Medex v. McCabe

• Decision Date: 14 November 2002
• Docket Number: No. 2,2
• Citation: 372 Md. 28,811 A.2d 297
• Parties: MEDEX v. Timothy J. McCABE.
• Court: Maryland Court of Appeals

811 A.2d 297

372 Md. 28

MEDEX v. Timothy J. McCABE.

No. 2, Sept. Term, 2002.

Court of Appeals of Maryland.

November 14, 2002.

Jody Maier (Jeffrey Pritzker of Margolis, Pritzker & Epstein, P.A., on brief), Towson, for petitioner/cross-respondent.

Jeffrey L. Forman (Bruce E. Kauffman of Kauffman and Forman, P.A., on brief), Towson, for respondent/cross-petitioner.

Argued before BELL, C.J., ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL and BATTAGLIA, JJ. RAKER, Judge.

This appeal arises out of a suit initiated by Timothy J. McCabe, against his former employer, Medex, to recover unpaid wages under the Maryland Wage Payment Collection Law (the Act), Maryland Code (1991, 1999 Repl.Vol.) § 3-501 et seq. of the Labor and Employment Article.¹ Under McCabe's employment contract, payment of the "incentive fees" was conditioned upon the employee being employed on the date of payment. We also granted McCabe's cross-appeal, raising the question of whether he was entitled to a jury trial to determine whether Medex's withholding of his wages was in violation of the statute and, thus, entitling him to up to three times the wage, reasonable counsel fees and other costs.

We agree with the holding of the Court of Special Appeals that the incentive payments were wages earned by the employee and, thus, McCabe was entitled to recover as wages the incentive fees under the Act. We agree with McCabe, however, that he was entitled to have a jury determine whether there existed a bona fide dispute entitling him to treble damages.

I. Background

McCabe was employed as a sales representative for Medex, a medical supplies manufacturer, from November 18, 1998 through February 4, 2000. He earned a salary of $49,000.00 plus incentive fees that were paid out under a series of incentive compensation plans. McCabe received an employee manual that included the following provision with regard to the incentive plans: "Payment from all Company incentive compensation plans is conditional upon meeting targets and the participant being an employee at the end of the incentive plan (generally the fiscal year) and being employed at the time of actual payment." (Emphasis added).

For Fiscal Year 2000, Medex adopted an Account Manager Sales Incentive Plan. Consistent with the employee handbook, the terms of the plan made payment of incentive fees conditional upon continued employment at the time of payment. The Fiscal Year ended on January 31, 2000. Four days later McCabe resigned from his employment with Medex.² Payments under the incentive plan did not occur until March 31, 2000. At that time, pointing to the condition in the plan, Medex refused to pay McCabe fees under the plan.

McCabe filed suit in the District Court of Maryland, sitting in Baltimore County, demanding fees owed, determined by agreement between the parties to be $32,850.73, as well as treble damages, pre-judgment interest, costs, and attorneys' fees. Medex prayed a jury trial and the case was transferred to the Circuit Court for Baltimore County. After denial of the parties' cross-motions for summary judgment, they filed a Joint Motion to Bifurcate, requesting an initial ruling on the applicability of the Act. According to the motion, the case would proceed to trial only in the event the court found Medex in violation of the Act, and in the following jury trial, McCabe would seek additional recovery for attorneys' fees and treble damages under § 3-507.1(b) of the Act.³ The trial court found the Act inapplicable and entered judgment in favor of Medex.

McCabe noted a timely appeal to the Court of Special Appeals. The Court of Special Appeals reversed the circuit court. See McCabe v. Medex, 141 Md.App. 558, 786 A.2d 57 (2001). Designating the incentive fees "commissions," the intermediate appellate court determined that McCabe had earned them as wages under § 3-501(c) of the Act, "and the additional conditions Medex placed on its employees were, therefore, invalid in light of Maryland statutory and common law." Id. at 564-65, 786 A.2d at 61. The Court of Special Appeals went on to consider whether there existed a bona fide dispute that would preclude an award of treble damages, attorneys' fees, and costs. It found that such a bona fide dispute existed, "[n]oting the fact that this issue was hotly contested at the trial level and the considerable amount of analysis required at arriving at [its own] decision." Id. at 570, 786 A.2d at 64. The Court of Special Appeals, therefore, limited McCabe's recovery to the actual wages withheld.

