Allen v. A.O. Smith, 36 Kan. App. 2d 530; 144 P.3d 760 (2005) (rev.den''d, 281 Kan. 1377 (2006) .
Allen was an action brought under the Kansas Wage Payment Act on behalf of a group former employees of A.O. Smith. The issue was whether Smith was liable for earned but unpaid vacation pay under Smith''s "earn in arrears" vacation policy. The employees had been immediately re-hired by a successor company that had a vacation policy which provided for the same amount of vacation, but the policy was "earn as you go." The question was whether the employees were entitled to the vacation they earned from Smith as well as the vacation they would earn from the new employer. The answer was yes. The vacation pay had been earned and was not covered, as Smith argued, by the new vacation policy. Smith''s non-payment was deemed to be "willful," doubling the recovery. The amount recovered was in excess of $900,000.00, and is believed to be the largest recovery ever under the Act.
The significance of Allen is two-fold. First, the court added clarity to the meaning of “discharge” from work. Smith claimed there had been no discharge since the employees went directly to employment with the successor company. The court rejected that idea, noting that besides the obvious point that the employees were no longer employed by Smith, but also finding that Smith’s interpretation was contrary to the purpose of the Act.
Second, “willfulness” was clarified. It was enough to be willful because Smith “...acted unilaterally to change its vacation policy without communicating it to employees, urged its purchaser not to discuss accrued vacation liability with employees, and attempted through the asset purchase agreement to avoid litigation by assuring some vacation would be earned and payable by the successor in the first year after discharge....” An unsuccessful dodge of liability was enough to be a “willful” non-payment.