Opinion
No. 59222-0-I.
October 27, 2008.
Appeal from a judgment of the Superior Court for King County, No. 05-2-12758-9, Mary Yu, J., entered December 4, 2006.
Affirmed in part, reversed in part, and remanded by unpublished opinion per Agid, J., concurred in by Becker and Leach, JJ.
City of Seattle (the City) employees challenge the City's regular and overtime pay practices. The City pays its employees for non-overtime work performed during a biweekly pay period within 10 days of the end of the pay period. The City pays most, but not all, overtime wages on the first or second payday after the pay period during which the employee earned overtime. The employees claim these delays violate the wage rebate act (WRA), wage payment act (WPA), and Minimum Wage Act (MWA). The employees appeal the trial court's order dismissing their claims on summary judgment. They contend the court erred by (1) approving a 10 day "lag" between the end of the pay period and the scheduled payday and (2) ruling that Washington's wage and hour laws provide no cause of action for delayed, rather than withheld, payments. The City cross-appeals, challenging the trial court's ruling that plaintiffs are not required to file an administrative claim before filing a lawsuit based on non-tort claims.
Chapter 49.52 RCW.
Chapter 49.48 RCW.
Chapter 49.46 RCW.
FACTS
The City pays regular wages to its employees within 10 days of the end of the pay period. The pay periods, which include 14 calendar days, start on Wednesday and end on Tuesday. The regularly scheduled payday is the second Friday following the end of the pay period. If the second Friday is a holiday, the City moves payday to the first day preceding that Friday that is not a holiday. The City pays most overtime wages due on the same schedule, i.e., within 10 days of the end of the pay period during which the employee worked overtime.
Seattle Municipal Code 4.20.110 provides:
Biweekly pay periods for all officers and employees of all departments of the City . . . are authorized on the following basis:
(A) Each biweekly pay period shall end on a Tuesday and . . . checks shall be delivered to those concerned after three (3:00) p.m. on the day before the payday, which payday shall be one (1) week from the Friday following said Tuesday; provided, that such payday may be advanced to Thursday if Friday is a legal holiday or to Tuesday or Wednesday if Christmas or New Year's Day falls on a Wednesday or Thursday.
The plaintiff employees work or used to work in the Seattle Police Department Communications Center and belong to the Seattle Police Dispatcher Guild (SPDG).
The employees seek to represent all City of Seattle employees, but the trial court denied their motion for class certification without prejudice.
Overtime summary reports covering April 18, 2002 to May 30, 2006, show that the employees received most, but not all, overtime wage payments due by the second paycheck. Based on the overtime summary reports, the City asserts that the plaintiff employees received 69 percent of their overtime wages by the first paycheck and 98 percent by the second. Because of the 10 day lag time and 14 day pay period, the second payday is 24 days after the end of the relevant pay period. The parties dispute why the City does not include all overtime payments in the first paycheck. The trial court did not make any findings about when the employees received overtime payments or why payments are delayed.
Apparently these reports were exhibits to the Declaration of Alissa Howell in Support of Plaintiff's Motion for Class Certification. The City resubmitted the employees' overtime reports with their Second Motion for Partial Summary Judgment.
The payroll data for all SPDG members also appear to show that SPDG members, like the named plaintiffs, received most, but not all, overtime wage payments due on the first or second regularly scheduled payday following the close of the pay period during which the SPDG member worked overtime.
The employees sued the City, alleging that the regular and overtime wage payment delays violated the WRA, WPA, and MWA. Both parties moved for partial summary judgment on the regular pay claims. The employees contended that former WAC 296-128-035 prohibits "lag" times of more than seven days under the wage statutes. The City argued that the seven day lag time requirement does not apply to biweekly pay systems. The trial court ruled that a 10 day lag time does not violate any of the statutes and granted the City's partial motion for summary judgment, dismissing the employee's regular pay claims. The employees filed a motion for reconsideration, which was denied.
