Hendershot v. Carey

• Decision Date: 07 July 1993
• Docket Number: No. 27A02-9202-CV-77,27A02-9202-CV-77
• Citation: 616 N.E.2d 412
• Parties: James HENDERSHOT and Tom Rotz, Barbara Hargis and Teresa Neal, On Behalf of Themselves and All Others Similarly Situated, Appellants-Plaintiffs, v. James P. CAREY, Mayor of Muncie, Muncie Common Council, John Doe, Chief Executive Officer of Muncie Sanitary District, and The Board of Sanitary Commissioners, Appellees-Defendants.
• Court: Indiana Appellate Court

Page 412

616 N.E.2d 412

James HENDERSHOT and Tom Rotz, Barbara Hargis and Teresa Neal, On Behalf of Themselves and All Others Similarly Situated, Appellants-Plaintiffs, v. James P. CAREY, Mayor of Muncie, Muncie Common Council, John Doe, Chief Executive Officer of Muncie Sanitary District, and The Board of Sanitary Commissioners, Appellees-Defendants.

No. 27A02-9202-CV-77.

Court of Appeals of Indiana Second District.

July 7, 1993.

Harry A. Wilson, Jr., Wilson Kehoe & Winingham, Indianapolis, for appellants-plaintiffs.

Steven D. Murphy, Todd A. Mikesell, DeFur, Voran, Hanley, Radcliff & Reed, Muncie, for appellees-defendants.

SULLIVAN, Judge.

James Hendershot, Tom Rotz, Barbara Hargis, and Teresa Neal, as representative plaintiffs in a class action on behalf of the employees (the class will hereinafter collectively be referred to as the "Employees") of the City of Muncie and of the Muncie Sanitary District (hereinafter collectively referred to as the "City"), appeal from the trial court's judgment that the City did not wrongfully withhold wages from the Employees in 1988.

We affirm in part, reverse in part, and remand for further proceedings.

Upon appeal, the Employees present five issues for our review, which we consolidate and restate.

I. Whether the City violated the Indiana Constitution's requirement of just compensation for work performed when it failed to pay the Employees their full pay checks on December 30, 1988;

II. whether the trial court erred in determining that the City did not violate I.C. 22-2-5-1 when it failed to pay some Employees on December 30, 1988;

III. whether the trial court erred in determining that the Employees' compensation was annual, as opposed to hourly;

IV. whether the City breached the employment contract when it failed to pay some of the Employees on December 30, 1988?

The underlying facts are not in dispute. The procedure for setting salaries for City employees is prescribed by statute. For the year 1988, pursuant to the statutes then in force, I.C. 36-4-7-2 (Burns Code Ed.1981), ¹ and I.C. 36-4-7-3 (Burns Code Ed.1981), ² the Mayor and the Board of Commissioners submitted proposals containing suggested maximum salaries and hourly wages for employees of the City of Muncie and the Muncie Sanitary District, respectively. These proposals were approved in July, 1987 by the Common Council for the City of Muncie. In August, 1987, the Mayor proposed a budget to the Common Council appropriating funds for projected 1988 expenditures. In such cases, the Common Council may either approve the budget as submitted, or may reduce the amount, but may not increase appropriations. In the instant case, the Common Counsel approved the budget.

The above process resulted in the enactment of Salary Ordinance Numbers 20-87, 21-87, and 22-87. Ordinance 20-87 fixed the 1988 maximum compensation for Muncie elected officials. Ordinance 21-87 fixed the 1988 maximum compensation for Sanitary District employees working in positions classified in labor grades 1 through 134. Ordinance 22-87 fixed the 1988 maximum compensation for all appointed officials and employees of the City of Muncie; these positions were classified in labor grades 2 through 140. After the above ordinances were approved, they were sent to the Payroll Office, where amounts representing annual salaries were divided by twenty-six in order to determine the amount of compensation each salaried employee would receive per biweekly pay period.

In either July or August of 1988, the City became aware that there were in fact 27 paydays in 1988, rather than the normal 26. ³ The City determined that its miscalculation as to the number of pay periods would create a budgetary shortfall. At the time that the error was discovered, each employee had yet to receive his or her last nine of twenty-six paychecks. Based upon the Payroll Department's original calculations, each salaried employee's check represented 1/26 of that employee's annual salary. Obviously, a shortfall would occur if each such employee was issued a twenty-seventh check in the same amount as the first twenty-six.

The same shortfall would occur with regard to hourly employees, although for a different reason. In order to prepare its budget and appropriate an amount sufficient to fund proposed expenditures, it would be necessary for the City to calculate the amount it would pay an hourly employee during the entire year. This it could do by multiplying the projected number of hours worked per week times the number of weeks worked, which would then be multiplied by the hourly rate. The City's budgetary shortfall vis a vis hourly employees would equal the amount expended upon the twenty-seventh pay check.

