Court Opinion

ID: 9498383
Source: CourtListenerOpinion
Date Created: 2023-08-05 17:16:18.307317+00
Date Added: 2024-06-11T17:58:48.453151
License: Public Domain

HAMILTON, Senior Circuit Judge,
concurring in part and dissenting in part:
While I fully agree with the holding in Part III of Judge Gregory’s opinion that Honeywell is not entitled to appellate review of the judgment below with respect to Dr. Varghese’s state law separation pay claims, I strongly disagree with the holding in Part II.B. of Judge Gregory’s opinion that Dr. Varghese was not entitled to enhanced damages under the Maryland Wage Payment and Collection Law (the MWP & CL), Md.Code, Labor & Employment, §§ 3-501 to 3-509, with respect to his stock option claims. Accordingly, I concur in Part III of Judge Gregory’s opinion, but dissent from Part II.B. of that opinion, concurred in by Judge Motz. I would affirm the judgment below in toto.
I.
The operative stock option plan in this case declared as follows:
The Company desires to attract and retain the best available talent and to encourage the highest level of performance by its employees. By affording employees the opportunity to acquire an equity interest in the Company and by providing them incentives to put forth maximum efforts for the success of the Company’s business, the Plan is expected to contribute to the attainment of those objectives.
(J.A. 187). With regard to stock option granting decisions, the same plan provided that Honeywell’s Management Development and Compensation Committee (the Committee) would “base its selection of award recipients, among other things, on the duties of the employees and their present and potential contributions to the Company’s success.” (J.A. 188). In this vein, the record contains the trial testimony of Honeywell Executive Compensation Analyst Katherine Behre (Behre) to the effect that an employee at Dr. Varghese’s level, ie., band four, is nominated for a stock option grant based upon two factors: (1) the employee’s performance and (2) as an inducement to the employee’s future contributions to the company. Similarly, Mary Neville, a twenty-year veteran of Honeywell who served as Honeywell’s Human Resources Manager at all times relevant to this appeal, testified at trial that stock option grants depended upon employee performance and the potential for future contributions to the company. She also confirmed that “[sjtock options are in the nature of compensation, ... whether you’re a band 4, band 3, band 2.” (J.A. 474).
Notably, the record also contains the Honeywell created document entitled “Our Pay Philosophy.” (J.A. 626). The document states that employees in positions below band 5 may receive stock option grants separately from bands 5 and 6 through its broad-based stock-option pro*428gram. Further, under the subheading “Why we use options,” the document expressly provides:
Our stock price is the ultimate indicator of the value of our company and its potential. The market rewards results, not just effort. Our long-term incentive ties your actions to achievement of our business strategy over time as evidenced by stock price performance. With stock options, there are no entitlements, no guarantees and no rewards for maintaining the status quo. Stock options provide a highly leveraged pay opportunity. As shareholder value increases, so will the value of your options.
(J.A. 627) (emphasis added). Under the subheading “Our Stock Option Philosophy,” the same document goes on to state:
Guidelines for stock options are determined each year based on a review of competitive-positioning and the value of an option at that point in time.
Your individual award level continues to be linked directly to the results of the Management Resource Review (MRR) process. Your award reflects your position as a key member of the leadership team and your potential to be a significant contributor going forward. Think about stock options as a look ahead: Top performers with the most significant potential receive the greatest number of options.

Id.

