RICHMOND State Hosp. v. BRATTAIN

• Decision Date: 27 December 2010
• Docket Number: No. 49A02-0908-CV-718.,49A02-0908-CV-718.
• Citation: 935 N.E.2d 212
• Parties: RICHMOND STATE HOSPITAL and All Other Similarly Situated State Institutions and Agencies, Appellants-Defendants, v. Paula BRATTAIN, Francis Ernst, Rebecca Strong, Terry Sutcliffe, Individually, Collectively, and on Behalf of All Others Similarly Situated, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

935 N.E.2d 212

RICHMOND STATE HOSPITAL and All Other Similarly Situated State Institutions and Agencies, Appellants-Defendants,

v.Paula BRATTAIN, ¹ Francis Ernst, Rebecca Strong, Terry Sutcliffe, Individually, Collectively, and on Behalf of All Others Similarly Situated, Appellees-Plaintiffs.

No. 49A02-0908-CV-718.

Court of Appeals of Indiana.

Oct. 8, 2010.

Rehearing Denied Dec. 27, 2010.

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Gregory F. Zoeller, Attorney General of Indiana, David L. Steiner, Frances Barrow, Donald G. Banta, Patricia Orloff Erdmann, Laura L. Bowker, Deputy Attorneys General, Indianapolis, IN, Attorneys for Appellants.

William A. Hasbrook, John F. Kautzman, Ruckelshaus Kautzman, Blackwell Bemis & Hasbrook, Indianapolis, IN, Stephen D. Susman, Jonathan Bridges, Stephen Shackelford, Jr., Susman Godfrey LLP, Dallas, TX, Attorneys for Appellees.

OPINION

CRONE, Judge.

Case Summary and Issues ²

From 1967 until 1993, the State of Indiana required some of its employees to work 40 hours per week while other employees in the same job classification were required to work only 37.5 hours per week for the same salary. The job classifications in which this occurred were referred to as “split classifications.” Thus, the 40-hour-per-week employees in split classifications effectively received a lower hourly wage than their counterparts working 37.5 hours per week.

Employees who had been required to work 40 hours per week filed a class action lawsuit against Richmond State Hospital and all other similarly situated State Institutions and Agencies (collectively referred to as “the State”) alleging that their salaries were required to be, but were not, equal to that paid to their counterparts working 37.5 hours per week. The trial court certified the class action and created four sub-classes: (1) merit/overtime-eligible; (2) merit/overtime-exempt; (3) non-merit/overtime-eligible; and (4) non-merit/overtime-exempt (collectively referred to as “the Employees”). ³ The trial court found that the State had a contractual duty to provide its employees with equal pay for comparable work, that it had breached that duty by failing to pay the 40-hour-per-week employees the same effective hourly wage as that paid to their counterparts who worked only 37.5 hours per week, entered judgment in favor of the Employees, and awarded them back pay in the amount of $42,422,788.

The State appeals the trial court's judgment. In considering the State's appeal, we address the following issues: (1) whether the trial court erred in finding that the merit Employees were not required to exhaust any available administrative remedies because to do so would have been futile; (2) whether the trial court abused its discretion in certifying a plaintiff class; (3) whether the trial court clearly erred in finding that the merit Employees were entitled to damages for the State's alleged breach of the “equal pay for comparable work” provision of the State Personnel Act; (4) whether the trial court clearly erred in finding that the nonmerit Employees were entitled to damages for the State's alleged breach of contract; (5) whether the trial court clearly erred in finding that the merit Employees were entitled to receive twenty years of back pay; (6) whether the trial court clearly erred in determining which job classifications were split; (7) whether the trial court abused its discretion in admitting Plaintiffs' Exhibit C; (8) whether the trial court erred in relying on the damages estimates prepared by the Employees' damages expert; and (9) whether the Employees' claims are barred under the equitable doctrine of laches.

We reach the following resolutions of the issues: (1) the trial court did not err in finding that the merit Employees were excused from exhausting administrative remedies because to do so would have been futile; (2) all the statutory requirements for class action certification were satisfied, and thus the trial court did not abuse its discretion in certifying a plaintiff class; (3) the merit Employees are entitled to damages for the State's breach of the “equal pay for comparable work” provision of the State Personnel Act; (4) the nonmerit Employees are entitled to back pay for the State's breach of the Equal Privileges and Immunities Clause of the Indiana Constitution; (5) the trial court erred in finding that the merit Employees were entitled to receive twenty years of back pay; (6) the trial court committed no error in determining which Employees were in split classifications; (7) the trial court did not abuse its discretion in admitting Plaintiffs' Exhibit C; (8) the trial court did not err in relying on damages estimates prepared by plaintiffs' damages expert; and (9) the State failed to establish all the elements of laches, and therefore it does not bar Employees' claims. We affirm in part, reverse in part, and remand with instructions to recalculate the amount of back pay to which the merit Employees are entitled.

