MINNEAPOLIS PERSONAL INJURY ATTORNEY  
attorney Michael E. Douglas Attorney at Law
  Personal Injury Attorney
  St. Paul Workers Compensation Lawyer work comp attorney
 > About Me
   :: My Commitment
   :: Our Community
   
 > Legal Practice Areas
  twin cities comsumer lawPersonal Injury
   :: Traffic Accidents
   :: Medical Malpractice
   :: Social Security Disability
   :: Premises Liability
   :: Wrongful Death
   :: Dog Bite
   :: Back/Spinal/Neck Injuries
   :: Whiplash
   :: Defective Medical Devices
   :: Defective Drugs
  Minnesota Personal InjuryWorkers Compensation
  St. Paul personal injuryConsumer Law
   :: Debt Collection
   :: Repossessions
   :: Foreclosures
   :: Loan, Credit, Banking
   :: Arbitration Agreements
   :: Deception and Fraud
   :: Auto Fraud / Lemon Law
   :: Warranties
   :: Predatory Lending
   
 > Contact Us
   :: Contact Us
 

Law Offices of Michael E. Douglas
P.O. Box 251551
Woodbury, Minnesota 55125-6551
   

 Saint Paul Lawyer
 
 mdouglas@injurylawtwincities.com

 

Lee v. Fresenius Medical Care, Inc.: EMPLOYMENT - pay timing for discharged employee; paid time off; dissent

