Utley v. Mill Man Steel, Inc.

• Decision Date: 20 August 2015
• Docket Number: No. 20130162.,20130162.
• Citation: 357 P.3d 992,2015 UT 75
• Parties: Kendall UTLEY, an individual, Appellee, v. MILL MAN STEEL, INC., a Colorado corporation, Appellant.
• Court: Utah Supreme Court

357 P.3d 992
2015 UT 75

Kendall UTLEY, an individual, Appellee
v.
MILL MAN STEEL, INC., a Colorado corporation, Appellant.

No. 20130162.

Supreme Court of Utah.

Aug. 20, 2015.

357 P.3d 993

Andrew Stavros, Austin B. Egan, Salt Lake, for appellee.

Bryce D. Panzer, Michael S. Wilde, Salt Lake, for appellant.

Associate Chief Justice LEE authored the opinion of the court with respect to Part I and Part II. A, in which Justice PARRISH and Justice HIMONAS joined, and the judgment of the court with respect to Part II.B, in which Justice HIMONAS joined. Chief Justice DURRANT authored an opinion concurring in part and dissenting in part in which Justice DURHAM joined in full and Justice PARRISH joined as to Part I.

Opinion

Associate Chief Justice LEE, opinion of the court as to Part I and Part II.A and concurring in the judgment of the court as to Part II.B.:

¶ 1 Mill Man Steel fired Kendall Utley on suspicion that he had misappropriated steel from the company. In so doing, Mill Man refused to pay Utley the commissions he claimed to have earned, asserting a right to withhold the commissions as an offset against the value of the allegedly misappropriated steel. Utley filed this suit, claiming that Mill Man had violated the Utah Payment of Wages Act (UPWA). The district court granted summary judgment for Utley. It held that Mill Man was required to pay Utley his commissions and that Mill Man could not qualify under a UPWA provision allowing an employer to withhold earned wages upon “present[ing] evidence that in the opinion of a hearing officer ... would warrant an offset.” Utah Code § 34–28–3(5)(c) (2013).¹

¶ 2 We reverse. We interpret this provision to allow Mill Man to present evidence to the district court in an attempt to establish that Utley's misappropriation “would warrant an offset” justifying Mill Man's failure to pay Utley's commissions. A contrary ruling would render the subsection (5)(c) exception a practical nullity. We avoid that result by interpreting the statute to allow an employer in a case like this one to seek a post-withholding opinion of a court or administrative law judge that an offset was warranted. Such employer does so at its peril, however. If the offset is not found to be warranted, the employer will be subject to liability and penalties under the UPWA.

I

¶ 3 In July 2009, appellant Mill Man hired Kendall Utley as a sales and purchasing agent to sell its steel plate and coil. A short time later, Utley opened a Mill Man office in Pleasant Grove, at the site of one of Utley's existing customers, Rocky Mountain Welding (RMW). Under the employment arrangement with Utley, Mill Man sent inventory to the RMW location and Utley was paid on a commission basis. About a year later, however, Mill Man went to the RMW site for an inspection and discovered that some 700 tons of steel—roughly 40 percent of the logged inventory—was missing. The value of the missing steel allegedly was about $370,000. Mill Man promptly fired Utley.

¶ 4 Prior to his termination, Utley sold amounts of steel that purportedly entitled him to commissions totaling $100,479.99. Shortly after Mill Man fired Utley, however, it informed him that it would not pay any of his outstanding commissions but was retaining them to offset its losses. Utley then filed suit claiming breach of contract and a violation of the Utah Payment of Wages Act. Mill Man raised affirmative defenses and counterclaims, including recoupment and offset, breach of fiduciary duty, conversion, fraud, and imposition of a constructive trust.

¶ 5 Utley moved for summary judgment. Mill Man opposed the motion, arguing that it did not owe Utley his commissions due to his breach of fiduciary duty and, alternatively, that Mill Man was due an offset under the

357 P.3d 994

UPWA in the amount of $370,000 because of Utley's negligence.

¶ 6 The district court granted summary judgment in favor of Utley. It was undisputed that Utley was owed $100,479.99 in commissions. And in the district court's view, the UPWA did not permit a preemptive withholding of these commissions. Thus, the district court concluded that Mill Man was required to pay Utley his commission under the terms of the UPWA. It also imposed a penalty on Mill Man to the tune of some $50,000. In all, the district court awarded Utley $205,262.37.