The Department of Labor and Industries (DLI) amended WAC 296-128-035 after the employees filed their complaint. Champagne v. Thurston County holds that the amended WAC 296-128-035 does not apply retroactively because the actual effects of the amended regulation went beyond "mere clarification." 163 Wn.2d 69, 79, 178 P.3d 936 (2008).
In a second motion for partial summary judgment, the City argued that overtime payments made within one month of the date worked are timely as a matter of law and moved to dismiss the delayed overtime claims. The employees also moved for partial summary judgment. The trial court concluded that overtime payments delayed beyond the first established payday after the pay period during which the employee worked overtime violated the MWA as a matter of law and denied the City's motion for partial summary judgment. The City moved to reconsider after the DLI proposed an amendment to former WAC 296-128-035. The trial court took the motion for reconsideration under advisement and stayed enforcement of the ruling on the second motion for partial summary judgment.
After Division Two of this court issued an opinion in Champagne v. Thurston County, the City again moved for summary judgment on the delayed overtime claims. The City argued that the MWA does not provide a cause of action for payments that are merely delayed and that the superior court lacked subject matter jurisdiction because the employees had not filed a notice of claim with the City before filing suit. The trial court ruled against the City on its notice of claim argument, but held that the employees did not have a cause of action because they eventually received all wages due. The employees filed a notice of appeal in this court and moved to have the case transferred to the Washington Supreme Court so that it could be considered with Champagne v. Thurston County, which was by then on appeal from Division Two. The Washington Supreme Court denied the motion to transfer as premature and decided Champagne v. Thurston County after the parties had filed opening briefs in this court. Both parties address Champagne in their reply briefs.
134 Wn. App. 515, 141 P.3d 72 (2006), aff'd on other grounds, 163 Wn.2d 69, 178 P.3d 936 (2008).
The employees admit they did not file a notice of claim.
63 Wn.2d 69, 178 P.3d 936 (2008).
DISCUSSION
This court reviews summary judgment orders de novo and engages in the same inquiry as the trial court. The reviewing court must construe the facts and all reasonable inferences from those facts in the light most favorable to the nonmoving party. A material fact is a fact upon which the outcome of the litigation depends. The burden is on the moving party to show there is no issue of material fact. The nonmoving party must set forth specific facts that demonstrate a genuine issue of material fact and cannot rest on mere allegations. The reviewing court will affirm a summary judgment if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.
Sheikh v. Choe, 156 Wn.2d 441, 447, 128 P.3d 574 (2006).
Hertog v. City of Seattle, 138 Wn.2d 265, 275, 979 P.2d 400 (1999).
Balise v. Underwood, 62 Wn.2d 195, 381 P.2d 966 (1963).
Young v. Key Pharm., Inc., 112 Wn.2d 216, 225, 770 P.2d 182 (1989).
CR 56(e); Baldwin v. Sisters of Providence in Wash., Inc., 112 Wn.2d 127, 132, 769 P.2d 289 (1989).
CR 56(c); Huff v. Budbill, 141 Wn.2d 1, 7, 1 P.3d 1138 (2000).
I. Wage Rebate, Minimum Wage, and Wage Payment Act Claims
A. Minimum Wage Act Claims
The City argues that Champagne completely forecloses the employees' MWA claims. The employees acknowledge that Champagne "substantially changes the legal principles that apply to this appeal" and do not argue that their MWA claims survive
Champagne. The MWA provides, in relevant part, that
[a]ny employer who pays any employee less than wages to which such employee is entitled under or by virtue of this chapter, shall be liable to such employee affected for the full amount of such wage rate, less any amount actually paid to such employee by the employer, and for costs and such reasonable attorney's fees as may be allowed by the court.
In Champagne, Thurston County employees challenged the County's practice of paying overtime wages at the end of the month following the month in which the employees earned overtime. The Washington Supreme Court affirmed Division Two's dismissal of the employees' MWA claim and held that "the MWA does not provide a cause of action where the employer has actually paid all wages due an employee." The Champagne court relied on Seattle Professional Engineering Employees Association v. Boeing Co., which states that the MWA exists among the other wage statutes to provide a remedy for employees who were paid less than the minimum wage. The employees here, like the plaintiffs in Champagne, were paid all regular and overtime pay due and do not claim they were paid less than the minimum wage. Because Champagne holds that employees who received all wages due do not have an MWA claim, the trial court properly dismissed the employees' MWA claims.
