Employment Law Daily Fired salesman will proceed with claim against company and PEO for unpaid accrued vacation
Monday, May 9, 2016

Fired salesman will proceed with claim against company and PEO for unpaid accrued vacation

By Brandi O. Brown, J.D. A former sales director who filed suit under state law for vacation time he had accrued before his discharge raised a material issue of fact as to whether he was owed that accrued pay, a federal district court in Pennsylvania ruled. The employee handbook failed to define termination “for cause” and was also ambiguous with respect to which instances warranted accrued vacation pay and which did not. The court rejected an argument by a second defendant, a professional employer organization, that it was not an “employer” (Mikhail v. Aeroseal, LLC, May 4, 2016, Beetlestone, W.). Pursuant to Pennsylvania’s Wage Payment and Collection Law (WPCL) employees have a remedy when their employers fail to pay them in a timely manner for their earned compensation. In this case, the plaintiff, who was fired by the employer allegedly for performance issues, asserted that he was owed payment for unpaid commissions and accrued vacation time. The employer argued that the employee was not owed any money. Handbook is unclear. The court concluded that the employee raised a material issue of fact with respect to whether he was owed the accrued vacation pay. According to the employee handbook, which had been incorporated into the offer letter given to the employee, if the plaintiff was terminated “for cause” he could lose remaining unused paid time off. However, no definition of “for cause” was given and, in its absence, the court found itself unable to determine what it meant. The court also noted that it was “unable to divine” those instances in which an employee fired for cause is entitled to that accrued pay, because the policy stated that such an employee “may” lose that time. Was his performance actually poor? In this case, although it was clear that the reason given for the employee’s discharge was his poor performance, the court concluded that there was disagreement between the parties over whether his performance was actually poor. The employer pointed to the year-end review, but that document was internally inconsistent. Although it contained statements about the employee’s sales falling short, there were also many positive statements about his work and he was deemed an “asset” to his team. The employee received a two-percent raise following the review. Correspondence following that review did not provide a clearer answer. A reasonable factfinder could conclude that it was not the employee’s performance that led to his discharge. Although the court denied the employer’s motion with respect to the employee’s breach of contract claim because of the existence of a genuine issue of material fact, it granted the motion with respect to his fraud/misrepresentation claim. The employee failed to point to evidence from which a reasonable factfinder could find that a material misrepresentation had been made. The court also granted the employer’s motion for summary judgment on its counterclaim for conversion—the employee did not oppose the argument and agreed to turn over his laptop. Was PEO an "employer?" With respect to the second defendant, a professional employer organization (PEO) that handled administrative functions for the employer, the court rejected its summary judgment argument that it was not also the employee’s “employer” under the state law. The WPCL includes in its definition of “employer” any “agent or officer” of employing organizations. The employee argued that the PEO was such an “agent.” Under the WCPL, he argued, an agent is liable for an employer’s failure to pay so long as it exercises a policy-making function for the company and actively participates in decisions about pay. Although the PEO argued that the court should adopt a holding that such an agent must have also participated in the specific decision to withhold wages, the court explained that it did not need to reach that issue. The record showed that the employer agreed to consult the PEO concerning terminations and, therefore, a factfinder could conclude that it was involved in the termination decision and the decision to deny the employee accrued pay. The Client Service Agreement in place between the two defendants contained numerous provisions that would allow a conclusion that the PEO had a policy-making function with respect to terminations and wages due, the court added, and therefore a dispute of material fact existed. One provision noted that both parties had the right to hire, discipline, and fire employees and stated that the PEO would be consulted prior to adverse employment actions. Another provision stated that the PEO would provide policies and procedures regarding human resources practices. And another provision reserved the PEO’s right to control and supervision over the employees. The court denied the employee’s motion for summary judgment on the issue of his claim for accrued vacation pay, and declined to sanction the employee for dilatory discovery practices by dismissing his claims against the PEO defendant.

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