1
STATE OF MINNESOTA
IN SUPREME COURT
A05-1887
Court of Appeals Anderson, Paul H., J.
Dissenting, Page, J.
Susan Lee,
Respondent,
vs. Filed: November 15, 2007
Office of Appellate Courts
Fresenius Medical Care, Inc.,
Appellant.
S Y L L A B U S
Minnesota Statutes 181.13(a) (2006) is a timing statute, which determines when
an employer must pay a discharged employee earned wages.
An employee has not earned the right to payment in lieu of paid time off when she
has failed to or cannot meet the conditions in the employment contract entitling her to
that payment.
Reversed.
Heard, considered, and decided by the court en banc.
2
O P I N I O N
ANDERSON, Paul H., Justice.
In August 2004, Susan Lee filed a claim in Saint Louis County Conciliation Court,
alleging that her former employer, Fresenius Medical Care, Inc., failed to compensate her
for paid time off that she had earned and was entitled to receive upon Freseniuss
termination of her employment. The conciliation court ordered Fresenius to pay Lee for
the paid time off plus fees and then granted Freseniuss motion for appeal and removal to
district court. The district court granted summary judgment in favor of Fresenius. Lee
then appealed to the Minnesota Court of Appeals, which reversed the district court,
concluding that under Minn. Stat. 181.13(a) (2006), Fresenius was obligated to
compensate Lee for the paid time off she had earned up to the time her employment was
terminated. We reverse.
In December 1991, respondent Susan Lee began working as a dialysis patient care
technician for Miller-Dwan Hospitals dialysis unit in Duluth, Minnesota, and she
continued in that position when appellant Fresenius Medical Care, Inc., purchased Miller-
Dwans dialysis unit in September 2000. Fresenius operates a dialysis clinic, which
treats patients with injured or diseased kidneys. Dialysis is a means by which a patients
blood is filtered through a machine to remove water and waste, a process that aids the
kidneys in performing their normal function. As a patient care technician for Fresenius,
Lees responsibilities included assisting registered nurses with pre- and post-dialysis
patient assessments and monitoring and documenting dialysis treatment parameters.
3
Around the time Lees employment with Fresenius began, Fresenius issued a copy
of its employee handbook to Lee, and she signed an acknowledgement form that she
received the handbook. The employee handbook issued to Lee offered vacation pay, or
paid time off,1 on the following terms:
The Paid Time Off (PTO) program allows you [employee] to receive paid
time off based on individual preferences and varying needs. * * * You
accrue PTO hours at a set rate per pay period. Your accrual depends on your
length of service and number of hours worked. * * *
New full-time employees begin to earn PTO upon hire at a rate of 7.69 hours
per pay period (200 hours, or 5 weeks per year). PTO accrual is pro-rated
for part-time employees. * * *
* * * *
PTO may be requested and scheduled at any time during the year. Approval
of requests will be based on the timeliness of your request, authorization by
the appropriate supervisor, and the needs of the department.
Lee was paid every two weeks, and based on her number of years worked and the 30
hours worked per week, she accrued 8.08 hours of paid time off per pay period at the
time her employment with Fresenius was terminated.
The employee handbook provides that an employee who resigns will be paid for
earned but unused paid time off if she gives proper notice, but the handbook specifies that
an employee who resigns without giving proper notice or who is terminated for
misconduct will not be eligible for payment of earned but unused paid time off:
1 The parties use the terms paid time off and vacation pay interchangeably.
Because Freseniuss employee handbook refers to paid time off, we use that term more
frequently in this opinion, but to the extent that the lower courts and cited case law use
the term vacation pay, we do not distinguish between these terms.
4
An employee who gives proper notice * * * is eligible to be paid for earned
but unused Paid Time Off (PTO). Unless otherwise required by state law, if
you do not give acceptable notice, you may not be paid for earned but
unused PTO, and you may not be considered eligible for re-employment. In
addition, if your employment is terminated for misconduct, you will not be
eligible for pay in lieu of notice or payment of earned but unused PTO unless
required by state law.
(Emphasis added.)
On August 13, 2002, Fresenius terminated Lee for what was described as a
pattern of behavior, which resulted in performance and patient safety issues.
Fresenius cited six incidents, occurring between June 6, 2002, and August 8, 2002, that
led to its decision to terminate Lee. Fresenius provided documentation for the six
incidents.
The first incident report cited Lee for her failure to immediately report a broken
valve in the water room, necessitating an emergency type procedure whereby
patients were temporarily removed from their dialysis machines. When Lees supervisor
confronted Lee about the incident, Lee reportedly stated that she didnt want to get
yelled at if she told. The second incident report cited Lee for her failure to immediately
take a patient off a dialysis machine after the patient reported cramping. Lee reportedly
failed to inform the on duty registered nurse about the patients cramping.
The third incident report cited Lee for her failure to take proper precautions to
protect patients from colds when she coughed in the vicinity of patients without wearing
a mask or using a tissue. The report indicates that Lee wore a mask while engaging in
direct patient care but failed to do so at other times, although according to the report, Lee
alleged that she covered her mouth with her hand. After being warned that she was to
5
either cover her mouth with a mask or tissue, Lee was reportedly seen coughing later that
same day without covering her mouth.
The final three reported incidents all occurred on the same day. First, Lee
reportedly failed to wear proper protective attire, consisting of an apron and face mask,
when putting a client onto a dialysis machine. Lee allegedly claimed that the protective
attire was too hot. Second, Lee was cited for unnecessarily requesting assistance from
her supervisor due to concerns with a patient. Lees supervisor apparently concluded that
the situation had not been urgent. The final incident report cited Lee for offering a
patient a bag of wild mushrooms, which her supervisor determined might be unsafe for
the patient.
Lee states in an affidavit that before she received the six discipline citations in the
summer of 2002, she had earn[ed] the highest of ratings and compliments for her work.
She further states that things changed in 2002 because she became interested and
involved in unionizing her work group. Lee now alleges that after beginning her union
activities, management began to harass her and charge her with the disciplinary citations,
which ultimately led to her termination.2 Lee states that after her termination, she was
compensated for her accumulated hourly wages but not her accumulated paid time off.
2 Lee alleges on appeal that there is a genuine issue of material fact as to whether
she was terminated as a result of her union activity and not because of any misconduct or
just cause. At a district court hearing on the parties cross-motions for summary
judgment, Fresenius alleged that Lee had initiated proceedings before the National Labor
Relations Board and that Lees complaint was dismissed because the administrative body
determined there was no basis for the complaint. We find no evidence in the record
regarding the union issues or bases for termination that were properly before the district
(Footnote continued on next page.)
6
In August 2004, approximately two years after her termination, Lee filed a claim
in Saint Louis County Conciliation Court, seeking to recover pay in lieu of vacation time,
or paid time off, that she had earned but had not used before her termination. Lee alleged
that she had accrued 181.86 hours of paid time off, worth ,011.60. The conciliation
court ordered judgment in favor of Lee, awarding her ,053.80, which included the paid
time off compensation demanded by Lee and a statutory penalty imposed for Fresniuss
failure to pay within 24 hours of Lees demand. Fresenius appealed the conciliation
courts order, and the conciliation court granted Freseniuss motion for appeal and
removal to Saint Louis County District Court.
Fresenius and Lee filed cross-motions for summary judgment, and the district
court granted Freseniuss motion and denied Lees motion. The court noted that under
Minn. Stat. 181.13 (2006), an employer is obligated to compensate an employee for
vacation pay if the employee meets the eligibility requirements. The court concluded that
eligibility requirements are determined by the employment contract between the
employer and the employee. The court found that the employee handbook provision that
made terminated employees ineligible for earned but unused paid time off met the criteria
