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Aronson & Co. v. Fetridge-Wage and Hour Law Analysis

Maryland appellate court applies Maryland Wage and Hour law to corporate officer and shareholder

          

           In a case of first impression, in Aronson & Co. v. Fetridge, the Maryland Court of Special appeals, applied the Maryland Wage and Hour Law to a high level employee/owner.  “In this case we are asked to examine, for the first time, the applicability of the Maryland Wage Payment and Collection Law to a claim against his former firm by a Certified Public Accountant who had been not only an employee, but a shareholder, president, and managing officer of the firm.” Opinion p. 2

            In the prior case of Stevenson v. Branch Banking & Trust Corp., 159 Md. App. 620 (2004), termination compensation due a former employee was determined not to be a wage under the Maryland Wage and Hour Law.  In Stevenson the Court of Special Appeals determined that “the provision conditioned the employee’s termination compensation on compliance with a covenant not to compete in a manner that removed the remuneration from the scope of the Wage Law.” Opinion p. 14.  The termination compensation was a quid pro quo and not a wage.

            The Court examined its prior decision in Stevenson and compared the contract between Aronson & Co. and Fetridge.  “In the event that Fetridge violated the covenant in the three years after leaving the firm, Fetridge was required in Section 10(c) to pay to Aronson an amount equal to thirty percent of his or his new employer’s fee collections from Aronson’s former clients. Section 10(d) of the Employment Agreement then provided that Aronson “shall have the right to offset against [TEC] payments it owe[d] pursuant to Section 9(c) any amounts owed by [Fetridge] pursuant to this Section 10[,]” the covenant not to compete.”  Opinion p. 5.

            The Court drew a distinction between this contract and the prior decision in Stevenson and held that the compensation due to Fetridge was in fact a wage.  Fetridge was entitled to compensation even if he did compete.  The amount he would receive was simple subject to a set-off.  “Aronson’s “right to offset against [TEC] payments it owes” for Fetridge’s violation of the Covenant Not to Compete is of a different nature than the condition on the termination compensation in Stevenson. Fetridge’s right to receive TEC was not conditioned on his compliance with the covenant not to compete.”  Opinion p. 14.

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