Court Opinion

ID: 4661464
Source: CourtListenerOpinion
Date Created: 2021-02-19 10:07:25.583088+00
Date Added: 2024-06-11T08:02:13.589765
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                          STATE OF MICHIGAN

                          COURT OF APPEALS

DETROIT PUBLIC SCHOOLS COMMUNITY                                  UNPUBLISHED
DISTRICT,                                                         February 18, 2021

              Petitioner-Appellant,

v                                                                 No. 350347; 350995
                                                                  Wayne Circuit Court
STEVEN WASKO,                                                     LC No. 19-001069-AA

              Respondent-Appellee,
and

MICHIGAN DEPARTMENT OF LICENSING
AND REGULATORY AFFAIRS, WAGE & HOUR
DIVISION,

              Appellee.

Before: CAVANAGH, P.J., and SERVITTO and CAMERON, JJ.

PER CURIAM.

       In Docket No. 350347, petitioner appeals by leave granted1 the circuit court’s order
affirming the decisions of the Wage and Hour Division of the Michigan Department of Licensing
and Regulatory Affairs (LARA) and Administrative Law Judge (ALJ) Michael St. John that
respondent was entitled to a monetary payout for accrued and unused vacation time. In Docket
No. 350995, petitioner appeals by leave granted2 the circuit court’s order granting respondent’s

1
 Detroit Pub Sch Community Dist v Wasko, unpublished order of the Court of Appeals, entered
December 30, 2019 (Docket Nos. 350347 and 350995).
2
 Detroit Pub Sch Community Dist v Wasko, unpublished order of the Court of Appeals, entered
December 30, 2019 (Docket Nos. 350347 and 350995).

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motion for costs and attorney fees under MCR 7.216(C) and MCL 408.488(3). We reverse and
remand in both cases.

                       I. FACTS AND PROCEDURAL BACKGROUND

        The general facts are undisputed. Respondent was employed with petitioner in several
different capacities beginning in 1992, and he worked for petitioner intermittently for over 25
years. Most recently, respondent was employed as an executive director. Petitioner and
respondent entered into an employment contract for that position for a term to begin July 1, 2016
and end June 30, 2017. Under the agreement, petitioner agreed to allow respondent to earn 25
vacation days per year as a fringe benefit and roll over no more than 20 vacation days from one
year to the next. This case concerns whether petitioner was required to pay several hours of unpaid
vacation time earned and accrued by respondent over the course of his employment.

        The employment agreement included a section entitled “Effects of Termination.” This
section provides, in relevant part, the bases for a with-cause termination and the effect termination
has on receipt of compensation and benefits. Section 3.1 of the employment agreement provides
that an employee “may be terminated with cause at the sole discretion of the District” and that
“[e]conomic necessity, elimination of Employee’s position, or the District’s
reorganization/realignment/restructuring” constituted qualifying events that could trigger
termination of an employee. Moreover, section 3.2(a) stated: “In the event the District terminates
the Employee’s employment with cause, Employee shall receive any compensation and benefits
earned up to the date of termination, and shall not be entitled to receive any further compensation
and benefits hereunder.”

        In mid-2017, respondent received letters from petitioner indicating his employment
agreement would expire on June 30, 2017, and would not be renewed because petitioner was
undergoing a reorganization. Respondent thereafter sought a payout for his 812 hours of accrued
and unused vacation time. However, petitioner only paid him for 25 of his accrued vacation days,
or only 200 of those 812 hours.

        Respondent filed a claim for with LARA’s Wage and Hour Division alleging he was
entitled to the full amount of his unused vacation days. After an investigation, LARA determined
petitioner owed respondent wages in the form of a fringe benefit totaling $41,192.31, with interest.
Petitioner appealed LARA’s decision and, on November 20, 2018, ALJ St. John affirmed LARA’s
determination and ordered petitioner to pay respondent over $41,000 in earned but unused vacation
time. ALJ St. John concluded the employment agreement was ambiguous and, because of that
ambiguity, he construed the agreement against petitioner as the drafter, concluding respondent was
entitled to payment for all of his unused vacation time accrued over the years. Even so, ALJ St.
John noted petitioner’s position, “while ultimately incorrect, [was] hardly unreasonable” because
it involved difficult questions of statutory and contract interpretation. ALJ St. John concluded
exemplary damages were not warranted. Respondent thereafter filed a motion for attorney fees
under MCL 408.488(3), which allows LARA to award attorney fees for a violation of the Payment
of Wages and Fringe Benefits Act (PWFBA), MCL 408.471 et seq. But ALJ St. John denied this
request too, explaining petitioner did not act in bad faith and its appeal was objectively reasonable.

