Ruhl v. ProjectCorps, LLC

ROBERT RUHL and PATRICIA PETERSON, Respondents, v. PROJECTCORPS, LLC, a Washington limited liability company, MICHELLE D. GADDIE, individually; and the marital community of MICHELLE D. GADDIE and KIMBERLY D. VALENZANO-GADDIE, Appellants.

No. 72604-8-I

Court of Appeals of Washington, Division 1

February 16, 2016

UNPUBLISHED OPINION

Verellen, A.C.J.

ProjectCorps LLC appeals the partial summary judgment order awarding unpaid salary and commissions, double damages, attorney's fees, and prejudgment interest to its former employees Robert Ruhl and Patricia Peterson. RCW 49.52.070 provides for double damages when an employer willfully refuses to pay an employee wages owed. But if a "bona fide dispute" exists over the employer's obligation to pay all of the employee's wages, or if the employee "knowingly submitted" to the withholding of wages, then RCW 49.52.070 does not apply.

We conclude genuine issues of material fact remain whether a bona fide dispute exists for Ruhl's and Peterson's 2013 salary and whether Ruhl and Peterson knowingly submitted to the withholding of their commissions. Accordingly, we reverse the partial summary judgment order regarding the 2013 salary and the commissions and related double damages and attorney's fees award. We remand for further proceedings consistent with this opinion.

FACTS

Michelle Gaddie formed and owned ProjectCorps. In 2011, ProjectCorps hired Ruhl and Peterson. Their compensation included salary and commissions. Ruhl and Peterson were paid salary twice per month at the rate of $7, 083.33 every pay period.

ProjectCorps experienced financial difficulties. In March 2012, Gaddie told Ruhl and Peterson that she intended "to cut" their salaries because of the company's "precarious financial position."^[1] Ruhl and Peterson were "interested in becoming owners of the company."^[2] Ruhl and Peterson agreed "to defer" their salaries so that those funds could be used as a buy-in if they became owners, or until ProjectCorps was in a better financial situation.^[3]

In July 2012, ProjectCorps ended the "salary deferment" and returned Ruhl and Peterson to full salary.^[4] Ruhl and Peterson did not become owners.

In January 2013, ProjectCorps faced "insurmountable financial difficulties."^[5]Gaddie told Peterson "the company needed to cut salaries."^[6] Gaddie informed Peterson that "effective March 16, 2013, her salary and her husband's salary would be cut by 20%."^[7] Gaddie directed the office manager Karen Chenkovich "to make the changes in payroll."^[8] Ruhl's and Peterson's salaries were reduced by 20 percent.

On April 8, 2013, Gaddie e-mailed Ruhl and Peterson with the subject line "Total for 2012 Salary Deferral":

As you know, Karen has done a nice job of keeping track of and we have maintained visibility of your 2012 salary deferral since March 2012. This is itemized below.

Please know that repayment of this money is very important to ProjectCorps and will be paid just as soon as we are able to. Once we return to a level of profitability that can support repayment, I will put a repayment plan in place for this amount and will then turn my attention to 2012 commissions.^[9]

The parties agree ProjectCorps owes Ruhl and Peterson each $11, 333.36 for 2012 salary.

On April 12, 2013, Gaddie e-mailed Ruhl and Peterson with the subject line "Deferred Commissions."^[10] Gaddie stated ProjectCorps owed them deferred commissions payments for "commissions earned" of $24, 316.72 to Ruhl and $45, 114.93 to Peterson.^[11]

On June 20, 2013, ProjectCorps terminated Ruhl and Peterson. A few days later, Chenkovich resigned as ProjectCorps's office manager. ProjectCorps hired Kimberly Valenzano to replace Chenkovich. Valenzano reviewed ProjectCorps's financial records and concluded ProjectCorps had overpaid Ruhl and Peterson.

In July 2013, Ruhl and Peterson sued ProjectCorps on a variety of legal theories, including violations of the wage rebate and wage payment acts, ^[12] for ProjectCorps's withholding of their salaries and commissions. Ruhl and Peterson sought partial summary judgment on their statutory wage claims. The trial court granted Ruhl and Peterson partial summary judgment. The court concluded ProjectCorps's withholding of their salaries and commissions was "willful, " and Ruhl and Peterson "did not knowingly submit to the violation."^[13] The partial summary judgment order awarded Ruhl and Peterson $216, 529.98 in unpaid compensation and double damages. The court also struck Valenzano's declaration testimony.

