Lee v. Fresenius Medical Care, Inc., A05-1887.

• Citation: 741 N.W.2d 117
• Decision Date: 15 November 2007
• Docket Number: No. A05-1887.,A05-1887.
• Parties: Susan LEE, Respondent, v. FRESENIUS MEDICAL CARE, INC., Appellant.
• Court: Minnesota Supreme Court

741 N.W.2d 117

Susan LEE, Respondent, v. FRESENIUS MEDICAL CARE, INC., Appellant.

No. A05-1887.

Supreme Court of Minnesota.

November 15, 2007.

Sandro Garofalo, Marko J. Mrkonich, Littler Mendelson, Minneapolis, MN, for Petitioner.

Don L. Bye, Shelly M. Marquardt, Duluth, MN, for Respondent.

Robert R. Reinhart, Melissa Raphan, Dorsey & Whitney, Minneapolis, MN, for Amicus Curiae Minnesota Employment Law Council.

Joseph G. Schmitt, Matthew E. Johnson, Mark J. Girouard, Halleland Lewis Nilan & Johnson, Minneapolis, MN, for Amicus Curiae Minnesota Chamber of Commerce.

Heard, considered, and decided by the court en banc.

OPINION

ANDERSON, Paul H., Justice.

In August 2004, Susan Lee filed a claim in Saint Louis County Conciliation Court, alleging that her former employer, Fresenius Medical Care, Inc., failed to compensate her for paid time off that she had earned and was entitled to receive upon Fresenius's termination of her employment. The conciliation court ordered Fresenius to pay Lee for the paid time off plus fees and then granted Fresenius's motion for appeal and removal to district court. The district court granted summary judgment in favor of Fresenius. Lee then appealed to the Minnesota Court of Appeals, which reversed the district court, concluding that under Minn.Stat. § 181.13(a) (2006), Fresenius was obligated to compensate Lee for the paid time off she had earned up to the time her employment was terminated. We reverse.

In December 1991, respondent Susan Lee began working as a dialysis patient care technician for Miller-Dwan Hospital's dialysis unit in Duluth, Minnesota, and she continued in that position when appellant Fresenius Medical Care, Inc., purchased Miller-Dwan's dialysis unit in September 2000. Fresenius operates a dialysis clinic, which treats patients with injured or diseased kidneys. Dialysis is a means by which a patient's blood is filtered through a machine to remove water and waste, a process that aids the kidneys in performing their normal function. As a patient care technician for Fresenius, Lee's responsibilities included assisting registered nurses with pre- and post-dialysis patient assessments and monitoring and documenting dialysis treatment parameters.

Around the time Lee's employment with Fresenius began, Fresenius issued a copy of its employee handbook to Lee, and she signed an acknowledgement form that she received the handbook. The employee handbook issued to Lee offered vacation pay, or paid time off,¹ on the following terms:

The Paid Time Off (PTO) program allows you [employee] to receive paid time off based on individual preferences and varying needs. * * * You accrue PTO hours at a set rate per pay period. Your accrual depends on your length of service and number of hours worked. * * *

New full-time employees begin to earn PTO upon hire at a rate of 7.69 hours per pay period (200 hours, or 5 weeks per year). PTO accrual is pro-rated for part-time employees. * * *

* * * *

PTO may be requested and scheduled at any time during the year. Approval of requests will be based on the timeliness of your request, authorization by the appropriate supervisor, and the needs of the department.

Lee was paid every two weeks, and based on her number of years worked and the 30 hours worked per week, she accrued 8.08 hours of paid time off per pay period at the time her employment with Fresenius was terminated.

The employee handbook provides that an employee who resigns will be paid for earned but unused paid time off if she gives proper notice, but the handbook specifies that an employee who resigns without giving proper notice or who is terminated for misconduct will not be eligible for payment of earned but unused paid time off:

An employee who gives proper notice * * * is eligible to be paid for earned but unused Paid Time Off (PTO). Unless otherwise required by state law, if you do not give acceptable notice, you may not be paid for earned but unused PTO, and you may not be considered eligible for re-employment. In addition, if your employment is terminated for misconduct, you will not be eligible for pay in lieu of notice or payment of earned but unused PTO unless required by state law.

(Emphasis added.)

On August 13, 2002, Fresenius terminated Lee for what was described as a "pattern of behavior," which resulted in "performance and patient safety issues." Fresenius cited six incidents, occurring between June 6, 2002, and August 8, 2002, that led to its decision to terminate Lee. Fresenius provided documentation for the six incidents.

