Coma Corporation v. Kansas Department of Labor

• Citation: 154 P.3d 1080
• Decision Date: 23 March 2007
• Docket Number: No. 95,537.,95,537.
• Parties: COMA CORPORATION d/b/a Burrito Express, and Mario Coria, Individually, Appellees, v. KANSAS DEPARTMENT OF LABOR, Appellant, and Cesar Martinez Corral.
• Court: United States State Supreme Court of Kansas

154 P.3d 1080

COMA CORPORATION d/b/a Burrito Express, and Mario Coria, Individually, Appellees, v. KANSAS DEPARTMENT OF LABOR, Appellant, and Cesar Martinez Corral.

No. 95,537.

Supreme Court of Kansas.

March 23, 2007.

Darren E. Root, of the Department of Labor, argued the cause, and A.J. Kotich, of the same department, was with him on the brief for appellant.

Diane F. Barger, of Wichita, argued the cause and was on the brief for appellees.

The opinion of the court was delivered by NUSS, J.:

Cesar Martinez Corral filed a claim for his earned but unpaid wages against his employer, Coma Corporation, d/b/a Burrito Express, and its president, Mario Coria. The Kansas Department of Labor (KDOL) determined that both respondents (Coma) owed Corral wages plus interest and also assessed a civil penalty for a total of $7,657 under the Kansas Wage Payment Act, K.S.A. 44-312 et seq.

On Coma's petition for review pursuant to the Kansas Act for Judicial Review and Civil Enforcement of Agency Actions (KJRA), K.S.A. 77-601 et seq., the district court reversed in part. It concluded that because Corral was an undocumented worker not legally permitted to work in the United States he was only entitled to the applicable minimum wage for work performed and was not entitled to a penalty. The KDOL appeals directly to this court under the KJRA.

The issues on appeal, and this court's accompanying holdings, are as follows:

1. Is an undocumented worker's employment contract enforceable under the Kansas Wage Payment Act? Yes.

2. Did the Kansas Department of Labor err in assessing penalties against Coma pursuant to K.S.A. 44-315(b)? No.

Accordingly, we affirm in part and reverse in part the judgment of the district court. We affirm the judgment of KDOL.

FACTS

Mario Coria is the president of Coma Corporation, a Wichita enterprise. On May 17, 2004, after Cesar Martinez Corral was fired from his Coma employment, he filed a claim for earned but unpaid wages. Corral alleged that he worked as a cook for Coma from October 2003 to May 12, 2004, at a pay rate of $6 per hour.

Corral testified at a telephone wage hearing conducted by a KDOL hearing officer. Corral stated that the manager, Luis Calderon, agreed to pay him $6 per hour with weekly payment. Although Corral maintained that he worked 6 or 7 days per week (50 to 60 hours), he only requested wages for 24 weeks at 40 hours per week—for a total of $5,760. He further testified that he was paid "$50 or $60 bucks a week." Based upon payment received of $60 per week, the hearing officer clarified that Corral was requesting $5,760 (24 weeks times 40 hours at $6 an hour) minus $2,040 ($1,440 [$60 actually paid per week times 24 weeks] minus $600 [rent of $100 per month times 6 months]) for a total of $3,760. No one besides Corral testified.

In granting Corral's claim, the hearing officer determined that the evidence presented no issues of fact and awarded wages plus interest:

"The evidence as to the agreement, the work done and the payment of some wages is not conflicting and presents no issue of fact to be resolved by the Presiding Officer . . . .

"The Claimant's evidence meets the burden of proof and establishes the contract, the services and the unpaid wages. Respondent failed to rebut Claimant's evidence. The Kansas Wage Payment Law requires Respondent to pay wages to Claimant in the amount of $3,720. Interest is assessed at 10% per annum for a total of $217."

The hearing officer also awarded Corral a penalty of $3,720 for Coma's willful and knowing withholding of his wages. Based upon $3,720 in wages, $217 in interest, and a penalty of $3,720, the hearing officer awarded Corral a total of $7,657 against Coma and Coria as its president. Coma filed a motion to dismiss, or in the alternative, to set aside initial order, which the Secretary of the KDOL denied. Coma also filed a petition for review that was denied.

Coma then filed a Petition for Judicial Review of Final Order with the district court. There, KDOL stipulated that Corral is an undocumented worker "not legally permitted to work in the United States."

In a 17-page opinion, the district court concluded that the Kansas Wage Payment Act (KWPA), K.S.A. 44-312 et seq., did apply to undocumented workers. It held, however, that Corral was only entitled to the applicable minimum wage for work performed because the employment contract was illegal due to Corral's status as an undocumented worker. The court remanded to KDOL for recalculation at the applicable minimum wage. It also reversed the hearing officer's penalty award, holding that federal immigration policy should prohibit a statutory penalty.

