Source: http://masscases.com/cases/sjc/453/453mass147.html
Timestamp: 2019-04-21 11:02:54+00:00

Document:
JOHNIE F. WEEMS, THIRD vs. CITIGROUP INC. & others [Note 1] (and a companion case [Note 2]).
Justin P. O'Brien (Michael A. Collora with him) for Johnie F. Weems, III, & others.
Preeta D. Bansal, of New York (David S. Clancy & Kara E. Fay with her) for Citigroup Inc & others.
Martha Coakley, Attorney General, & Karla E. Zarbo, Assistant Attorney General, for the Commonwealth, amicus curiae, submitted a brief.
In July, 2002, a judge in the Federal court denied the parties' cross motions for summary judgment on the count under the act. In July, 2007, a second judge certified the following question to this court: "Does the forfeiture provision of the Citigroup Capital Accumulation Plan violate [the act]?" For the reasons set forth below, we answer the question in the negative.
Background. We present the relevant facts as taken from the parties' joint statement of facts and exhibits submitted pursuant to S.J.C. Rule 1:03, § 3 (2).
versions of CAP have existed over the years, there are three basic programs, "payroll," "bonus," and "branch manager." Under each program, participants acquire "restricted" stock (stock), meaning that the sale or transfer of the stock is prohibited until after a specific vesting period.
The plaintiffs Maxwell Peckler, James P. Pinder, and Avery L. Williams were employed as "financial consultants" [Note 7] for Salomon Smith Barney Inc. (SSB) in Massachusetts. The plaintiff Gary H. Cohen was employed as an SSB branch manager. All participated in CAP and forfeited unvested restricted stock when they voluntarily terminated their employment after December 3, 1993.
The differences among the programs lay in the specific manner and terms of participation.
Bonus and branch manager programs. The bonus program applied to employees who received a base salary and annual discretionary incentive bonus. These employees became mandatory participants in CAP, receiving some of their bonus in stock. The total amount of stock awarded was based on the participant's total annual compensation (including, but not limited to, base salary and annual incentive bonus). The stock vested in three years.
The branch manager program was "similar in material respects" to the bonus program except that there were separate documents outlining the branch managers' compensation plan concerning the award of stock bonuses. In addition, branch managers could participate, under certain conditions, in the payroll program.
Payroll program. Those who elected to participate in the payroll program, such as Peckler, Pinder, and Williams, were required to sign a form authorizing the defendants to take a portion of their "cash compensation paid . . . during the specified period" and use it to purchase stock. The form allowed the participant to designate a minimum of five per cent of his or her "cash compensation" for the stock, up to a maximum of twenty-five per cent. The document was signed before the period of employment for which the stock was purchased.
The stock purchase was listed as a line item "deduction" on the employee's pay slip, alongside health and dental insurance deductions and payroll tax deductions. The defendant (here, SSB), in turn, used the money to purchase the stock every six months. The stock vested in two years. It is important to note that, if a participant left the employ of the defendant before the defendant's six-month purchase was made, the participant would receive, in cash, the amount that had been deducted for the anticipated stock purchase. Absent participation in the program, an employee would have received, in cash, the amount designated for the purchase of the stock.
citing American Mut. Liab. Ins. Co. v. Commissioner of Labor & Indus., 340 Mass. 144 , 147 (1959). To that end, G. L. c. 149, § 148, provides: "[Employers] shall pay weekly or bi-weekly each such employee the wages earned by him . . . [and] any employee leaving his employment shall be paid in full on the following regular pay day, and, in the absence of a regular pay day, on the following Saturday . . . . No person shall by a special contract with an employee or by any other means exempt himself from this section . . . ." An employer who violates the act is subject to possible civil and criminal penalties, injunctive relief, treble damages, and attorney's fees and costs. Id. at §§ 27C, 148, 150.
The act expressly states that holiday and vacation pay due under an agreement, as well as commissions that are definitely determined and due and payable to the employee, are wages within the meaning of the act, but it does not otherwise expressly define the term "wages." Id. at § 148. Our appellate courts have held that the act does not cover contributions to deferred compensation plans or severance pay. See respectively Boston Police, supra at 719-721; Prozinski v. Northeast Real Estate Servs., LLC, 59 Mass. App. Ct. 599 , 605 (2003). With respect to the payment of commissions, this court held in Wiedmann v. Bradford Group, Inc., 444 Mass. 698 , 708 (2005), that the statutory requirement that commissions be paid when they are "definitely determined" means when they become "arithmetically determinable." In Okerman v. VA Software Corp., 69 Mass. App. Ct. 771 , 776-779 (2007), the Appeals Court held that commissions earned over and above a base salary were covered by the act; the court declined to limit the reach of the act, where the only limitation contained in the act's language was that commissions be "definitely determined" and "due and payable." Contrast Commonwealth v. Savage, 31 Mass. App. Ct. 714 , 716-718 (1991) (certain real estate commissions were not covered by act, where commissions were episodic and broker functioned as independent contractor).
