Opinion ID: 2634386
Heading Depth: 2
Heading Rank: 2

Heading: Throop's Contract Claim Is Covered by the Two-Year Statute of Limitations in the AWHA.

Text: The standard of review for summary judgment is discussed above in Part III.A. In addition to alleging direct violations of the AWHA, Throop also claimed that Air Logistics breached his employment contract by violating the AWHA. Air Logistics moved for summary judgment on this claim, arguing that there was no factual dispute regarding whether Air Logistics paid the members of the class everything that was required by the terms of their contract. Air Logistics argued that Throop was trying to use the contract claim solely to extend the statute of limitations from two years, for AWHA claims, to three years, for contracts. Throop filed a cross-motion for summary judgment on the same issue, arguing that contracts incorporate applicable law. Throop argued that Air Logistics breached its contractual obligation to pay overtime by violating AWHA's overtime provisions. Throop also argued that his employment contract (a letter of hire and the company policy manual) required the payment of overtime in terms that were either ambiguous or illegal. He contended that if the terms were ambiguous they should be construed in a manner that is consistent with AWHA. If illegal, Throop argued that AWHA should simply be substituted for the illegal terms. The superior court granted Throop's motion for summary judgment on the contract claim. The superior court noted that the AWHA expressly incorporates its overtime requirements into all employment contracts. It also noted that, under general rules of contract interpretation, employment contracts incorporate all applicable laws. According to the superior court, allowing a contract claim to proceed alongside an AWHA claim does [not do] violence to the legislature's intent in setting a two-year statute of limitation for AWHA claims because AWHA and contract law offer different remedies: AWHA offers liquidated damages whereas contract law offers only actual damages. The court then held that the parties contracted in the shadow of wage and hour law, aware that its provisions set the scope of the permissible terms for their contract. They could have, and should have, reasonably expected their contract to be interpreted in light of these provisions. It granted Throop's summary judgment motion, approving his contract claim and enabling Throop to recover actual damages (but not liquidated damages) for three years rather than two. Alaska Statute 23.10.060 sets out the overtime provisions of the AWHA. Subsection (c) states that [t]his section is considered included in all contracts of employment. Alaska Statute 23.10.130 sets out the statute of limitations for AWHA claims, stating that [a]n action for unpaid minimum wages, unpaid overtime compensation, or liquidated damages under AS 23.10.050-23.10.150 is forever barred unless it is started within two years after the cause of action accrues. [39] Throop makes two arguments concerning his breach of contract claim. He argues first based on an incorporation theory that because Air Logistics violated the overtime provisions of AWHA and because those provisions were incorporated by law into his contract of employment, his contract of employment was breached. His second argument is that his actual contract, as reasonably construed, required the payment of overtime in accordance with AWHA. We address each of these claims in the paragraphs that follow, beginning with the incorporation theory. Under Gore v. Schlumberger Ltd., when AWHA overtime requirements are incorporated into a contract, the limitations in AWHA are as well. [40] In Gore the employee requested punitive damages for a violation of the overtime claim of the AWHA. [41] The court noted that the AWHA prescribes with comprehensive specificity the remedies available for its violation and held that [t]he comprehensiveness of this remedial system implies that the legislature did not intend to allow further unenumerated remedies such as punitive damages. [42] The court then addressed an argument similar to Throop's contract claim: whether the appellant was entitled to punitive damages under a contract theory. The employee in Gore noted that AS 23.10.060 incorporates the overtime provisions into employment contracts and argued that the employer had breached the contract by violating the AWHA. [43] The employee then argued for punitive damages under a breach of contract theory, arguing that if a contract is willfully violated punitive damages should be available. [44] This court rejected this claim, holding that if the statute is a part of every contract, so are its limitations. [45] The analysis in Gore is applicable to Throop's incorporation theory. The employee in Gore alleged a breach of contract solely on the basis of a violation of the AWHA overtime provisions, emphasizing that the provision was expressly incorporated into contracts by the statute. The employee in Gore requested punitive damages, which were available for contract claims but not AWHA claims. Throop is requesting a three-year statute of limitations, which is available for contract claims but not AWHA claims. In Gore we held that since the statute was incorporated into the contract, its limitations must be incorporated as well. While Gore dealt