After discovering the problem (i.e., that it had divided salaried employees' salaries by twenty-six paychecks instead of twenty-seven, and that it had forecast only twenty-six pay periods instead of twenty-seven for hourly employees, and thus had appropriated insufficient funds to pay the twenty-seventh paycheck), the City met with the State Board of Accounts to discuss its options and was told that the City could not pay more than had originally been appropriated in the salary ordinance. In other words, the City could not simply appropriate extra funds with which to issue a twenty-seventh check.

Seemingly unable to pay the Employees the full amount of a twenty-seventh check, the City offered each employee a choice between two options. Under the first option, the employee would receive nine paychecks in the same amount that he or she had received until that point in the year, but would not receive a paycheck on December 30, 1988, the twenty-seventh and final payday of the year. Under the second option, the employee would receive the same amount of money by year end, but that amount would be spread out over ten checks instead of nine; in other words, each of the ten checks would be for 9/10 of the amount that the employee had received on the first sixteen checks of 1988. Under either option, the annual compensation received would be the same. The Employees brought this class action, claiming that the City had wrongfully withheld the last two-weeks salary.

In the instant case, the Employees appeal a negative judgment. A negative judgement may only be challenged upon appeal as contrary to law. Sherk v. Indiana Waste Systems, Inc. (1986) 4th Dist.Ind.App., 495 N.E.2d 815, 817, trans. denied. "A judgment is contrary to law if the evidence is without conflict and points unerringly to a conclusion different from that reached by the trial court." Communications Workers of America, Locals 5800, 5714 v. Beckman (1989) 4th Dist.Ind.App., 540 N.E.2d 117, 127.

I. Constitutional Claim

The Employees first contend that "application of I.C. 36-4-7 to allow defendants to avoid paying plaintiffs amounts due and owing under their hourly wage contract would be a violation of the Indiana Constitution, Article I, Secs. 21, 24, and 37." Brief of Appellants at 36. Indiana Code 36-4-7 contains guidelines to be followed by municipalities when setting budgets.

When a statute is challenged as unconstitutional, we first determine whether the matter may be disposed of upon non-constitutional grounds. State of Indiana, Indiana State Police, and Indiana Department of Highways v. Rendleman (1992) Ind., 603 N.E.2d 1333. In denying the appellants' claim, the trial court rendered a negative decision against the entire class as originally certified. However, our resolution of the issues presented herein, infra, divides the entire class into two subclasses. To foreshadow, we hold that the trial court properly denied the claims of one subclass, but that the other subclass should have prevailed. Obviously, the constitutionality question is moot as to the subclass which prevails. As to the other subclass, we hold that the trial court properly denied those claims upon the ground that members of that group received all of the compensation to which they were entitled. See Issue III, infra. Thus, we need not address the constitutional question.

II. Biweekly Wage Statute

The Employees next claim that the City violated I.C. 22-2-5-1 (Burns Code Ed.1992) by refusing to issue the December 30, 1988 paycheck. ⁴ This provision reads, in pertinent part: "(a) Every person, firm, corporation, or association, their trustees, lessees, or receivers appointed by any court, doing business in Indiana, shall pay each employee at least semi-monthly or bi-weekly, if requested, the amount due the employee." Those employees who chose the second option would not have received a paycheck between December 16, 1988 and January 13, 1989, a period of four weeks. Thus, the Employees claim, the City was in violation of I.C. 22-2-5-1 because it went more than two weeks without issuing paychecks.

Indiana Code 22-2-5-1 does not confer automatic liability upon employers whenever a period of longer than two weeks elapses between paychecks. Rather, the statute provides that in order to place liability upon an employer for failure to issue paychecks at least every two weeks, an employee must first submit a request to that effect. See Flex Let Corp. v. Vogel (1962) 134 Ind.App. 495, 186 N.E.2d 696. Put another way, an employer must pay an employee at least every two weeks if the employee so requests. In the instant case, the City expressly offered to pay the Employees on December 30, albeit a reduced amount, an offer which some employees apparently rejected. Those employees cannot now charge the City with responsibility for a choice that some employees made, i.e., to go four weeks rather than two before receiving a paycheck. It is irrelevant that the amount of the checks was in dispute; the statute addresses the frequency with which an employer must pay its employees, not the amount that it must pay. In summary the City did not violate I.C. 22-2-5-1 when some employees chose not to receive a paycheck on December 30.

III. Hourly v....