Court of Appeals Rejects Mandatory Treble Damages Under Wage Payment and Collection Law

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Last week, in the case of Peters v. Early Healthcare Giver, Inc., the Court of Appeals had another opportunity to reflect on the Maryland Wage Payment and Collection Law (“WPCL”) and specifically discuss the application of the treble damages and attorneys’ fees provisions of the statute.  Under the WPCL, an employee has a private right of action against her employer if the employer fails to timely pay the employee’s earned wages, which includes unpaid overtime.  The WPCL has a specific provision allowing an award of up to three times the unpaid wages (i.e., treble damages), attorneys’ fees, and costs when the withholding of the wage was not the result of a “bona fide dispute.”  

The Court of Appeals addressed four issues with respect to the WPCL, all of which revolved around the existence of a bona fide dispute and the award of treble damages, that are important for employers to understand.  First, the Court noted that a trial court must determine in all WPCL cases whether a failure to pay wages was the result of a bona fide dispute.  Although the employee bears the overall burden to prove her claim under the WPCL, once a violation has been proven, the burden of proof as to whether the employer’s violation was the result of a bona fide dispute shifts to the employer.  The basis for this burden shifting approach is rational – the employer is in a better position to establish and demonstrate its rationale for denying the wage payment.  Because the burden to prove a bona fide dispute falls to the employer, it is important for employers to understand exactly what is meant by the phrase “bona fide dispute.”   A bona fide dispute exists when there is “a legitimate dispute over the validity of the claim or the amount that is owing where the employer has a good faith basis for refusing an employee’s claim for unpaid wages [and] the inquiry into whether an employer’s withholding of wages was the result of a bona fide dispute is one concerned with the employer’s actual, subjective belief that the party’s position is objectively and reasonably justified.”  Explanations by an employer that it thought it had already paid the wage, that it was an oversight, or that the employer was ignorant of the law will not satisfy the requirements of establishing a bona fide dispute.  It is also important for employers to understand that a bona fide dispute cannot be developed after the fact.  The test is what the employer’s basis was at the time of the violation, not after a claim is brought and an attorney is retained to develop arguments on the client’s behalf. 

As to the payment of treble damages and attorneys’ fees, the Court rejected the argument that they were mandated in all cases where it was determined that no bona fide dispute existed. It ruled that requiring an award of treble damages would nullify the statute’s plain language, which specifically states that a court “may” award the enhanced damages.  The Court did, however, offer guidance that a trial court should consider the remedial nature of the WPCL when considering an award of treble damages and that the statute should be liberally construed to favor an attorneys’ fees award to encourage attorneys to take valid WPCL claims.  Finally, the Court rejected the employee’s argument that the WPCL permits an award of unpaid wages in addition to treble damages, and it declined to overturn an earlier Maryland case holding that under the plain language of the statute, the maximum recovery is a total of three times the unpaid wages.

Although the Court’s decision did not greatly change the preexisting general interpretations of the WPCL, it formally clarified some guiding principles that employers should understand.  Specifically, an employer should have a working knowledge of state and federal wage payment laws, because a bona fide dispute will only exist if the employer can state a credible factual and/or legal position.  This is one of the many reasons that employers should discuss their wage payment policies and other employment practices with an attorney prior to a problem developing, not after.  An attorney can assist the employer in developing policies that comply with current laws and, even if the policy is ultimately determined to be in violation, the reasoning behind it may be sufficient to permit a finding that the violation was in good faith and save the employer from having to pay treble damages and attorneys’ fees.  An employer should expect that if it cannot identify a bona fide dispute that a trial court will likely award the Plaintiff attorneys’ fees, at minimum, and depending upon the severity of the violation, potential enhanced damages.

Topics:  Appeals, Attorney's Fees, Employer Liability Issues, Treble Damages, Unpaid Overtime, Unpaid Wages, Wage and Hour, Wage Payment and Collection Act, Wages

Published In: Civil Procedure Updates, Civil Remedies Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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