Opinion ID: 2320967
Heading Depth: 1
Heading Rank: 4

Heading: Severance Pay and Related Attorney's Fees

Text: Because the next two issues deal with the trial court's rulings on the defendant's entitlement to severance benefits and related attorney's fees, we address them together. The defendant contends that, contrary to the trial court's ruling, he is entitled to his full severance benefits under the parties' agreement, RSA chapter 275 and RSA chapter 358-A. He also argues that because ACAS willfully refused to pay his severance benefits, he is entitled to double or treble damages and attorney's fees. We address each argument in turn.
Section 6(c) of the defendant's employment agreement provides, in relevant part: Upon termination of the [defendant's] employment hereunder (i) by the Company without Cause pursuant to Section 5(iv), or (ii) by the [defendant] for Good Reason pursuant to Section 5(v), the [defendant] shall be entitled to (i) his Base Salary for the Severance Period, payable in accordance with the usual payroll practices in effect at the Company, and (ii) a pro rata portion of [the defendant's] Incentive Bonus, if any, for the applicable period during any calendar year [the defendant] was employed by the Company. . . . Under section 6(d) of the agreement, the defendant is not entitled to severance if he is terminated for cause. Cause is defined in the parties' agreement, in part, as a material breach of the [defendant's] obligations in connection with his or her Service or of a confidentiality, non-competition or other similar agreement, if any, with the Company. Also, the agreement provides that its provisions governing severance and the non-competition and non-disclosure agreements survive the defendant's termination. ACAS acknowledges that on January 7, 2003, it dismissed the defendant without cause and, because it terminated him without cause, it began paying his severance benefits. Also, ACAS admits that on January 31, 2003, it suspended the defendant's severance payments. ACAS argues that it was entitled to do so because it discovered the defendant's dealings with Accura, Hurst and Brehm, which violated his non-competition and non-disclosure agreements. ACAS contends that had it known of those violations prior to the defendant's termination without cause, it would have terminated him for cause. Essentially, ACAS argues that its evidence of the defendant's pre-termination violations is a defense to its obligation to pay severance benefits, though this evidence was not obtained until after his termination. We agree. The interpretation of a contract is a question of law, which we review de novo. Barclay Square Condo. Owners' Assoc. v. Grenier, 153 N.H. 514, 517, 899 A.2d 991 (2006). Also, [w]hether after-acquired evidence may limit damages or completely bar liability is a question of law reviewable de novo by this court. McDill v. Environamics Corp., 144 N.H. 635, 640, 757 A.2d 162 (2000). [I]n a breach of contract action after-acquired evidence of employee misconduct is a defense to a breach of contract action for wages and benefits lost as a result of discharge if the employer can demonstrate that it would have fired that employee had it known of the misconduct. Id. at 641, 757 A.2d 162 (quotation omitted). Under the terms of the parties' agreements, the defendant forfeited his right to severance payments if he violated his non-competition or non-disclosure agreements. Here, ACAS contends, and the trial court found, that had ACAS known of the defendant's violations prior to his termination without cause, it would have terminated him for cause. Therefore, although ACAS did not learn of the defendant's violations until after his termination, we conclude that under the terms of the parties' agreements, ACAS was justified in terminating the defendant's severance payments for his pre-termination violations. The defendant acknowledges this understanding of the parties' agreement when, in his brief, he states: [I]f [the defendant] had violated his Non-Competition Agreement while he was employed by the Company, he could have been terminated `for cause' on that basis. Similarly, [he] could have had a `without cause' termination changed to a `for cause' termination after the fact  but only if he had violated his covenant pre -termination. The defendant contends that he did not work for Accura until after his termination by ACAS. The trial court found, however, that the defendant engaged in a calculated series of moves to help Brehm and Hurst set up a competitive business through identification of corporate opportunities, disclosure of confidential information, advice regarding marketing and solicitation of Precitech customers so that Accura would be poised to enter the market upon expiration of Brehm's non-competition agreement and [the defendant's] `extracation' [ sic ] from his own contractual and fiduciary obligations. . . . Because there is evidence in the record to support these findings, we conclude that the defendant was not entitled to severance under the terms of the parties' contract. Finally, we note that the trial court ruled that ACAS was entitled to recover the $6,132.29 in severance payments it made before suspending them. The defendant makes no separate challenge to that ruling, and it is, therefore, affirmed.