The Committee granted Dr. Varghese stock options on four separate occasions. Specifically, the Committee granted Dr. Varghese stock options on July 31, 1992, July 30, 1993, July 29, 1994, and July 19, 1996.
The record facilely supports the reasonable inference that Dr. Varghese performed his job duties at Honeywell with distinction in the one year periods immediately preceding each of these stock option grants. For example, the record contains two glowing performance reviews for two of the option grant periods. The first is for the period beginning July 1991 and ending July 1992. The second is for the period beginning August 1992 and ending October 1993. In both reviews, Honeywell rated Dr. Varghese’s overall performance during the respective rating periods as “Outstanding.” (J.A. 175, 181). According to the performance review forms, such a rating meant that “[mjajor job responsibilities were exceeded in all areas. Established objectives that stretched employee performance were achieved or exceeded. Overall performance was clearly exceptional.” (J.A. 172,178).
To its credit, Honeywell makes no disparaging statements in this appeal regarding Dr. Varghese’s job performance while at Honeywell. Similarly, Honeywell does not take issue with the statement in Dr. Varghese’s appellate brief that his job performance was excellent during the years for which Honeywell granted him the stock options.1
Based upon the series of stock option grants, at the time of his involuntary termination of employment in 1999, Dr. Varghese had the vested right to purchase 4,800 shares of Honeywell stock at prices established at the time of the respective grants. Soon after receiving notice of his termination, Dr. Varghese wrote several letters to Honeywell asking to exercise his stock options. Honeywell subsequently informed Dr. Varghese that his options had expired because it deemed his termination to have been voluntary. Honeywell does not challenge on appeal the jury’s finding *429that it had misclassified Dr. Varghese’s termination, and thus had impermissibly refused to allow him to exercise his fully vested stock options. Rather, Honeywell challenges Dr. Varghese’s qualification for enhanced damages under the MWP & CL for its actions in this regard.
For his part, Dr. Varghese acknowledged at his pretrial deposition and at trial that, in contrast to a band 5 or 6 employee, as a band 4 employee, he had no guarantee that Honeywell would grant him stock options in any given year. Rather, he only had the potential for such a grant. Dr. Varghese also testified at trial that Honeywell never promised that it would actually grant him stock options as part of his compensation. However, it is undisputed from the record that, as a band 4 employee, he would be eligible for the discretionary grant of stock options.
II.
With the preceding factual background and procedural history in mind, I turn now to analyze whether the right to exercise the stock options granted Dr. Varghese in accordance with the terms of the operative stock option plan constitutes “wages” under the MWP & CL.
Specifically, the MWP & CL provides: “Each employer shall pay an employee ... all wages due for work that the employee performed before the termination of employment, on or before the day on which the employee would have been paid the wages if the employment had not been terminated.” Md.Code, Labor and Employment, § 3-505. MWP & CL § 3-507.1 creates a private right of action to recover for violation of MWP & CL § 3-505:
[I]f an employer fails to pay an employee in accordance with ... § 3-505 of this subtitle, after 2 weeks have elapsed from the date on which the employer is required to have paid the wages, the employee may bring an action against the employer to recover the unpaid wages....
Md.Code, Labor and Employment, § 3-507.1(a). The enhanced penalty provision of this section provides:
If, in an action under subsection (a) of this section, a court finds that an employer withheld the wage of an employee in violation of this subtitle and not as a result of a bona fide dispute, the court may award the employee an amount not exceeding 3 times the wage, and reasonable counsel fees and other costs.

Id.