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        Petitioner appealed to the circuit court, arguing the agreement did not provide for a
monetary payout of unused vacation days upon termination, that ALJ St. John improperly changed
the language of the parties’ agreement, and that the ALJ’s decision violated the Payment of Wage
and Fringe Benefits Act (PWFBA). In response, respondent asserted ALJ St. John properly
determined the employment agreement was ambiguous, asserting “substantial evidence” supported
the decision, including language found in several other provisions of the employment agreement.
The circuit court determined that the ALJ’s decision was supported by competent, material and
substantial evidence on the whole record and thus affirmed that decision.

       Rather than appeal the portion of ALJ St. John’s decision regarding attorney fees,
respondent filed a motion asking the circuit court to order petitioner to pay respondent’s attorney
fees under MCL 408.488(3) or MCR 7.216(C). The trial court granted the motion. These appeals
followed.

              II. PAYMENT OF ACCRUED AND UNUSED VACATION TIME

        On appeal, petitioner argues that respondent’s employment agreement did not provide for
the payment for more vacation days than it already paid him and that the PWFBA also does not
require the payment of additional accrued and unused vacation time. We agree.

               This Court has limited review of a circuit court’s review of an agency
       determination. This Court must determine “whether the lower court applied the
       correct legal principles and whether it misapprehended or grossly misapplied the
       substantial evidence test to the agency’s factual findings.” This standard of review
       is indistinguishable from the “clearly erroneous” standard of review. [Dana v
       American Youth Foundation, 257 Mich App 208, 211; 668 NW2d 174 (2003)
       (citations omitted).]

“[A] finding is clearly erroneous when, on review of the whole record, this Court is left with the
definite and firm conviction that a mistake has been made.” Boyd v Civil Serv Comm, 220 Mich
App 226, 235; 559 NW2d 342 (1996).

               The circuit court’s legal conclusions are reviewed de novo and its findings
       of fact are reviewed for clear error. Great deference is accorded to the circuit
       court’s review of the [administrative] agency’s factual findings; however,
       substantially less deference, if any, is accorded to the circuit court’s determinations
       on matters of law. [Mericka v Dep’t of Comm Health, 283 Mich App 29, 36; 770
       NW2d 24 (2009) (quotation marks and citations omitted).]

This Court has specifically held that the Michigan Department of Labor’s interpretation of the
PWFBA should be accorded deference. Gravely v Pfizer, Inc, 170 Mich App 262, 267; 427 NW2d
613 (1988). “[Q]uestions of statutory interpretation are reviewed de novo by this Court.” Dana,
257 Mich App at 211. Specifically, “[i]f an administrative agency or circuit court interprets a
statute, such a determination is a question of law subject to review de novo.” Mericka, 283 Mich
App at 36. “The existence and interpretation of a contract are questions of law reviewed de novo.”
Kloian v Domino’s Pizza LLC, 273 Mich App 449, 452; 733 NW2d 766 (2006).

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        “In reviewing questions of statutory interpretation, [this Court’s] purpose is to discern and
give effect to the Legislature’s intent.” Echelon Homes, LLC v Carter Lumber Co, 472 Mich 192,
196; 694 NW2d 544 (2005). “If the statutory language is clear and unambiguous, judicial
construction is neither required nor permitted, and courts must apply the statute as written.” Tevis
v Amex Assurance Co, 283 Mich App 76, 81; 770 NW2d 16 (2009).

