Wilson v. Smurfit Newsprint Corp.

• Decision Date: 23 February 2005
• Citation: 107 P.3d 61,197 Or. App. 648
• Parties: Gregory L. WILSON, Larry G. Chastain, George O. Kendall, Catherine Poe, David W. Blank, and Catherine Sale, Appellants-Cross-Respondents, v. SMURFIT NEWSPRINT CORPORATION, Respondent-Cross-Appellant.
• Court: Oregon Court of Appeals

107 P.3d 61

197 Or. App. 648

Gregory L. WILSON, Larry G. Chastain, George O. Kendall, Catherine Poe, David W. Blank, and Catherine Sale, Appellants-Cross-Respondents, v. SMURFIT NEWSPRINT CORPORATION, Respondent-Cross-Appellant.

9912-13689; A120585.

Court of Appeals of Oregon.

Argued and Submitted on July 15, 2004.

Decided February 23, 2005.

Christina L. Beatty-Walters, Portland, argued the cause for appellants-cross-respondents. With her on the briefs were Steve D. Larson, Portland, Stoll Stoll Berne Lokting & Shlachter, P.C., Barton C. Bobbitt, Portland, and Barton C. Bobbitt, P.C.

Andrew M. Altschul, Portland, argued the cause for respondent-cross-appellant. With him on the briefs were Joel A. Mullin, Portland, and Stoel Rives LLP. Before EDMONDS, Presiding Judge, and LANDAU and SCHUMAN, Judges.

SCHUMAN, J.

Plaintiffs were working for defendant Smurfit Newsprint Corporation at its Newberg paper mill when defendant sold the mill to another company. In this class action, plaintiffs characterize the sale as a termination of their employment and allege that defendant did not pay them various forms of earned compensation within one business day, thereby entitling them to statutory penalties. See ORS 652.140 (imposing time limit); ORS 652.150 (establishing penalty). A subclass of plaintiffs also seeks damages from defendant for an alleged violation of ORS 652.610(3), which prohibits unauthorized payroll deductions. After several rounds of summary judgment motions, the trial court concluded that plaintiffs were entitled to some of the relief they sought but not all of it. Plaintiffs appeal and defendant cross-appeals.

Both the grant and denial of the parties' summary judgment motions are subject to review, Cochran v. Connell, 53 Or.App. 933, 939, 632 P.2d 1385, rev. den., 292 Or. 109, 642 P.2d 311 (1981), and we review both according to the same standard: summary judgment is appropriate if the evidence in the record and all reasonable inferences that may be drawn from it, viewed in the light most favorable to the nonmoving party, disclose no issue of material fact, and the moving party is entitled to judgment as a matter of law. ORCP 47 C; Jones v. General Motors Corp., 325 Or. 404, 407-08, 939 P.2d 608 (1997).

In the fall of 1999, defendant notified its employees, including plaintiffs, that it intended to sell its Newberg facility to Southeast Paper Manufacturing Company (SP). The notice alerted the employees that November 10, the day of the sale, would be their "employment termination date." The sale occurred as planned.

The contract between defendant and SP required SP to "offer employment to substantially all" of defendant's employees. As a condition of working for SP, however, the employees had to reapply and to pass a drug test, and union employees lost any seniority rights that they had accumulated while working for defendant. All but five of defendant's approximately 300 employees were subsequently rehired by SP. The rehired employees lost no work time due to the sale, experienced no gap in their medical insurance coverage, and most underwent no change in assignment. When they left work on November 9, they worked for Smurfit; when they arrived at work on November 10, they worked for SP. Union employees received their final paychecks from Smurfit and their first checks from SP on November 19, and nonunion employees received their final Smurfit and first SP paychecks on November 15 or shortly thereafter.

Plaintiffs then initiated this class action seeking civil penalties from defendant under ORS 652.140(1) and ORS 652.150(1) for untimely payment of wages after termination. ORS 652.140(1) provides, in part:

"Whenever an employer discharges an employee or where such employment is terminated by mutual agreement, all wages earned and unpaid at the time of such discharge or termination shall become due and payable not later than the end of the first business day after the discharge or termination."

ORS 652.150(1), in turn, imposes penalties on employers who violate ORS 652.140(1):

"[I]f an employer willfully fails to pay any wages or compensation of any employee whose employment ceases, as provided in ORS 652.140 * * *, then, as a penalty for such nonpayment, the wages or compensation of such employee shall continue from the due date thereof at the same hourly rate for eight hours per day until paid or until action therefor is commenced. However, in no case shall such wages or compensation continue for more than 30 days from the due date."

