SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

Melvin Rosen, et al v. Smith Barney, Inc. (A-49-07)

(NOTE: This Court wrote no full opinion in this case. Rather, the Court’s affirmance of the judgment of the Appellate Division is based substantially on the reasons expressed in Judge Lihotz’s (temporarily assigned) majority opinion.)

Argued March 26, 2008 -- Decided June 25, 2008

PER CURIAM

The issue in this appeal as of right -- arising from the dissent filed by Judge Harvey Weissbard -- is whether the plaintiffs’ agreement to divert earnings to an incentive compensation plan violated the New Jersey Wage and Hour Law (Wage law), N.J.S.A. 34:11-4.1 to -67, or the statute’s public policy.

Plaintiffs Melvin Rosen and James D. Fox are former employees of defendants Smith Barney, Inc., Salomon Smith Barney, Inc., and Salomon Brothers, Inc. (collectively Smith Barney) and participated in their employer’s “Capital Accumulation Plan” (CAP). Both Rosen and Fox voluntarily executed agreements that allowed Smith Barney to use a percentage of their compensation to purchase parent company stock (Plan stock) after an initial six-month deferral period. The CAP afforded Rosen and Fox shareholding voting rights and dividends, as well as other benefits, and Plan stock ownership fully vested after a period of two years. The CAP enrollment form provided, however, that all unvested funds would be forfeited should the participant resign or be terminated before expiration of the two-year vesting period. The forfeiture provisions were consistent with the Internal Revenue Code provision permitting tax deferral.

Rosen voluntarily resigned from his employment with Smith Barney on July 1, 1994, and Fox on February 16, 1999. In each case Smith Barney invoked the CAP’s forfeiture clause and retained the participant’s unvested Plan stock. On October 1, 1999, plaintiffs filed a complaint alleging the CAP violated the Wage law because its terms required the forfeiture of earned wages. Plaintiffs also asserted common law tort claims of breach of contract, conversion, breach of fiduciary duty, and unjust enrichment. On January 24, 2003, Smith Barney filed a motion for summary judgment seeking to dismiss plaintiffs’ tort claim. Plaintiffs cross-moved for partial summary judgment and asserted that the CAP’s forfeiture provisions were incompatible with the Wage law and New Jersey public policy.