with limitations on the type of damages available, we believe it is also applicable to limitations regarding the duration for which damages can be recovered. Thus, under Gore, Throop can only recover on his incorporation theory for violations that occurred during the two-year statute of limitations period that is set out in AS 23.10.130. The Gore approach ensures that effect will be given to the AWHA's statute of limitations provision. [46] Under Alaska law all employment is contractual. [47] If we were to adopt Throop's incorporation argument, any employee who alleged a violation of the AWHA overtime provisions could simply plead a breach of contract based on the incorporation of the overtime statute into the employment contract. All overtime claims would be governed by the three-year statute of limitations for contracts, and AS 23.10.130  which explicitly limits actions for unpaid overtime compensation to two years  would be largely superfluous. But not entirely superfluous. The superior court reasoned that special remedies in the AWHA  liquidated damages and full attorney's fees  would still be subject to the act's two-year limit even though unpaid overtime compensation is not. This rationale seems doubtful both as a matter of the statutory language and legislative intent. Section .130 expressly makes [a]n action for . . . unpaid overtime compensation, or liquidated damages under AS 23.10.050-23.10.150 subject to its two-year bar. Contract actions that include claims for unpaid overtime based on the incorporation clause of AS 23.10.060(c) are fairly described as action[s] for . . . unpaid overtime compensation . . . under AS 23.10.050-23.10.150. Additionally, it is unlikely that the legislature intended the main claim  unpaid overtime  to be governed by a limitations period different from the limitations period for special remedies claims. These combined considerations persuade us that section .130 applies to Throop's incorporation-based overtime claim. This conclusion does not mean that all contract claims for unpaid overtime are subject to the two-year statute. Claims under contracts that call for overtime compensation in terms that reasonably can be interpreted as encompassing the statutory definition should fall within the contract limitations period. We discussed one such claim in Quinn v. Alaska State Employees Ass'n. [48] Quinn involved a claim for unpaid overtime. [49] The plaintiff's original suit only included statutory claims, not a contract claim. [50] But the Quinn court construed the complaint to include a breach of contract claim because the plaintiff had attached a copy of the collective bargaining contract to his motion for summary judgment. [51] Although not stated in the opinion, the contract explicitly called for the payment of overtime at one and one-half times the rate of regular pay. The Quinn court held that the statute of limitations for contracts therefore applied to Quinn's overtime claim: Thus, it is fair to construe Quinn's complaint as alleging a breach of the collective bargaining agreement, and to hold that the six-year statute of limitation for contracts applies. [52] Throop argues that his contract called for the payment of overtime in ambiguous terms and therefore the contract should be construed so that it is consistent with AWHA requirements. Air Logistics counters that the contract is not ambiguous because it clearly treats remote operations pay as separate from the hourly wage on which overtime will be calculated, and clearly specifies the number of hours that will be paid as overtime hours. Air Logistics has the better of this argument. Throop's contract consists of Air Logistics's policy manual and Throop's letter of hire. The policy manual provides that: For hours worked in excess of 8 hours per day or 40 hours straight time per week, overtime will be paid at 1 1/2 times the regular hourly rate. The policy manual states that all employees will be given a letter of hire that will establish initial rates of pay and initial assignments as well as provide the basis for a more detailed explanation of Air Log's compensation policy. Throop's letter of hire stated that his base hourly wage was $21.05, a rate that excluded ROP which, in turn, was explicitly said to be a separate pay item. Likewise, the letter of hire stated that for each two-week shift Throop would be paid for ninety-six straight time hours and fifty overtime hours. Since Throop's contract of employment is clear rather than ambiguous, the rule of construction that ambiguous language in contracts will, where reasonably possible, be construed in accordance with legal requirements does not apply to it. [53] Throop also suggests that if the contract sets out an illegal definition of overtime, the court should simply substitute lawful terms in accordance with AWHA. In our view this argument does not substantially differ from the incorporation argument discussed and rejected above. If statutory terms are substituted their limitations should accompany them. In such case the action would fairly be considered one for unpaid overtime compensation under . . . AS 23.10.050-23.10.150 and would therefore be covered by the two-year statute of limitations prescribed by AS 23.10.130. For the reasons expressed above, summary judgment should have been granted to Air Logistics on the contract claim.