Duncan v. Alaska Usa Federal Credit Union

199 P.3d 991

148 Wn. App. 52

E. John DUNCAN, Appellant, v. ALASKA USA FEDERAL CREDIT UNION, INC., Respondent.

No. 61651-0-I.

Court of Appeals of Washington, Division 1.

December 29, 2008.

Kara Heikkila, Hall Farley Oberrecht & Blanton PA, Boise, ID, Thaddeus O'Sullivan, Holmes Weddle & Barcott, Seattle, WA, for Respondent.

Kevin Terry Steinacker, Shane Lytle Yelish, Tacoma, WA, for Appellant.

COX, J.

¶ 1 E. John Duncan appeals an order granting summary judgment to Alaska USA Federal Credit Union ("Alaska USA"), dismissing his breach of contract and wage claim statute claims. There are genuine issues of material fact whether the employee handbook of Alaska USA promised specific treatment in specific situations and whether a bona fide dispute between the parties bars exemplary damages under the wage claim statute. But there are no genuine issues of material fact whether Alaska USA could unilaterally amend the terms of the compensation agreement between the parties. We affirm in part, reverse in part, and remand.

¶ 2 Alaska USA is a credit union that operates multiple branches in western Washington. In September 2000, Duncan began working for Alaska USA as the manager of its Kent branch. Upon being hired, Duncan acknowledged, in writing, receipt of an employee handbook that specified the terms of his performance reviews and compensation.

¶ 3 In 2003, Alaska USA created a business plan to introduce a new lending program in Washington. To facilitate the program, Alaska USA created the position of Pacific Northwest Credit Development Officer ("CDO"). Alaska USA identified Duncan for the CDO position based on his prior sales experience.

¶ 4 Following several discussions with Duncan, Alaska USA presented him with a written summary of a proposed compensation plan ("2003 Plan"). The 2003 Plan specified the basis points on new loans, bonuses, and minimum guaranteed compensation that Duncan would receive as compensation for the CDO position. The 2003 Plan also provided: "This compensation plan will be reviewed and potentially amended after one year and will be subject to such review and amendment annually thereafter."¹ Duncan agreed to take the CDO position in mid-October 2003. Alaska USA's personnel records indicate that the effective date of Duncan's transfer was November 1, 2003.

¶ 5 Duncan's efforts as CDO were successful. A September 2004 employee evaluation states that Duncan met or exceeded expectations and that "[a]s a result of [Duncan's] efforts, in a very short time the Pacific Northwest volumes have grown to become about 25% of the credit union's dealer businesses."² Duncan was also named employee of the year for 2004. An October 2005 evaluation states that "[d]uring the past year Pacific Northwest dealer network loan volume has grown significantly and now constitutes approximately 40 percent of total network monthly volume."³ Both parties agree that Duncan's sales volumes, which served as the basis for his commissions, were greater than expected. Moreover, Duncan's compensation was $434,658 in 2004 alone.

¶ 6 In the fall of 2004, Alaska USA significantly amended downward Duncan's compensation scheme ("2004 Plan"). The 2004 Plan also provided: "This amended compensation plan replaces all terms and conditions of the previous compensation plan and will be subject to review and amendment semi-annually."⁴

¶ 7 Duncan received notice of this amendment by an October 5, 2004 e-mail that referenced a telephone conversation on the day before. Duncan objected but ultimately signed an agreement based on this new plan, which had an effective date of October 1, 2004.

¶ 8 At the end of March 2005, Alaska USA extended the 2004 Plan through the end of April 2005. Duncan signed this extension as well.

¶ 9 In May 2005, Alaska USA again amended Duncan's commission rate downward ("2005 Plan"). The 2005 Plan was to be reviewed again in three months. Duncan again objected. Duncan also signed this agreement, which had an effective date of May 1, 2005 and was apparently signed on May 3, 2005.

¶ 10 Upon expiration of the 2005 Plan, a compensation plan with nearly identical terms was provided to Duncan with an effective date of August 1, 2005. Alaska USA successively extended the 2005 Plan to December 31, 2005, March 31, 2006, and June 30, 2006. Duncan signed these amendments as well.

¶ 11 Duncan took leave from Alaska USA under the Family Medical Leave Act. After exhausting that leave, he retired in October 2006.

