Who is an “Employee” Under the Maryland Wage Payment and Collection Act?

Date: February 20, 2002

In the case of Baltimore Harbor Charters, Inc. v. Frank Ayd III (Sept., 2001), the Maryland Court of Appeals ruled that the founder and former president of Baltimore Harbor Charters, Inc., can keep the $66,000 he won in his breach of contract suit against the company. and can also try to treble that amount in a new trial under the Maryland Wage Payment and Collection Act.

According to Maryland’s highest court, the trial judge erred by keeping the wage payment claim from the jury based on the plaintiff Ayd’s executive status and authority in the company. “[T]he issue of whether Ayd was an employee under the Wage Act was withheld improperly from the jury by the trial court’s dismissal," the Court of Appeals stated.

After he sold his boat chartering business to Robert Berman, Charles Ayd continued to perform managerial and consulting duties for the company. In addition, Berman named Ayd President and Treasurer and he continued to be the sole signatory on the company’s checking account. Ayd and Berman initially agreed that Ayd would continue to be paid a $200 per month administrative fee, as well as $200 as a captain’s fee for each charter. Ayd later claimed that he was also entitled to payment of $576.92 per week for management and consulting and for his duties as President and Treasurer, based on an informal action taken by the Board shortly before Berman bought the outstanding stock.

Berman refused to pay, contending that there had been no such agreement. After unsuccessful negotiations, Ayd terminated his employment with BHC and sued, alleging breach of contract, quantum meruit, unjust enrichment, and a claim for unpaid wages under the Maryland Wage Payment and Collection Act (Wage Act). BHC filed a counterclaim.

The trial court dismissed Ayd’s claim under the Wage Act, and the jury returned a verdict in favor of Ayd on two of his other claims. The Court of Special Appeals concluded that the trial court erred in dismissing Ayd’s Wage Act claim. The Court of Appeals granted BHC’s petition for certiorari and remanded the case for a trial on Ayd’s claim under the Wage Act.

The Maryland Wage Act provides a private cause of action by which employees can recover unpaid wages from their employers. Ayd’s Wage Act claim hinged on whether he could be classified as an employee of BHC. According to the Court, while the Act is silent as to the definition of “employee,” that term may be interpreted using common-law distinctions observed between the terms employees or agents and those classified as independent contractors.

On remand for a new trial, the Court of Appeals instructed the trial court to take evidence and analyze the following issues: (1) whether Berman exercised control over Ayd’s work; (2) whether Ayd performed services typically associated with the boat charter business, (3) whether Ayd acted in the interest of the company and not in his own interest when performing the work; (4) whether BHC supplied the equipment used; and (5) whether Ayd was paid regularly and had an ownership interest in the company.

The outcome of this case will be closely watched in that the issue of whom is an employee under the Maryland Wage Payment and Collection Act has never been conclusively resolved. In other words, employers must be cautioned that titles such as “general manager”, “superintendent”, or even “President” do not always mean that the individual occupying such position is automatically exempt from “employee” status and therefore may be eligible for protection under the Wage Payment Act.