Opinion ID: 6335209
Heading Depth: 2
Heading Rank: 2

Heading: Severance Package as Wages Under the WPCA

Text: Next, Ms. Miller argues that the circuit court’s ruling—that the severance package owed pursuant to the Employment Agreement was not “wages” pursuant to the WPCA—was clearly erroneous. Ms. Miller contends that she is entitled to the severance package because the terms of the Employment Agreement defined severance pay as wages, thereby triggering the applicability of the civil penalties under the WPCA, located at West Virginia Code §§ 21-5-1 to 21-5-18. On the contrary, SJRC adopts the conclusion of the circuit court and argues that the severance package at issue cannot be considered wages because the severance package is a sum certain that was negotiated at the time the Employment Agreement was entered into, and therefore, cannot be earned until after the employment relationship is severed. We begin our analysis by examining the WPCA. As such, we are mindful that “[t]he primary object in construing a statute is to ascertain and give effect to the intent of the Legislature.” Syl. Pt. 1, Smith v. State Workmen’s Comp. Comm’r, 159 W. Va. 108, 219 S.E.2d 361 (1975). Therefore, where the legislative intent is plainly expressed, we are required to apply rather than interpret the statute at issue. “When a statute is clear and unambiguous and the legislative intent is plain, the statute should not be interpreted by the courts, and in such case it is the duty of the courts not to construe but to apply the statute.” 15 Syl. Pt. 5, State v. Gen. Daniel Morgan Post No. 548, Veterans of Foreign Wars, 144 W. Va. 137, 107 S.E.2d 353 (1959). Conversely, “[a] statute that is ambiguous must be construed before it can be applied.” Syl. Pt. 1, Farley v. Buckalew, 186 W. Va. 693, 414 S.E.2d 454 (1992). With these standards in mind, we turn our attention to the WPCA. In Mullins v. Venable, 171 W. Va. 92, 297 S.E.2d 866 (1982), this Court discussed the purpose and intent of the WPCA. We stated: The West Virginia Wage Payment and Collection Act is remedial legislation designed to protect working people and assist them in the collection of compensation wrongly withheld. Farley v. Zapta Coal Corp., 167 W. Va. 630, 281 S.E.2d 238 (1981). The Act requires every “person, firm or corporation” doing business in West Virginia to pay their employees wages for work or services at least once every two weeks, unless otherwise provided by special agreement. W. Va. Code § 21-5-3. Whenever an employee quits or resigns the “person, firm or corporation” must pay the employee’s wages and accrued fringe benefits no later than the next regular payday. W. Va. Code § 21-5-4(c); Farley v. Zapata Coal Corp., supra. If the employer fails in this duty, the “person, firm or corporation” is liable, in addition to wages and benefits, for liquidated damages. W. Va. Code § 21-5- 4(e). Mullins, 171 W. Va. at 94, 297 S.E.2d at 869. Accord Syl. Pt. 7, Grim v. E. Elec., LLC, 234 W. Va. 557, 767 S.E.2d 267 (2014). As such, because the WPCA is a remedial statute, we must construe it liberally. See State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc., 194 W. Va. 770, 777, 461 S.E.2d 516, 523 (1995) (“Where an act is clearly remedial in nature, we must construe the statute liberally so as to furnish and accomplish all the purposes intended.” (internal citations omitted)). 16 It is the task of this Court to determine whether the circuit court erred in finding that Ms. Miller’s severance package—as set forth in the Employment Agreement— did not constitute wages under the WPCA. The WPCA provides that when an employee resigns from his or her employment, the employer “shall pay the employee’s wages no later than the next regular payday.” See W. Va. Code § 21-5-4(c) (2018). However, “if the employee gives at least one pay period’s notice[,]” then the employer “shall pay all wages earned by the employee at the time of quitting.” See id. In our discussion above, we concluded that Ms. Miller was entitled to the severance package set forth in the Employment Agreement. However, whether Ms. Miller is entitled to the civil penalty provisions of the WPCA, arising from SJRC’s failure to timely provide the severance package, is contingent on whether the severance package constitutes wages. West Virginia Code § 21-5-1(c) (2015) 