Jones v. Four Corners Rod and Gun Club

• Decision Date: 30 January 2020
• Docket Number: CC 13C12103 (SC S066044)
• Parties: Rich JONES, Petitioner on Review, v. FOUR CORNERS ROD AND GUN CLUB, an Oregon non-profit corporation, Respondent on Review.
• Court: Oregon Supreme Court

366 Or. 100

456 P.3d 616

Rich JONES, Petitioner on Review,

v.FOUR CORNERS ROD AND GUN CLUB, an Oregon non-profit corporation, Respondent on Review.

CC 13C12103 (SC S066044)

Supreme Court of Oregon, En Banc.

Argued and submitted March 1, 2019.

January 30, 2020

Conrad E. Yunker, Conrad E. Yunker, P.C., Salem, argued the cause and filed the briefs for petitioner on review. Also on the briefs was David Schuck, Schuck Law, LLC, Vancouver, Washington.

Brian A. Buchanan, Salem, argued the cause and filed the brief for respondent on review.

Shenoa Payne, Richardson Wright LLP, Portland, filed the brief for amicus curiae Oregon Trial Lawyers Association.

FLYNN, J.

This appeal arises out of plaintiff's civil action to recover unpaid wages that defendant unlawfully withheld after the parties agreed to trade a lodging benefit for labor. Although Oregon's wage laws authorize employers to deduct from an employee's wages "the fair market value of lodging, meals or other facilities or services furnished by the employer for the private benefit of the employee," ORS 653.035(1), those laws also prohibit employers from taking any deduction from wages unless the employer obtains the employee's advance written authorization and keeps a record of the deductions, ORS 652.610(3) (2013).¹ Defendant admittedly failed to comply with the requirements for deducting the lodging benefit from plaintiff's wages.

The issue in this court is whether defendant's violation of ORS 652.610(3) prevents defendant from asserting an equitable claim for the value of the lodging benefit, either as an affirmative defense to plaintiff's wage claim or as a lawful counterclaim. We conclude that defendant's unlawful withholding of wages prevents it from asserting the value of the lodging benefit as an affirmative defense to defeat plaintiff's wage claim but does not prevent defendant from asserting an equitable counterclaim for the value of the lodging benefit.

I. BACKGROUND

The factual and procedural posture of the case are set out in detail in the opinion of the Court of Appeals. Jones v. Four Corners Rod and Gun Club , 290 Or. App. 811, 418 P.3d 765 (2018). We summarize those details that are pertinent to the dispute in this court. The dispute arises out of an agreement that plaintiff would provide maintenance and groundskeeping labor in exchange for a lodging benefit (lodging at a home located on defendant's property as well as utilities and cellular phone service).² However, defendant never obtained plaintiff's written authorization to deduct the lodging benefit from plaintiff's wages. The employment relationship lasted for a period of three years, during which plaintiff never received a paycheck, paycheck stub, or any monetary wages and defendant kept no records of the deductions. Eventually, defendant terminated plaintiff's employment and obtained a judgment evicting plaintiff from the home.

After defendant terminated plaintiff's employment, plaintiff brought the present action, in which he asserted claims for unpaid minimum wages, statutory civil penalties, and statutory attorney fees. See ORS 652.200 (providing that, with some exceptions, "court shall" award "a reasonable sum for attorney fees" to a successful plaintiff in a judgment for unpaid wages); ORS 652.615 (creating private cause of action for violations of ORS 652.610(3) and authorizing award to prevailing party of actual damages or $200, whichever is greater, in addition to costs, disbursements, and reasonable attorney fees). Defendant responded by admitting most of plaintiff's allegations, but it asserted an affirmative defense of "setoff" based on the value of the lodging benefits.³ Defendant also asserted equitable counterclaims premised on the theory that plaintiff would be unjustly enriched at defendant's expense if plaintiff were allowed to recover wages in addition to the value of the lodging benefit. Finally, defendant asserted as a counterclaim that it should be awarded an attorney fee because its affirmative defense of setoff prevented plaintiff from recovering anything on his claim for unpaid wages. See ORS 653.055(4) ("court may award reasonable attorney fees to the prevailing party in any action brought by an employee" to recover unpaid wages).

Pointing to defendant's violation of ORS 653.610(3), plaintiff denied that defendant lawfully could recover the value of the lodging benefit as either a setoff or counterclaim to plaintiff's claim for unpaid wages. However, the parties agreed to submit the few factual disputes to the jury before resolving the legal disputes. The jury found that plaintiff had earned a minimum wage of $38,796 during the years he had worked for defendant; that defendant had provided the lodging for plaintiff's "private benefit"; and that the value of that lodging benefit was $43,403. The parties then submitted legal arguments regarding how those findings should affect the judgment.

