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The Fourth Circuit Court of Appeals ruled last week that an employee was not entitled to recover the value of unvested stock shares under Maryland Wage Payment and Collection Law (MWPCL) because New Jersey law applied to her employment contract in a conflict of laws scenario.
Hillary Kunda sued her former employer, C.R. Bard, Inc. (Bard), alleging that Bard violated Maryland law when it failed to pay her for unvested shares earned through the company's long-term profit sharing plan after she left the company. Kunda claimed that, despite a New Jersey choice-of-law provision in the plan agreement, Maryland law applied to the contract because the MWPCL constitutes a fundamental public policy in Maryland.
The district court granted Bard's motion to dismiss for failure to state a claim, and, last week, the Fourth Circuit Court of Appeals affirmed that decision.
Kunda participated in Bard's elective "Optimum Program" for the calendar years of 2002, 2003, and 2005. By electing to participate in the Optimum Program, eligible sales representatives, like Kunda, 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. Bard would match each Elective Unit with two to 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.
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 sued, asserting that she was entitled to the remaining vested Premium Units.
In a choice-of-law showdown, Maryland employs Section 187 of the Second Restatement of Conflict of Laws to determine whether Maryland law trumps another state's law. In this case, the issue is whether Bard's New Jersey choice-of-law contract is contrary to a fundamental Maryland policy.
Kunda claimed that Maryland law should apply to her case because the MWPCL is a fundamental public policy. The Fourth Circuit Court of Appeals disagreed, noting that, while no Maryland state court has considered the issue, Maryland district courts have ruled three times that the MWPCL "does not appear to represent a fundamental public policy."
Furthermore, the MWPCL contains no express language of legislative intent that the law is a fundamental Maryland public policy, or an indication that contractual provisions that conflict with the law will be void and unenforceable in the state.
Do you think the Fourth Circuit Court of Appeals came down on the right side of this conflict of laws question? Should the Maryland legislature take steps to define the MWPCL as a fundamental public policy?
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