We granted certiorari, Medex v. McCabe, 368 Md. 239, 792 A.2d 1177 (2002), and now consider whether incentive fees that are a part of the employee's promised compensation for work performed, but are not yet due for payment at the time of the employee's resignation, must be paid, despite an express term in the employment contract to the contrary. We hold that they must. We also granted McCabe's cross-petition to address the finding by the Court of Special Appeals of a bona fide dispute. Determination of the existence of a bona fide dispute between McCabe and Medex is an issue to be determined by a jury.

II. Incentive Fees as "Wages" Under § 3-501(c)

Determination that the incentive fees at issue in this case are governed by the terms of the Act requires a preliminary finding that the incentive payments constitute "wages" under § 3-501(c). The statutory definition of wage is very broad:

"(1) `Wage' means all compensation that is due to an employee for employment.

(2) `Wage' includes:

(i) a bonus;

(ii) a commission;

(iii) a fringe benefit; or

(iv) any other remuneration promised for service."

§ 3-501(c). Commissions are clearly within the scope of the Act, and a cause may arise under the Act for an employer's failure to pay commissions earned during employment yet not payable until after resignation. See Admiral Mortgage, Inc. v. Cooper, 357 Md. 533, 540, 745 A.2d 1026, 1029 (2000); Magee v. DanSources Technical Serv., Inc., 137 Md.App. 527, 574, 769 A.2d 231, 258-59 (2001). In Admiral Mortgage, we stated:

"Under that law, the term `wage' includes a commission. § 3-501(c)(2). Section 3-505, dealing with the payment of wages on termination of employment, requires an employer to pay 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. Under that statute, if [the employee] was due a commission on the closing of a loan generated or developed by him, the commission should have been paid, at the latest, when the loan was closed. Section 3-507.1 gives an employee a civil cause of action to recover wages withheld in violation of § 3-505."

357 Md. at 540-41, 745 A.2d at 1029-30 (footnote omitted).

Medex argues that the "incentive fees" were not simply commissions, but more akin to a bonus for continued employment. Even were this so, and evidence produced in the record seemed to belie this contention, § 3-501(c)(2) expressly includes "bonus" as an example of compensation that may fall within the ambit of the Act. This is in contrast to other jurisdictions where bonuses are separated from wages into a category of fringe benefits. See e.g. Mich. Comp. Laws Ann. § 408.471 (2002) (listing "commission" within the definition of "wages," and "bonus" within the definition of "fringe benefits"). In Maryland, not all bonuses constitute wages. See Whiting-Turner v. Fitzpatrick, 366 Md. 295, 783 A.2d 667 (2001). We have held that it is the exchange of remuneration for the employee's work that is crucial to the determination that compensation constitutes a wage. Id. at 303, 783 A.2d at 671. Where the payments are dependent upon conditions other than the employee's efforts, they lie outside of the definition. Id., 783 A.2d at 671-72.

In Whiting-Turner, the employee argued that he was entitled to a bonus share of the employer's profits. The employee was hired with a salary and an opportunity to join in profit sharing after two years of service. The employer offered to begin the profit sharing early, but the employee resigned prior to payment. As the Court found, the money sought was not compensation for the employee's services, but merely a gratuity, revocable at any time before delivery. Id. at 306, 783 A.2d at 673. The accelerated bonus had not been "promised for service" and hence could not be wages. Id. at 305, 783 A.2d at 672.

Such a situation stands in marked contrast to the case sub judice. In this case, the incentive fees were related directly to sales made by the employees during a defined fiscal year. McCabe had performed all the work necessary to earn the fees, and Medex had registered the sales. In the terminology of the incentive plan itself, some of the incentive fees "begin to earn" at meeting 80% of a target goal, while another "[i]ncentive begins" upon the sale of certain goods. The work of the employee may have preceded the payment date of the fees, but the fees were compensation for work performed, and, thus, wages under the Act.

III. "Wages Due" Under § 3-505

Having determined that the incentive fees constitute wages, we must determine whether they are owed to McCabe as "wages due." Medex urges us to accept the reasoning of the Circuit Court that found that the wages could not become due unless the employee were employed at the date of payment. The language of both the employment contract and incentive plan states that, to be eligible for the incentive fees, the employee must still be employed at the date of payment. McCabe signed off on this language. Under common law contract principles, such an employment contract provision would have been sufficient to deny the employee the incentive fees. See Maryland Credit Fin. Corp. v. Hagerty, 216 Md. 83, 89-90, 139 A.2d 230, 233 (1958) (enforcing clear language of an employment contract that an employee had to remain in the employer's service until...