6 defines wages as compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission, or other basis of calculation. As used in § 21-5- 4, § 21-5-5, § 21-5-8a, § 21-5-10, and § 21-5-12 of this code, the term “wages” shall also include then accrued fringe benefits capable of calculation and payable directly to an employee[.] (Emphasis added). However, West Virginia Code § 21-5-1(c) also provides “[t]hat nothing herein contained shall require fringe benefits to be calculated contrary to any agreement between an employer and his or her employees which does not contradict the provisions of 6 West Virginia Code § 21-5-1 was modified by the Legislature in 2021. However, no changes were made that affect our decision. 17 this article.” Fringe benefits are defined by the WPCA as “any benefit provided an employee or group of employees by an employer, or which is required by law, and includes regular vacation, graduated vacation, floating vacation, holidays, sick leave, personal leave, production incentive bonuses, sickness and accident benefits, and benefits relating to medical and pension coverage.” W. Va. Code § 21-5-1(l). Here, the Legislature used the word “includes” to signify that the list of fringe benefits is meant to be a nonexclusive list of examples. See, e.g., RGIS Inventory Specialists v. Palmer, 209 W. Va. 152, 157, 544 S.E.2d 79, 84 (2001) (stating that “the use of the term of enlargement ‘including’ signifies a nonexclusive list”). In the case sub judice, the Employment Agreement provides that if an employee voluntarily resigns for good reason, he or she will be “entitled to the Severance Package set forth” in the Employment Agreement. Pursuant to the provisions of the Agreement, the “Severance Package” consists of “[b]ase [s]alary paid monthly in accordance with [SJRC’s] normal payroll practices for the lesser of (A) the number of full months of the then remaining term of the Agreement; or (B) three (3) months, together with health insurance coverage during the severance period.” Based upon the clear language of the Employment Agreement, we conclude that Ms. Miller’s severance package is a benefit provided to employees at SJRC as an inducement to procure their services, and therefore, fits within the Act’s definition of a “fringe benefit.” See generally W. Va. Code § 21-5-1(l). 18 The parties dispute, however, whether Ms. Miller’s “fringe benefit” (the severance package) is “capable of calculation and payable directly to [the] employee” such that it can qualify as “wages” under the WPCA. In Meadows v. Wal-Mart Stores, Inc., 207 W. Va. 203, 530 S.E.2d 676 (1999), this Court examined the language of West Virginia Code § 21-5-1(c) to determine what it meant for wages to also include “then accrued fringe benefits” that are “capable of calculation and payable directly to an employee.” The Court stated: The parties agree concerning the meaning of “capable of calculation.” They also agree that fringe benefits may be calculated in a manner agreed upon by the employees and employers so long as the agreement does not contradict the provisions of W. Va. Code § 21-5-1 et seq. The parties do not agree, however, concerning the meaning of the term “then accrued.” In order to define “then accrued,” we give the term its familiar and ordinary meaning. .... In light of the above, we believe the proper definition of the word “accrued” in W. Va. Code § 21-5-1(c) is “vested.” The concept of vesting is concerned with expressly enumerated conditions or requirements all of which must be fulfilled or satisfied before a benefit becomes a presently enforceable right. Because the WPCA contains no such conditions or requirements, the payment of fringe benefits can only be governed by the terms of employment found in employment policies promulgated by employers and agreed to by employees. Accordingly, the terms of the applicable employment policy, and not the WPCA, determine whether fringe benefits are included in the term “wages” under W. Va. Code § 21-5-1(c). 