Another Maryland court has ruled that severance pay required by an employment contract can be considered owed “wages” under the Maryland Wage Payment & Collection Law and just not an item that has to be provided by contract terms. This is important because if the severance pay is considered an owing wage, the employee can require up to three times the amount of wages. If just a contract item, the employee cannot recover three times the amount owed and cannot get attorney fees paid by the employer if the employee wins in court.
In Playmark Inc. v. Perrett, the Maryland Court of Special Appeals ruled that the severance pay required to be paid out was an owing wage and just not a contract item. In pertinent part, the Court stated:
"[T]he scope of [the Wage Act] extends to the type of severance pay that represents deferred compensation for work performed during the employment. Thus, a severance benefit that is based on the length [or] nature of the employee’s service, and promised upon termination, may be recoverable under the [Wage Act]."
The Court rejected the employer’s argument that the severance pay was not an owing wage because it was not paid for work done. The employer claimed that the severance pay was a result of a noncompete provision being in the contract. The Court disagreed, stating “the mere inclusion of a covenant not to compete does not automatically remove post-employment payments from the realm of “wages” and the scope of the Wage Act if those benefits are (1) promised in exchange for employment, and (2) not expressly conditioned on continuing compliance with the covenant not to compete post-employment. The Court noted that noting in the contract conditioned severance pay on the employee’s compliance with the noncompete contact.
If you need assistance with possible severance pay, contact the attorneys at Lebau & Neuworth at 1.888.456.2529 or lebauneuworth.com/contact-us.