The MWP & CL defines “wage” broadly and specifically identifies a non-exclusive list of compensation categories as wages for purposes of the MWP & CL:
(1) “Wage” means all compensation that is due to an employee for employment.
(2) “Wage” includes:
(i) a bonus;
(ii) a commission;
(iii) a fringe benefit; or
(iv) any other remuneration promised for service.
Md.Code, Labor and Employment, § 3-501(c). In Whiting-Turner Contracting Co. v. Fitzpatrick, 366 Md. 295, 783 A.2d 667 (2001), the Court of Appeals of Maryland made clear that MWP & CL § “501(c)(2)(iv) serves two functions: it makes clear both that the listed forms of remuneration are simply examples, by the use of the phrase ‘any other remuneration,’ and that the ‘other remuneration’ that may be included in — in order to be considered — wages must have been ‘promised for service.’ ” Whiting-Turner, 783 A.2d at 672.
Of course, the posture of this case on appeal requires that we view the evidence in the record in the light most favorable to *430Dr. Varghese and draw all reasonable inferences from that evidence in his favor. Ocheltree v. Scollon Prod., Inc., 335 F.3d 325, 331 (4th Cir.2003). Under this dictate, the record supports the reasonable inference that Honeywell granted Dr. Varghese the stock options at issue in significant part because he had performed his job in an exceptional manner in the immediately preceding years.2 In other words, Dr. Varghese had performed his job at Honeywell during those years in a manner that was not required of him; in a manner which exceeded the status quo by a wide margin.
Based upon Whiting-Turner, 783 A.2d at 667, Medex v. McCabe, 372 Md. 28, 811 A.2d 297 (2002), and Dr. Varghese’s admission at trial that Honeywell never promised to grant him stock options, Honeywell argues that prior to the actual grants of the stock options at issue, such stock options and/or the right to exercise them did not qualify as “remuneration promised for [Dr. Varghese’s] service.” Md.Code, Labor & Employment, § 3-501(c)(2)(iv). However, once Honeywell actually granted Dr. Varghese the stock options with the concomitant promises that he could exercise them in accordance with the terms of the operative stock option plan, Dr. Varghese’s right to exercise those options in accordance with the terms of the operative stock option plan constituted “remuneration promised for service,” id., and thus wages under the MWP & CL. Part II.B. of Judge Gregory’s opinion, as concurred in by Judge Motz, overlooks the reality that the facts of this case, when properly viewed, fall squarely within the language of the enhanced damages provision of the MWP & CL.
The fact that Honeywell granted Dr. Varghese the stock options for service that he was not erstwhile required to perform is critical to the analysis, because the promised right to exercise the stock options is then not a mere gratuity, but “remuneration promised for service.” Md. Code, Labor & Employment, § 3-501(c)(2)(iv). As the Maryland Court of Appeals declared in Whiting-Turner, “[o]nce a bonus, commission or fringe benefit has been promised as a part of the compensation for service, the employee would be entitled to its enforcement as wages.” Whiting-Turner, 783 A.2d at 672.
Here, viewing the evidence in the record in the light most favorable to Dr. Varghese, which we are required to do, Dr. Varghese’s right to exercise the stock options granted him by Honeywell was promised by Honeywell as part of the compensation for Dr. Varghese’s exceptional service, and therefore, constituted wages under the MWP & CL. Accordingly, I would hold that the district court did not err in refusing to grant Honeywell’s motion for judgment as a matter of law with respect Dr. Varghese’s claim for enhanced damages under the MWP & CL.
One final and crucial point: The fact that the respective stock option grants post-dated Dr. Varghese’s beyond-the-status-quo service during the years immediately preceding those grants is neither foreclosed by the language of the MWP & CL nor Maryland case law. Viewing the evidence in the light most favorable to Dr. Varghese, one can draw the reasonable inference that prior to the time of even the first stock option grant to Dr. Varghese, Honeywell had promised, as part of Dr. Varghese’s total compensation, that once it granted him stock options based upon his beyond-the-status quo service to the company, he could exercise those options in accordance with the terms of the operative *431stock option plan. The key fallacy in Judge Gregory’s analysis in Part II.B., as concurred in by Judge Motz, is his unwillingness to draw this reasonable inference, which by precedent he is bound to do. Of course the opposite inference is the one that is unreasonable — Honeywell set up a detailed employee stock option plan, placed great emphasis on the plan’s purpose to encourage the highest level of performance by its employees, but did not intend the promise that granted stock options could be exercised in accordance with the operative stock option plan to constitute part of the employee’s total compensation for employment. Plainly stated, Judge Gregory and Judge Motz’s view of the evidence on this point fails to afford Dr. Varghese the benefit of viewing the evidence in the record in the light most favorable to him and drawing all reasonable inferences therefrom in his favor.
In sum, I would affirm the judgment below in toto. Accordingly, I concur in Part III of Judge Gregory’s opinion, but dissent from Part II.B., as concurred in by Judge Motz.

. If the record below contains performance reviews for the other two option grant periods, the parties did not see fit to include them in the joint appendix for our consideration.

. Even Part II.B. of Judge Gregory's opinion, as concurred in by Judge Motz, recognizes "that the grant of stock options in this matter was, in all likelihood, at least partially remuneration for Dr. Varghese's past performance.” Ante.