19 Meadows, 207 W. Va. at 215-16, 530 S.E.2d at 688-89. After determining the meaning of “then accrued,” the Meadows Court ultimately held in Syllabus point 5, that [p]ursuant to W. Va. Code § 21-5-1(c) (1987), whether fringe benefits have then accrued, are capable of calculation and payable directly to an employee so as to be included in the term “wages” are determined by the terms of employment and not by the provisions of W. Va. Code § 21-5-1(c). Further, the terms of employment may condition the vesting of a fringe benefit right on eligibility requirements in addition to the performance of services, and these terms may provide that unused fringe benefits will not be paid to employees upon separation from employment. See also Syl. Pt. 5, Adkins v. Am. Mine Rsch., Inc., 234 W. Va. 328, 765 S.E.2d 217 (2014) (“The determination as to whether ‘wages,’ as defined in West Virginia Code §21-5- 1(c) (2013 Repl. Vol.), are payable pursuant to the requirements of West Virginia Code §21-5-1 et seq. (2013 Repl. Vol.) is governed by the terms of the employment agreement, whether written or in the form of a consistently applied unwritten policy.”). In accordance with this Court’s discussion above, when Ms. Miller resigned from SJRC for good reason, she became entitled to the severance package pursuant to the provisions of the Employment Agreement. SJRC claims that the severance package described in the Employment Agreement is not compensation for labor or services, could not be earned until after the end of the employment relationship, and was designed to be contractual damages owed to employees for suffering an unexpected loss, and thus, the 20 severance package cannot be wages under the WPCA. 7 In reply, Ms. Miller contends that the severance package is an unused fringe benefit that is owed to her under the WPCA unless the Employment Agreement contains “express and specific” language to the contrary. We agree with Ms. Miller. Under the Employment Agreement, at the time of Ms. Miller’s separation from employment, the severance package was accrued, capable of calculation, and payable directly to her. The severance package was an inducement to procure an employee’s services and represented a form of deferred compensation for work performed during the employment. Therefore, Ms. Miller’s severance package is a fringe benefit that constitutes unpaid wages under the WPCA, and SJRC was required to pay those wages in accordance with the timeline provided by the Act. In failing to pay Ms. 7 This Court addressed a similar question in Citynet, LLC v. Toney, 235 W. Va. 79, 772 S.E.2d 36 (2015). In Citynet, an employee sought to redeem the vested balance of his employee incentive plan account. In arguing that the incentive plan account was not subject to the WPCA, Citynet argued that the employee failed to show that he was entitled to the fringe benefit under the terms of the agreement. This Court disagreed with Citynet and stated: Citynet fails to appreciate that the ability of an employer to “condition the vesting of a fringe benefit right on eligibility requirements,” or to decline to pay unused fringe benefits “to employees upon separation from employment,” does not allow an employer to fail to pay vested fringe benefits to an employee upon separation from employment. In this regard, the Meadows Court observed that “W. Va. Code § 21-5- 1(c) simply means that if under the terms of employment an employee is entitled to the payment of fringe benefits, the payment of these benefits has the same status as unpaid wages.” Meadows, 207 W. Va. at 216, 530 S.E.2d at 689 (emphasis added; footnote omitted). Citynet, 235 W. Va. at 94, 772 S.E.2d at 51. 21 Miller in accordance with West Virginia Code § 21-5-4(c), SJRC violated the WPCA. Accordingly, Ms. Miller is entitled not only to the severance package, but also to the damages, costs and reasonable attorney’s fees permitted under the WPCA. See W. Va. Code §§ 21-5-4(e) and 21-5-12(b) (1975). C. Paid Time Off (“PTO”) as Part of Severance Package Lastly, Ms. Miller argues that her claims for payment of accrued paid time off (PTO) were improperly dismissed by the circuit court. In support of this argument, Ms. Miller states that such payments were earned and due to her under the language of SJRC’s Employee Handbook, which is a separate document establishing additional terms of her employment with SJRC in conjunction with the Employment Agreement. The Employee Handbook provides that employees who leave after providing proper notice will be paid their accrued PTO. While the Employment Agreement is silent on this issue, Ms. Miller contends that she is entitled to such