necessary to constitute a binding employment contract. Therefore, the court granted
Freseniuss motion for summary judgment, concluding that Fresenius was not
(Footnote continued from previous page.)
court on the summary judgment motion other than the two statements in Lees affidavit
that she had earned high ratings for her work and then became involved in union
activities. We note the parties disagreement only insofar as it informs Lees argument
on appeal that she was wrongfully terminated.
7
contractually obligated to compensate Lee for the paid time off after she was terminated
for misconduct.
Lee appealed the district courts order to the court of appeals, which reversed the
district court. Lee v. Fresenius Med. Care, Inc., 719 N.W.2d 222, 223 (Minn. App.
2006). The court of appeals noted that under section 181.13(a), an employer must
compensate a terminated employee for wages earned but unpaid at the time of discharge,
and Minnesota case law has determined that unused vacation pay constitutes wages for
purposes of the statute. 719 N.W.2d at 224. The court of appeals agreed with the district
court that an employers liability for an employees vacation pay is wholly contractual,
but the court of appeals stated that the district court fail[ed] to recognize the principle
that [a] party cannot provide by contract what is prohibited by statute. Id. at 225
(quoting Winnetka Partners Ltd. Pship v. County of Hennepin, 538 N.W.2d 912, 914
(Minn. 1995)).
The court of appeals concluded that section 181.13(a) requires an employer to
compensate an employee for accrued but unused vacation time, and therefore the
provision in Lees contract that made employees terminated for misconduct ineligible for
paid time off is legally ineffective. 719 N.W.2d at 226. The court of appeals then
reversed the district courts order, concluding that the terminated-for-misconduct
provision in the handbook cannot be legally enforced. Id. We granted Freseniuss
petition for review.
8
I.
Lee asks us to interpret her employment agreement with Fresenius in light of
section 181.13(a) and determine whether she is entitled to payment in lieu of the paid
time off that she alleges she earned. On appeal from summary judgment, we determine
whether there are any genuine issues of material fact and whether the district erred in
applying the law. Isles Wellness, Inc. v. Progressive N. Ins. Co., 703 N.W.2d 513, 516
(Minn. 2005). We view the evidence in the light most favorable to the party against
whom summary judgment was granted. Hickman v. SAFECO Ins. Co. of Am., 695
N.W.2d 365, 369 (Minn. 2005). Lee also argues that if we conclude that she is not
entitled to payment in lieu of the paid time off in dispute, then she is entitled to a trial on
the issue of whether she was wrongfully terminated.
We first consider whether Lee is entitled to payment in lieu of her paid time off.
Fresenius argues that based on Minnesota case law, section 181.13(a) permits an
employment agreement between an employer and its employees to define when wages
are earned. Fresenius further argues that because Lee was terminated for misconduct, the
terms of the employment contract make her ineligible for payment in lieu of paid time
off. Contract interpretation is a question of law which we review de novo. Travertine
Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004). Statutory
construction is also a legal issue reviewed de novo. Vlahos v. R&I Constr. of
Bloomington, Inc., 676 N.W.2d 672, 679 (Minn. 2004). When construing statutes, we
attempt to ascertain and effectuate the intention of the legislature. Minn. Stat. 645.16
(2006). We construe statutes to effect their essential purpose but will not disregard a
9
statutes clear language to pursue the spirit of the law. Eischen Cabinet Co. v.
Hildebrandt, 683 N.W.2d 813, 815 (Minn. 2004).
Can an Employment Agreement Govern Eligibility for Paid Time Off?
Before we determine what effect, if any, section 181.13(a) has on Lees eligibility
for payment in lieu of paid time off, we must determine whether an employment
agreement may govern an employees eligibility for paid time off, and if so, whether a
valid employment agreement existed between Fresenius and Lee. Fresenius argues that
an employees eligibility for paid time off is governed by the employment agreement
between the employer and its employee. In Tynan v. KSTP, Inc., we noted that liability
as to vacation-pay rights is wholly contractual. 247 Minn. 168, 177, 77 N.W.2d 200,
206 (1956). The court of appeals reached a similar conclusion in Brown v. Tonka Corp.,
stating that [a]n employers liability for employees vacation pay is wholly contractual.
519 N.W.2d 474, 477 (Minn. App. 1994) (citing Tynan, 247 Minn. at 177, 77 N.W.2d at
206). We conclude that the rule articulated in Tynan and cited in Brown is not in conflict
with Minnesota statutes, which do not provide for employee vacation pay as of right.
Accordingly, when employers choose to offer paid time off as a benefit, employers and
employees can contract for the circumstances under which employees are entitled to paid
time off and payment in lieu of paid time off, so long as the contract provisions are not
prohibited by or otherwise in conflict with a statute.
Did an Enforceable Employment Contract Exist Between Fresenius and Lee?
We next determine whether an employment contract existed between Fresenius
and Lee. Fresenius asserts that its employee handbook is an enforceable, unilateral
10
employment contract with its employees. We have previously articulated the
circumstances under which an employee handbook may constitute a binding unilateral
employment contract. Pine River State Bank v. Mettille, 333 N.W.2d 622, 625-27 (Minn.
1983). In Pine River, we said the terms in an employee handbook constitute a contractual
offer if those terms are definite in form and are communicated to the employee through
dissemination of the handbook. Id. at 626. Once a handbook is received by an employee,
[t]he employees retention of employment constitutes acceptance of the offer, and by
continuing to stay on the job, although free to leave, the employee supplies the necessary
consideration for the offer. Id. at 626-27.
The employee handbook at issue here was received by Lee, evidenced by her
acknowledgment that she received the handbook. Further, Fresenius retained Lee after
she received the handbook and Lee continued on the job for almost two years, until her
termination. We conclude that Freseniuss employee handbook constitutes an
enforceable employment contract between Fresenius and Lee. Therefore, we conclude
that the parties are bound by the terms of the handbook to the extent that they are valid
under Minnesota law.
Under the terms of Lees employment contract with Fresenius, Lee is not entitled
to payment in lieu of her paid time off because the terminated-for-misconduct provision
in the employment contract explicitly makes Lee ineligible for payment. The
employment contract only makes employees eligible for payment in lieu of paid time off
if an employee resigns with proper notice, which condition Lee could not meet because
she was terminated for misconduct. Importantly for our analysis, Lee neither asserts that
11
Fresenius breached its employment contract, nor claims that the terms of the employment
contract entitle her to payment in lieu of paid time off.
Is Paid Time Off Wages for Purposes of Section 181.13(a)?
Because Lee acknowledges that Fresenius did not violate the employment
contract, she essentially makes a statutory rather than a contractual argument. She argues
that notwithstanding the terms of her employment contract with Fresenius, she is entitled
to payment in lieu of her paid time off because the terminated-for-misconduct provision
in the employment agreement is invalid under Minn. Stat. 181.13(a). Section 181.13(a)
provides:
When any employer employing labor within this state discharges an
employee, the wages or commissions actually earned and unpaid at the time
of the discharge are immediately due and payable upon demand of the
employee. If the employees earned wages and commissions are not paid
within 24 hours after demand, whether the employment was by the day,
hour, week, month, or piece or by commissions, the employer is in default.
The discharged employee may charge and collect the amount of the
employees average daily earnings at the rate agreed upon in the contract of
employment, for each day up to 15 days, that the employer is in default, until
full payment or other settlement, satisfactory to the discharged employee, is
made.
Lee asserts that her paid time off constituted wages under section 181.13(a), and
because she has actually earned her paid time off, she must be compensated for that
paid time off.
The legislature has not specifically defined the term wages for purposes of
Minn. Stat. 181.13(a). Therefore, the first step in this part of our analysis is to
determine whether paid time off, or vacation pay, constitutes wages for purposes of
section 181.13(a). In Tynan, we did not decide the issue of whether paid vacation time is
12
part of an employees wages in Minnesota because it was unnecessary for resolution of
