Watson v. Mont. Dep't of Fish

414 Mont. 217

539 P.3d 1126

Jay WATSON, Petitioner and Appellee,

v.MONTANA DEPARTMENT OF FISH, WILDLIFE AND PARKS, Respondent and Appellant.

DA 23-0057

Supreme Court of Montana.

Submitted on Briefs: August 16, 2023

Decided: December 12, 2023

For Appellant: Jaime MacNaughton, Sarah Clerget, Fish, Wildlife and Parks, Helena, Montana

For Appellee: Justin Oliveira, Patten, Peterman, Bekkedahl & Green, PLLC, Billings, Montana

Justice Jim Rice delivered the Opinion of the Court.

¶1 The Montana Department of Fish, Wildlife and Parks (FWP or agency) appeals a December 14, 2022 judgment in favor of Jay Watson (Watson) on his grievance against the agency for backpay, entered by the Thirteenth Judicial District Court, Yellowstone County, which reversed the Final Agency Decision entered by the Board of Personnel Appeals (BOPA or Board). FWP also challenges the District Court's award of attorney fees to Watson. We restate the issues presented as follows:

1.

Whether the District Court erred by reversing BOPA's Final Agency Decision.

2. Whether the District Court erred by awarding attorney fees to Watson.

¶2 We affirm on Issue 1 and reverse and remand on Issue 2.

FACTUAL AND PROCEDURAL BACKGROUND

¶3 In 2011, FWP adopted a new "one rate" pay system for the agency in an effort to address recruitment struggles and alleviate the effects of an extended state employee pay freeze. This system defined a non-negotiable salary for each position at FWP and provided that all employees holding the same position code were paid the same rate of compensation.¹ At the time of the plan's implementation, Watson was employed for FWP as a Biology Research Specialist. However, Watson was not initially paid a rate of pay equal to the highest paid employee in his job code. This disparity was not recognized until July 2018, at which time the base rate for Watson and other Biology Research Specialists was increased to the level that the highest-paid Biology Research Specialist was earning.

¶4 In August 2018, Watson filed a grievance with the Board of Personnel Appeals seeking payment of the differential between his pay rate and the highest pay rate for his position from the time the agency's new pay system was implemented in 2012 until his pay was corrected in July 2018. Watson sought relief pursuant to the statutory grievance procedure specific to FWP, set forth in § 87-1-205, MCA (2017), which provided:

An employee of the department^{[2 ]} who is aggrieved by a serious matter of employment based upon work conditions, supervision, or the result of an administrative action and who has exhausted all administrative remedies within the department is entitled to a hearing before the board of personnel appeals provided for in 2-15-1705 and subject to the provisions of 2-18-1011 through 2-18-1013.

Any order of the board is binding upon the department.^{[3 ]}

¶5 In September 2018, the FWP Director acknowledged and apologized for the payment error in a letter to Watson and explained that Watson would receive three years of backpay with interest. FWP paid this amount, but Watson continued his grievance because he was seeking backpay for the entire six years he claimed to be underpaid. In February 2019, a BOPA Investigator issued a Preliminary Decision dismissing the grievance. The Investigator referenced the 30-day statutory cap on retroactive pay awarded in grievance appeals, set forth in § 2-18-203(3), MCA, but noted that, in a previous grievance proceeding involving the pay of another FWP employee, the O'Rourke case, a hearing officer had ruled the statutory 30-day cap applied only to pay band allocation grievances, not compensation grievances, consistent with the plain language of the statute. See § 2-18-203(3), MCA (2015) ("The period of time for which retroactive pay for a pay band allocation appeal may be awarded ... may not extend beyond 30 days prior to the date on which the appeal was filed.") (emphasis added). Consequently, the Investigator reasoned the 30-day cap did not apply to Watson's claim, but that, "[u]nder the Wage Payment Act, Title 39, Part 3 of the Montana Code Annotated, an employee can recover at most three years of retroactive pay." Because Watson had already received pay for the three years prior to his claim, the Investigator dismissed the grievance.⁴

¶6 Watson pursued the next grievance step by requesting an evidentiary hearing with Office of Administrative Hearings (OAH). See Admin. R. M. 24.26.403(3) (2017). After conducting a hearing on October 8, 2019, on March 13, 2020, the Hearing Officer issued its Findings of Fact, Conclusions of Law, and Recommended Order. The Hearing Officer held the three-year limitation under the MWPA, referenced by the BOPA Investigator, did not apply. The Hearing Officer further determined the 30-day limitation on retroactive pay under § 2-18-203(3), MCA, did not apply to Watson's claim because it was "not a pay band allocation appeal," but did not reference the Legislature's 2017 revision to that statute. Having concluded the limitations upon a retroactive award under MWPA and the federal Fair Labor Standards Act (FLSA) were inapplicable, the Hearing Officer recommended that Watson be awarded compensation for differential wages earned for the full six years from 2012 to 2018, less the three years for which he had already been paid.

