Ellerman v. Centerpoint Prepress, Inc.

• Decision Date: 10 May 2001
• Docket Number: No. 68632-7.,68632-7.
• Citation: 143 Wash.2d 514,22 P.3d 795
• Court: Washington Supreme Court
• Parties: Michael J. ELLERMAN, Petitioner, v. CENTERPOINT PREPRESS, INC., a Washington Corporation; Rosemary Widener, Defendants, and Betty Handly, Respondent.

22 P.3d 795

143 Wash.2d 514

Michael J. ELLERMAN, Petitioner, v. CENTERPOINT PREPRESS, INC., a Washington Corporation; Rosemary Widener, Defendants, and Betty Handly, Respondent.

No. 68632-7.

Supreme Court of Washington, En Banc.

Argued September 21, 2000.

Decided May 10, 2001.

Edwards, Sieh, Smith & Goodfriend, Howard Mark Goodfriend, Seattle, Law Offices of J. David Smith, J. David Smith, Edmonds, for petitioner.

Margaret E. Harris, Seattle, James M. Cleland, Jr., Mount Vernon, for respondent.

ALEXANDER, C.J.

We granted Michael Ellerman's petition to review a Court of Appeals' decision affirming a judgment in favor of Betty Handly and against Michael J. Ellerman in Ellerman's action for "wages owed and exemplary damages." The issue that was before the Court of Appeals and is now before us is whether Handly is liable for Ellerman's unpaid wages as a "vice principal" or "agent" of Ellerman's employer, Centerpoint Prepress, Inc. We hold that the Court of Appeals correctly determined that Handly was neither a "vice principal" nor "agent" personally liable in damages for the willful withholding of wages. Accordingly, we affirm the Court of Appeals.

I.

The basic facts of this case are not in dispute. For several years, Michael J. Ellerman worked for a typesetting business, the "Type Gallery." That business was owned by Betty Handly. Type Gallery subsequently failed and went into bankruptcy proceedings in October 1992.

In November 1992, a new typesetting business was started called Centerpoint Prepress, Inc. (Centerpoint). The only investor in this business, Rosemary Widener, became the new corporation's sole stockholder, board member, and president. By virtue of her position, Widener was the only person authorized to sign checks on behalf of the corporation and the only person who actually did so. Betty Handly managed the company's business activities and was paid $16.50 per hour for her services.

Michael Ellerman also began working at Centerpoint in November 1992 at an agreed upon wage of $13.50 per hour. Unfortunately, Centerpoint soon ran into financial difficulties. As a consequence, Ellerman, Handly, and other employees were not paid all of the wages that were due them for the period May 1 through June 18, 1993.¹

Centerpoint eventually ceased operation. Ellerman then brought suit against Centerpoint, Widener, and Handly for $2,782.94 in unpaid wages. He also sought exemplary damages, pursuant to RCW 49.52.070, in an amount equal to twice the amount of the wages he alleged were willfully and intentionally withheld from him. Ellerman obtained a default judgment against Centerpoint. Ellerman eventually settled with Widener, leaving Handly as the only defendant for trial.

The case proceeded to trial. At its conclusion a King County court commissioner, acting as a judge pro tempore, determined that Handly had no liability for unpaid wages on the basis that she was not an "employer" liable for wages and had not violated any statutory provisions.

Ellerman appealed the trial court's decision to the Court of Appeals. That court affirmed the trial court, holding that Ellerman's wages were not willfully and intentionally withheld because the company simply lacked the financial ability to pay the wages.

Ellerman then petitioned this court for review. We granted his petition and remanded to the Court of Appeals for reconsideration in light of our decision in Schilling v. Radio Holdings, Inc., 136 Wash.2d 152, 961 P.2d 371 (1998), a case in which we held that financial inability to pay wages is not a defense to a claim of willful and intentional withholding of wages. On remand, the Court of Appeals again affirmed the judgment in favor of Handly. Although it acknowledged our holding in Schilling, it nonetheless concluded that Handly was not personally liable because she was neither Ellerman's "employee" nor "an officer, vice principal or agent" of his employer responsible for the payment of wages. RCW 49.52.050; .070. Ellerman again petitioned for review and we granted his petition.

II. ANALYSIS

Because there is no dispute that Ellerman is owed unpaid wages, the issue before us is whether Handly, an employee of Centerpoint, who functioned as the company's business manager, has personal liability for payment of Ellerman's wages. Ellerman claims that she has liability, pursuant to statutes, as a vice principal or agent of Centerpoint. Handly contends that she has no liability under applicable statutes because she was not Ellerman's employer and had no authority to make decisions regarding wages or payment of wages.

A.