       MCL 408.471 of the PWFBA defines “fringe benefits” and “wages” as follows:

               (e) “Fringe benefits” means compensation due an employee pursuant to a
       written contract or written policy for holiday, time off for sickness or injury, time
       off for personal reasons or vacation, bonuses, authorized expenses incurred during
       the course of employment, and contributions made on behalf of an employee.

               (f) “Wages” means all earnings of an employee whether determined on the
       basis of time, task, piece, commission, or other method of calculation for labor or
       services except those defined as fringe benefits under subdivision (e) above.

        “Fringe benefits” are to be paid by an employer “to or on behalf of an employee in
accordance with the terms set forth in the written contract or written policy.” MCL 408.473. An
employer cannot “withhold a payment of compensation due an employee as a fringe benefit to be
paid at a termination date unless the withholding is agreed upon by written contract or a signed
statement obtained with the full and free consent of the employee without intimidation or fear of
discharge for refusing to agree to withholding of the benefit.” MCL 408.474.

        When interpreting a contract, this Court’s primary goal is to determine the intent of the
parties to the contracting. Trader v Comerica Bank, 293 Mich App 210, 215; 809 NW2d 429
(2011). A contract must be read as a whole, and each word, phrase, and clause must be given
effect. Id. at 216 (citations omitted). If the contractual language is unambiguous, this Court must
“construe the contract and enforce its terms as written.” Id. A “contract is ambiguous when its
provisions are capable of conflicting interpretations.” Klapp v United Ins Group Agency, Inc, 468
Mich 459, 467; 663 NW2d 447 (2003) (citation and quotation marks omitted).

        When a contract is ambiguous, extrinsic evidence can be admitted to determine the actual
intent of the parties. Shay v Aldrich, 487 Mich 648, 667; 790 NW2d 629 (2010). “An ambiguity
may either be patent or latent.” Id. A patent ambiguity is apparent from the face of the document
and, as a result, extrinsic evidence is not admissible to identify a patent ambiguity. Id. However,
extrinsic evidence may be used to show a latent ambiguity in a contract because a latent ambiguity
is an ambiguity that “ ‘arises from a collateral matter when the document’s terms are applied or
executed.’ ” Id., quoting Grosse Pointe Park v Mich Muni Liability & Prop Pool, 473 Mich 188,
198; 702 NW2d 106 (2005). “Because the detection of a latent ambiguity requires a consideration
of factors outside the instrument itself, extrinsic evidence is obviously admissible to prove the
existence of the ambiguity, as well as to resolve any ambiguity proven to exist.” Id. (citation and
quotation marks omitted). Regarding latent ambiguities, our Supreme Court has stated:

               A latent ambiguity exists when the language in a contract appears to be clear
       and intelligible and suggests a single meaning, but other facts create the necessity
       for interpretation or a choice among two or more possible meanings. To verify the

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       existence of a latent ambiguity, a court must examine the extrinsic evidence
       presented and determine if in fact that evidence supports an argument that the
       contract language at issue, under the circumstances of its formation, is susceptible
       to more than one interpretation. Then, if a latent ambiguity is found to exist, a court
       must examine the extrinsic evidence again to ascertain the meaning of the contract
       language at issue. [Shay, 487 Mich at 668 (citations, quotation marks, and footnotes
       omitted).]

        We find that Section 3.2(a) of the employment contract at issue was not ambiguous and the
ALJ and circuit court erred in concluding otherwise. Section 3.2(a) provided that, in the event an
employee’s employment was terminated with cause, the employee “shall receive any
compensation and benefits earned up to the date of termination, and shall not be entitled to receive
any further compensation and benefits hereunder.” This section unambiguously means that
respondent’s salary and benefits would continue while he was employed and until the date of
termination of the employment contract (here, June 30, 2017) and would then stop. Section 3.2(a)
does not state that, when the employment contract was terminated and respondent ceased working
for petitioner that respondent would receive compensation for unused benefits earned throughout
his employment history. The contract at issue was, after all, for only a one-year term.