"None of the foregoing sections of this chapter, nor [G. L. c. 149, § 48,] shall be applicable to or control or prohibit the deduction of labor or trade union or craft dues or obligations, or making deposits in, purchasing shares of, or for the repayment of any loan from any credit union established under the laws of the commonwealth or of the United States, or deposits in any savings bank, trust company, national banking association or co-operative bank, or subscriptions to a non-profit hospital service corporation established under [G. L. c. 176A], or to a medical service corporation established under [G. L. c. 176B], or to a charitable corporation, or payments or contributions of or toward the cost of or the premiums on any insurance policy or annuity contract or purchase of government bonds, or purchase of stock pursuant to an employee stock purchase plan, from wages of an employee by an employer in accordance with a written request made by the individual employee; provided, that no such written request, whether recorded or not, except in the case of labor or trade union or craft dues, shall be regarded as an assignment valid against a trustee process.
Discussion. The plaintiffs argue that the forfeiture provision of CAP violates the act because it sometimes requires employees to forfeit a portion of their earned wages. They further argue that the agreements signed by them, enrolling them in CAP, are unenforceable under the provision of the act that prohibits "special contracts," [Note 9] and as a matter of public policy. The defendants respond, in essence, that the restricted stock acquired by an employee under the terms of CAP is "contingent compensation," and not "wages" subject to the act.
"Statutory interpretation is a question of law for the court. . . . [W]e interpret the statutory language 'according to the intent of the Legislature ascertained from all its words construed by the ordinary and approved usage of the language, considered in connection with the cause of its enactment, the mischief or imperfection to be remedied and the main object to be accomplished, to the end that the purpose of its framers may be effectuated.' " Boston Police, supra at 719-720, quoting Champagne v. Champagne, 429 Mass. 324 , 326 (1999), and cases cited.
of company stocks. [Note 13] See generally Weems v. Citigroup, Inc., supra at 786-794 (Connecticut statute authorizing deductions from employee wages covered deductions for CAP's payroll plan).
cash refund of the amount that had been designated for the (unfulfilled) purchase. It is only after the stock has actually been awarded to the employee at the various six-month intervals that the cash used for the purchase (and the stock itself) can be "forfeited."
We disagree with the Attorney General's reading of the act and G. L. c. 154, § 8, to conclude that the limited defenses under the act are applicable to the forfeiture of stock purchases. Employee stock purchase plans are explicitly excluded from the act. Defenses to the act are thus immaterial. See Massachusetts Bay Transp. Auth. v. Massachusetts Bay Transp. Auth. Retirement Bd., 397 Mass. 734 , 738 (1986) (where language of statute plain, there is no room for speculation as to its meaning). See also Ciardi v. F. Hoffmann-LaRoche, Ltd., 436 Mass. 53 , 62 (2002) (statutes addressing same subject matter should be construed as harmonious whole). Likewise, because G. L. c. 154, § 8, excludes employee stock plans from the act's purview, we cannot adopt the plaintiffs' argument that, as a matter of public policy, we should find that forfeiture is forbidden by the act.
Conclusion. For the reasons set forth above, we answer "no" to the certified question. As discussed, our conclusion that CAP's forfeiture provision in the payroll program does not violate the act is qualified by our assumptions that, as a matter of fact, the participation in the payroll program was voluntary and that the benefits conferred by CAP's programs were not illusory.
The Reporter of Decisions is to furnish attested copies of this opinion to the clerk of this court. The clerk in turn will transmit one copy, under the seal of this court, to the Clerk of the United States District Court for the District of Massachusetts as the answer to the question certified, and will also transmit a copy to each party.
[Note 1] Salomon Smith Barney Holdings Inc., Salomon Smith Barney Inc., and Travelers Group Inc. (collectively, defendants).
According to the joint statement of facts submitted pursuant to S.J.C. Rule 1:03, as appearing in 382 Mass. 700 (1981), Citigroup Inc. (Citigroup) is a corporation organized under Delaware law with New York as its principal place of business. Citigroup was formed in 1998 as a result of a business combination of Travelers Group Inc. and Citicorp. Salomon Smith Barney Inc. and Salomon Smith Barney Holdings Inc. were predecessors to certain Citigroup subsidiaries, namely Citigroup Global Markets Inc. and Citigroup Global Markets Holdings Inc., respectively.
[Note 2] Maxwell Peckler & others vs. Citigroup Inc. & others. Johnie F. Weems was not a party to the Massachusetts Superior Court case that was consolidated in the United States District Court with similar actions from other States.
[Note 3] In addition to alleging a violation of G. L. c. 149, §§ 148 et seq. (act), the plaintiffs challenge the forfeiture provision of the CAP plan based on theories of conversion, constructive trust, breach of fiduciary duty, violation of the covenant of good faith and fair dealing, and unjust enrichment. Those counts are not before us.
[Note 4] The certified class consists of "all former employees of Citigroup, Salomon Smith Barney, Travelers Group Inc., or related and affiliated companies in Massachusetts who participated in the Capital Accumulation Plan of Citigroup Inc., Travelers Group Inc., Travelers Inc., and/or Primerica Corporation who resigned or who were terminated on or after December 3, 1993 and as a consequence lost the right to receive shares of stock and/or options and/or other earned income under the terms of the plan upon termination."
