. 23:631 refers to wages which are earned during a pay period. In other words, "terms of employment" refers to a particular pay period. Therefore, only compensation that is earned during a pay period will be considered wages under the statutes. This interpretation is consistent with the references to "wages" throughout the statutes.

Now, applying the above principles to the employment agreement between Dr. Boudreaux and Hamilton, we find, for the reasons set forth below, that the "compensation on termination" described in Secti...