The first incident report cited Lee for her failure to immediately report a broken valve in the "water room," necessitating an "emergency type procedure" whereby patients were temporarily removed from their dialysis machines. When Lee's supervisor confronted Lee about the incident, Lee reportedly stated that "she didn't want to get yelled at if she told." The second incident report cited Lee for her failure to immediately take a patient off a dialysis machine after the patient reported cramping. Lee reportedly failed to inform the on duty registered nurse about the patient's cramping.

The third incident report cited Lee for her failure to take proper precautions to protect patients from colds when she coughed in the vicinity of patients without wearing a mask or using a tissue. The report indicates that Lee wore a mask while engaging in direct patient care but failed to do so at other times, although according to the report, Lee alleged that she covered her mouth with her hand. After being warned that she was to either cover her mouth with a mask or tissue, Lee was reportedly seen coughing later that same day without covering her mouth.

The final three reported incidents all occurred on the same day. First, Lee reportedly failed to wear proper protective attire, consisting of an apron and face mask, when putting a client onto a dialysis machine. Lee allegedly claimed that the protective attire was too hot. Second, Lee was cited for unnecessarily requesting assistance from her supervisor due to concerns with a patient. Lee's supervisor apparently concluded that the situation had not been urgent. The final incident report cited Lee for offering a patient a bag of wild mushrooms, which her supervisor determined might be unsafe for the patient.

Lee states in an affidavit that before she received the six discipline citations in the summer of 2002, she had "earn[ed] the highest of ratings and compliments for her work." She further states that things changed in 2002 because she "became interested and involved in unionizing her work group." Lee now alleges that after beginning her union activities, management began to harass her and charge her with the disciplinary citations, which ultimately led to her termination.² Lee states that after her termination, she was compensated for her accumulated hourly wages but not her accumulated paid time off.

In August 2004, approximately two years after her termination, Lee filed a claim in Saint Louis County Conciliation Court, seeking to recover pay in lieu of vacation time, or paid time off, that she had earned but had not used before her termination. Lee alleged that she had accrued 181.86 hours of paid time off, worth $3,011.60. The conciliation court ordered judgment in favor of Lee, awarding her $5,053.80, which included the paid time off compensation demanded by Lee and a statutory penalty imposed for Fresnius's failure to pay within 24 hours of Lee's demand. Fresenius appealed the conciliation court's order, and the conciliation court granted Fresenius's motion for appeal and removal to Saint Louis County District Court.

Fresenius and Lee filed cross-motions for summary judgment, and the district court granted Fresenius's motion and denied Lee's motion. The court noted that under Minn.Stat. § 181.13 (2006), an employer is obligated to compensate an employee for vacation pay if the employee meets the eligibility requirements. The court concluded that eligibility requirements are determined by the employment contract between the employer and the employee. The court found that the employee handbook provision that made terminated employees ineligible for earned but unused paid time off met the criteria necessary to constitute a binding employment contract. Therefore, the court granted Fresenius's motion for summary judgment, concluding that Fresenius was not contractually obligated to compensate Lee for the paid time off after she was terminated for misconduct.

Lee appealed the district court's order to the court of appeals, which reversed the district court. Lee v. Fresenius Med. Care, Inc., 719 N.W.2d 222, 223 (Minn. App.2006). The court of appeals noted that under section 181.13(a), an employer must compensate a terminated employee for wages earned but unpaid at the time of discharge, and Minnesota case law has determined that unused vacation pay constitutes "wages" for purposes of the statute. 719 N.W.2d at 224. The court of appeals agreed with the district court that "an employer's liability for an employee's vacation pay is wholly contractual," but the court of appeals stated that the district court "fail[ed] to recognize the principle that `[a] party cannot provide by contract what is prohibited by statute.'" Id. at 225 (quoting Winnetka Partners Ltd. P'ship v. County of Hennepin, 538 N.W.2d 912, 914 (Minn.1995)).

The court of appeals concluded that section 181.13(a) requires an employer to compensate an employee for accrued but unused vacation time, and therefore the provision in Lee's contract that made employees terminated for misconduct ineligible for paid time off is legally ineffective. 719 N.W.2d at 226. The court of appeals then reversed the district court's order, concluding that the terminated-for-misconduct provision in the handbook cannot be legally enforced. Id. We granted Fresenius's petition for review.

I.

Lee asks us to interpret her employment agreement with...