¶7 FWP filed objections to the OAH decision with the Board.⁵ FWP first challenged the merits of the pay issue itself, i.e., that Watson had not been incorrectly paid under the agency's "one rate" pay system, a position FWP explained it was "now" taking, despite its earlier position that Watson had been underpaid.⁶ Secondly, FWP challenged OAH's conclusion that the three-year limitation on pay awards under the MWPA did not apply, and argued, "[i]f damages are awarded, a three-year compensatory damage cap must apply." Notably, FWP did not object to or address the Hearing Officer's conclusion that the 30-day cap under § 2-18-203(3), MCA, did not apply to Watson's claim.

¶8 Given the framing of the case by FWP's objections, BOPA focused on the applicability of the MWPA, and reversed the Hearing Officer on that issue, concluding "[a] wage claimant is not entitled to back pay beyond the three-year lookback in the Wage Payment Act of Title 39, and the Hearing Officer failed to cite any binding authority to justify a different award of damages." Noting that Watson had already received payment for three years of backpay, BOPA issued a Final Agency Decision dismissing his grievance.

¶9 In August 2020, Watson filed a Petition for Review of a Final Agency Decision with the Thirteenth Judicial District Court pursuant to § 2-4-702, MCA. Watson argued BOPA had erred by limiting his award to three years under the MWPA, and that he should receive the entire six-year backpay awarded by the Hearing Officer. He also claimed attorney fees, which he had claimed before the OAH. FWP did not cross-petition on its merits defense, but only defended against Watson's petition by arguing BOPA had broad discretion to fashion an appropriate remedy and that BOPA's use of the MWPA for guidance in fashioning the appropriate remedy for Watson was not an abuse of discretion. Again, FWP made no argument that the Hearing Officer or BOPA had erred by not applying the 30-day cap on retroactive awards under the 2017 amendment to § 2-18-203(3), MCA.

¶10 The District Court entered an Order in May 2021 that reversed the Final Agency Decision entered by BOPA and reinstated the backpay award recommended by the Hearing Officer. The District Court reasoned that Watson "never asserted a claim for backpay under the [MWPA]," and that BOPA "incorrectly concluded that it was bound under the statutory terms of the MWPA" rather than "FWP's statutorily authorized grievance policy." The District Court also awarded attorney fees. In an Order entered in December 2022, the District Court reasoned, without citation to authority, that "district courts, such as this Court, have the broad discretionary authority to award attorney fees on a case by case basis," and awarded attorney fees to Watson.

¶11 FWP appeals, challenging the District Court's reversal of BOPA and its granting of attorney fees.

STANDARD OF REVIEW

¶12 We review a district court order reviewing an agency action by employing the same standards that the district court used to review the agency decision. Ostergren v. Dep't of Revenue , 2004 MT 30, ¶ 11, 319 Mont. 405, 85 P.3d 738. The district court reviews an agency's interpretations and applications of law to determine whether they are correct. Knowles v. State ex rel. Lindeen , 2009 MT 415, ¶ 22, 353 Mont. 507, 222 P.3d 595. In reviewing an administrative agency's findings of fact, the standard of judicial review for the District Court and this Court is whether the findings are "clearly erroneous in view of the reliable, probative and substantial evidence in the whole record." Section 2-4-704(2)(a)(v), MCA ; State Pers. Div. of Dep't of Admin. v. BOPA , 255 Mont. 507, 511, 844 P.2d 68, 71 (1992).

¶13 "This Court reviews for correctness a district court's decision as to whether legal authority exists to award attorney fees." Hughes v. Ahlgren , 2011 MT 189, ¶ 10, 361 Mont. 319, 258 P.3d 439. If legal authority exists to award attorney fees, "[w]e review a court's order granting attorney fees for an abuse of discretion." JRN Holdings, Ltd. Liab. Co. v. Dearborn Meadows Land Owners Ass'n , 2021 MT 204, ¶ 18, 405 Mont. 200, 493 P.3d 340. "The test for an abuse of discretion is ‘whether the trial court acted arbitrarily, without employment of conscientious judgment, or exceeded the bounds of reason resulting in substantial injustice.’ " In re A.S ., 2006 MT 281, ¶ 24, 334 Mont. 280, 146 P.3d 778 (quoting In re Custody and Parental Rights of C.J.K ., 2005 MT 67, ¶ 13, 326 Mont. 289, 109 P.3d 232 ).

DISCUSSION

¶14 1. Whether the District Court erred by reversing BOPA's Final Agency Decision.

¶15 FWP argues the District Court's reversal of BOPA's...