¶ 7 Mill Man appealed. We review the summary judgment decision below de novo, yielding no deference to the district court. See, e.g., Bahr v. Imus, 2011 UT 19, ¶¶ 12–18, 250 P.3d 56.

II

¶ 8 The UPWA provides that [w]henever an employer separates an employee from the employer's payroll the unpaid wages of the employee become due immediately, and the employer shall pay the wages to the employee within 24 hours of the time of separation at the specified place of payment. utah code § 34–28–5(1)(a). An employer who fails to make this payment in this timeframe, moreover, is guilty of unlawfully withholding wages under the UPWA. Id. § 34–28–12(1). And the sanctions for unlawful withholding are significant, including not only a statutory fine,² but even criminal liability.³

¶ 9 This case implicates an exception to the general rule. Under the exception, withholding of wages is permitted where “the employer presents evidence that in the opinion of a hearing officer or an administrative law judge would warrant an offset.” Id. § 34–28–3(5)(c). This exception is one in a series. The others listed in the statute allow an employer to withhold earned wages where “the employer is required to withhold or divert the wages” because of a court order or state or federal law; “the employee expressly authorizes the deduction in writing”; or “the employer withholds or diverts the wages” in accordance with certain authorized retirement plans. Id. § 34–28–3(5)(a), (b), and (d).

¶ 10 Mill Man claims a right to invoke the subsection 5(c) exception in this case. It asserts that Utley's misappropriation of its steel is a matter that “would warrant an offset” against his commissions, and finds error in the district court's refusal to allow it to present evidence in support of that claim. Utley defends the district court's decision on two grounds: (a) that the statute requires an employer to secure an “opinion” as to the viability of an offset before withholding any wages; and (b) that a district court judge is not a “hearing officer” under the terms of the UPWA. We disagree on both counts, and reverse and remand for further proceedings.

A

¶ 11 Utley first defends the district court's decision on timing grounds. He claims that subsection 5(c) is unavailable because this provision makes the opinion of the hearing officer a precondition to the right of the employer to withhold. Utley bases this position on two grounds: (1) the terms of the exception—specifically the proviso that the exception allowing withholding is not available “unless” the employer presents evidence that is deemed by the hearing officer to “warrant an offset,” Utah Code § 34–28–3(5)(c), and (2) the structure of the statute—the fact that the other, parallel exceptions in the UPWA appear to be preconditions. We find neither point persuasive, and accordingly reject this basis for foreclosing Mill Man's reliance on subsection 5(c).

1

¶ 12 The term “unless” is one of condition. Webster'S Third New International Dic

357 P.3d 995

tionary 2503 (2002) (defining “unless” as “except on the condition that”); American Heritage Dictionary 1402 (2d ed.1981) (same). But without more, the conditional construct of this term does not impose a temporal limitation. We can easily speak of unless conditionality without reference to timing, as in a parent's condition to a child that “you may not take the car unless you fill it with gas.”

¶ 13 Granted, unless conditionality is sometimes temporal. Depending on context, the child subject to the above requirement might properly understand it as a precondition. That might hold, for example, if everyone knows that the car's gas gauge is currently on empty. But context could also eliminate the timing element—and leave only the condition. That, in fact, might be the better interpretation of the parent's directive to fill the car with gas in certain circumstances. If the car has plenty of gas in it for the child's errand, presumably the parent would prefer that the tank be filled after the child uses it. And in that circumstance “unless” would properly be understood as a condition, but not a precondition.

¶ 14 In our view, the same holds for the “unless” condition in subsection 5(c) of the UPWA. We interpret the term “unless” in subsection 5 as merely expressing a condition (without any suggestion as to timing ).⁴ That conclusion follows, as explained below, from the relevant surrounding circumstances—specifically, from the legal and practical context of the statute's operation, which render the operation of the 5(c) exception a practical ity under Utley's approach.

¶ 15 Under Utley's interpretation of the statute, an employer wishing to withhold wages on the basis of a claim of an offset must first file a pre-withholding legal proceeding and convince a hearing officer to render an “opinion” that the employer's “evidence ... would warrant an...