Fired Employee Can’t Collect Unpaid Wages Due to His Profit-Sharing Compensation
In most cases, a fired employee can collect wages for work performed prior to termination. But if that employee is enrolled in the company’s profit-sharing plan, no payment needs to be made. An appeal by a scientist at Mad Science Laboratories affirmed the trial court’s decision that the man will get none of his past wages.
In 2016, plaintiff/appellant Jonathan Napitupulu went to work as a technical supervisor at Mad Science Laboratories, a company that specializes in designing and manufacturing educational science experiments for school children. The company operated an “online space” where science is combined with entertaining games that allow kids to “learn, play, and just be curious.”
He was to be paid a salary of $170,000 per year as well as a five percent ownership in the business and additional payments as part of his enrollment in a profit-sharing plan. When he was hired, he was classified as an “at-will employee,” which means his employer could terminate him for any reason, at any time. He was also free to leave his job, and his departure would have no legal repercussions.
The next year, Mad Science informed him that they could not afford his agreed-upon salary. He would, however, continue to collect his profit-sharing compensation, which came to $103,500 from January to October 2017. He quit in October and filed a complaint under a section of the California Labor Code that requires “immediate payment of any wages earned and unpaid at the time of the employee’s discharge.” It also says that “salaries of executive, administrative and professional employees are due and payable,” the month immediately following the month in which the salary was earned.
Napitupulu alleged he had been promised “a fixed compensation.” He sought $134,578.52 in back, unpaid wages plus “waiting time penalties” equal to $14,166.16.
In 2021, Mad Science moved for summary judgment before Los Angeles Superior Court Judge H. Jay Ford III. The motion was granted and the plaintiff appealed, arguing that the trial court erred in both its summary judgment decision and in denying his request to file an amended complaint. The appeal went before a three-justice panel from Division One of California’s Second District Court of Appeal, which unanimously affirmed the trial court’s opinion on May 23, in an unpublished opinion authored by Presiding Justice Frances P. Rothschild.
The key issues in the ruling were Napitupulu’s status as an at-will employee and his decision to continue working for nine months after he was told he would no longer get his agreed-upon salary. Appellant unsuccessfully argued that profit sharing was not the same as wages and that the alternate form of payment violated California’s minimum wage laws. He also challenged the timeliness of his profit-sharing payments and said that these payments should have been continued even after he quit.
None of these arguments were persuasive. In addition, Justice Rothschild pointed out that they had never been raised in his original complaint. The opinion stressed that Napitupulu was an at-will employee who had received adequate notice of the changes in compensation and that his continued working indicated his acceptance of the new salary.
The appeals court also found no abuse of discretion by the trial court, which appellant had alleged because Judge Ford would not allow him to amend his complaint. None of his amendments, Rothschild wrote, “would change the undisputed material facts.” Judge Ford had denied Napitupulu’s motion to be allowed to name five additional defendants and to approve payments because he was “an owner of the company,” whose “rights were being ignored.”
This case should instruct all employees about the precarious status of at-will employees, especially those who choose to remain in their jobs if compensation is changed. Profit sharing may sound good, but it quickly loses its appeal if there are no profits to share.
