Schilling v. Radio Holdings, Inc.
| Decision Date | 03 September 1998 |
| Docket Number | No. 63730-0,63730-0 |
| Citation | 961 P.2d 371,136 Wn.2d 152 |
| Court | Washington Supreme Court |
| Parties | , 137 Lab.Cas. P 58,506, 4 Wage & Hour Cas.2d (BNA) 1641 Sarah K. SCHILLING, an individual, Respondent, v. RADIO HOLDINGS, INC., a Washington corporation; Jerome C. Knoll, an individual; Jerome C. Knoll and Jane Doe Knoll and the marital community thereof; Michael O. Barry, an individual; Michael O. Barry and Jane Doe Barry and the marital community thereof; and CMN Broadcasting, Inc., a Washington corporation, Defendants, Robert R. Bingham, an individual; and Robert T. Bingham and Jane Doe Bingham, and the marital community thereof, Appellants. |
Bart R. Anderson, Bellevue, for respondent.
Radio Holdings, Inc., and its president, Robert Bingham, failed to pay wages due Sarah Schilling. Bingham does not dispute Radio Holdings employed Schilling, Schilling is owed back wages, or she was not paid, but alleges Radio Holding's financial problems prevented payment of Schilling, precluding a finding he or the corporation willfully withheld the wages. The King County Superior Court granted summary judgment to Schilling on her claim for double damages pursuant to RCW 49.52.070, which provides for such damages when an employer willfully withholds wages due an employee. As Bingham's refusal to pay wages is willful under a long line of Washington cases and we decline to engraft a "financial inability" defense onto RCW 49.52.070, in the absence of express legislative direction, we affirm the trial court's judgment.
Does an employer who fails to pay an employee's back wages, because of alleged financial inability to do so, willfully withhold such wages within the meaning of RCW 49.52.070?
Robert Bingham was president of Radio Holdings, Inc.
Radio Holdings); he and his spouse were sole shareholders of the corporation. Until March 1993, Radio Holdings owned KKFX radio station where Schilling worked as an office manager from January 1991 to March 1993.
In April 1992, Radio Holdings began experiencing financial difficulties and stopped issuing regular paychecks to KKFX employees. Instead, employees were issued "advances on payroll due," which were variable cash amounts representing a portion of each employee's wages due; the balance of the wages would be paid at a later date. These advances were issued so that Radio Holdings could pay other bills to stay in business. Schilling and the other KKFX employees were aware of Radio Holdings' financial problems.
At some point during 1992, Children's Media Network (CMN) agreed to purchase KKFX from Radio Holdings. Bingham asserted the sale was controlled by U.S. Bank, Radio Holdings' secured creditor, but he tried to negotiate payment of employee wages out of the sale proceeds. Bingham later stated, "After negotiating on behalf of the employees for their compensation out of the closing proceeds, I believed that I had come to a binding agreement that required the purchaser of the radio station KKFX to pay the employees' wages." Clerk's Papers at 243. The purchase agreement actually stated in pertinent part:
All wages and salaries of Seller's employees shall be paid and discharged by Seller to and including 11:59 P.M. on the Closing date, but to the extent, for reasons beyond Seller's control, Seller shall be unable to discharge its obligations in full as to any employee or employees, Buyer shall be allowed a credit therefor to permit payment thereof by Buyer.
Bingham wrote to Schilling on August 28, 1992, expressly assuring her she would be paid in full:
I have made arrangements with the bank that all past due monies owed employees will be paid out of the closing proceeds upon completion of the sale.
Clerk's Papers at 195 (emphasis added). Bingham also assured Schilling orally she would be paid in full. Schilling received assurances as well from a person she believed was working for CMN. Schilling averred that she worked for a year without contemporaneous payment of wages because she believed she would be paid in full upon the sale of KKFX: "Because I thought I was going to be paid in full when the radio station was sold, I continued to work for Mr. Bingham and Radio Holdings." Clerk's Papers at 220.
