A Participant Lawsuit Against Employer Crosses State Lines

 December 29, 2011 (PLANSPONSOR.com) - An employee sued her former employer, alleging it had failed to pay her for unvested shares earned through the company's profit sharing plan.

Hillary Kunda sued her former employer, C.R. Bard, Inc., alleging that the company violated Maryland law when at the time of her termination, it failed to pay her for unvested shares earned through the company’s profit sharing plan. She argued that despite a New Jersey choice-of-law provision in the plan agreement, Maryland law applies to the contract because the Maryland Wage Payment and Collection Law (MWPCL) constitutes a fundamental Maryland public policy.

The district court granted Bard’s motion to dismiss for failure to state a claim on which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). The court found that New Jersey law applies to the contract because the MWPCL is not a fundamental public policy of Maryland and that the unvested shares are not wages under New Jersey law. Furthermore, the court held that even if Maryland law applied, the unvested shares are not wages under the MWPCL and thus were never owed to Kunda.  The United States Court of Appeals for the Fourth Circuit affirmed the district court’s decision.

Bard, a New Jersey corporation, hired Kunda, a Maryland resident, as a sales representative in 2001. When hired, Kunda’s compensation included a $1,500 semi-monthly salary, commissions, and other fringe benefits.

In 2003, Bard implemented the “Bard Optimum Program,” an “equity based long-term incentive program for top performing sales representatives,” in order to recruit and retain top talent by offering an “opportunity to defer bonus and commission awards on a pre-tax basis.” The plan contained a New Jersey choice-of-law provision.

Participation in the Optimum Program was entirely elective, with eligibility determined on a yearly basis. To be eligible, sales representatives had to meet certain criteria, including ranking among the top 50 percent of the domestic sales force and maintaining a fully satisfactory performance rating for the year.

By electing to participate in the Optimum Program, eligible sales representatives deferred part of their compensation in return for fully vested Elective Units, which could be redeemed for a number of restricted shares of Bard's stock determined by the stock price on the date of issuance. Moreover, Bard would match each Elective Unit with two, three, or four unvested Premium Units, also determined by the stock price on the date of issuance.A participant's right to fully vested Premium Units depended on continued employment with Bard for a seven-year vesting period after issuance of the unvested Premium Units. The Premium Units would not vest if the employee no longer worked for Bard at the end of the vesting period except in cases of death, permanent disability, or retirement.

Kunda participated in the Optimum Program for the calendar years of 2002, 2003, and 2005; she received four Premium Units per Elective Unit in 2002 and two Premium Units per Elective Unit in 2003 and 2005. In 2008, Bard terminated Kunda's employment without cause. Apart from certain Premium Units from 2002 that Bard vested in Kunda on an accelerated schedule, Kunda's Premium Units were unvested at the time of termination, and Bard deemed Kunda's Premium Units forfeited.

Kunda brought suit against Bard in the United States District Court of Maryland, claiming that she was entitled to the remaining vested Premium Units not given to her upon termination. The district court granted Bard's motion to dismiss pursuant to Rule 12(b)(6). First, the court held that New Jersey law, and not Maryland law, applied. Second, the court held that Kunda had failed to state a valid claim under the New Jersey Wage Payment Law (NJWPL) or any other New Jersey law. Third, the court found that even if Maryland law applied, Kunda had no claim under the MWPCL.