the issues presented in that case. 247 Minn. at 176, 77 N.W.2d at 205. But we did
observe that prevailing case law from other jurisdictions concludes that paid vacation
time is part of an employees wages and not a gratuity. Id. at 177, 77 N.W.2d at 206; see
also Kohout v. Shakopee Foundry Co., 281 Minn. 401, 403-04, 162 N.W.2d 237, 238-39
(1968) (noting that the Second Circuit Court of Appeals concluded that wages included
vacation pay and applying the statute of limitations applicable to wage claims to claims
for vacation pay); 19 Samuel Williston & Richard A. Lord, A Treatise on the Law of
Contracts 54.35 (4th ed. 2001) (Vacation pay has also been held to constitute wages
or compensation by a number of courts.). In addition, we note that the Minnesota
Court of Appeals has concluded that an agreement to pay vacation pay to employees
made to them before they performed their services, and based upon length of service and
time worked, is not a gratuity but is a form of compensation for services. Brown, 519
N.W.2d at 477 (quoting Tynan, 247 Minn. at 177, 77 N.W.2d at 206). We note that this
language in Tynan was quoting from a New Jersey case as an example of the majority
rule in other states; but, we did not explicitly adopt this rule in Minnesota. Nevertheless
the court of appeals apparently concluded that this language in Tynan was binding. To
the extent we have not spoken explicitly on this rule, we now conclude that paid time off
or vacation pay constitutes wages for purposes of section 181.13(a).3
3 We note that for purposes of other statutes, the legislature has provided a
definition for the term wage or wages, intending those definitions to apply only to
select statute sections. See Minn. Stat. 177.23, subd. 4, 181.66, subd. 4 (2006). We
(Footnote continued on next page.)
13
Is Lee Entitled to Payment for Her Earned but Unused Paid Time Off?
Fresenius argues that because Lee was terminated for misconduct, she isunder
the terms of the employment contractineligible for payment in lieu of paid time off.
This argument is premised on Freseniuss contention that section 181.13(a) does not
prohibit the specific provision in Freseniuss employment contract with Lee, which
provides that if your employment is terminated for misconduct, you will not be eligible
for pay in lieu of notice or payment of earned but unused PTO [paid time off] unless
required by state law.
In support of its position, Fresenius asks us to interpret section 181.13(a) as
permitting an employment contract to determine when wages are actually earned for
purposes of the statute. Fresenius then asserts that Lee is not entitled to the compensation
under section 181.13(a) because of the terminated-for-misconduct provision. Lee asserts
that this contract provision is prohibited by state law because section 181.13(a) requires
employers to compensate discharged employees for wages actually earned. Lee argues
that her paid time off constitutes wages actually earned under the statute.
(Footnote continued from previous page.)
emphasize that our conclusion that paid time off or vacation pay constitutes wages for
purposes of section 181.13(a) applies only to this section and not to other statutes where
the legislature used the term wage or wages, because in other sections where the term
is undefined, it does not appear that the legislature intended the term to encompass earned
but unused paid time off or vacation time. See, e.g., Minn. Stat. 181.101 (2006)
(Every employer must pay all wages earned by an employee at least once every 31 days
* * *.).
14
The term actually earned is not defined in the Minnesota Statutes, and we have
never had an occasion to interpret this term in light of section 181.13(a).4 Lee essentially
argues that section 181.13(a) creates a substantive right, allowing a terminated employee
to use that statute as the basis for a claim for wages, even when the employees
employment contract denies payment for those wages. For the reasons discussed below,
it does not appear that the legislature intended to create a substantive right to vacation
pay in section 181.13(a). Rather, we conclude that section 181.13(a) is a timing statute,
mandating not what an employer must pay a discharged employee, but when an employer
must pay a discharged employee.
This interpretation of section 181.13(a) comports with our rule that when a statute
provide[s] for a penalty, [the statute] should be strictly construed. Chatfield v.
Henderson, 252 Minn. 404, 410, 90 N.W.2d 227, 232 (1958). As we noted in Chatfield,
section 181.13(a) provides for a civil penalty when an employer fails to pay an employee
after discharge upon demand of the employee. Id., 90 N.W.2d at 232. If we interpreted
section 181.13(a) as creating a substantive right for discharged employees to challenge
non-payment of wages, employers could be subject to civil penalties for failing to pay
wages that the employer had no reasonable way of predicting it owed. Our conclusion
4 The court of appeals has addressed the term actually earned under section
181.13(a) in conjunction with alleged unpaid commissions but concluded only that the
employment contract may be considered in determining whether the commission was
owed to a discharged employee. Holman v. CPT Corp., 457 N.W.2d 740, 743 (Minn.
App. 1990) (concluding that because the employee handbook had no provision on the
subject, the issue of whether the employee had actually earned the commissions was a
question of fact inappropriate for resolution on a summary judgment motion).
15
that section 181.13(a) must be strictly construed is amplified when we consider that
Minn. Stat. 181.74 (2006) holds employers criminally liable for refusing to provide
contracted-for benefits to employees under employment agreements.
Minnesota law concerning vacation pay further supports our interpretation of
section 181.13(a). As stated above, Minnesota law does not provide for employee
vacation time or pay as of right; rather, the law permits employers to choose whether to
grant employees vacation benefits. When vacation benefits are granted, employers have
considerable discretion in choosing how and whether to compensate employees for
vacation time. If an employer does offer an employee paid time off, what is earned
during the specified pay period during which paid time off accrues is not a right to a
direct, monetary payment; what is earned is instead a right granted by the employer for
the employee to take time off from work in the future but nevertheless be paid, subject to
the terms specified in the employment contract that grants paid time off. Paid time off is
different than employees hourly wages, which represent payment for hours that
employees have already worked, and employers must pay these wages to the employee
within a statutorily-defined time period. See Minn. Stat. 181.101 (2006).
No statute or case law in Minnesota mandates the terms on which paid time off
must be offered, or that it be offered at all. As we stated in Tynan, employers liability
as to vacation-pay rights is wholly contractual. 247 Minn. at 177, 77 N.W.2d at 206.
Therefore, employers are permitted to set conditions that employees must meet in order
to exercise their earned right to vacation time with pay. For example, employers may
require employees to request in advance and be granted employer permission to use paid
16
time off. Presumably this is done so that employees are not absent from work at
particularly busy times or so that multiple employees are not taking time off concurrently,
thereby harming or disabling the employers ability to function. Freseniuss own
handbook terms regarding paid time off impose such conditions: [a]pproval of requests
will be based on the timeliness of your request, authorization by the appropriate
supervisor, and the needs of the department.
In other words, employers may offer, and employees may accept, a contract
provision that attaches conditions to the right to accrued vacation wages, whether in the
form of actual paid time off or payment in lieu of paid time off. To the extent that paid
time off is considered wages, such conditions define those wages. And to the extent that
wages in the form of paid time off (or, as here, payment in lieu of paid time off) have
been earned, such conditions define what has been earned. Because section 181.13(a)
does not itself create a substantive right to vacation pay, it does not prohibit the
contractual definition of vacation wages as subject to conditions expressed in the
contract.
Indeed, in Tynan we acknowledged that contractual terms may validly condition
the right to payment in lieu of paid time off. The dissents emphasis on the in legal
effect choate language in Tynan fails to take into account the courts immediately
subsequent discussion of a Michigan case in which the contract provided for
compensation in lieu of vacation subject to two conditions: the employees had to have
completed at least 6 months of work and also had to be on the seniority list of the
company on December 1. 247 Minn. at 180, 77 N.W.2d at 207 (discussing Treloar v.
17
Steggeman, 333 Mich. 166, 167, 52 N.W.2d 647, 648 (1952)). We did not question the
