Stevenson v. BRANCH BANKING & TR. CO.

Decision Date17 November 2004
Docket NumberNo. 0802,0802
Citation861 A.2d 735,159 Md. App. 620
PartiesJ. Diane STEVENSON v. BRANCH BANKING AND TRUST CORPORATION, t/a BB & T.
CourtCourt of Special Appeals of Maryland

Francis J. Collins (Kahn, Smith & Collins on the brief), Baltimore, for appellant.

Timothy F. McCormack (Hope D. Miller on the brief), Baltimore, for appellee.

Argued before ADKINS, KRAUSER, RAYMOND G. THIEME, JR., (Retired, Specially Assigned) JJ.

ADKINS, Judge.

Branch Banking and Trust Company (BB & T), appellee and cross-appellant, fired Senior Vice President J. Diane Stevenson, appellant and cross-appellee, because her leadership of the bank's Maryland Region did not satisfy its post-merger expectations. Stevenson sued BB & T for breach of her written employment contract and for violation of the Maryland Wage Payment and Collection Law (the Wage Payment Act). See Md.Code (1991, 1999 Repl.Vol., 2004 Cum.Supp.), § 3-501 et seq. of the Labor & Employment Article (LE). Both of Stevenson's claims arise from BB & T's contractual obligation to pay "Termination Compensation" equal to Stevenson's "annual cash compensation" before her termination. The jury's special verdict was in Stevenson's favor on both counts, but the court ordered a remittitur, reducing the award to $60,540.00.

Stevenson asks us to reverse the judgment, arguing inter alia that it was too small because, in calculating the amount of severance that the bank owed under the terms of her employment contract, the court erroneously prevented the jury from considering earnings from the exercise of bank stock options that generated a significant portion of her compensation package. BB & T cross-appeals, arguing inter alia that the Wage Payment Act does not extend to an employer's failure to pay severance. On a question of first impression regarding whether the Wage Payment Act affords relief to employees claiming severance pay, we conclude that non-payment of severance pay representing deferred compensation for services performed during the employment may be grounds for relief under the Act. In this instance, however, the Termination Compensation owed to Stevenson was not the type of "wages for work performed before termination" that gives rise to a Wage Payment Act claim. We shall vacate the judgment for that reason, and because the trial court should have let the jury decide whether Stevenson's severance benefit included her stock option earnings and should not have awarded Stevenson four times her unpaid wages.

FACTS AND LEGAL PROCEEDINGS

BB & T merged with Maryland Federal Bancorp, Inc. in 1998. At the time, Stevenson was a Senior Vice President of branch operations with Maryland Federal. BB & T offered Stevenson a position as Senior Vice President of the Maryland Region, with a three year written employment agreement beginning September 20, 1998.

Section 4 of the proposed agreement contained a non-compete clause. "[I]n consideration of the mutual covenants" in the employment agreement, Stevenson was asked to promise that, "upon termination of [her] employment," she would not "directly or indirectly, either as a principal, agent, employee, employer, stockholder, co-partner or in any other individual or representative capacity whatsoever," compete with BB & T. Specifically, Stevenson could not "engage in a Competitive [banking, financial services, insurance, mortgage, or trust] Business anywhere in the States of Maryland, Virginia, North Carolina, or South Carolina, or the District of Columbia, or any county contiguous to" those jurisdictions. She also would be barred from soliciting BB & T customers and employees.

Just as when she worked for Maryland Federal, Stevenson's compensation was to include bank stock options. These options allowed her to purchase shares of bank common stock at a below-market price, then sell that stock for a profit at a higher market price, at a time she selected.

