ABC Office Equipment, Inc. v. Royal Consumer Business Products

RULING ON MOTION FOR SUMMARY JUDGMENT DORSEY, District Judge. On October 6, 1987, John J. Crimmins filed a cross-complaint against Royal Consumer Business Products (“Royal”), a division of Triumph-Adler-Royal, Inc. (“TARI”) and Triumph-Adler North America, Inc. (“TANA”). Royal moves for permission to file a motion for summary judgment directed to Crimmin’s cross-complaint. The motion is granted. Facts Crimmins became President of Royal in 1984 pursuant to an employment contract with T/A Business Systems, Inc., then Royal’s corporate parent. In December 1986, Crimmins was asked by Giovanni Fei, President of TANA, to transfer to New Jersey, where Royal planned to relocate its corporate headquarters. Crimmins declined. By letter dated December 23, 1986, Fei indicated that failure to accept the transfer was considered a resignation and that his employment agreement was voided. The letter also proposed that “if [Crimmins] remained with the company until May 31, 1987 and assisted with the transition period of relocating the company ... [he] would be entitled to a severance allowance equal to the continuation of all company benefits and salary for a period of 6 months.” Crimmins agreed and accepted the terms of the letter by signing and returning it to Fei on December 31, 1986. Royal found a new president, Marion Baker, earlier than expected, who assumed her duties on March 1, 1987. Crimmins was released from active participation on that date, but remained available and was occasionally consulted through May 31, 1987. Affidavit of Crimmins, ¶ 8. Crimmins received his salary and benefits until May 31, 1987. By letter dated May 12, 1987, E.A. Vogus, Director of Human Resources, inquired as to Crimmins’ preference as to payment of the severance allowance, lump sum or salary continuation. Vogus also noted that the severance allowance was contingent on a covenant not to compete during the period covered by the severance allowance pursuant to his July 14, 1976 employment agreement. Crimmins alleges in the first and third counts of his cross-complaint that Royal has wrongfully refused to pay him the “severance allowance” and accrued vacation pay, respectively. In addition, in his second and fourth counts, Crimmins brings a statutory wage claim under Conn.Gen. Stat. § 31-72 seeking double damages, costs and attorney fees for such non-payment. Discussion Royal asserts that it is entitled to summary judgment on the first and third counts on the grounds that it has paid Crimmins’ compensatory damage claim in full, including accrued interest at the statutory rate. Crimmins contends that the money tendered was merely an offer of settlement which has not been accepted and has no legal effect. Royal has proposed an accord and satisfaction which, if accepted, would warrant granting its motion. Absent acceptance, summary judgment is not warranted on Counts One and Three. Double damages under § 31-72 is a punitive award requiring a finding of bad faith, arbitrariness, or unreasonableness. Kepchar v. Diehl Research Center, Civil No. B-84-428 (D.Conn. Aug. 31, 1988), Memorandum of Decision at 19, citing Crowther v. Gerber Garment Technology, Inc., 8 Conn.App. 254, 265-66, 513 A.2d 144 (1986). Thus, double damages will not be awarded for a mere breach of contract. Id. Such a determination presents an issue of fact properly resolved by the trier of fact. However, whether Crimmins’ severance allowance and accrued vacation pay constitute “wages” under § 31-72 can be resolved. Wages are defined as “compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission, or [1559] other basis of calculation.” Conn.Gen.Stat. § 31-71a(3). Severance Allowance Neither this court’s research nor the parties’ have revealed any Connecticut case law construing severance pay as “wages” under § 31-71a. The “severance allowance” offered to Crimmins was consideration for his agreement to remain with the company until May 31, 1987 and to assist the company’s relocation. Royal contends that severance pay is not “compensation for labor or services rendered by an employee,” Conn.Gen.Stat. § 31-71a(3), but rather is a benefit conferred upon an employee after the termination of employment in recognition of past services and to ease any economic readjustment attributable to dismissal. See Mace v. Conde Nast Publications, Inc., 155 Conn. 680, 685, 237 A.2d 360 (1967). Plaintiff does not present a classic example of severance pay in that the agreement which provided it was entered into after Royal had stated that it considered Crimmins’ employment contract terminated. If Crimmins had not agreed to the terms of the December 23 letter, Royal’s stated position was that his employment was terminated and no severance pay would have been agreed upon. It is neither necessary nor appropriate to speculate what other course the parties might have followed had the December 23 letter not been agreed to. The six month “severance allowance” was offered in the face of Royal’s stated position that Crimmins’ employment was at an end. The offer thus had the purpose of inducing Crimmins to remain with Royal, while his replacement was sought and to aid in relocation. It was in essence a new agreement under which Crimmins agreed to remain with Royal until May 31, 1987 for which he was to receive a salary and thereafter severance