enforceability of those conditions, but rather noted, both at the beginning of the
discussion5 and at the end,6 that the contract at issue in Tynan did not contain the second
condition present in the contract reviewed in Treloar. See also Simons v. Midwest Tel.
Sales & Service, Inc., 433 F. Supp. 2d 1007, 1011 (D. Minn. 2006) (denying a claim
under section 181.13(a) for vacation pay after termination because contract conditioned
vacation pay on present and continued employment and stated You must be employed
at least one (1) week after your Vacation.).7
Lee argues that Minnesota case law has never allow[ed] an employer to refuse to
pay a terminated employee benefits that have already been earned and vested. Lee
asserts that in essence Fresenius is proposing that it be allowed to enforce a condition
subsequent to payment of earned and vested benefits. We disagree. Fresenius chose to
offer the benefit of paid time off, but subject to conditions. Although Lee had earned the
right to paid time off, her employment contract provided that her use of and right to
5 Section 3.08 makes no such provision as was done in the case of Treloar v.
Steggeman * * *. Tynan, 247 Minn. at 180, 77 N.W.2d at 207.
6 There is no such definite prescribed condition precedent to be found under the
provisions of section 3.08 granting vacations with pay in the case at bar. Tynan, 247
Minn. at 180, 77 N.W.2d at 207.
7 The dissent states that the decision to deny vacation pay in Simons was based on a
provision that vacation pay accrued at the end of each quarter. But this was an alternative
reason. The court first explained that: The plain language of the contract supports the
argument that Simons is not entitled to compensation for any vacation days not taken
before her termination because she would not be employed by Central Telephone after
those dates. Simons, 433 F. Supp. 2d at 1011.
18
payment for paid time off was subject to conditions precedentnot conditions
subsequentof making a timely request and receiving authorization from her supervisor.
Fresenius also chose to impose conditions on the benefit of payment in lieu of paid
time off. The employment contract required Lee to give proper notice in order to be
eligible for payment in lieu of paid time off, and the contract explicitly stated that
[u]nless otherwise required by state law, if you do not give acceptable notice, you may
not be paid for earned but unused [paid time off]. Similar to an employers decision to
place conditions on an employees use of paid time off while employed, Fresenius
presumably has an incentive to place a notice condition on an employees right to receive
payment in lieu of paid time off. Such a notice condition increases the chances that an
employee will give notice before resigning by creating the additional incentive of
compensating the employee for unused paid time off. Employers presumably value an
employees notice before resignation because it allows them time to meet the needs that
less labor will inevitably create.
But Fresenius decided not to offer the benefit of payment in lieu of paid time off to
employees terminated for misconduct. We conclude that such a contractual term is not
prohibited by statute. Under Minn. Stat. 181.13(a), the vacation wages that an
employee has actually earned are defined by the employment contract between the
employer and the employee and cannot be determined through a claim brought under
section 181.13(a). In this case, Lee earned her right to use paid time off while she was
employed, but she is not entitled to payment in lieu of paid time off because she could not
meet the employment contact condition of giving proper notice after she was terminated
19
for misconduct. In accordance with our rule that vacation pay is wholly contractual, it
was lawful for Fresenius to place such a condition on Lees right to receive payment in
lieu of paid time off. Fresenius did not violate the terms of its employment contract with
Lee and therefore is not liable in this case.8
Our interpretation of section 181.13(a) conforms to court interpretations of similar
wage-payment statutes in other jurisdictions, where courts have strictly enforced the
terms of employment contracts. For example, in Indiana, a statute provides that
employees, upon separation from employment, must be paid the amount due them at
their next and usual payday. Ind. Heart Assocs., P.C. v. Bahamonde, 714 N.E.2d 309,
311 (Ind. Ct. App. 1999) (quoting Ind. Code 22-2-5-1). In Bahamonde, the Indiana
Court of Appeals stated that a terminated employee is entitled to accrued vacation pay
unless there is an agreement to the contrary. Id. at 311-12. The employer in that case
8 The dissent would treat earned paid time off as an absolute right to payment,
relying on and enforcing rigidly the contractual provisions that define only when paid
time off is earned or accrued. But the dissent would give no force to the related terms of
the contract that define what is earned in terms of paid time off or payment in lieu of paid
time offthat is, the conditions under which paid time off or payment in lieu of paid
time off are allowed. The dissent cites no authority that justifies this differential
treatment of the contractual provisions, other than to state that we should not treat wages
in the form of paid time off differently than ordinary wages. But wages in the form of
paid time off are different as a matter of law, because, as the dissent acknowledges, paid
time off is entirely a creature of contract. Here, the contract defines that form of wages
as subject to conditions, and Lee concedes that there has been no breach of the contract
terms. Finally, the question whether paid time off wages should be regulated in the same
manner as ordinary wages is a policy matter for the legislature to address. In this respect
we note again that section 181.13(a) addresses only the narrow issue of the timing of
wage payments after discharge, not the substantive issue of what must be paid as wages.
As previously noted, we are required to construe statutes to effect their essential purpose
and we may not disregard a statutes clear language. See Eischen Cabinet Co., 683
N.W.2d at 815.
20
had a policy that denied accrued vacation pay to employees who were terminated for
gross misconduct. Id. at 312. The court concluded that a terminated employee who sued
to recover accrued but unused vacation pay was not entitled to her vacation pay if she
was terminated for gross misconduct in violation of the employees written policy. Id. at
312-13.
Similarly, in Maryland, a state statute provides that an employee must be paid all
wages due for work that the employee performed before the termination of employment.
Md. Code Ann., [Labor and Employment] 3-505 (LexisNexis 2006). In Rhoads v.
F.D.I.C., a federal district court concluded that a terminated employee was not entitled to
accrued vacation pay under Maryland Law because the employee manual in effect at the
time of the employees discharge stated that [i]f you are terminated for cause by the
Association, payment for accrued vacation leave is forfeited. 956 F. Supp. 1239, 1259-
60 (D. Md. 1997), revd on other grounds, 257 F.3d 373 (4th Cir. 2001).9
9 The Montana Supreme Court reached a different result in Langager v. Crazy
Creek Prods., Inc., 954 P.2d 1169 (Mont. 1998). In this Montana case, the court
interpreted a ruling by the states board of personnel appeals, which concluded that once
the decision is made to grant a paid vacation, the employer is obligated to pay that which
is earned and due and owing. Id. at 1174. The parties differed about whether the
vacation pay in question was earned. Id. The employers personnel manual required
that employees work their regularly scheduled shifts both before and after a scheduled
vacation. Id. Therefore, the employer argued that because the employee quit before
using her accrued vacation time, she did not meet the terms of the manual. Id. The
Montana Supreme Court concluded that under Montana law, vacation pay is earned by
virtue of an employees labor and once it has accrued, it has by definition been earned.
Id. at 1175. In Langager the Montana Supreme Court was reviewing an administrative
agencys interpretation of a 1949 opinion issued by the Montana Attorney General, 954
P.2d at 1173-74; in contrast, we are interpreting a statute, which confines us to rules of
statutory construction, see, e.g., Minn. Stat. 645.16. Finally, we note that the Montana
(Footnote continued on next page.)
21
Lee suggests that the result we reach is unfair because she worked the necessary
hours to earn her right to use Freseniuss paid time off benefit. But any unfairness in
Freseniuss terminated-for-misconduct provision is tempered by the facts that
(1) Fresenius was not required to offer paid time off as a benefit, (2) Fresenius was not
required to offer payment in lieu of paid time off as a benefit, and (3) Lee consented to
the conditions placed on her right to receive paid time off and payment in lieu of paid
time off by accepting the terms of the employment contract.
We do recognize, however, that the result we reach may appear to be unfair to an
employee who believes that she has earned certain wages and believes that her employer
