IN COURT OF APPEALS
Fresenius Medical Care, Inc.,
Filed August 8, 2006
Reversed and remanded
St. Louis County District Court
File No. 69-C1-05-600719
Don L. Bye,
Sandro M. Garofalo, Marko Mrkonich, Littler Mendolson, P.C., 33 South Sixth Street, Suite 3110, Minneapolis, MN 55402 (for respondent)
Considered and decided by Toussaint, Chief Judge; Peterson, Judge; and Minge, Judge.
S Y L L A B U S
1. When used in Minn. Stat. § 181.13(a) (2004), the term “wages” includes compensation for accrued vacation time that an employee has earned under the terms of an employment contract at the time the employee is discharged.
2. A contract provision that makes an employee who is discharged for misconduct ineligible for compensation for accrued vacation time that is earned and unpaid at the time the employee is discharged has no legal effect because Minn. Stat. § 181.13(a) requires an employer to pay a discharged employee wages that are earned and unpaid at the time of the discharge, and parties cannot provide by contract what is prohibited by statute.
O P I N I O N
This appeal is from a summary judgment that appellant Susan Lee is not entitled to be paid for unused vacation time that she had earned at the time she was discharged because Lee’s employment contract included a provision that an employee who is terminated for misconduct is not eligible for payment of earned but unused vacation time, and Lee was discharged for misconduct. We reverse and remand.
Lee began working at the Miller-Dwan dialysis center in
In 2002, Fresenius terminated Lee’s employment. Fresenius paid Lee her accumulated wages, but it did not pay her for earned but unused vacation time. Lee brought an action in conciliation court seeking compensation for 181.86 hours of vacation time that she claimed she had earned but had not used when Fresenius terminated her employment. The conciliation court awarded Lee vacation pay, and Fresenius removed the case to the district court. Fresenius moved for summary judgment, and the district court determined that under her employment contract, Lee was not entitled to be paid for her earned but unused vacation time. Based on this determination, the district court granted the motion for summary judgment. This appeal followed.
Is Lee entitled to be paid for vacation time that she had earned and had not used at the time she was discharged?
On appeal from a
summary judgment, we determine whether there are any genuine issues of material
fact and whether the district court erred in its application of law. Funchess v. Cecil Newman Corp., 632 N.W.2d 666, 672 (
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 employee’s 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 employee’s 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.
statute does not define “wages.” But
this court applied the statute in an action seeking compensation for accrued
vacation time brought by employees whose employer closed its
The district court determined that when an employer discharges an employee, the employer is obligated under Minn. Stat. § 181.13(a) to pay the employee for accrued vacation time. But the district court determined further that Fresenius was not obligated to pay Lee for accrued vacation time because an employer’s liability for an employee’s vacation pay is wholly contractual, and under the policy stated in the Fresenius employee handbook, an employee who is terminated for misconduct is not eligible for payment of earned but unused vacation time. The district court determined that the policy stated in the employee handbook was a part of the employment contract between Fresenius and Lee, and, therefore, because Lee was discharged for misconduct, she was not entitled to be paid for her unused vacation time under the terms of her contract.
it is generally true that an employer’s liability for an employee’s vacation
pay is wholly contractual, the district court’s conclusion that Lee was not
entitled to be paid for her unused vacation time under the terms of her
contract fails to recognize the principle that “[a] party cannot provide by
contract what is prohibited by statute.”
Winnetka Partners Ltd. P’ship v.
the assessor signed the addendum certification, the property owner filed a
petition in tax court, seeking a reduction in the January 2, 1992 assessment
for the property.
property owner appealed, and the supreme court affirmed.
“The owner of the property may seek, through the exercise of administrative and legal remedies, a reduction in market value for property tax purposes, but no city assessor, county assessor, county auditor, board of review, board of equalization, commissioner of revenue, or court of this state shall grant a reduction of the market value below the minimum market value contained in the assessment agreement during the term of the agreement filed of record . . . .”
the supreme court’s reasoning in Winnetka
Partners to the facts of this case, we conclude that the provision in Lee’s
contract that an employee who is terminated for misconduct is not eligible for
payment of earned but unused vacation time
can be given no legal effect. Under
D E C I S I O N
The provision in Lee’s contract that makes an employee who is terminated for misconduct ineligible for payment for earned but unused vacation time allows Fresenius to avoid paying a discharged employee for accrued vacation time that is earned and unpaid at the time of the discharge. Therefore, the contract provision allows what Minn. Stat. § 181.13(a) prohibits, and the district court erred in giving the provision legal effect.
Reversed and remanded.
 The handbook refers to vacation as “Paid Time Off,” but Fresenius states in its brief that it uses the terms “vacation” and “paid time off” interchangeably.
 The district court found that Lee did not dispute that she was terminated for misconduct. Lee argues on appeal that the reason why she was terminated is disputed. Under our analysis, it is not necessary to determine whether Lee was terminated for misconduct.
 Lee argues that she is entitled to a trial to determine whether the provisions in the employee handbook make her ineligible for payment for earned but unused vacation. But it is not necessary to conduct a trial for the purpose of interpreting the provisions in the employee handbook because if the handbook does not make Lee ineligible for payment for earned but unused vacation, she is entitled to payment, and if a provision in the handbook makes her ineligible for payment, the provision has no legal effect, and Lee is entitled to payment in spite of the provision.