Fang v. Showa Entetsu Co.11/20/2003
urts considered several factors to determine whether payment sought by a discharged employee constituted wages or compensation, including whether the payment is "both vested and determinable as of the date of termination." See Rohr v. Ted Neiters Motor Co., 758 P.2d 186, 188 (Colo. App. 1988)(quoting Hartman v. Freedman, 197 Colo. 275, 280, 591 P.2d 1318, 1322 (1979); applying factors to conclude that bonus earned as of termination constituted wages or compensation under the former § 8-4-101(9)); cf. § 8-4-101(8)(a)(I), C.R.S. 2003 (wages and compensation must be "earned, vested, and determinable").
For purposes of the CWCA, compensation is earned "if it is vested pursuant to an employment agreement at the time of an employee's termination." Barnes v. Van Schaack Mortgage, 787 P.2d 207, 209 (Colo. App. 1990).
In the absence of controlling statutory provisions, severance payments are generally viewed as consideration for past services. See Moore v. Digital Equip. Corp., 868 P.2d 1170, 1171 (Colo. App. 1994)(superseded on other grounds by § 8-73-110, C.R.S. 2003). Not all severance payments, however, constitute compensation. For example, in Wank v. Saint Frances College, 740 N.E.2d 908 (Ind. Ct. App. 2000), after the plaintiff's employment was terminated because of a merger, the defendant offered the plaintiff a severance package in acknowledgment of his years of service. The court held that the severance pay offered was not a wage under the Indiana Wage Payment Statute because it was not part of the plaintiff's terms of employment or connected to the work he had performed, but instead was "a discretionary, gratuitous benefit offered to employees as an act of benevolence." Wank v. Saint Frances Coll., supra, 740 N.E.2d at 913.
Unlike Wank, however, plaintiff's severance payment here was not a gift. Plaintiff's employment agreement required defendants to pay him a sum certain -- two times his ending salary -- if they terminated him. In addition, the employment agreement did not require him to perform any other service. Thus, plaintiff's severance payment was determinable and vested upon entering the contract, payable under the contract upon termination. See Black's Law Dictionary 1557 (7th ed. 1999)(defining vested as "a completed consummated right for present or future enjoyment; not contingent; unconditional; absolute").
Accordingly, because plaintiff's severance pay was vested and determinable at the date of discharge, the trial court properly concluded that, under the applicable version of the CWCA, plaintiff's severance pay constituted wages. See Rohr v. Ted Neiters Motor Co., supra; see also Hartman v. Freedman, supra (vacation pay falls within definition of wages or compensation); Montemayor v. Jacor Communications, Inc., supra (stock options may be considered compensation under CWCA); E.S. Lipstein, Civil Actions Under the Colorado Wage Claim Act, 28 Colo. Law. 65, 66 (Feb. 1999).
We note that effective August 6, 2003, § 8-4-101 was amended to specifically exclude severance pay as wages or compensation. Section 8-4-101(8)(b), C.R.S. 2003. However, the General Assembly, when amending the CWCA, is presumed to be aware of existing law setting forth the factors relevant to a determination of wages or compensation under that act. See Vaughan v. McMinn, 945 P.2d 404 (Colo. 1997)(General Assembly is presumed cognizant of the judicial precedent in a particular area when it enacts legislation in that area). Thus, by the amendment, the General Assembly appears to acknowledge that a severance payment like plaintiff's here could constitute wages or compensation under the previous version of the statute. See Hearings on H.B. 1206 before the House Business Committee
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