has divested her right to those wages based on the employers unilateral decision to
terminate her employment. If this result is unfair, we conclude that the remedy that Lee
seeks cannot be found in section 181.13(a), which is a timing statute narrowly tailored to
that purpose. Further, if we were to adopt the interpretation for which Lee argues, there
could be unintended, collateral consequences for other vacation-benefit policies.
In this regard, our interpretation of section 181.13(a) is buttressed by our statutory
mandate to consider the consequences of a particular interpretation when ascertaining
(Footnote continued from previous page.)
Supreme Court subsequently upheld an employers policy of paying only 95% of the cash
value of paid time off, distinguishing this condition on the value of the benefit, which
was present at the time the benefit was earned, from the condition subsequent in
Langager. McConkey v. Flathead Elec. Coop., 125 P.3d 1121, 1125-26 (Mont. 2005).
Our holding in Tynan that an employers liability as to vacation-pay rights is wholly
contractual, 247 Minn. at 177, 77 N.W.2d at 206, is antithetical to any interpretation of
section 181.13(a) that would prohibit an employer and an employee from agreeing to
reasonable conditions on benefits at the time those benefits are earned.
22
legislative intent. Minn. Stat. 645.16. As amicus curiae Minnesota Employment Law
Council (MELC) argues, if we interpreted section 181.13(a) to stand for the proposition
that an employee had actually earned an absolute right to compensation for paid time off
as soon as she had accrued those hours in a given pay period, we would create
uncertainty and potentially serious collateral consequences for many employers
vacation-benefit policies. For example, MELC discusses so-called use-it-or-lose-it
policies, where employers allow employees to accrue and earn vacation time on the
condition that the vacation time must be used by a certain date in the future. Under such
a policy, if the employee does not use the vacation time by a requisite date, she loses her
right to the vacation time. MELC notes that use-it-or-lose-it policies are important to
employers for at least two reasons: (1) in many jobs, especially high-stress jobs,
employers want to encourage employees to use vacation time, rather than continuing to
accrue it, because the time away from work refreshes and reenergizes employees,
resulting in greater employee safety and production; and (2) employers want predictable
compensation packages so that they can plan their budget around times when they will
owe benefit compensation to employees.
MELC also notes that many employers place a cap on the amount of vacation time
employees may accrue, for reasons similar to the use-it-or-lose-it policies. If we reached
a different conclusion in this case, and held that employees have actually earned an
absolute right to vacation pay as they accrue vacation hours for working each pay period,
the legality of both the use-it-or-lose-it policy and the cap-on-vacation-time-accrual
23
policy would be called into question.10 We do not believe the legislature intended the
consequences of such an interpretation when it enacted section 181.13(a), particularly
when employers are under no obligation to offer any vacation time or paid time off to
employees.
For all the foregoing reasons, we reverse the court of appeals and reinstate the
districts court grant of summary judgment in favor of Fresenius.
II.
Lee argues that if she is not entitled to payment in lieu of her paid time off, this
case must be remanded for trial because a genuine issue of material fact exists as to
whether Fresenius justifiably terminated Lee for misconduct. Lee asserts that she was
attempting to unionize her work group, and all of Freseniuss evidence of Lees
misconduct occurred after she began her union activities. Lee implies that Fresenius
terminated Lee not for the alleged misconduct, but because of her union activity.
Fresenius argues that because Lee did not argue that she was wrongfully
terminated or that there was a genuine issue of material fact at the district court level, the
issue may not be argued on appeal. We agree. Generally, we will not consider an issue
raised for the first time on appeal. Thiele v. Stich, 425 N.W.2d 580, 582 (Minn. 1988).
The only claim Lee filed in this case was a claim to recover payment in lieu of paid time
off. Lee did not claim that there is a genuine issue of material fact regarding her
10 Although the dissent would recognize an absolute right to payment for earned
vacation hours, it does not address the consequential abrogation of these common
employment policies.
24
termination. In fact, Lees brief to the district court specifically asserted that this case is
not about either the termination of Susan Lees employment or whether there was
misconduct to justify termination, but instead simply calls upon the court to * * *
follow the clear statutory directive of Minn. Stat. Ch. 181.13. Because the issue of
whether Lees termination was justified by her misconduct was not raised below, it
cannot be raised on appeal.
We conclude that Lee is not entitled to a remand for trial.
Reversed.
D-1
D I S S E N T
PAGE, Justice (dissenting).
Under Minn. Stat. 181.13(a) (2006), when an employer discharges an employee,
the wages * * * actually earned [by the employee] and unpaid at the time of the
discharge are immediately due and payable upon demand of the employee. The court
correctly holds that paid time off constitutes wages for purposes of section 181.13(a).
While it appears, as the court states, that the legislature did not intend to create in
section 181.13(a) a substantive right to vacation pay, it is obvious from the language of
the statute that the legislature intended to create in section 181.13(a) a substantive right to
be paid for wages actually earned. Therefore, once it is agreed that paid time off
constitutes wages, the critical question in this case becomes whether, at the time Lee was
terminated, she had earned the 181.86 hours of paid time off, i.e., the wages, that she had
accrued before she was terminated. If the wages were earned before she was terminated,
section 181.13(a) required that Lee be paid for them immediately upon termination. If
the wages were not earned before Lee was terminated, she is not entitled to be paid for
them.
The court is also correct to the extent that it holds that because no Minnesota
statute requires an employer to provide paid vacation or paid time off, the provision of
paid vacation or paid time off is a matter of contract between the employer and the
employee. The court correctly looks to the contract between Fresenius and Lee to
determine whether Fresenius agreed to provide Lee with paid time off. Here, the contract
is the Fresenius employee handbook, which provides, in relevant part:
D-2
Resignation and Termination of Employment
* * * *
An employee who gives proper notice, as described above, is eligible to be
paid for earned but unused Paid Time Off (PTO). Unless otherwise
required by state law, if you do not give acceptable notice, you may not be
paid for earned but unused PTO and you may not be considered eligible for
re-employment. In addition, if your employment is terminated for
misconduct, you will not be eligible for pay in lieu of notice or payment of
earned but unused PTO unless required by state law.
* * * *
Paid Time Off
* * * *
The Paid Time Off (PTO) program allows you to receive paid time off
based on individual preferences and varying needs. It may be used for
vacation, holiday, short-term sick time, and personal time. Regular fulltime
and regular part-time employees scheduled to work 20 hours or more
per week are eligible for PTO. You accrue PTO hours at a set rate per pay
period. Your accrual rate depends on your length of service and number of
hours worked. There is a maximum amount of PTO that may be accrued.
If the cap is reached, the additional earned time will be added to your
Extended Sick Leave (ESL) bank, instead of your PTO bank.
New full-time employees begin to earn PTO upon hire at a rate of 7.69
hours per pay period (200 hours, or 5 weeks per year). PTO accrual is prorated
for part-time employees. Accrual rates increase with length of service
at given intervals.
A minimum of three months must be worked before your earned PTO can
be used, except for a company Fixed Holiday. PTO is paid out at your base
hourly rate and does not include overtime, shift differentials, on-call pay or
any other type of additional pay.
PTO may be requested and scheduled at any time during the year.
Approval of requests will be based on the timeliness of your request,
authorization by the appropriate supervisor, and the needs of the
department.
D-3
(Emphasis added.)
The contract between Fresenius and Lee unequivocally provides that Lee earned
paid time off each pay period. Because the 181.86 hours of paid time off at issue here
were, under the terms of the contract, earned each pay period, and because the court
correctly holds that earned paid time off is considered wages for purposes of section