Facts and Procedural History

The Employees were or are employed by the State. There are different categories of state employees, which are governed by different statutes and regulations. There are merit employees, who work at the merit agencies listed in Indiana Code Section 4-15-2-3.8, ⁴ and nonmerit employees. The merit and nonmerit employees can be further divided into those who are eligible for overtime pay under federal labor laws and those who are not. Thus, there are four categories of Employees involved in this class action suit: (1) merit/overtime-eligible; (2) merit/overtime-exempt; (3) non-merit/overtime-eligible; and (4) non-merit/overtime-exempt.

History of State Rules Governing Work Hours

In 1953, the Indiana General Assembly passed Indiana Code Section 4-1-2-1 requiring state employees working in “state offices” to work 37.5 hours per week. Indiana Code Section 4-1-2-1 provides in relevant part:

It is the intent of this chapter that state offices be open and able to conduct public business at all times during an eight and one-half (8 1/2) hour working day. Each employee shall work for a full seven and one-half (7 1/2) hours each working day and provision for a one (1) hour lunch period shall be provided each employee.

In 1967, the State Personnel Board ⁵ determined that state employees who worked in “state institutions,” as opposed to state offices, would work 40 hours per week. See 31 Ind. Admin. Code 2-11-1 (1988) (requiring merit employees to work 40 hours per week); 31 Ind. Admin. Code 1-9-1 (requiring nonmerit employees to work 40 hours per week) (1988). ⁶ In 1987, the State Personnel Department (“SPD”) ⁷ learned that nine state institutions were not in compliance with the 40-hour work week requirement. ⁸ The SPD issued a memorandum (“the 1987 Memorandum”) to all state agencies and institutions, which stated in pertinent part as follows:

Persons employed full time in state institutions are to work a minimum of 40 hours per week in accordance with 31 I.A.C. 1-9-1 and 31 I.A.C. 2-11-1.

Persons employed full time in state offices are to work a minimum of 37- 1/2 hours per week, with an hour off each day for lunch, in accordance with IC 4-1-2-1. The phrase “state offices” is interpreted as those places where the general public may conduct business with the various departments and agencies of their state government. Appellants' Br. at 67. Thus, certain job classifications had some employees who worked 40 hours per week in state institutions and others who worked 37.5 hours a week in state offices, creating a system wherein such job classifications were known as “split classes.” The state institutions that were out of compliance with the 40-hour work week rule came into compliance in the beginning of 1988, with the exception of correctional facilities, which returned to compliance in early 1990.

Arden & Coulter v. State Employees' Appeals Commission

On September 19, 1993, in response to an important Indiana Court of Appeals opinion, Arden & Coulter v. State Employees' Appeals Commission, 578 N.E.2d 769 (Ind.Ct.App.1991), the SPD abolished the split class system and issued a policy standardizing the computation of hourly rates for all state employees on the basis of a 37.5-hour work week. To understand the facts and procedural history of this case, familiarity with the Arden decision is essential. Arden involved only two categories of state employees, merit/overtime-eligible and merit/overtime-exempt, rather than the four categories present in this litigation. However, Arden was not a class action lawsuit. In Arden, employees who had been working 37.5 hours per week at state institutions objected to the 40-hour work week requirement that was implemented pursuant to the 1987 Memorandum and “timely pursued all administrative remedies,” but the State Employees' Appeals Commission (“SEAC”) denied relief. ⁹ Id. at 770. The employees sought judicial review of the SEAC's decision. The trial court affirmed the SEAC, and both groups of employees appealed.

On appeal, the Arden court addressed two separate issues. With regard to the merit/overtime- eligible employees, the issue on appeal was whether it was proper for the State to require merit/overtime-eligible employees in a given classification to work 40 hours per week for the same salary as that received by other employees in the same classification who worked only 37.5 hours per week. To answer the question, the Arden court relied on 31 Indiana Administrative Code 2-4-2, which provided that “[a]ll regulations ... shall be designed ... to guarantee ... equal pay for comparable work in the several agencies of the state service.” (Emphasis added.) We concluded that the merit/overtime-eligible employees in a given classification working in state institutions and those of the same classification working in state offices were doing comparable work. Id. at 772. As to equal pay, we rejected ...