Champagne, 163 Wn.2d at 88.
139 Wn.2d 824, 830-31, 991 P.2d 1126 (2000).
B. Wage Rebate Act Claims
The parties agree that the employees state a claim under the WRA but dispute the City's liability. The WRA states, in relevant part, that
[a]ny employer . . . who. . . .
(2) [w]ilfully and with intent to deprive the employee of any part of his wages, shall pay any employee a lower wage than the wage such employer is obligated to pay such employee by any statute, ordinance, or contract . . .
shall be liable in a civil action by the aggrieved employee or his assignee to judgment for twice the amount of the wages unlawfully rebated or withheld by way of exemplary damages, together with costs of suit and a reasonable sum for attorney's fees.
Employers who willfully violate WAC 296-128-035 with the intent to deprive the employee of any part of her wages are liable under the WRA.
Champagne, 163 Wn.2d at 80-81. Champagne explains that violations of former WAC 296-128-035 "may trigger the remedies available under the WRA even though the WRA is not listed among the statutory authority for former WAC 296-128-035." Id. at 80 n. 9.
The employees claim that the City willfully violated former WAC 296-128-035 by not paying regular and overtime wages within seven days of the end of the pay period. Former WAC 296-128-035 states that "[a]ll wages due shall be paid at no longer than monthly intervals to each employee on established regular paydays. To facilitate bookkeeping, an employer may implement a regular payroll system in which wages from up to seven days before pay day may be withheld from the pay period covered and included in the next pay period."
Former WAC 296-128-035 (2007).
In Clark v. City of Kent, this court interpreted the version of WAC 296-128-035 at issue here. We held that the seven day lag time limit applies only to employers who pay their employees once a month. "The seven day processing period in the regulation was only intended to be applied to employers who have established monthly paydays, so that the longest any employee would go without pay would be one month plus seven days." Although the disputed pay practice in Clark involved lagged overtime pay only, the plaintiffs offer no persuasive reason why it does not apply to all pay practices governed by former WAC 296-128-035. Here, the City pays its employees regular wages every two weeks, so that the longest an employee goes without a paycheck for regular wages is two weeks. Under Clark, former WAC 296-128-035's seven day time limit does not apply to this case because the City pays its employees bi-weekly. Thus, the trial court did not err by dismissing the employees' regular pay claims. We affirm the trial court's ruling on this issue.
136 Wn. App. 668, 150 P.3d 161 (2007).
Id. at 677 (holding that a 14 day overtime pay lag period did not violate former WAC 296-128-035 where the employers paid employees two times per month), review denied, 163 Wn.2d 1023 (2008). Both the employees and the City of Kent filed amicus briefs in Clark.
Clark, 136 Wn. App. at 678.
The City claims that "virtually all" employees received overtime wage payments by either the first or second payday after the wages were earned and argues that this practice does not constitute a willful violation of former WAC 296-128-035. Overtime wages paid on the first payday are subject to the same 10 day lag time as the non-overtime wage payments. This pay practice complies with the requirements of Clark, as discussed above. They do not violate former WAC 296-128-035.
The City argues that its practice of paying overtime on the payday of the second pay period after the employee earned overtime is not a willful violation of former WAC 296-128-035 because the law governing overtime pay delays was murky and the delay is necessary to allow for verification and approval of overtime. The employees argue that willfulness is a factual question for the trial court to decide after it has had a chance to do discovery on the issue. Neither we nor the trial court need reach the question of willfulness with respect to second paycheck overtime payments to employees who receive bi-weekly paychecks. As the court in Clark observed, former WAC 296-128-035 does not directly address when employers must pay overtime wages due, except that former WAC 296-128-035 requires employers to pay overtime within one month plus seven days. The Clark employees received a portion of their overtime wages on the second payday following the pay period in which they earned overtime. Clark approved this practice under former WAC 296-128-035 because the employees, who were paid twice-monthly, received all overtime wages due within one month plus seven days.