[Note 5] According to the parties, "CAP was initially adopted by Primerica Corporation (which is not a named defendant . . .) in the late-1980s. Following a 1993/1994 business combination of Primerica Corporation and Travelers Corporation (which, prior to the business combination, did not have CAP), CAP was sponsored by the successor entity, named defendant Travelers Group Inc. CAP is now sponsored by named defendant Citigroup, which resulted from a 1998 business combination of Travelers Group Inc. and Citicorp (a then-independent company that did not have CAP)."
[Note 6] We note that terms such as "wages," "compensation," "cash," "deduction," and the like are used in this opinion strictly for purposes of answering the question before us about the act. We have not been asked to determine whether CAP comports with any other law. We do not intend the nomenclature we choose to express a view as to the meaning such terms have under other statutes, such as the Federal tax laws. See note 12, infra.
[Note 7] In the context of these cases, financial consultants are stockbrokers. We note that, in their joint statement of facts, the parties have not revealed how financial consultants are paid. From deposition testimony, it appears as though they were paid in commission. The plaintiffs state, in their brief, that financial consultants are paid commissions. As discussed infra, the payroll plan also was open to branch managers; they are paid a salary.
[Note 8] The parties have not provided, and we have not found, any legislative history for this statute.
[Note 9] Because of our conclusion that the stock programs at issue here do not constitute wages under the act, the special contract provision does not apply.
[Note 10] We reject the plaintiffs' argument that we should adopt a broad definition of wages in this situation. Jancey v. School Comm. of Everett, 421 Mass. 482 , 490-492 (1995), S.C., 427 Mass. 603 (1998), on which they rely for this proposition, is distinguishable. In the Jancey case, the court defined "wages" under the Equal Pay Act, a remedial statute that requires an assessment of all potential sources of "pay" in order to ensure equality of total compensation. Id. at 493 (narrow interpretation of wages in context of Equal Pay Act would allow some employers to evade statute, by compensating men and women at same hourly rate but offering men greater benefits). The weekly wage act, in contrast, is designed to prevent the unreasonable detention of earned wages. The question here is not how broadly to define wages, but rather, as we discuss infra, what earned wages are within the meaning of the act.
[Note 11] The United States Court of Appeals for the First Circuit has recently affirmed the dismissal of contract and State common-law claims, brought under Florida and Georgia law, challenging CAP's forfeiture provision. In re Citigroup, Inc., 535 F.3d 45 (1st Cir. 2008). The plaintiffs in that case are part of the multi-district litigation from which the cases before us arise. The court held that the forfeiture provisions of CAP are "unambiguous" and "enforceable." Id. at 48. The court also held in that case that participation in the payroll program was entirely voluntary. Id. at 49.
[Note 12] The defendants claim that the forfeiture provision is necessary to comport with the requirements of the Federal tax code. See Rosen v. Smith Barney, Inc., 195 N.J. 423, 425-426 (2008) (discussing 26 U.S.C. § 83[a] and [c] requiring substantial risk of forfeiture for deferred taxes on income); Y.D. Tauber & D.R. Levy, Executive Compensation 77, 83 (2002) (discussing tax implications of restricted stocks under 26 U.S.C. § 83). See also B. Overton & S.E. Stoffer, Executive Compensation Answer Book Q 10:68 (2008) (discussing restricted stock as part of executive compensation); M.S. Sirken & L.K. Cagney, Executive Compensation §§ 5:04-5:04 (2008) (discussing restricted stock and tax implications).
[Note 13] A representative version of the enrollment document stated, in pertinent part: "I elect to participate in [CAP] subject to all of the provisions and administrative rules of [CAP] and I acknowledge that I have received and read the CAP prospectus which accompanied this form. I hereby irrevocably direct my employer, Smith Barney, to pay me the percent indicated below in the form of restricted stock out of all cash compensation paid to me during the specified period. I understand that if I leave Smith Barney voluntarily or am terminated with [c]ause before the restrictions lapse on these shares of restricted stock received under [CAP], I will forfeit the stock as well as the money I am hereby authorizing to be paid in the form of such restricted stock. I further understand that my election to participate now obligates me to be a participant in CAP during the full year. . . ." The enrolling employee then designated a specific percentage of his or her total compensation to be received in the form of restricted stock.
[Note 14] We invited the fair labor division of the office of the Attorney General to file an amicus brief addressing the certified question, to which the defendants have responded. See G. L. c. 149, § 150 (authorizing Attorney General to enforce act).
"Whoever fails to send the labor, trade union or craft dues deducted from an employee's wages to the union within fourteen days . . . shall be punished by a fine . . . . Any other money deducted from an employee's wages shall be paid over forthwith, but in no event more than seven business days from the date when the deduction has been made or was due to the employee, to the person, credit union, bank, insurance company or corporation named by the employee pursuant to the provisions of this section, unless there is a prior written agreement between the employer and the recipient named by the employee that provides that payment may be made at some other time or times" (emphasis added).

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