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BOWERS v. NETI TECHS.

June 7, 1988

R. Dennis Bowers and Roger H. Folts
v.
Neti Technologies, Inc.; Network Technologies International, Inc.; Commission on Professional and Hospital Activities; Phoenix Companies, Inc.; Lawrence B. Brilliant; Ronald D. Gregg; John L. Boyle, II; John G. Bassett and Jean Chenoweth



The opinion of the court was delivered by: GAWTHROP

 ROBERT S. GAWTHROP III, D.J.

 Before the court in this employment dispute is defendants' Motion for Judgment on the Pleadings in Civil Action No. 87-4679 on Behalf of Defendants Bassett, Chenoweth, Cochran, Brilliant, Gregg, Boyle, II, Network Technologies, International, Inc., National Health Forum, Inc. and NETI Technologies International, Inc. pursuant to Rules 12(b)(2) and 12(b)(6) of the Federal Rules of Civil Procedure. *fn1" Plaintiffs, Bowers and Folts, filed this action seeking recovery under the Pennsylvania Wage Payment and Collection Law (WPCL), 43 P.S. § 260.1 et seq. (Purdon Supp. 1987), of amounts allegedly due them pursuant to their employment agreements with Phoenix Companies, Inc. ("Phoenix"). Plaintiffs seek recovery under the WPCL of: (1) severance payments due in the event of breach of their employment agreements, and (2) the value of their Phoenix stock, which they had the option of selling back to Phoenix at market value upon breach of the agreements by Phoenix. Phoenix is a failed venture and cannot fund these payments, thus plaintiffs seek from other defendants the funds allegedly due from Phoenix. Defendants raise three issues: (1) Whether the severance payments and stock option payments allegedly due to plaintiffs are "wages" under the WPCL and thus compensable; (2) Whether certain individuals *fn2" (primarily directors) can be held liable as "employers" under the WPCL; and (3) Whether nonresident corporate officers *fn3" and a nonresident successor corporation *fn4" are subject to this court's personal jurisdiction. Upon consideration of the pleadings and the voluminous file in this matter, and after oral argument in open court, I grant defendants' motion in part and deny it in part, for the reasons set forth below.

 I. BACKGROUND

 The Bowers Employment Agreement provides, in pertinent part, that upon termination of Bowers by Phoenix (other than for cause of by reason of death or disability):

 
A. COMPANY shall pay to employee as severance pay an amount equal to EMPLOYEE's annual Base Salary at the time of termination, in equal bi-monthly payments over a period not to exceed one (1) year from termination.
 
B. EMPLOYEE shall have the option, but shall not be required, to sell all or part of the stock then owned by him and the COMPANY shall buy such stock so offered for an amount equal to its then current value . . .

 Exhibit "B" to amended complaint, paragraph 13.

 On March 9, 1984, Folts and Phoenix entered into an employment agreement pursuant to which Folts was employed as Chief Operating Officer of Phoenix for a term of five years at a salary of $ 90,000 per year plus certain other benefits. Complaint at paragraph 24. The language of the Folts Employment Agreement is substantially the same as the language quoted from the Bowers' Agreement. The Employment Agreements form the basis for plaintiffs' claims under the WPCL.

 Bowers and Folts were terminated from their employment with Phoenix on December 7, 1984, and January 7, 1985, respectively. Bowers and Folts thereafter filed civil actions, No. 85-1635 ("Bowers I") and No. 85-1911 ("Bowers II"), against individual and corporate defendants other than Phoenix for, inter alia, breach of their employment agreements. Bowers and Folts also instituted arbitration proceedings against Phoenix itself, as required by their agreements, claiming that they were terminated without cause. Complaint, paragraph 38. The arbitrator found that the terminations were without cause, awarded Bowers and Folts severance pay, and ordered Phoenix to fulfill the stock repurchase provisions of plaintiffs' Employment Agreements. Complaint, paragraph 39. The arbitrator declined to arbitrate plaintiffs' claims against Phoenix under the WPCL and plaintiffs subsequently filed this suit. This court entered an Order and Judgment confirming the arbitration award on October 1, 1987. Phoenix has yet to pay Bowers and Folts the amounts to which they were awarded in the arbitration proceedings.