The defendant contends that his severance benefits are wages as defined in RSA chapter 275 and that ACAS' failure to pay them is a violation of the statute. Also, the defendant contends that because ACAS' refusal to pay is willful and without good cause he is entitled to recover increased damages, costs and attorney's fees. Interpretation of a statute is a question of law, which we review de novo. Appeal of Tennis, 149 N.H. 91, 93, 816 A.2d 973 (2003). Also, while we defer to the trial court's factual findings, provided there is evidence in the record to support them, we review its application of the law to the facts de novo. Saviano v. Director, N.H. Div. of Motor Vehicles, 151 N.H. 315, 318, 855 A.2d 1278 (2004). RSA 275:44, I, requires that Whenever an employer discharges an employee, the employer shall pay the employee's wages in full within 72 hours. If, however, an employer willfully and without good cause fails to pay an employee's wages . . ., such employer shall be additionally liable to the employee for liquidated damages in the amount of 10 percent of the unpaid wages for each day . . . such failure continues. . . . RSA 275:44, IV. RSA 275: 42, III defines wages as: compensation, including hourly health and welfare, and pension fund contributions required pursuant to a health and welfare trust agreement, pension fund trust agreement, collective bargaining agreement, or other agreement adopted for the benefit of an employee and agreed to by his employer, for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission, or other basis of calculation. Under RSA 275:43, III, Vacation pay, severance pay, personal days, holiday pay, sick pay and payment of employee expenses, when such benefits are a matter of employment practice or policy, or both, shall be considered wages pursuant to RSA 275:42, III, when due. The trial court found that, Severance benefits were not a `matter of practice or policy' at Precitech, and are therefore not `wages' as defined by RSA 275:42, III or RSA 275:43. According to the trial court, Only a few key management employees were offered employment contracts by ACAS in connection with its acquisition of Precitech, and the severance benefits were negotiated individually with each management employee. We agree with the trial court that because severance benefits were offered only in connection with the sale of Precitech and only then to a few employees on terms negotiated individually with those employees, granting severance benefits was not a matter of practice or policy at ACAS. Therefore, we conclude that the defendant's severance benefits do not meet the definition of wages in RSA 275:42, III and RSA 275:43, III. Additionally, the trial court found that the defendant's severance benefits were not wages because they were not `compensation . . . for labor or services rendered,' but rather, consideration for his agreement not to compete with Precitech if he was terminated without cause or voluntarily resigned. Such a finding, although not necessary to the determination of the issue, serves to reinforce the conclusion that not only are the defendant's severance benefits not wages, they were not intended by the parties to be treated as wages. Accordingly, we uphold the trial court's conclusion that the defendant's severance benefits are not wages under RSA chapter 275. Because we hold that the defendant's severance benefits are not wages, ACAS did not violate RSA chapter 275 in refusing to pay them.
The defendant contends that ACAS' refusal to pay his severance benefits qualifies as an unfair act or practice under RSA 358-A:2. Also, the defendant contends that because ACAS' refusal was willful and knowing, he is entitled to double or treble damages as well as costs and attorney's fees. RSA 358-A:2 states that it is unlawful for any person to use any unfair method of competition or any unfair or deceptive act or practice in the conduct of any trade or commerce within this state. Trade and commerce, in turn, are defined as the advertising, offering for sale, sale, or distribution of any services and any property . . ., and shall include any trade or commerce directly or indirectly affecting the people of this state. RSA 358-A:1, II. RSA 358-A:2 provides a non-exhaustive list of acts and practices that are unlawful. Finally, RSA 358-A: 10 permits any person injured by an unfair act or practice to bring a private action for damages and to recover enhanced damages for that injury. The defendant does not argue that ACAS violated any of the enumerated provisions of the CPA. Therefore, we must determine whether ACAS' actions fit within the statute's general prohibition on unfair and deceptive acts. In making our determination, the trial court's findings of fact and rulings of law will be upheld unless they lack evidentiary support or constitute clear error of law. Milford Lumber Co. v. RCB Realty, 147 N.H. 15, 19, 780 A.2d 1259 (2001). We have recognized that the general provision of the CPA is broadly worded, and not all conduct in the course of trade or commerce falls within its scope. State v. Moran, 151 N.H. 450, 452, 861 A.2d 763 (2004). In determining which commercial actions, not specifically delineated, are covered by the act, we have employed the rascality test. See Barrows v. Boles, 141 N.H. 382, 390, 687 A.2d 979 (1996). Under the rascality test, the objectionable conduct must attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble of the world of commerce. Moran, 151 N.H. at 452, 861 A.2d 763. Here, the trial court found that RSA 358-A:2 did not apply to the conduct of ACAS in this case. We agree. ACAS suspended the defendant's severance payments based upon its reasonable belief that he had violated his restrictive covenants. This conduct is not of the same type as that proscribed by the CPA. Moreover, suspending benefits until its obligation to pay them is established does not raise an eyebrow of one inured to the rough and tumble of the world of commerce. Accordingly, we uphold the trial court's conclusion that the defendant is not entitled to recovery under the CPA. For the above reasons we conclude that the defendant was not entitled to severance benefits under the parties' agreement, RSA chapter 275 or the CPA.