Out-of-State Employers Should Heed the Maryland Wage Payment and Collection Law
A year after a Maryland Court of Appeals decision, federal courts have taken notice of the state's strong public policy of allowing workers to recover their wage claims under the Maryland Wage Payment and Collection Law (Wage Payment Act).
Employers should take notice, too -- even if they are located outside Maryland and their employment agreements are governed by the laws of that state -- because their employees can now seek redress for payment of all wages owed under the Wage Payment Act for work performed in Maryland.
This is important because the Wage Payment Act provides a broad definition of what wages are, including bonuses, commissions, fringe benefits, overtime wages, and any other compensation promised. Also, employers with employees performing work in Maryland can be answerable for those unpaid wages, in addition to the Wage Payment Act’s strong penalties, which include triple damages, attorney’s fees, and costs of litigation.
A Landmark Decision
In Cunningham v. Feinberg, 441 Md. 310 (2015), the Maryland Court of Appeals held that an attorney doing work in Maryland could bring a claim under the Wage Payment Act for unpaid wages against the Virginia-based law firm where he worked despite the fact that his employment contract had been entered into in Virginia.
The court found that because there was no choice-of-law provision in the employment contract, and the case involved no dispute over the validity, enforceability, construction, or interpretation of the contract, the law of the jurisdiction in which the contract was made, did not apply. Consequently, the employee could sue under the Wage Payment Act.
The appeals court’s analysis did not end with merely resolving the case in favor of the employee. The court went on to state its opinion that the Wage Payment Act represents strong Maryland public policy.
Cunningham was remarkable, not for its holding or facts, but for the court’s “nifty bit of considered dicta” -- that Maryland has a “strong public policy” to apply the Wage Payment Act to work performed in the state for an out of state employer. The court used the opinion to signal to federal courts, which had previously held on several occasions, that the Wage Payment Act did not represent a strong enough public policy to render a choice of law provision invalid, the need to expand the application of the Wage Payment Act. This interpretation expressly rejected the Fourth Circuit’s holding in Kunda v. C.R. Bard, Inc., 671 F.3d 464 (4th Cir. 2011), that the Wage Payment Act is not a fundamental Maryland public policy for choice-of-law analysis.
Federal courts have taken notice, and are now following the opinions expressed in Cunningham.
For instance, the United States District Court for the District of Maryland, in Hausfeld v. Love Funding Corp., 131 F. Supp. 3d 443 (D. Md. 2015), held that Cunningham “unmistakably expressed the view of Maryland’s highest court that the Wage Payment Act represents the strong public policy of Maryland.” The Hausfeld court examined an employee’s Wage Payment Act claim against his Virginia employer, based on an employment agreement entered into in Washington, DC. The court found that because of Maryland’s strong public policy, Maryland’s usual rule that the law of the state where the parties entered into the contract governed disputes about the contract and therefore the Wage Payment Act did apply. As recently as this spring, in Sigala v. ABR of VA, Inc., No. GJH-15-1779 (D. Md. Apr. 21, 2016), another federal court came to a similar conclusion and found the Wage Payment Act applied for work done in Maryland for a Virginia company under an employment agreement entered into in Virginia.
Federal courts are responding quickly to Cunningham’s declaration that the Wage Payment Act represents strong Maryland public policy. Out of state employers must understand that the Wage Payment Act will apply if their employees perform work in Maryland.
Josh Schmand is a litigation attorney at Lerch, Early & Brewer in Bethesda, Maryland who works on complex business, corporate, and commercial disputes, as well as criminal matters, advising clients on the risks and benefits of litigation, preparing for trial when needed, and serving as a determined advocate. For more information about t Maryland Wage Payment and Collection Law contact Josh (301) 347-1273 or firstname.lastname@example.org.