181.13(a), that should be the end of the inquiry.
The court grounds its conclusion that Lee was not entitled to be paid after she was
terminated for the 181.86 hours of paid time off she had already earned, in part, on the
general proposition that
[i]f an employer does offer an employee paid time off, what is earned
during the specified pay period during which paid time off accrues is not a
right to a direct, monetary payment; what is earned is instead a right
granted by the employer for the employee to take time off from work in the
future but nevertheless be paid, subject to the terms specified in the
employment contract that grants paid time off.
There are a number of problems with this general proposition.
First, the court is wrong to say that vacation pay or paid time off is strictly a matter
of contract and is therefore unaffected by statute. The contract between employer and
employee may govern when and how much paid time off is earnedjust as the contract
between employer and employee may govern how much the employee earns for her labor
(provided, for example, that it is at least the statutory minimum and is not discriminatory)
and how often she is paid. But if paid time off is wages, once it has been earned Minn.
Stat. 181.13(a) requires that it be paid, just as once monetary wages have been earned
Minn. Stat. 181.13(a) requires that they be paid. Indeed, the contract here explicitly
D-4
acknowledges that the payment of earned but unused paid time off is subject to applicable
state law. In Minnesota, that applicable state law is, in the case of a former employee,
section 181.13(a).
Second, the contract in this case imposed no conditions on the employees right to
earn paid time off. To earn is [t]o acquire by labor, service, or performance.
Blacks Law Dictionary 547 (8th ed. 2004). That is to say, once the labor has been
performed, the wages are earned. See, e.g., Langager v. Crazy Creek Prods., Inc., 954
P.2d 1169, 1175 (Mont. 1998) (concluding that vacation pay is earned by virtue of an
employees labor and once it has accrued, it has by definition been earned). The courts
conclusion that what is earned once the employee has performed the labor is not a
right to a direct monetary payment, but is instead a right subject to additional conditions
imposed at the employers discretion, flies in the face of the traditional definition of what
it means to earn wages and does violence to the concept of what constitutes wages. A
conditional right to wages for work actually performed is no right at all.
Third, the courts statement is contrary to the express terms of the contract
governing Lees employment. The Fresenius handbook, as noted above and as drafted by
Fresenius, provides that employees accrue paid time off at a set rate per pay period
and that [n]ew full-time employees begin to earn PTO upon hire at a rate of 7.69 hours
per pay period (200 hours, or 5 weeks per year). (Emphasis added.) The handbook does
not differentiate between paid time off that merely accrues (to be earned at some
later date) and paid time off that has been earned in the first instance. In fact, the
handbook uses the terms accrued and earn interchangeably. While the handbook
D-5
places some conditions on when an employee may use earned paid time off, one example
being that an employee must have worked for Fresenius for a minimum of three months
before paid time off can be used, the handbook places no additional requirements on the
earning of paid time off. For example, the handbook does not provide that an employee
must work a certain number of weeks or months before she begins to earn paid time
off. Nor does the handbook provide that paid time off is earned only at the end of a
calendar month or quarter. Rather, the handbook is clear: employees both accrue and
earn paid time off from their first day of employment and continue to earn it each pay
period. Because Lee had performed the labor that resulted in the accrual of paid time off,
that paid time off had been earned. Indeed, even Fresenius describes the 181.86 hours of
paid time off that Lee had accrued at the point her employment was terminated as having
been earned, and in describing the situations that will result in paid time off not being
paid the handbook refers only to paid time off that has already been earned but not used.
It is also worth noting that the court describes Lees paid time off as having been
earned.
Fourth, although the court asserts that conditioning the payment of paid time off
on whether Lee is terminated constitutes a condition precedent to her earning or accruing
the right to be paid for the paid time off, the court is simply wrong. That is clear from the
language of the contract: employees earn and accrue paid time off from their first
day of employment. Thus, termination can only occur subsequent to paid time off being
earned. The termination condition imposed by Fresenius does not affect the earning or
accrual of paid time off. The law does not allow and we would not permit an employer to
D-6
withhold an employees paycheck simply because the employee was terminated, even for
cause. That raises the question of why we would treat earned wages in the form of paid
time off differently. The simple answer is that we should not. To allow Fresenius to
divest Lee of paid time off, which Fresenius acknowledges has been earned, is to say that
paid time off is not really wages at all.
The court states that because [n]o statute or case law in Minnesota mandates the
terms on which paid time off must be offered, or that it be offered at all, employers are
permitted to set conditions that employees must meet in order to exercise their earned
right to vacation time with pay. On this point, the court is also wrong. While it is
correct that an employer may place reasonable conditions as to when an employee can
take earned paid time off, just as an employer may determine that the employees wages
will be paid monthly rather than weekly, an employer may not set conditions as to
whether an employee will be paid wages for work already performed and therefore
earned. That is so whether the wages are in the form of a direct monetary payment or
paid time off. Tying the payment of wages to a condition, such as whether the employee
is terminated, which may or may not arise after the work has been performed, is
impermissible.
The court bolsters its interpretation of section 181.13(a) with comparisons to two
cases interpreting wage-payment statutes in other jurisdictions that the court characterizes
as similar. But those statutes are readily differentiated. In Indiana Heart Associates,
P.C. v. Bahamonde, for example, the statute requires only the payment of the amount
due to the employee. 714 N.E.2d 309, 311 (Ind. Ct. App. 1999) (quoting Ind. Code
D-7
22-2-5-1). The definition of the amount due is a matter of contract between employer
and employee, and nothing in the statute bars the parties from agreeing (by virtue of an
employee handbook or otherwise) that an employee can be divested of vacation pay
otherwise earned. Similarly, the Maryland statute at issue in Rhoads v. F.D.I.C., 956 F.
Supp. 1239, 1259-60 (D. Md. 1997), requires only the payment of all wages due for
work that the employee performed before the termination of employment without
defining when wages are due. Md. Code Ann., [Lab. & Empl.] 3-505 (LexisNexis
2006). As a result, Maryland law also allows the employer and employee to contract
when wages become due and allows the employee to be divested of wages after they
are otherwise earned. In contrast to both of these, Minnesotas statute requires the
payment of wages actually earned and unpaid at the time of the discharge. Minn. Stat.
181.13(a). The statute allows for employer and employee to define when wages are
earned, but does not allow for divestiture of wages once they are earned.
The court also bolsters its interpretation of section 181.13(a) with a reference to
Tynan v. KSTP, Inc., 247 Minn. 168, 77 N.W.2d 200 (1956), a case in which we
addressed a former employees entitlement to vacation pay. Tynan was subject to a
collective bargaining agreement as a member of the Radio Broadcast Technicians Union.
Id. at 170, 77 N.W.2d at 202. The collective bargaining agreement in effect on Tynans
last day of work provided that someone in Tynans position continuously employed for
six (6) months, but less than one (1) year, shall receive a vacation of fourteen (14)
consecutive days and further provided that [l]ength of service for vacation purposes
only shall be determined as of May 1st of each year. Id. at 170 n.1, 77 N.W.2d at 202
D-8
n.1. The collective bargaining agreement automatically renewed on October 1 of each
year; Tynans last day of work was April 5, 1950. Id. at 171-72, 77 N.W.2d at 203. The
employer argued Tynan was not entitled to vacation pay because he had not fulfilled the
terms of the collective bargaining agreement, namely, that he be employed on May 1, in
order to receive vacation pay. Id. at 173-74, 77 N.W.2d at 204. We rejected this
argument on grounds that once vacation pay was earned under the terms of the collective
bargaining agreement, it became in legal effect choate:
It is clear that, under the collective bargaining agreement in force
since 1948, the technicians surrendered all previous holiday-pay
arrangements which had been contained in prior union agreements and they
received in lieu thereof the right to certain granted vacations with pay
conditioned upon fulfilling certain continuous periods of employment.
These were 6 months of continuous service within the year covered by the
annual agreement in order to become entitled to a vacation of 14
consecutive days and continuous employment as a technician for at least
one year during the period of the annual contract in order to become
entitled to a vacation of 21 consecutive days. At the end of each respective
period of service, the granted vacation with pay as then established became
earned and in legal effect choate. It would be highly technical, and
inequitable, taking into account the apparent conditions under which these
granted periods of vacations with pay were entered into as successor
provisions to all previous holiday-pay arrangements, to hold that another
condition precedent for which the defendant contends exists, namely, that
plaintiffs rights would be lost if he was not in the service of the employer
on May 1 of the year following the completion of the period of service.
Id. at 179-80, 77 N.W.2d at 207 (emphasis added).1 Similarly in this case, once paid time
off has been earnedand under the terms of the contract it is earned at the end of each
pay periodit is in legal effect choate.2
1 The court contends that my discussion of Tynan fails to take into account the
courts immediately subsequent discussion of a Michigan case in which the contract
(Footnote continued on next page.)
D-9
(Footnote continued from previous page.)
provided for compensation in lieu of vacation subject to two conditions. But the
Michigan case, Treloar v. Steggeman, 333 Mich. 166, 52 N.W.2d 647 (1952), involved
two conditions precedent to the earning of vacation in the first place: that the employee
be on a seniority list on December 1, 1947, and that the employee have completed at
least six months work since December 1, 1946. Id. at 167, 52 N.W.2d at 648. Here,
there are no conditions precedent on the earning of vacation.
We have said that a condition precedent is any fact or event, subsequent to the
making of a contract, which must exist or occur before a duty of immediate performance
arises under the contract. Natl City Bank v. St. Paul Fire & Marine Ins. Co., 447
N.W.2d 171, 176 (Minn. 1989). In this case, the employee handbook is the contract,
which Lee accepted by virtue of her employment. Once Lee had earned vacation and
once she had been employed by Fresenius for at least three months, Fresenius had a duty
of immediate performance to allow Lee to take her earned vacation and, although
Fresenius could impose reasonable conditions on when Lee did so, it could not otherwise
have prevented her.
And so what the court characterizes in this case as a condition precedentthat the
employee not have been terminated for causeis a condition subsequent, not a condition
precedent, to the taking of or payment for paid time off, the effect of which is to divest
Lee of that which she had earned. We have said that forfeitures are not favored and will
not be enforced when great injustice would thereby be done and when the one seeking the
forfeiture is adequately protected without it. Warren v. Driscoll, 186 Minn. 1, 5, 242
N.W. 346, 347 (1932). In this case, Fresenius could have sued Lee for monetary
damages due to her alleged misconduct, and thus could have been adequately protected
without resorting to confiscation of her earned wages; indeed, that is the implication of
Minn. Stat. 181.79 (2006).
Finally, even if we were to permit a forfeiture here, our case law severely limits
what can be forfeited. In Marsh v. Minneapolis Herald, Inc., 270 Minn. 443, 134
N.W.2d 18 (1965), the employee sued his former employer for unpaid overtime; the
employer counterclaimed for alleged disloyalty and sought forfeiture of the entire amount
paid to the employee during his tenure. Id. at 444, 134 N.W.2d at 19. We stated that
[s]ince plaintiffs compensation was payable weekly, each week is an entire and
separable contract. Misconduct that goes to the essence of the contract must be
established for each week worked before his right to compensation can be defeated or the
wages previously paid, forfeited. Id. at 448, 134 N.W.2d at 22. Even if a forfeiture
were available here, which it is not, under Marsh Fresenius would be entitled to withhold
only the paid time off earned and unpaid for the pay periods in which it contends that Lee
(Footnote continued on next page.)
D-10
Simons v. Midwest Tel. Sales & Service, Inc., 433 F. Supp. 2d 1007 (D. Minn.
2006), applies the Minnesota statute at issue here and concludes that the terminated
employee was not entitled to be paid, but the facts of that case differ from those here.
The contract in Simons provided that the employee earned vacation at the rate of 2-1/2
days per calendar quarter: 2-1/2 days on March 31, 2-1/2 days on June 30, 2-1/2 days on
September 30, and 2-1/2 days on December 31. Id. at 1009. Simons took vacation on
January 2, March 29, and April 23; her last day of work was May 6, 2004. Id. Thus, the
issue was whether vacation days were earned at the beginning of the calendar quarter
(as the employee advocated) or at the end of the calendar quarter (as the employer
advocated). Id. at 1011. The court agreed with the employer that under the terms of the
contract, vacation was not earned until the end of the calendar quarter, meaning that the
employee had already taken more vacation days than she had earned as of her last day of
work. Id. That is, the employee in Simon had no vacation actually earned and unpaid at
(Footnote continued from previous page.)
committed misconduct. It could not do what it has done here, namely, confiscate paid
time off earned during pay periods in which Lee allegedly committed no misconduct.
2 The court characterizes my position as giving no force to the related terms of the
contract that define what is earned in terms of paid time off or payment in lieu of paid
time offthat is, the conditions under which paid time off or payment in lieu of paid
time off are allowed. If my position gives no force to such things (a position with which
I do not entirely agree), it is only because the statute gives them no force. I agree, for
example, that the employer can require employees to give reasonable notice before taking
paid time off. And I agree, for example, that employers can require new employees to
work for a reasonable period of time before taking paid time off. But those are
restrictions on when, not on whether, paid time off is either taken or paid out. On the
question of whether a former employee must be paid for earned paid time off, the
legislature has spoken and the statute controls.
D-11
the time of discharge under Minn. Stat. 181.13(a).3 In contrast, in this case Fresenius
concedes that Lee had paid time off earned and unpaid on the date of the termination of
her employment.
The statute is clear: the employer must immediately pay a terminated employee
for wages earned and unpaid at the time of discharge. If paid time off constitutes wages,
which it does, and if the paid time off has been earned, which in this case it has, then
under Minn. Stat. 181.13(a) an employer must immediately pay a terminated employee
for all paid time off earned and unused at the time of discharge. Because the paid time
off at issue in this case had been earned, Freseniuss refusal to pay Lee for it violated
Minn. Stat. 181.13(a).
I therefore respectfully dissent.
3 To the extent the federal courts decision in Simons rested on a provision of the
employers vacation policy that purported to divest an employee of vacation pay already
earned, it is contrary to Minn. Stat. 181.13(a). In any event, we are not bound by the
federal courts interpretation of the statute.
 

 
 
 

  What day were you injured?

  / /


  What caused your injuries?
Traffic/Bicycle Accident
Work-Related Injury
Wrongful Death
Dog Bite
Slip and Fall
Other:


  How have your injuries affected

  your life?

 


  What kinds of medical care
  professionals have you seen?

 


  What has your treatment cost?

 

  Is Insurance Involved?
My insurance may cover
        this.

Someone else's insurance
        may cover this.

I already filed a claim.
I rejected a settlement
        offer.

I accepted a settlement
        offer.

  Were there any witnesses?
Bystanders Witnessed This.
Police Responded and Filed
        a Police Report

Police Responded but Did
        Not File a Police Report


 

 

          By visiting this page or clicking the
  "submit" button above, you agree
  that you have read and accept this   "disclaimer".
 
Copyright © Michael E. Douglas, Attorney at Law, Saint Paul MN. All Rights Reserved.
Minnesota Law Firm representing Personal Injury, Car / Auto Accident, Workers Compensation, Medical Malpractice, Social Security Disability claims.
Dedicated to Injured Workers, Victims of Negligence, Car Accidents, Victims of Fraud, and those in need of legal assistance.