Naugle v. Beech Grove City Schools

• Decision Date: 27 April 2007
• Docket Number: No. 49S02-0606-CV-242.,49S02-0606-CV-242.
• Citation: 864 N.E.2d 1058
• Parties: Tabatha J. NAUGLE and SANDRA M. Cain, on Behalf of Themselves and Others Similarly Situated, Appellants (Plaintiffs below), v. BEECH GROVE CITY SCHOOLS, Appellee (Defendant below).
• Court: Indiana Supreme Court

864 N.E.2d 1058

Tabatha J. NAUGLE and SANDRA M. Cain, on Behalf of Themselves and Others Similarly Situated, Appellants (Plaintiffs below), v. BEECH GROVE CITY SCHOOLS, Appellee (Defendant below).

No. 49S02-0606-CV-242.

Supreme Court of Indiana.

April 27, 2007.

Ronald E. Weldy, Indianapolis, IN, Attorney for Appellants.

Eric M. Hylton, James B. Chapman II, Indianapolis, IN, Attorneys for Amicus Curiae ISTA.

William R. Groth, Indianapolis, IN, Attorney for Amicus Curiae AFSCME Council 62.

David L. Swider, Susan Oliver, Robert W. Rund, D. Michael Wallman, Indianapolis, IN, Attorneys for Appellee.

Julie M. Slavens, Indianapolis, IN, Attorney for Amicus Curiae Indiana School Boards Association.

On Petition to Transfer from the Indiana Court of Appeals, No. 49A02-0505-CV-472.

BOEHM, Justice.

We hold that the term "days" as used in the Wage Payment Statute refers to business days and not calendar days. We also hold that (1) our reasoning in Brownsburg Community School Corp. v. Natare Corp., 824 N.E.2d 336 (Ind.2005) does not prevent the application of the Wage Payment Statute to school corporations; (2) there is no school powers statute that precludes application of the Wage Payment Statute to school corporations; (3) there is no generic good faith defense to the Wage Payment Statute; and (4) there is no requirement within the Ten-Day Rule of the Wage Payment Statute that the employee request or demand wages.

Facts and Procedural History

Beech Grove City Schools ("Beech Grove") is a public school corporation located in Beech Grove, Indiana. Tabatha J. Naugle and Sandra M. Cain were employed by Beech Grove as custodians during 2003.

Prior to 2003, Beech Grove paid its employees twenty-six times in each calendar year based on pay periods of two weeks. Payments were made seven calendar days (five business days) after the end of each pay period. Beech Grove adjusted its payroll schedule to resolve two issues in 2003. First, in that year there were twenty-seven pay dates instead of the usual twenty-six. This anomaly occurs every seven years. Second, several employees requested that they receive their paychecks on the Wednesdays before the four-day Thanksgiving and Fall Recess breaks, rather than on the Mondays following the breaks. Under the previous payroll schedule, Beech Grove could not satisfy these requests because it would have had insufficient time — only three workdays after the pay period—to prepare and issue the payroll before the breaks.

To correct the extra pay period and meet these employee requests, Beech Grove implemented a new payroll schedule beginning on July 11, 2003. The first pay date in July 2003 was moved from July 4 to July 11. The new payroll schedule provided for the employees to receive their wages fourteen calendar days (ten business days) after the end of each pay period instead of the previous seven calendar days (five business days). Under this new payroll schedule, Beech Grove had twenty-six pay dates in 2003 instead of twenty-seven and was able to pay employees on the Wednesdays before the two breaks. The only complaint Beech Grove received about the new schedule was from a single employee who mistakenly thought that he would lose one week of pay. Beech Grove discontinued the new system on July 9, 2004 and reverted to the previous procedure of paying employees seven calendar days (five business days) after the end of each pay period.

Naugle voluntarily resigned from her employment at Beech Grove on October 24, 2003, and Cain was terminated on February 6, 2004. On February 18, 2004, Naugle and Cain filed suit against Beech Grove, alleging that Beech Grove had violated the Wage Payment Statute by failing to pay their wages within the time the statute required.¹ Naugle and Cain initiated this claim as a class action and requested actual wages, liquidated damages, and attorney fees as provided under the damages provision of the Wage Payment Statute. The parties, with the approval of the trial court, agreed to defer the issue of class certification until the issue of liability was resolved.

The Wage Payment Statute provides that "[p]ayment shall be made for all wages earned to a date not more than ten (10) days prior to the date of payment." Ind.Code § 22-2-5-1(b). Naugle and Cain moved for partial summary judgment on the issue of Beech Grove's liability for violating this "Ten-Day Rule." Beech Grove filed a cross-motion for summary judgment, arguing that (1) the Ten-Day Rule requires a demand for payment before penal damages and attorney fees may be assessed but no demand was made; (2) the term "days" in the Ten-Day Rule means business days rather than calendar days; (3) Beech Grove is a political subdivision and, as such, is not subject to the Wage Payment Statute; (4) Beech Grove is not subject to punitive damages and attorney fees under the doctrine announced in Brownsburg Community School Corp. v. Natare Corp., 824 N.E.2d 336 (Ind.2005), reh'g denied; and (5) the Wage Payment Statute does not apply because Beech Grove acted in good faith. The trial court denied the plaintiffs' motion for partial summary judgment and granted Beech Grove's cross-motion for partial summary judgment on each of the grounds advanced by Beech Grove.