Defendant acknowledged that plaintiff was owed wages in the amount that the jury found plus prejudgment interest on the unpaid wages. Defendant also agreed that it owed a statutory penalty for its unlawful deductions as well as a penalty for deducting the value of the lodging benefit without following the statutory requirements for such deductions and that it owed a penalty for its failure to pay plaintiff wages due upon termination. But defendant contended that the value of its lodging benefit cancelled out the amount due to plaintiff on his first claim for relief, making defendant the prevailing party on that claim and the party entitled to recover an attorney fee pursuant to ORS 653.055(4). Defendant anchored its right to recover the value of the lodging benefit in ORS 652.610(5), which provides that the prohibition on making unauthorized deductions from wages does not "[d]iminish or enlarge the right of any person to assert and enforce a lawful setoff or counterclaim."

Plaintiff contended that defendant's equitable claim to the value of the lodging benefit was not a "lawful setoff or counterclaim" because it would effectively nullify plaintiff's statutory right to recover wages and penalties. According to plaintiff, "[d]efendant should not be permitted to advance arguments of equity to relieve itself of the consequences of its own unlawful acts."

The trial court agreed with defendant that defendant was entitled to recover the value of the lodging benefit.

Moreover, because the value of the benefit "more than fully offset" the wages that the jury found were due to plaintiff, the court determined that defendant was the prevailing party on plaintiff's claim for unpaid minimum wages. As a result, the court denied an award of attorney fees to plaintiff on the claim for unpaid wages and awarded defendant an attorney fee for prevailing on that claim. Next, the court ruled for plaintiff on his claims for statutory civil penalties but declined to award plaintiff attorneys fees for recovering on those claims.⁴ The "money award" section of the judgment reflects the court's conclusion that the net amount due to plaintiff was "$0" and that defendant was entitled to a net award for attorney fees of $12,520 and prevailing party costs in the amount of $1,080.

On appeal, plaintiff assigned error to most of the trial court's rulings regarding the judgment. He repeated his arguments that defendant could not use the value of the lodging benefit to offset its liability for unpaid minimum wages, whether as an affirmative defense or counterclaim. Thus, plaintiff argued, the trial court erred in identifying defendant as the prevailing party on plaintiff's wage claim and in awarding defendant, rather than plaintiff, attorney fees on that claim. Plaintiff also separately assigned error to the trial court's refusal to award plaintiff attorney fees for prevailing on his claims for statutory civil penalties.

The Court of Appeals reversed and remanded the judgment with respect to the issue of attorney fees on plaintiff's claims for statutory penalties, but it otherwise affirmed the trial court's judgment. Jones , 290 Or. App. 811, 418 P.3d 765. The court first observed that the nature of defendant's affirmative defense was really that of "recoupment" rather than "setoff," because "the value of lodging and utilities sought by defendant arose out of the transaction upon which plaintiff's wage claims were brought." Id. at 822, 418 P.3d 765. The court concluded, however, that labeling the defense "recoupment" did not affect defendant's ability to prevail on its affirmative defense.⁵ Thus, the Court of Appeals agreed with the trial court that defendant could assert the value of the lodging benefit as a lawful affirmative defense, which effectively "zeroed out" plaintiff's recovery on his first claim and made defendant the prevailing party entitled to attorney fees on that claim. Id. at 823, 418 P.3d 765 (internal quotation marks omitted). This court allowed plaintiff's petition for review, and, as explained below, we reverse in part the decision of the Court of Appeals.

II. ANALYSIS

A. Oregon's Wage Laws as Context for the Dispute in this Case

Before analyzing the parties' arguments, we begin by describing the statutory framework out of which the dispute arises. The starting point is ORS 653.025, which establishes a general minimum wage requirement for Oregon workers:

"for each hour of work time that the employee is gainfully employed, no employer shall employ or agree to employ any employee at wages computed at a rate lower than [the minimum rate set out by statute.]"

Throughout the term of employment, the employer must pay the wages due on an established pay day, ORS 652.120, and when the employment terminates—whether through discharge or mutual agreement—"all wages earned and unpaid" are "due and payable not later than the end of the first business day after the discharge or termination," ORS 652.140(1).

Those general rules are subject to exceptions, one of which is at issue in this case. The pertinent exception...