Id.
Id. at 670.
Id. at 678.
The employees attempt to relitigate Clark by pointing out that Washington courts have looked to the Federal Labor Standards Act for guidance in interpreting Washington's wage laws. Contrary to the plain language of the United States Department of Labor's interpretive bulletin on overtime payment, the employees claim that federal law requires payment of overtime wages on the first payday corresponding to the work period in which the employee worked. 29 C.F.R. § 778.106, which as an interpretive bulletin is entitled to deference only according to its power to persuade, states that
See Drinkwitz v. Alliant Techsystems, Inc., 140 Wn.2d 291, 300, 996 P.2d 582 (2000).
United States v. Mead Corp., 533 U.S. 218, 228, 121 S. Ct. 2164, 150 L. Ed. 2d 292 (2001).
[t]he general rule is that overtime compensation earned in a particular workweek must be paid on the regular pay day for the period in which such workweek ends. When the correct amount of overtime compensation cannot be determined until some time after the regular pay period, however, the requirements of the Act will be satisfied if the employer pays the excess overtime compensation as soon after the regular pay period as is practicable. Payment may not be delayed for a period longer than is reasonably necessary for the employer to compute and arrange for payment of the amount due and in no event may payment be delayed beyond the next payday after such computation can be made.
The employees cite dicta in Biggs v. Wilson, which appears to interpret the general rule of 29 C.F.R. § 778.106 as having no exceptions. In addition to conflicting with another federal case, Biggs is distinguishable. Unlike the delay in overtime processing at issue here, Biggs involved an unreasonable withholding of non-overtime wage payments because of a California fiscal emergency. Because we agree with the reasoning in Clark's holding approving second paycheck overtime practices under former WAC 296-128-035, we do not need to look to federal law to provide the applicable standard. We affirm dismissal of the employees' second paycheck overtime claims.
1 F.3d 1537 (9th Cir. 1993), cert. denied, 114 S. Ct. 902 (1994). Biggs' interpretation of the interpretive bulletin on overtime pay is dicta because it is not necessary to Biggs' holding on acceptable regular pay delays.
See Clark, 136 Wn. App. at 677.
The outcome would be the same if we adopted the federal standard, which allows second paycheck overtime payments when reasonably necessary. 29 C.F.R. § 778.106; O'Brien v. Town of Agawam, 350 F.3d 279, 298 (1st Cir. 2003). If the trial court found that the City's practices were not reasonably necessary, then the employees would have to show that the City willfully enacted the delay with the intent to deprive the employees of any part of their wages. Even if the trial court found a violation, the City's practices could not be willful because the City had a good-faith basis in law for its second paycheck practices under a reasonable interpretation of Washington and federal law.
Finally, former WAC 296-128-035 does not allow overtime payments made after the second paycheck for employees who receive biweekly paychecks. Thus, on remand, the trial court will have to determine whether the City paid overtime wages due after the second payday. If so, it must decide whether the City violated the regulation willfully and with intent to deprive employees of wages due. "Determining willfulness is a question of fact reviewed under the substantial evidence standard." Employers are liable under the WRA if they know their practices violate the WAC and result in a deprivation of payment due. Employers are not liable for delayed payments under the WRA when the right to the payment due was subject to a fairly debatable dispute. There is a fairly debatable dispute when both parties have a reasonable, good faith basis for their divergent positions. The employees should prevail on this issue if they can show that the City deliberately created an unlawfully inefficient system that resulted in the deprivation of wages due.
See Clark, 136 Wn. App. at 677-78.
Champagne, 163 Wn.2d at 81 (citing Pope v. Univ. of Wash., 121 Wn.2d 479, 490, 852 P.2d 1055, 871 P.2d 590 (1993), cert. denied, 510 U.S. 1115 (1994)).