The employment contract also provided in Section 6 for "Termination Compensation" if either BB & T or Stevenson terminated the contract before its term expired. The contract stated in pertinent part:

6c. Employer may terminate Employee's employment other than for "Just Cause," as described in Subparagraph (b) above, at any time upon written notice to Employee, which termination shall be effective immediately. In the event Employer terminates Employee pursuant to this Subparagraph (c), (1) Employee will receive the highest amount of the annual cash compensation (including cash bonuses and other cash-based benefits, including for these purposes amounts earned or payable whether or not deferred) received from Maryland Federal or Employer during any of the three calendar years immediately preceding such termination ("Termination Compensation") in each year until the end of the Term (prorated for any partial year).... In addition, Employee shall continue to participate in the same group hospitalization plan, health care plan, dental care plan, life or other insurance or death benefit plan, ... on the same terms as were in effect prior to Employee's termination, either under Employer's plans or comparable coverage, for all periods Employee receives Termination Compensation....
6e. In the event Employee elects to resign from employment under this Agreement for other than "Good Reason," death or disability following the one-year anniversary of the date of this Agreement, Employee shall be entitled to receive a lump sum amount equal to his annual Termination Compensation times the lesser of (i) the number of years until the end of the term, with partial years rounded to two decimal places, or (ii) 2.
6f. In receiving any payments pursuant to this Section 6, Employee shall not be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Employee hereunder, and such amounts shall not be reduced or terminated whether or not Employee obtains other employment. (Emphasis added.)

Before executing this agreement, Stevenson had a face-to-face conversation with Robert Halleck, Regional President of BB & T, about whether "other cash-based benefits" meant that her earnings from the exercise of stock options would be included in the calculation of Termination Compensation. In her employment with Maryland Federal, Stevenson's profits from exercising her stock options had been a significant amount of her overall earnings. In 1997, she earned $60,476.80 as a result of buying and selling Maryland Federal stock.

At trial, Stevenson testified that Halleck assured her that "other cash-based benefits" meant the cash she received as a result of exercising her stock options. Stevenson "chose to go with BB & T ... because of [her] conversations with Mr. Halleck[.]" In accepting the position at BB & T, she declined another position, as President of Enterprise Federal Bank.

Stevenson's employment with BB & T ended just over a year after it began. In the 13 months she worked for BB & T, Stevenson earned a significant portion of her income from the exercise of bank stock options. In 1998, she earned $81,380 in base salary plus twice that amount — $162,601.86 — by exercising her options on five different occasions. All five were "cashless same day exercises" in which she purchased and sold bank shares in a single trading session. These stock options were reported to the IRS as employment compensation to Stevenson. The bank direct-deposited into Stevenson's bank account the cash proceeds of her stock option earnings, in the same manner her paycheck was deposited.

On October 31, 1999, Halleck met with Stevenson and told her that he was "going to have to let [her] go" because "the powers that be were very disappointed with the Maryland region, and... they want to bring somebody in from down south, somebody that was BB & T born and bred, and they felt that they would do a better job." At trial, both Stevenson and Halleck testified that BB & T did not give her an opportunity to stay with the bank in another capacity. Although Halleck gave her the option of resigning, Stevenson rejected that offer because she was aware that she would not have health insurance or stock options for the remaining two years of her contract if she resigned, and that her Termination Compensation otherwise would last through the time she was required to comply with the non-compete clause.

In paying the Termination Compensation due under Stevenson's employment contract, however, BB & T took the position that Stevenson voluntarily resigned, rather than that she was terminated. By letter dated November 9, BB & T informed Stevenson that she was entitled to a lump sum payment of $156,250.18 under section 6(e) of the employment agreement. The letter detailed how the bank calculated the proffered payment:

There are 23 months remaining in the term of your contract as of your termination date. This equates to a multiplier of 1.92. Phil Burrows confirmed that your termination compensation was $81,380.30, which was your 1998 compensation. So, the payment is calculated as $81,380.30 x 1.92 = $156,250.18.

Thus, BB & T's payment formula excluded from Stevenson's benchmark "1998 compensation" the $162,601.86 she earned that year from the exercise of her stock options. The bank did not provide Stevenson with any information regarding health insurance.

In November 2001, Stevenson filed suit against BB & T, claiming (1) the bank underpaid her because it mischaracterized her termination as a resignation; (2) the bank failed to include the money she earned in exercising her stock options in its calculation of Termination Compensation, resulting in an underpayment of $314,844.63; and (3) the bank also failed to provide health insurance and other benefits.

A year after Stevenson filed suit, BB & T amended its interrogatory answers to acknowledge that it had underpaid Stevenson by $6,444.04. BB & T explained how it calculated the underpayment:

In determining [Stevenson's] Termination
...

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