¶ 12 Duncan commenced this declaratory judgment action, alleging breach of contract and violation of the wage claim statute. He seeks exemplary damages under the wage claim statute and other relief. The trial court granted Alaska USA's motion for summary judgment, dismissing the action.

¶ 13 Duncan appeals.

EMPLOYEE HANDBOOK

¶ 14 Duncan argues that there are genuine issues of material fact whether Alaska USA breached the terms of its employee handbook that promise specific treatment in specific situations. We agree.

¶ 15 We review a grant of summary judgment de novo.⁵ Summary judgment is proper when "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law."⁶ All facts and reasonable inferences are considered in the light most favorable to the party opposing summary judgment.⁷ Summary judgment should be granted only if, from all of the evidence, reasonable persons could reach but one conclusion.⁸ The party moving for summary judgment has the burden of proving there is no genuine issue as to any material fact.⁹

¶ 16 "Generally, an employment contract, indefinite as to duration, is terminable at will by either the employee or employer."¹⁰ However, there are two ways in which "employers may be obligated to act in accordance with policies as announced in handbooks issued to their employees."¹¹ First, the employee and employer could contractually obligate themselves concerning provisions found in an employee handbook.¹² Second, even absent a contractual agreement,

if an employer, for whatever reason, creates an atmosphere of job security and fair treatment with promises of specific treatment in specific situations and an employee is induced thereby to remain on the job and not actively seek other employment, those promises are enforceable components of the employment relationship.[¹³]

¶ 17 Here, Duncan claims that Alaska USA breached the terms of its handbook when it reviewed the terms of his CDO compensation plans more frequently than annually, reducing his compensation when it did so. Specifically, Duncan cites section 4.3 of the employee handbook under the heading "Salary Adjustments." In relevant part, it states:

Salary reviews and adjustments will occur no more frequently than [annually], except if:

• an employee is assigned to a new or existing position in a different category; or • a revision to an employee's job description is made resulting in the assignment of significantly more or less responsibility; or

• the scope of responsibility of an employee's position is significantly changed; or

• as market conditions warrant.[¹⁴]

¶ 18 Duncan argues that a genuine issue of material fact exists whether this language constitutes Alaska USA making a promise of specific treatment in specific situations, thus obligating it to review and adjust his compensation no more frequently than annually.

¶ 19 To demonstrate a breach under the specific treatment prong, a plaintiff must prove "(1) that a statement (or statements) in an employee manual or handbook or similar document amounts to a promise of specific treatment in specific situations, (2) that the employee justifiably relied on the promise, and (3) that the promise was breached."¹⁵ "Each of these elements presents an issue of fact."¹⁶ However, the issues may be decided as a matter of law "if reasonable minds could not differ in resolving them."¹⁷

Specific Treatment in Specific Situations

¶ 20 Mere "general statements of company policy" that do not "amount to promises of specific treatment" are not binding.¹⁸ Our courts have applied this principle to different factual situations with varying results.

¶ 21 Courts have found a question of fact as to the existence of a promise for specific treatment where the language of an employee manual could be construed to require the employer to utilize a certain process or procedure.¹⁹ For example, in Thompson v. St. Regis Paper Co.,²⁰ an employee who was forced to resign for "stepp[ing] on somebody's toes" relied on a handbook providing that terminations "will be processed in a manner which will at all times be fair, reasonable, and just."²¹ The court also paraphrased an internal memoranda quoted by the employee as "stating termination of controllers will be discussed before the fact between the corporate controller and divisional operations managers."²² On the record available to it, the court concluded that it was "unable to determine the effect of the manual in relation to the employment relationship ...." and "whether any statements therein amounted to promises of specific treatment in specific situations."²³ The court remanded the case for further consideration.²⁴

¶ 22 Similarly, in Swanson v. Liquid Air Corp.,²⁵ a memorandum of working conditions contained an exclusive list of five types of conduct sufficient for discharge without prior notice.²⁶ The memorandum also provided: "in all other instances of misconduct, at least one warning, shall be given."²⁷ The court held that material issues of fact remained whether the employer promised specific treatment in that situation.²⁸

¶ 23 Here, the handbook language that "[salary] adjustments will occur no more frequently than [annually]" is like that described in Thompson and Swanson. Arguably, this handbook language is mandatory. For example, the word "will" has been held to be mandatory, not discretionary.²⁹ Thus, summary judgment was improper on this basis.

¶ 24 Alaska USA argues that the...