When an employee is discharged or otherwise ceases to work for an employer, "the wages due him on account of his employment shall be paid to him at the end of the established pay period." RCW 49.52.010. Any "employer or officer, vice principal or agent of any employer" is guilty of a misdemeanor if he or she "[w]ilfully and with intent to deprive the employee of any part of his wages" pays the employee less than the wage to which the employee is entitled. RCW 49.52.050(2). Any "officer, vice principal or agent of any employer" who shall violate RCW 49.52.050(2) shall be liable to the unpaid employee "for twice the amount of the wages unlawfully ... withheld" and attorney fees. RCW 49.52.070.

Ellerman does not contend that the trial court erred in holding that Handly was not Ellerman's "employer."² Rather, he asserts that Handly was a "vice principal" or "agent" of Centerpoint and, therefore, liable for the withholding of wages. Thus, the issue before us is whether Handly falls within the aforementioned statutes as a "vice principal" or an "agent" of Centerpoint who had liability for the withholding of Ellerman's wages.

When interpreting statutory language, the goal of the court is to carry out the intent of the Legislature. Seven Gables Corp. v. MGM/UA Entm't Co., 106 Wash.2d 1, 6, 721 P.2d 1 (1986). In ascertaining this intent, the language at issue must be evaluated in the context of the entire statute. In re Sehome Park Care Ctr., Inc., 127 Wash.2d 774, 778, 903 P.2d 443 (1995).

The Legislature enacted the statutes at issue here in 1939. Sometimes referred to as the "Anti-Kickback" statutes, they were enacted to prevent abuses by employers in a labor-management setting, e.g., coercing rebates from employees in order to circumvent collective bargaining agreements. See Cameron v. Neon Sky, Inc., 41 Wash.App. 219, 222, 703 P.2d 315

(citing McDonald v. Wockner, 44 Wash.2d 261, 269-71, 267 P.2d 97 (1954)), review denied, 104 Wash.2d 1026 (1985). This court recently stated in Schilling, 136 Wash.2d at 159,

961 P.2d 371 (quoting State v. Carter, 18 Wash.2d 590, 621, 140 P.2d 298 (1943)), with respect to these statutes:

"[T]he fundamental purpose of the legislation, as expressed in both the title and body of the act, is to protect the wages of an employee against any diminution or deduction therefrom by rebating, underpayment, or false showing of overpayment of any part of such wages. The act is thus primarily a protective measure, rather than a strictly corrupt practices statute. In other words, the aim or purpose of the act is to see that the employee shall realize the full amount of the wages which by statute, ordinance, or contract he is entitled to receive from his employer, and which the employer is obligated to pay, and, further, to see that the employee is not deprived of such right, nor the employer permitted to evade his obligation, by a withholding of a part of the wages ..."

We held that these statutes should be liberally construed to advance the Legislature's intent to protect employee wages and assure payment. Schilling, 136 Wash.2d at 159, 961 P.2d 371.

Ellerman's primary contention is that Handly falls under RCW 49.52.070 as a "vice principal." More specifically, he argues that since the statute does not define "vice principal," that term should be given its common law meaning. State v. Pacheco, 125 Wash.2d 150, 154, 882 P.2d 183 (1994) (Legislature is presumed to intend undefined terms to mean what they did at common law). Under the common law, the concept of "vice principal" was used primarily in the context of fellow-servant law to determine whether an employee could be held liable when one employee inflicted injury on another employee. Under that theory of liability, an employee is considered a vice principal of the employer if he or she has the authority to direct and supervise the work of the other employee. Allend v. Spokane Falls & N. Ry. Co., 21 Wash. 324, 338, 58 P. 244 (1899). In such circumstances, the "vice principal" is the employer's "alter ego" with respect to the work being done. Carlson v. P.F. Collier & Son Corp., 190 Wash. 301, 310-11, 67 P.2d 842 (1937). We have held that the ultimate test for determining whether an employee is a vice principal is the power of superintendence and control. Id.

Clearly under the common law, the term "vice principal" is broad and could include a manager or supervisor such as Handly who the trial court found was the "manager of the corporation's business affairs, and overseeing the activities of the other employees." Clerk's Papers (CP) at 68. It does not, however, follow that Handly is personally liable for the wages that were not paid to Ellerman or for exemplary damages. We say that because, in our view, the statute requires more than a finding that the putative vice principal is managing the employer's business. It requires the vice principal to withhold wages "[w]ilfully and with intent to deprive the employee" of his wages. RCW 49.52.050(2). Thus, we conclude that a vice principal cannot be said to have willfully withheld wages unless he or she exercised control over the direct payment of the funds and acted pursuant to that authority. Although the dissent suggests that our determination is inconsistent with the common law definition of "vice principal," we are satisfied that it accords with a sensible...