See id. at 81-82; Schilling v. Radio Holdings, Inc., 136 Wn.2d 152, 159-62, 961 P.2d 371 (1998).
See Champagne, at 81 ("[a] bona fide dispute is a `fairly debatable dispute over . . . whether all or a portion of the wages must be paid.'") (internal quotation marks omitted) (quoting Schilling, 136 Wn.2d at 161-62).
See Dep't of Labor Indus. v. Overnite Transp., Co., 67 Wn. App. 24, 35-36, 834 P.2d 638 (1992) (no bona fide dispute where employer took position unsupported by authority), review denied, 120 Wn.2d 1030 (1993).
We reject the City's argument that organizational employers benefit from a more difficult standard for WRA liability than do individual employers. Citing Pope v. University of Washington, the City argues that the employees must prove that City officials reached a consensus to deprive employees of their earned wages. In Pope, the University did not come to a consensus about its pay practices. Instead, it delayed making a decision that would have corrected its allegedly unlawful pay practices. The court held that the University's confusion about Social Security withholding was not sufficient evidence of intentional action on the part of the University. Pope does not create a tougher willfulness standard. It merely holds that the employer's actions were not willful under the existing standard: a deprivation of wages is willful under the WRA if it is the result of a "knowing and intentional action." Here, the City will be liable under the WRA if it knowingly and intentionally adopted a payroll system that delays payment of overtime wages beyond the second paycheck.
121 Wn.2d 479, 852 P.2d 1055, 871 P.2d 590 (1993), cert. denied, 510 U.S. 1115 (1994).
Id. at 490-91 (citing Chelan County Deputy Sheriffs' Ass'n v. Chelan County, 109 Wn.2d 282, 300, 745 P.2d 1 (1987)). Even if the City were correct about what Pope held, unlike the employer in Pope, it came to a consensus about its payroll system when it enacted Seattle Municipal Code (SMC) 4.20, which governs the City's pay practices, and when it approved the collective bargaining agreement for SPDG employees.
C. Wage Payment Act Claims
The employees' complaint alleges that the 10 day regular pay lag and overtime delays constitute withholding in violation of the WPA. The City argues that a cause of action for delayed payments under the WPA does not survive the Champagne decision. We agree. The WPA, in relevant part, provides that "[w]hen any employee shall cease to work for an employer, whether by discharge or by voluntary withdrawal, the wages due him on account of his employment shall be paid to him at the end of the established pay period." The WPA goes on to state that
[i]t shall be unlawful for any employer to withhold or divert any portion of an employee's wages unless the deduction is:
(1) [r]equired by state or federal law; or
(2) [s]pecifically agreed upon orally or in writing by the employee and employer; or
(3) [f]or medical, surgical or hospital care or service, pursuant to any rule or regulation . . .
RCW 49.48.010(1)-(3).
Champagne holds that the WPA does not apply beyond the context of termination. Because claims by current employees are beyond the scope of the WPA, the trial court properly dismissed WPA claims by plaintiffs still employed by the City.
163 Wn.2d at 89.
One plaintiff here is a former employee of the City and, thus, has a WPA claim that cannot be dismissed under Champagne. Pope holds that the unlawful withholding provision in the WPA must be read in the context of the statute as a whole. Read as a whole, the WPA "governs deductions made from wages at the termination of employment" and allows claims for wages that are not paid at the end of the established pay period. Like the Pope plaintiffs, the former employee in this case is not claiming that the City made improper deductions to wages due at the end of employment. Like the other plaintiffs, the former employee is challenging the lag times associated with the established pay periods. Thus, the WPA does not apply to those claims.
121 Wn.2d at 489 (citing Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 789, 719 P.2d 531 (1986)).
Id.
II. Notice of Claim Requirement for Non-tort Actions Against the City
The City argues that the trial court lacked jurisdiction to hear claims for damages against the City because the employees did not file a notice of claim as required by the City's sovereign immunity waiver statute. Seattle derives its sovereign immunity from the state and may enjoy that immunity only to the extent that the state does. The state waived sovereign immunity for claims arising from tortious conduct by enacting chapter 4.96 RCW, which conditions the waiver of sovereign immunity for tort actions on the filing of a notice of claim to the agent appointed by the local government entity to receive the claim for damages.