was to be paid equal to six months’ salary. In construing the definition of wages, two Connecticut Superior Courts have looked to cases construing the definition of “total wages” under the unemployment compensation statute, Conn.Gen.Stat. § 31-222(b)(l), for guidance. See Palladino v. Northeast Graphics, Inc., No. 347358 (Conn.Super.Court, Hartford/New Britain at Hartford, Mar. 8, 1989), Memorandum of Decision at 3; Balet v. Town of East Hartford, 13 C.L.T. 23 (Conn.Super.Court, Hartford/New Britain at Hartford, Apr. 29, 1987). In McGowan v. Administrator, 153 Conn. 691, 220 A.2d 284 (1966), the court noted that the term wages, defined under § 31-222(b) as “all renumeration for employment,” “connotes all renumeration for any service performed in the course of an employer-employee relationship.” Id. at 693, 220 A.2d 284. Thus, the court held that “[s]inee, in connotation of the statute, wages cease when employment does, severance pay cannot be considered wages.” Id. The “severance allowance” in issue is not found to be within the § 31-71a(3)’s definition of wages. The allowance was an additional payment provided to induce Crim-mins to remain with Royal for the interim relocation period and not “compensation for labor or services rendered.” The statute, which provides an extraordinary statutory remedy, is concerned with timely payment of wages and was enacted to discourage the unilateral withholding of wages by an employer. The “severance allowance” in issue was a bonus above and beyond the regular salary drawn by Crimmins until his termination on May 31, 1987. The six month figure appears to be an arbitrary figure provided as a bonus with no relation to any service rendered by Crimmins. Crimmins argues that Vogus’ May 12, 1987 letter imposed on him a covenant not to compete with Royal and that this is sufficient to bring the “severance allowance” within the statutory meaning of “wages.” See Kepchar, Memorandum of Decision at 19. In his May 12 letter, Vo-gus asserted that Crimmins’ severance allowance was contingent on a covenant not to compete contained in his July 14, 1976 employment agreement. However, as previously noted, Royal considered his prior employment agreement voided by his failure to agree to relocation and the parties entered into a subsequent employment agreement on December 31, 1987 which did not provide for any further covenant or ongoing commitment not to compete. In fact, Crimmins, in his May 26,1987 letter in [1560] response to Yogus, expressed his preference of receiving the severance allowance in one lump sum and asserted that he was only bound by the December 31 agreement and felt no obligation not to compete after his May 31 termination date.1 See Exhibit H to Crimmins’ 11/9/87 Affidavit. Accordingly, the “severance allowance” is not found to be in consideration of a covenant not to compete, but was a bonus for the agreement to assist in relocation and is not within the definition of wages under § 31-71a(3). Accrued Vacation Pay Crimmins asserts that his accrued but unpaid vacation pay at the time of his termination constitutes wages as defined in § 31-71a(3). In Palladino, Memorandum of Decision at 3, the Superior Court held that “accrued vacation pay did not constitute ‘wages’ as that term is contemplated” by Conn.Gen.Stat. § 31-72. The court reasoned that the statute draws a distinction between “accrued fringe benefits” which includes vacation pay, see Conn.Gen.Stat. § 31-76k, and “wages” and that § 31-72 provides for double damages for failure to make wage payments, but makes no mention of the failure to pay fringe benefits upon termination as required by § 31-76k. Id. at 2-3. If the legislature has intended to include fringe benefits or accrued vacation pay in the definition of “wages” in § 31-71a(3), it could have expressly done so in light of the distinction drawn in the statutory scheme. In addition, the Connecticut Supreme Court in McGowan, 153 Conn. 691, 220 A.2d 284, in defining “wages” in the context of unemployment compensation, held that the term wages connotes all renumeration for service performed in the course of the employment relationship and that vacation pay did not constitute wages, but was payment “by way of compensation for loss of wages.” Id. at 693, 220 A.2d 284. Accrued vacation pay provided upon termination is not akin to wages for services rendered, but is a fringe benefit not within the definition of wages. Conn.Gen.Stat. § 31-71a(3). Accordingly, since the renumeration in issue is not found to be wages for the purposes of a statutory wage claim under § 31-72, Royal’s motion for summary judgment on Counts Two and Four is granted. Summary Royal’s motion for summary judgment is granted as to Counts Two and Four and denied as to Counts One and Three. SO ORDERED. Footnotes [1] Whether plaintiff had an ongoing obligation to abide by the non-competition clause is not, and need not be, here decided. As non-competition was a term in the arrangement reached on December 31, 1987, it could only have been found in the prior agreement. If it was still enforceable after December 31, 1987, it would only have derived from the earlier agreement (as Vogus asserted in his letter of May 12). Thus, it would not be consideration for the severance pay agreed on as part of the December 31, 1987 understanding. [1569] by, and on a nationally telecast edition of ABC Business World News.