St. Louis County District Court File No. C9-00-602439
Considered and decided by Harten, Presiding Judge, Anderson, Judge, and
An employer who, without written authorization, deducts from an employee's accrued salary the amount of a loan the employer made to the employee, is penalized under Minn. Stat. §á181.79 (2002) twice the amount of the deduction.
The opinion of the court was delivered by: Harten, Judge
Respondent employee brought an action against appellant employer under Minn. Stat. §á181.79 (2000) after appellant, without respondent's consent, deducted the amount necessary to repay a loan from respondent's accrued salary. Appellant counterclaimed for interest on the loan. The district court denied appellant's counterclaim and awarded respondent twice the amount of the deduction as provided by law. Because we conclude that the district court did not err by determining that respondent violated Minn. Stat. §á181.79, we affirm.
In November 1990, respondent John Brekke and three other individuals formed appellant THM Biomedical, Inc. (THM) for the purpose of commercializing biomedical devices developed and patented by Brekke. Under the investment agreement, Brekke was issued THM common stock in exchange for "services previously performed and to be performed pursuant to * * * an Employment Agreement attached hereto." Brekke and THM entered into the employment agreement; Brekke served as an officer and as one of the three members of THM's board of directors in addition to being a full-time employee.
In 1991, THM made two loans to Brekke totaling $65,000. Brekke signed a promissory note for each loan, agreeing to repay the principal "along with 8% interest." In 1993, Brekke paid $5,000 on the loans.
THM had cash flow problems and often could not pay Brekke's salary when due. A June 2000 corporate balance sheet listed Brekke's "accrued wages" as $188,873.
In July 2000, THM received $950,000 in settlement funds after resolving a long-running licensing dispute with a third party. THM's board met to discuss the use of the funds. At the meeting, Brekke was told that he would net about $20,000 of his accrued salary after deductions for payroll taxes, $60,000 in loan principal, and accrued interest. Brekke requested that THM forgive the loans, but THM denied his request. THM issued Brekke a check for $59,700, the amount that remained after payroll taxes and $60,000 were deducted from his accrued salary. The $60,000 deduction was labeled "Other." Brekke cashed the check on the following day.
THM sold its assets to Kensey Nash Corporation on 1 September 2000. Brekke, who owned 18.6% of THM's shares, received more than $2 million from the sale.
Brekke sued THM in October 2000, claiming that it had violated Minn. Stat. §á181.79 (2000) by deducting the loan payment from his salary without his consent. THM counterclaimed for $42,506 in unpaid interest.*fn1 The district court denied THM's counterclaim and awarded Brekke $120,000 under the penalty provision of sectioná181.79. Both parties moved for amended findings and/or a new trial, ...