Some plaintiffs also sought penalties under ORS 652.615. That statute creates a private right of action against an employer who makes unauthorized deductions from an employee's wages contrary to ORS 652.610(3), which provides that, with certain exceptions not relevant here, "[n]o employer may withhold, deduct or divert any portion of an employee's wages" without written authorization from the employee.

The court ultimately divided the plaintiff class into subclasses. Subclass A consists of defendant's employees who were not subsequently employed by SP. Plaintiffs in that subclass reached a settlement with defendant and are not parties to this appeal. Subclass B consists of all defendant's employees who worked at the Newberg facility at the time of its sale and were rehired by SP. Subclass C, itself a subclass of Subclass B, consists of defendant's nonunion, salaried employees who were exempt from overtime compensation. In an attempt to minimize confusion, we adopt the following shorthand labels for the different groups: Subclass B is "all plaintiffs," consisting of "union plaintiffs" and "salaried plaintiffs."¹

All plaintiffs sought penalty wages under ORS 652.150 on the theory that defendant did not timely pay them their accumulated regular earnings until their next payday, November 15 (for salaried plaintiffs) or November 19 (for union plaintiffs). That penalty would be in the amount of their regular earnings between the day after their termination and the time they were paid, that is, November 15 or 19.

In addition to the penalties for late payment of earned regular wages, union plaintiffs also sought penalties because defendant did not timely pay them the severance benefits that they claimed they were entitled to under their collective bargaining agreement (CBA). Because defendant had not paid that amount after 30 days, that penalty would be in the amount of their regular earnings for 30 days.

Salaried plaintiffs, in addition to the penalty for late payment of earned regular wages, sought a penalty based on the theory that defendant unlawfully withheld medical insurance payments from their last paychecks. According to salaried plaintiffs, because that unlawful withholding violated two statutes, ORS 652.150(1) and ORS 652.610(3), it subjected defendant to two separate penalties.

Union plaintiffs' claim regarding penalties for untimely payment of severance benefits was submitted to arbitration as required by the CBA.² The arbitrator concluded that, when defendant sold its business to SP, union plaintiffs were "terminated" and that defendant violated the CBA by failing to provide severance benefits to them at that time. The arbitrator's award was upheld on appeal to the United States District Court of Oregon and the Ninth Circuit Court of Appeals. Smurfit Newsprint Corp. v. Ass'n of Western Pulp and Paper Workers, Local 60, 59 Fed Appx 207 (9th Cir.2003); Smurfit Newsprint Corp. v. Ass'n of Western Pulp and Paper Workers, Local 60, No Civ 01-953-AS, 2001 WL 34043382 (D.Or., Aug. 14, 2001).

Meanwhile, after several rounds of summary judgment motions, the trial court concluded that defendant owed union plaintiffs penalties for failing to pay their regular wages on time but not for failing to pay severance benefits on time.³ Regarding salaried plaintiffs, the court concluded that defendant owed them penalties for failing to pay their regular wages on time but not for unauthorized insurance deductions. Further, the court denied all plaintiffs' requests for prejudgment interest and awarded plaintiffs approximately $145,000 in attorney fees. Judgment was entered accordingly.

On appeal, plaintiffs maintain that the sale of defendant's facility amounted to a termination of their employment and that defendant failed to pay them regular wages, and, severance benefits. They, also maintain that defendant unlawfully withheld medical insurance premium payments. Finally, they also argue that they should receive prejudgment interest on their penalty wages. Defendant, on the other hand, maintains on cross-appeal that the sale of its plant was not a termination of employment because plaintiffs continued performing their presale jobs with no change in the terms and conditions of their employment and that, if there was a termination, then defendant owed penalties only for unpaid regular wages and not for severance benefits or withheld medical insurance premium payments.

To respond to the parties' assignments of error, we must therefore address the following questions: First, did the sale of defendant's plant amount to a termination of plaintiffs' employment? Second, if so, was Veterans Day, November 11, a "business day" for purposes of determining the number of days between the termination and plaintiffs' receipt of their wages? Third, did defendant "willfully" fail to pay union employees'"earned and unpaid" severance benefits? Fourth, did the court err in certifying salaried plaintiffs as a class for purposes of maintaining a class action? Fifth, if not, did defendant unlawfully withhold medical insurance premiums from class members' final paychecks; or, if so, did that withholding expose defendant to penalties under both ORS 652.150 and ORS 652.615? Sixth, should plaintiffs receive prejudgment interest on any or all of their penalty wages? And Seventh, did the court correctly award plaintiffs their attorney fees?

I. TERMINATION OF EMPLOYMENT

Whether plaintiffs were...