payment pursuant to Meadows v. Wal-Mart Stores, Inc., supra, which states that ambiguities must be resolved in favor of the employee. SJRC disagrees with Ms. Miller’s position and maintains that the Employment Agreement is sufficiently specific as to the amount of unused fringe benefits owed to an employee upon separation from employment—and unused PTO is not listed in the Employment Agreement. SJRC further notes that the terms of Ms. Miller’s termination are governed exclusively by the Employment Agreement, and any argument citing to the Employee Handbook as a legal basis for Ms. Miller’s position is both irrelevant and inapplicable to the present matter. 22 Under the WPCA, some types of fringe benefits are encompassed in the definition of wages. See W. Va. Code § 21-5-1(c). The WPCA defines fringe benefits as including various types of paid time off such as vacation, sick leave, and personal leave, among other types of benefits. See W. Va. Code § 21-5-1(l). As stated above, in our discussion about severance pay, we noted that West Virginia Code § 21-5-1(c) defines wages, in part, as “then accrued fringe benefits capable of calculation and payable directly to an employee: Provided, That nothing herein contained shall require fringe benefits to be calculated contrary to any agreement between an employer and his or her employees which does not contradict the provisions of this article.” As stated in Meadows, “the terms of the applicable employment policy, and not the WPCA, determine whether fringe benefits are included in the term ‘wages’ under W. Va. Code § 21-5-1(c).” 207 W. Va. at 215-16, 530 S.E.2d at 688-89. Additionally, it should be noted that “[t]he ‘terms of employment’ not only include a written employment agreement but also include[ ] the employer’s personnel handbook or manual, personnel policy materials, memoranda and documents intended to be used by employers in establishing the benefits of their employees.” Wolfe v. Adkins, 229 W. Va. 31, 36, 725 S.E.2d 200, 205 (2011) (citing Younker v. E. Associated Coal Corp., 214 W. Va. 696, 591 S.E.2d 254 (2003)). In Wolfe, former employees brought a lawsuit against their employer and alleged various claims under the WPCA. In particular, the employees sought payment for unused, accumulated sick leave. 229 W. Va. at 32, 725 S.E.2d at 201. Upon review by this Court, it was discovered that the employer did not have any policy that expressly 23 dictated the payment or nonpayment of unused sick leave upon an employee’s separation from employment. Id. at 38, 725 S.E.2d at 207. Therefore, this Court concluded that the employees were not entitled to the unused sick leave, and ultimately held that [w]here there is no provision in a written employment agreement, personnel handbook, personnel policy materials or employer documents granting employees payment for unused, accumulated sick leave upon termination from employment, the unused, accumulated sick leave, upon termination from employment, is not a vested, nonforfeitable fringe benefit under the West Virginia Wage Payment and Collection Act and is not payable to the employees. Id., Syl. Contrary to the facts in Wolfe, here, SJRC’s Employee Handbook explicitly includes a provision regarding the payment of unused PTO upon the termination of an employment relationship. It states: “Employees providing proper notice will be considered to have left in good standing and may be eligible for the payment of certain accrued, unused paid time off.” (Emphasis added). The Employee Handbook declares that only employees who fail to give “the proper notice” of their resignation are “not be eligible for the payment of eligible, available paid time off[.]” Because the Employee Handbook specifically provides for the payment of “certain accrued, unused paid time off,” and because Ms. Miller appears to have given the proper and timely notice to SJRC of her resignation, we conclude that Ms. Miller should be entitled to a determination of her entitlement to receive her unused PTO as part of her severance package. Therefore, on remand, the circuit court 24 is instructed to construe the Employee Handbook, 8 properly assess on the record whether Ms. Miller qualified for payment of her PTO upon her departure from employment, and if so the amount of such PTO contemplated by the Employee Handbook. 9