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Multi-State Employers Face Potential Wage and Hour Claim Complications in the Washington DC Region

Published by on July 24, 2015

In a significant decision earlier this year, the Court of Appeals of Maryland found that employees performing work in Maryland on behalf of their Virginia employer may pursue claims for unpaid wages under the Maryland Wage Payment Collection Law (“MWPCL”) in certain circumstances. In Cunningham v. Feinberg, plaintiff Matthew Feinberg entered into an employment agreement […]

In a significant decision earlier this year, the Court of Appeals of Maryland found that employees performing work in Maryland on behalf of their Virginia employer may pursue claims for unpaid wages under the Maryland Wage Payment Collection Law (“MWPCL”) in certain circumstances.

In Cunningham v. Feinberg, plaintiff Matthew Feinberg entered into an employment agreement with Cunningham & Associates, P.A. to provide legal services to Cunningham’s clients in Virginia and Maryland. Feinberg was required to work primarily from Cunningham’s headquarters in Virginia, but his work for the firm required him to travel to Maryland from time to time.

The contract did not list a salary or pay rate, but instead stated that Feinberg would be compensated based on his production, without any formula or method of calculation included. Further, the contract did not contain any remedy for unpaid wages or a choice of law provision.

This contractual ambiguity proved to be the source of the Court of Appeals’ holding in this case. Cunningham argued that under the doctrine of lex loci contractus, the contract should be interpreted under the laws of the state where the contract was signed. Since the contract was signed in Virginia, the MWPCL was inapplicable and Virginia law should govern.

The Court of Appeals rejected this argument, holding that, because the contract was silent as to the wages owed and any remedies for failure to pay, no express terms had been breached and therefore lex loci contractus did not apply. According to the Court, the MWPCL was an independent claim, not requiring either a related breach of contract claim or an analysis of the contract providing the source of the allegedly unpaid wages.

Further, the Court noted that there was an exception to lex loci contractus preventing the application of the doctrine if doing so would violate a strong public policy.

The accurate payment of wages articulated in the MWPCL is a strong public policy in Maryland, and Feinberg had allegedly not been compensated for work performed. As a result, his MWPCL claim could proceed.

Laconic Lookout:

Beware of employment contracts lacking specific terms for compensation and choice of law. If Cunningham had listed an hourly rate, annual and monthly salary rate, or a method of calculation of wages, they may have avoided the MWPCL’s jurisdiction in this case.

Employers drafting agreements, even agreements with a results-based compensation metric, should provide clear descriptions of how wages should be calculated and what state’s laws will govern interpretation of the terms.

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