Naugle and Cain appealed. The Court of Appeals held that the trial court wrongly interpreted "days" to mean business days instead of calendar days. Nevertheless, it affirmed, concluding that under Brownsburg public school corporations were not employers subject to the Wage Payment Statute. Naugle v. Beech Grove City Schs., 840 N.E.2d 854 (Ind.Ct.App. 2006). The Court of Appeals did not address the other grounds advanced by Beech Grove in support of the trial court's ruling. We granted transfer.² 2006 Ind. LEXIS 570 (Ind. June 30, 2006).

Standard of Review

Upon reviewing the grant or denial of summary judgment, we use the same standard of review as the trial court. Summary judgment is appropriate only where the evidence shows that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Poznanski ex rel. Poznanski v. Horvath, 788 N.E.2d 1255, 1258 (Ind.2003) (citing Ind. Trial Rule 56(C); Tom-Wat, Inc. v. Fink, 741 N.E.2d 343, 346 (Ind.2001)). All facts and reasonable inferences drawn from those facts are construed in favor of the non-moving party. Troxel v. Troxel, 737 N.E.2d 745, 748 (Ind. 2000) (citing Shell Oil Co. v. Lovold Co., 705 N.E.2d 981, 983-84 (Ind.1998)). The review of a summary judgment motion is limited to those materials designated in the trial court under Trial Rule 56(C). Id.

Application of the Wage Payment Statute

In St. Vincent Hospital and Health Care Center, Inc. v. Steele, 766 N.E.2d 699, 703 (Ind.2002), we held that the Wage Payment Statute governs both the frequency and amount an employer must pay its employee. See I.C. §§ 22-2-5-1 to 22-2-5-3. Subsection 1(a) provides that "[e]very person, firm, corporation, limited liability company, or association, their trustees, lessees, or receivers appointed by any court, doing business in Indiana, shall pay each employee at least semimonthly or biweekly, if requested, the amount due the employee." (emphasis added). The Ten-Day Rule appears in subsection 1(b) and also imposes a requirement as to the timing of wage payment. An employer who fails to make payment of wages to any employee as provided in Indiana Code section 22-2-5-1 is subject to liquidated damages and attorney fees. I.C. § 22-2-5-2. As explained below, we do not agree with all of the five independent reasons why Beech Grove contends it was not liable under the Wage Payment Statute, but we agree that Beech Grove did not violate the statute.

A. Brownsburg v. Community School Corp. v. Natare Corp.

Beech Grove contends that this case is controlled by the reasoning of this Court in Brownsburg Community School Corp. v. Natare Corp., 824 N.E.2d 336 (Ind. 2005), reh'g denied. Beech Grove contends that it is a public school and therefore it is not subject to the Wage Payment Statute because the General Assembly did not intend for public school corporations to be subject to statutory liquidated damages. The trial court agreed with that argument, and the Court of Appeals affirmed. Naugle, 840 N.E.2d at 858-59. We do not agree that Brownsburg applies to this case.

In Brownsburg, a supplier of prefabricated pools sued a school corporation, an architect, and a swimming pool consultant, alleging the three conspired in violation of the Indiana Antitrust Act to exclude the supplier from consideration as a supplier for a swimming pool construction project. The supplier sought treble damages, costs, and attorney fees under the Antitrust Act. The school corporation moved for judgment on the pleadings, alleging it was not a "person" as that term was used in the Antitrust Act and therefore it was not an entity subject to the civil treble damages under that statute. Brownsburg, 824 N.E.2d at 338. The Court of Appeals held the school corporation was a "person," as that term was defined in the Antitrust Act, and therefore could sue and be sued under that statute. Id. We held that the Brownsburg school corporation was a "person" that could sue under the Antitrust Act, but it was not liable for treble damages under the statute. Id. at 344.

The Court of Appeals, citing Brownsburg, concluded that "[i]t is illogical to suggest that public schools should be subject to treble damages for paying wages four days late, but immune from such penalties when they engage in more serious — quasi-criminal—wrongdoing as in Brownsburg." Beech Grove, 840 N.E.2d at 859. The Court of Appeals held that in the absence of definitions of "person" and "corporation" in the Wage Payment Statute that specifically include school corporations or governmental entities, our reasoning in Brownsburg controlled and excluded governmental units from the Wage Payment Statute. Id.

The Wage Payment Statute applies to "[e]very...