SMC 5.24.005(A) provides:
No action shall be commenced against the City in which monetary damages are being claimed until a written Claim for Damages has been presented to and filed with the City Clerk. Such a claim must name the claimant, include the claimant's address, specify the date and location of the claimed loss, describe any alleged act or omission on the part of the City and the basis upon which liability is being asserted against the City, identify any known witnesses, detail the nature and extent of the injury or damage sustained and state the amount being claimed. The claim form must be signed by the claimant or an authorized representative prior to its filing.
Wilson v. City of Seattle, 122 Wn.2d 814, 818, 863 P.2d 1336 (1993).
RCW 4.96.010(1) provides:
All local governmental entities, whether acting in a governmental or proprietary capacity, shall be liable for damages arising out of their tortious conduct, or the tortious conduct of their past or present officers, employees, or volunteers while performing or in good faith purporting to perform their official duties, to the same extent as if they were a private person or corporation. Filing a claim for damages within the time allowed by law shall be a condition precedent to the commencement of any action claiming damages. The laws specifying the content for such claims shall be liberally construed so that substantial compliance therewith will be deemed satisfactory. RCW 4.96.020(2) ("The governing body of each local governmental entity shall appoint an agent to receive any claim for damages made under this chapter.").
The employees argue that they are suing under state law for non-tort claims and need not file a notice of claim with the City. The City counters that SMC 5.24.005, which it enacted under the authority of chapter 4.96 RCW, requires a plaintiff to file a claim for damages with the city clerk before any action for monetary damages may be commenced. Because the employees did not file a notice of claim with the City, it contends that it still enjoyed sovereign immunity and the trial court lacked jurisdiction over the employees' claims.
In Wilson v. City of Seattle, the Washington Supreme Court addressed the authority of the City to require a claim for damages as a condition precedent to the waiver of sovereign immunity in non-tort claims: "RCW 4.96.010 authorizes only claims-filing ordinances for damages arising from tortious conduct; the statute does not authorize the City of Seattle to require the filing of claims for other types of damages such as breach of contract or special statutory remedies." In support of its proposition that Wilson no longer controls, the City relies on one case from Division Three, Harberd v. City of Kettle Falls, which does not discuss or cite Wilson. After Harberd, the Washington Supreme Court, Division Two, and the United States District Court for the Eastern District of Washington all proceeded under the assumption that Wilson was still good law. Matia Contractors, Inc. v. City of Bellingham, decided by Division One after the employees filed briefs in this case, settled any confusion that may have remained: Wilson is controlling precedent, and Wilson holds that chapter 4.96 RCW authorizes claims filing ordinances only for tort claims. The trial court properly ruled that the employees were not required to file a notice of claim.
122 Wn.2d 814, 818, 863 P.2d 1336 (1993).
Wilson, 122 Wn.2d at 820.
120 Wn. App 498, 84 P.3d 1241, review denied, 152 Wn.2d 1025 (2004).
Wright v. Terrell, 162 Wn.2d 192, 196, 170 P.3d 570 (2007) (holding that statutory claims for damages are not tort claims and "are thus not subject to the claims filing statute").
Burnett v. Tacoma City Light, 124 Wn. App. 550, 558 n. 11, 104 P.3d 677 (2004).
Columbia Park Golf Course, Inc. v. City of Kennewick, No. CV-07-5054-EFS 2008 WL 628709, at *4 (E.D. Wash. Mar. 4, 2008) ("Wilson is a Washington Supreme Court opinion and therefore prevails over the conflicting Court of Appeals Harberd decision").
144 Wn. App. 445, 183 P.3d 1082 (2008). The City mentioned, but did not respond to, Matia in its reply brief.
We affirm the trial court's orders on all issues except overtime payment claims under the WRA for payments delayed by more than two paychecks. We remand this issue to the trial court for further proceedings consistent with this opinion.