In August 1992, despite Bingham's apparent belief CMN would pay the back wages of KKFX employees, he set aside $25,000 to pay wages due to employees. He believed the $25,000 fund would be sufficient to pay all of the wages that would accrue up until the sale. The sale did not close when scheduled, however, and the wages continued to accrue beyond the $25,000. In addition, Bingham paid $13,000 out of the fund to a former employee who had threatened to sue Radio Holdings and one of its employees for sexual harassment. The $13,000 represented the back wages of the potential defendant, and was allegedly paid at that employee's request. As a result of the $13,000 payment and the delayed closing, the $25,000 fund was insufficient to pay all KKFX employees their back wages when the sale finally closed.
On March 24, 1993, a Radio Holdings accountant offered Schilling $3,241.34 in compensation for her back wages, although she was owed nearly $14,000, provided she sign a release form absolving Radio Holdings, U.S. Bank, CMN, and related parties of any claims arising from her employment at KKFX. According to Schilling, the accountant also told her "that Bingham wanted to simply give [the employees their] checks, but CMN insisted that he obtain [the employees'] signatures or he they [sic] would not release the funds." Clerk's Papers at 241. Schilling refused to sign the release.
Schilling then filed suit against Bingham, Radio Holdings, CMN, and several other defendants, on a variety of theories including RCW 49.52.070 for Bingham's willful
withholding of wages. Bingham denied liability because he did not receive anything out of the closing proceeds and his failure to pay wages was not intentional. Bingham moved for summary judgment, alleging a lack of willful conduct for purposes of the statute. The motion was denied and the Court of Appeals denied discretionary review. Ultimately, Schilling filed a motion for summary judgment, which the trial court granted, directing that a judgment be entered in her favor in the amount of $13,955, with an additional punitive award of $13,955, and her attorney fees and costs. We granted direct review. RAP 4.2(a).
In reviewing a summary judgment, we engage in the same inquiry under CR 56 as the trial court. Schaaf v. Highfield, 127 Wash.2d 17, 21, 896 P.2d 665 (1995). We must determine if there are any genuine issues of material fact and whether Schilling was entitled to judgment as a matter of law. CR 56(c).
The Legislature has evidenced a strong policy in favor of payment of wages due employees by enacting a comprehensive scheme to ensure payment of wages, including the statutes at issue here which provide both criminal and civil penalties for the willful failure of an employer to pay wages. See United Food & Commercial Workers Union Local 1001 v. Mutual Benefit Life Ins. Co., 84 Wash.App. 47, 51-52, 925 P.2d 212 (1996) (). In RCW 49.48, the Legislature mandated that employers pay employees all wages due upon the conclusion of the employment relationship and banned all withholding or diversion of wages by employers unless specifically approved by statute. RCW 49.48.010. The Legislature allowed recovery of attorney fees in actions to recover wages due.
RCW 49.48.030. The Department of Labor and Industries was given concurrent administrative enforcement powers for claims of failure to pay wages. RCW 49.48.040--.070. 1
The Legislature also established a remedy of exemplary damages if an employer willfully refuses to pay wages. RCW 49.52.050 provides, in pertinent part, that "[a]ny employer or officer, vice principal or agent of any employer" is guilty of a misdemeanor if that entity "[w]ilfully and with intent to deprive the employee of any part of his wages, [pays] any employee a lower wage than the wage such employer is obligated to pay such employee by any statute, ordinance, or contract[.]" RCW 49.52.050(2). 2 RCW 49.52.070 provides a corresponding civil remedy against the employer, its officers and agents:
Any employer and any officer, vice principal or agent of any employer who shall violate any of the provisions of subdivisions [RCW 49.52.050(2) ] shall be liable in a civil action by the By providing for costs and attorney fees, the Legislature has provided an effective mechanism for recovery even where wage amounts wrongfully withheld may be small. See Brandt v. Impero, 1 Wash.App. 678, 682, 463 P.2d 197 (1969). This comprehensive legislative system with respect to wages indicates a strong legislative intent to assure payment to employees of wages they have earned. As we stated in State v. Carter, 18 Wash.2d 590, 621, 140 P.2d 298, 142 P.2d 403 (1943), with respect to RCW 49.52.050 ():
aggrieved employee or his assignee to judgment for twice the amount of the wages unlawfully rebated or withheld by way of exemplary damages, together with costs of suit and a reasonable sum for attorney's fees: PROVIDED, HOWEVER, That the benefits of this section shall not be available to any employee who has knowingly submitted to such violations.
[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...
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