ANALYSIS

Standard of Review

KDOL actions are reviewable under the Act for Judicial Review and Civil Enforcement of Agency Actions (KJRA), K.S.A. 77-601 et seq. See K.S.A. 44-322a (c). Our standard of review is statutorily defined by the KJRA. See Blue Cross & Blue Shield of Kansas, Inc. v. Praeger, 276 Kan. 232, 245, 75 P.3d 226 (2003). KDOL argues that in the instant case a court shall grant relief to Coma only if it determines:

1. The KDOL has erroneously interpreted or applied the law; or

2. The KDOL action is based on a determination of fact, made or implied by the agency, that is not supported by the evidence that is substantial when viewed in light of the record as a whole, which includes the agency record for judicial review, supplemented by any additional evidence received by the court under this act.

See K.S.A. 77-621(c)(4) and (7).

On appeal, we exercise the same statutorily limited review of the KDOL's action as does the district court, i.e., "`as though the appeal had been made directly to this court.'" 276 Kan. at 245, 75 P.3d 226. The party asserting the agency's action is invalid bears the burden of proving the invalidity. K.S.A. 77-621(a)(1). 276 Kan. at 245, 75 P.3d 226. As a result, Coma—as the petitioner for review to the district court—retains the burden in this court of proving that at least one of the above-listed statutory bases for error exists.

Issue 1: An undocumented worker's employment contract is enforceable under the Kansas Wage Payment Act.

Coma argues that Corral's employment contract was illegal and unenforceable because he is an illegal alien. Intertwined with this argument is another: Coma claims that federal immigration law preempts the KWPA. The KDOL responds that the district court was correct in concluding that Corral was covered by the KWPA, essentially rejecting the preemption argument. It argues the court erred, however, in concluding that Corral's employment contract was illegal and unenforceable due to his status as an undocumented worker and that Corral therefore was entitled only to minimum wage.

To the extent resolution of the issues necessitates statutory interpretation, this court's review is unlimited. Schmidtlien Electric, Inc. v. Greathouse, 278 Kan. 810, 819, 104 P.3d 378 (2005). As we stated in Blue Cross & Blue Shield of Kansas, Inc., v. Praeger, 276 Kan. at 247, 75 P.3d 226:

"`Interpretation of a statute is a question of law. [Citation omitted.] Special rules apply, however, when considering whether an administrative agency "erroneously interpreted or applied the law":

"The interpretation of a statute by an administrative agency charged with the responsibility of enforcing that statute is entitled to judicial deference. This deference is sometimes called the doctrine of operative construction. . . . [I]f there is a rational basis for the agency's interpretation, it should be upheld on judicial review. . . . [However,] [t]he determination of an administrative body as to questions of law is not conclusive and, while persuasive, is not binding on the courts." [Citation omitted.] Deference to an agency's interpretation is especially appropriate when "the agency is one of special competence and experience." [Citation omitted.] However, the final construction of a statute always rests with the courts. [Citations omitted.]'"

KDOL specifically alleges that it is an agency of special competence and experience. As a result, it argues that the doctrine of operative construction applies to its interpretation providing KWPA coverage to undocumented workers such as Corral. Cf. A.O. Smith Corp. v. Kansas Dept. of Human Resources, 36 Kan.App.2d 530, 535, 144 P.3d 760 (2005) (applying operative construction).

Application of the KWPA to undocumented workers

As mentioned, Coma's "illegal contract" argument is intertwined with its allegation that the KWPA does not apply to Corral because "it contravenes the central policy of federal immigration law," i.e., state law is preempted by federal law. Coma quotes Ray v. Atlantic Richfield Co., 435 U.S. 151, 158, 98 S.Ct. 988, 55 L.Ed.2d 179 (1978):

"[A] state statute is void to the extent that it actually conflicts with a valid federal statute. A conflict will be found `where compliance with both federal and state regulations is a physical impossibility ...,' [citation omitted] or where the state `law stands as an obstacle to the accomplishments and execution of the full purposes and objectives of Congress.' [Citations omitted.]"

Preemption is a question of law over which we exercise de novo review. Doty v. Frontier Communications, Inc., 272 Kan. 880, 888, 36 P.3d 250 (2001).

Because of Coma's reliance upon preemption, it does not dispute that K.S.A. 44-313(b) of the KWPA expansively defines an employee as "any person allowed or permitted to work by an employer." (Emphasis added.) Nor does it dispute that pursuant to K.S.A. 44-314(a), an employer is required to pay all wages due to an employee at least once a month. In short, the plain language of the statute does not exclude undocumented workers from the "employee" definition or from the protections of the KWPA. Nor are there any KWPA exceptions to this expansive definition.

Coma's purported trumping argument is instead based upon 8 U.S.C. § 1324a(a) (2000), which makes...