The trial court awarded Ruhl and Peterson $18, 029.36 in attorney's fees. The parties stipulated to entry of a CR 54(b) final judgment for purposes of an immediate appeal which awarded Ruhl and Peterson $256, 499.65.

ProjectCorps appeals.

ANALYSIS

Standard of Review

We review a summary judgment order de novo.^[14] The de novo standard also applies to all evidentiary rulings on summary judgment.^[15] We view the facts and all reasonable inferences in the light most favorable to the nonmoving party.^[16] Summary judgment is proper if there are no genuine issues of material fact.^[17] "'A material fact is one that affects the outcome of the litigation.'"^[18]

2012Salary

ProjectCorps has not assigned error to the $11, 333.36 award of 2012 salary to Ruhl and Peterson. ProjectCorps has not argued the award of 2012 salary was improper. Nor does ProjectCorps challenge the award of attorney's fees and double damages for the 2012 salary. Absent an assignment of error, briefing and argument, we conclude the award of 2012 salary, together with attorney's fees and double damages associated with that salary, are uncontested on appeal.^[19]

2013 Salary

ProjectCorps contends a genuine issue of material fact remains whether a bona fide dispute exists for Ruhl's and Peterson's 2013 salary. We agree.

RCW 49.52.070 provides for double damages "when an employer willfully withholds wages due an employee."^[20] The term "willful" means the employer's failure to pay was "volitional."^[21] "If an employer knows that [s]he is not paying wages when due, and intends such conduct, then the action is willful."^[22]

Two instances negate a finding of willfulness: the employer's failure to pay wages was due to carelessness or inadvertence or was "the result of a bona fide dispute."^[23]The employer bears the burden of showing a "bona fide dispute."^[24] The employer must have a "genuine belief that she is not obligated to pay certain wages, ^[25] and such belief must be "fairly debatable."^[26]

The issue of whether an employer acts willfully is generally a question of fact. But the issue may be resolved on summary judgment when no material facts are in dispute.^[27] The trial court here concluded in its oral ruling:

[T]here's no evidence that there was a reduction of salary as opposed to a continuing financial straits that the defense found itself in and that just as it did before, it simply started paying them less than their salary. There's no evidence of a salary change. There is evidence of... shorting them on their payment. And I find that. . . there's not a genuine issue of material fact[ ] as to the salary that was withheld for 2013.^[28]

From January 1, 2013 to March 15, 2013, Ruhl and Peterson each received $7, 083.33 per pay period. From March 16, 2013 to May 15, 2013, Ruhl and Peterson each received $5, 666.67 per pay period.^[29]

In her declaration, Gaddie states she informed Peterson that her and her husband's salaries "would be cut by 20%" effective March 16, 2013.^[30] Contrary to Ruhl's and Peterson's arguments, this statement is not inadmissible hearsay. Gaddie was an authorized agent for ProjectCorps stating the terms of Ruhl's and Peterson's employment. An out-of-court statement that has "independent legal significance" is not hearsay.^[31] Gaddie's statement had independent legal significance as a change in the terms of compensation. Ruhl and Peterson offer no authority to support their suggestion that an employer is limited to written business records to establish changes in the terms of employment.^[32]

Ruhl and Peterson claim a party cannot create a genuine issue of material fact by offering a declaration opposing summary judgment that contradicts admissions pleaded in an answer. Generally, a party's affidavit that contradicts prior deposition or interrogatory answers "cannot be used to create an issue of material fact."^[33] The cases that Ruhl and Peterson rely upon involve deposition testimony or interrogatories that were later contradicted by an affidavit opposing a summary judgment motion. But Gaddie's declaration does not contradict any deposition testimony or answers to interrogatories. Ruhl and Peterson provide no authority that for purposes of opposing summary judgment, a party is precluded from making a declaration that conflicts with an admission pleaded in an answer.^[34]

Ruhl and Peterson offer evidence challenging the credibility of Gaddie's declaration testimony of a salary pay cut. For example, Ruhl's and Peterson's earnings records filed with the Washington State Department of Enterprise Services do not reflect a wage decrease, but similar earnings records for two other ProjectCorps employees reveal their salary change. Such contradictory evidence merely attacks the credibility or weight of Gaddie's declaration. "Courts do not weigh the evidence or assess witness credibility on a motion for summary judgment."^[35]

Therefore, we conclude Gaddie's declaration creates a genuine issue of material fact whether Ruhl's and Peterson's salaries were cut 20 percent effective March 16, 2013. Any such wage cut could negate a willful withholding of 2013 salaries.

Commissions

ProjectCorps contends a genuine issue of material fact remains whether Ruhl and Peterson ...