 On July 27, 1987, plaintiffs filed their initial Complaint in Civil Action No. 87-4679 ("Bowers III"). Previous complaints filed on behalf of the plaintiffs in Bowers I and Bowers II were consolidated with Bowers III by this court. Bowers III sought payment under the WPCL of the contractual separation payments allegedly due to Bowers and Folts from Phoenix, Boyle (as an officer and agent of Phoenix), and from Bassett, Chenoweth, Brilliant and Gregg (as agents of Phoenix). With the exception of Phoenix, the defendants named in the initial Complaint moved to dismiss the Complaint. After defendants moved to dismiss the Complaint plaintiffs filed an Amended Complaint adding as defendants Cochran (as an officer and agent of Phoenix), NETI (as the alleged alter ego of Phoenix), Network, and NHF (as the alleged alter ego and successor to Phoenix). All defendants except Phoenix moved to dismiss the Amended Complaint. The defendants later withdrew the motion to dismiss and substituted a motion for judgment on the pleadings in its place. It is this motion that is presently before the court.

 II. DISCUSSION

 A. Are the Contractually-Agreed-Upon Separation Payments Allegedly Due to Bowers and Folts Under the Employment Agreements Compensable Under the WPCL

 Defendants argue that the separation pay and stock repurchase payments allegedly due to Bowers and Folts under their Employment Agreements do not fall within the purview of the WPCL.

 1. Separation Pay

 The thrust of defendants' argument is that neither the separation payments nor the payments for shares to be repurchased by Phoenix, are covered by the WPCL because neither of the payments constitute "wages" within the meaning of the WPCL. *fn5" The WPCL defines wages as follows:

 
"Wages". Includes all earnings of an employe, regardless of whether determined on time, task, piece, commission or other method of calculation. The term "wages" also includes fringe benefits or wage supplements whether payable by the employer from his funds or from amounts withheld from the employes' pay by the employer.

 (Emphasis added). Fringe benefits or wage supplements are in turn defined as:

 
all monetary employer payments to provide benefits under any employe benefit plan, as defined in section 3(3) of the Employee Retirement Income Security Act . . . as well as separation, vacation, holiday, or guaranteed pay ; reimbursement for expenses; union dues withheld from the employes' pay by the employer; and any other amount to be paid pursuant to an agreement to the employe, a third party or fund for the benefit of employes.

 43 P.S. § 260.2a (Purdon Supp. 1987) (emphasis added).

 Given the terms of the Bowers and Folts contracts, which specifically entitle both men to severance pay, and given the WPCL's specific reference to separation pay as a protected fringe benefit, I cannot dismiss plaintiff's severance pay claim. In fact, even prior to the 1977 amendment, which specifically brought severance pay under the coverage of the Act, at least one court had recognized that such pay was protected. See Heimenz v. Pennsylvania Power & Light, 75 D. & C. 2d 405 (Lycoming 1976). Thus, defendants' motion for judgment on the pleadings on this claim is denied.

 2. Stock Repurchase Payments

 Nor may plaintiff's claim to the stock repurchase payments be dismissed. Although defendants argue that such payments were not true "wages", earned by plaintiffs, I find to the contrary. For purposes of this motion for judgment on the pleadings, I conclude that the stock repurchase payments were offered by defendants to plaintiffs to encourage plaintiffs to join Phoenix as employees. Like other fringe benefits, which are offered to employees when they first join a company, the stock repurchase payments were not provided to the employees on a weekly or even annual basis. Nevertheless, they were certainly "wages" within the broad definition of the WPCL in that they were payments pursuant to agreement, and they were offered to plaintiffs as employees, and not for some reason entirely unrelated to their employment by Phoenix. Accordingly, I deny defendants' motion to dismiss the WPCL claim with respect to the stock repurchase payments.

 B. Can Certain Individual Defendants be Considered "Officers" or "Agents" of Phoenix in Order to Impose Upon Them Civil Liability under the WPCL

 Certain individual defendants assert that they are not liable as "employers" under the WPCL because they were neither officers nor agents of Phoenix when Bowers and Folts were terminated. The WPCL's ...


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