Wage Payments in Maryland
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Wages in Maryland are governed by a number of federal and state statutes. In this brief note we focus on two such laws: the Federal Fair Labor Standards Act and the Maryland Wage Payment and Collection Act. Each of these laws provides employees with strong and effective protections to securing wages, and every employer should be familiar with each’s requirements, because the consequences of violation, including damage multiples and attorneys’ fees, can prove very expensive.
Maryland’s Wage Payment and Collection Law
Under Maryland’s wage payment law a "wage" includes a bonus, a commission, a fringe benefit, or any other remuneration promised in connection with an employee’s service.
Given this definition, a bonus or commission earned by an employee, even if payment is deferred to a future time, is a "wage." Consequently an unpaid bonus or unpaid commission may be sought under Marylands Wage Payment and Collection Act. However, a future payment that is expressly contingent on a future event, including the requirement that the employee remain employed up to the time when the payment is to be made, may not be "earned" until the employee remains employed through to the time when the payment is due.
The law requires employees (except for administrative, executive or professional employees) to be paid on a regular basis and no less than once every two weeks or twice every month. In general, an employer may not take a deduction from wages unless the deduction is specifically authorized in writing by the employee.
- The employer who lends an employee money must require the employee to authorize the employer to deduct the amounts owed from the employee’s paycheck if the employee fails otherwise to repay the loan.
- The employer who terminates an employee’s employment may not deduct money owed by the employee from the last paycheck unless the employee has authorized the deduction in writing.
When an employee’s employment is terminated, the employer must pay the terminated employee all wages due either before the effective date of termination or no later than the next regular pay period.
- Where a terminated employee is deeply in debt to the employer and the employer does not have written consent to deduct money from the employee’s wages and where the wages are substantial enough to make the action worthwhile, an employer who believes it will not be repaid should seek an immediate emergency declaratory order from a court finding the debt to be due and authorizing the employer to withhold the wages as partial payment of the debt.
Previously vacation pay was in a gray area where courts looked to employer policy as applied in the past. However, recent amendments to the law now require an employer to pay an employee for unused vaction pay unless the employee has been informed in an acknowledged writing that vacation pay will not be paid upon termination. This brings the vacation pay rule in line with the rule on employee debt, discussed above.
An employer that violates Maryland’s wage payment law is liable in a civil action brought by the employee (including administrative, executive or professional employees) for up to three times the unpaid wages plus attorneys fees.There is a recent federal case interpreting Maryland law (we think wrongly) holding that prejudgment interest may be awarded as a matter of course on top of these damage multipiers.
The employee may not need to hire a private counsel to enforce his or her rights here; the Commissioner of Labor is authorized to file suit on behalf of an employee with a wage claim dispute.However, Commission staff is thinly-spread and heavily worked; of necessity it must pick and chose its cases and may not be as aggressive as a private lawyer.
- The penalty payments and attorneys fees can substantially dwarf the wages owed and employers are urged to take care to follow this law. Under the "lodestar" approach to calculating attorneys fees, the fees alone can exceed the total award in a case. For example, an employee who is owed $2,500 can conceivably, in a proper case, receive an award of $7,500 plus attorneys fees of $10,000
In the absence of authorization to withhold a wage payment (or part thereof) the only defense available to the employer under this law is that there is a "bona fide dispute" as to whether in fact the wage payment is due. What is a bona fide dispute is a question of fact, but the dispute must relate to the amount due or to whether any amount is due, and not to whether some amount owed by the employee to the employer can be set-off against the wages due.
- Suppose an employment agreement provides that an employee is entitled to severance pay unless employment is terminated "for cause" and the employee is then terminated for cause. A jury may find that the employee was or was not terminated "for cause" under the employment agreement. If the jury finds that the employee was not terminated for cause, the jury may still further find that whether termination for cause applied was a close call, that the dispute was bona fide, and on that basis decline to award a multiple of wages or attorneys fees.
- Suppose an employee with a one-year contract is fired after three months and her last month’s wages are not paid. The jury may award treble damages and attorneys fees with respect to the last month’s unpaid wages, and may award the remaining nine months ages under a breach of contract theory, but may not award treble damages or attorneys fees under the Wage Payment and Collection Act with respect to the nine months of contract damages; the amount due here is not a "wage" for work performed. (Battaglia v. Clinical Perfusionists, Inc., 338 Md. 352, 658 A.2d 680 (1995).
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