       Respondent’s employment agreement entitled him to receive 25 days of paid vacation per
year while he was employed. This section unambiguously means respondent was provided with
25 days of vacation time that he could take while employed under the employment agreement.
Respondent sought a different benefit in the form of a payout of his 812 hours of unused vacation
time that he had earned prior to the contract at issue, multiplied by his hourly pay rate. But
respondent’s employment contract does not provide for such a benefit in the event he was
terminated with cause, which he was in light of the school district’s reorganization.

        Notably, a second ALJ, ALJ Paul Smith, was assigned to determine whether petitioner
should have paid respondent for his accrued and unused sick leave after his employment was
terminated. ALJ Smith concluded that respondent’s claimed right to be paid his accrued and used
sick time did not exist within his employment agreement:

               This Tribunal may not read additional words into the contractual language
       in order to find the existence of a fringe benefit that does not exist in the
       Administrative Employment Agreement. Paragraph 3.2(a) of the agreement states
       that an employee terminated with cause “shall receive any compensation and
       benefits earned up to the date of termination, and shall not be entitled to receive
       any further compensation and benefits hereunder.” The unambiguous meaning of
       this language is that the employee’s salary and benefits will continue to the date of
       termination and then stop. This language does not say that the employee will
       receive compensation for unused benefits earned up to the date of termination. And
       this Tribunal is not permitted to read those additional words into the document
       where they are not present.

              The benefit at issue in this matter is expressly defined and described in
       Paragraph 2.3 of the agreement as a right to be absent from work on leave days
       “without loss of pay.” The right to miss work on a certain number of accumulated

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       leave days “without loss of pay” is not the same thing as a right to receive a cash
       payout at termination, at some unspecified rate, for any portion of that benefit that
       was not used during the time of employment. Nothing in the parties’ agreement
       created a right to be paid money for unused benefits. Accordingly, the specific
       “benefit” that Respondent is entitled to “receive” up to the date of termination under
       Paragraph 3.2(a) is the benefit that is described and defined in Paragraph 2.3 of the
       agreement, which is the right to miss work on leave days “without loss of pay.”

               In sum, under Act 390, Respondent is only entitled to recover a fringe
       benefit set forth in the written employment agreement. See MCL 408.473. Here it
       was the right to miss work on leave days without the loss of pay. The contract gave
       Respondent the right to “receive” this benefit up to the date of termination, but it
       did not give him a right to receive payment for unused leave days because nowhere
       in the contract is the “leave day” benefit described as anything more than the right
       to miss work on leave days without loss of pay. To convert this benefit to an
       additional right to be paid for accrued and unused leave days would require writing
       new words into the agreement that are absent from the controlling document.

        Consistent with the analysis above, we agree with ALJ Smith’s decision. Respondent’s
employment agreement allowed him to take vacation time without losing pay while he was
employed. The employment agreement did not, however, provide respondent with the right to a
monetary payout for his unused vacation time. The decisions of ALJ St. John and the circuit court
improperly rewrote the parties’ employment agreement to include a benefit not provided in the
agreement. See McDonald v Farm Bureau Ins Co, 480 Mich 191, 199-200; 747 NW2d 811 (2008)
(“[I]t has long been the law in this state that courts are not to rewrite the express terms of
contracts.”). Therefore, ALJ St. John made a clear legal error in his interpretation of the parties’
employment agreement, and the circuit court clearly erred by failing to correct that error.

                              III. ATTORNEY FEES AND COSTS

         Given our conclusion that ALJ St. John made a clear legal error in his interpretation of the
parties’ employment agreement, and the circuit court clearly erred by failing to correct that error,
we need not extensively address petitioner’s arguments regarding attorney fees and costs. Our
reversal of the award in favor of respondent clearly means that respondent was not the prevailing
party and, therefore, not entitled to award of fees. See Lavene v Winnebago Indus, 266 Mich App
470, 475; 702 NW2d 652 (2005) (stating that the prevailing party is generally entitled to recover
litigations costs).

                                       IV. CONCLUSION

       Reversed and remanded for further proceedings. We do not retain jurisdiction.

                                                              /s/ Mark J. Cavanagh
                                                              /s/ Deborah A. Servitto
                                                              /s/ Thomas C. Cameron

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