Court Opinion

ID: 4446605
Source: CourtListenerOpinion
Date Created: 2019-10-14 19:15:31.371138+00
Date Added: 2024-06-11T14:53:08.227882
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

WILLIAM SORNSIN, an individual,                                                  )
MARC T. BECK, an individual,                                                     )   No. 78278-9-I
ROBERT GOREE, an individual,                                                     )
AARTI VARMA, an individual, EVAN                                                 )   DIVISION ONE
W. LEWIS, an individual, BENJAMIN                                                )
G. JOLDERSMA, an individual,                                                     )
BRIAN N. KU, an individual,                                                      )   PUBLISHED OPINION
DAMIEN JOLDERSMA, an individual,                                                 )
DONALD J. CLORE, an individual,                                                  )
JOSEPH C. WRIGHT, an individual,                                                 )
                                                                                 )
                                         Appellants,                             )
                                                                                 )
              v.                                                                 )
                                                                                 )
SCOUT MEDIA, INC., a Delaware                                                    )
corporation, CRAIG and JANE DOE                                                  )
MALLITZ, and their marital community, )
CRAIG AMAZEEN, an individual, JOE )
and JANE DOE ROBINSON, and                                                       )
their marital community; TAMMER and )
JANE DOE FAHMY, and their marital )
community, PILOT GROUP GP, LLC, )
a Delaware corporation, and JANE                                                 )
and JOHN DOES 1 through 8,                                                       )
                                                                                 )
                                         Respondents.                            )   FILED: October 14, 2019
_________________________________________________________________________________)
             LEACH, J.           —     Ten former employees of Scout Media Inc. appeal the trial

court’s summary dismissal of their failure to pay wages claim. They claim an

affirmative statutory entitlement to payment for accrued paid time off (PTO) that
No. 78278-9-I /2

they did not use before they voluntarily quit. Because they have no statutory

right to payment and do not claim a contractual right, we affirm.

                                              FACTS

       On July 10, 2016, many members of the technology team of Scout Media

Inc., including appellants, resigned at the same time without prior notice. The

parties agree that Scout Media paid appellants all salary earned as of their date

of resignation and did not pay appellants for their accrued and unused PTO.

Scout’s employee manual addresses “PTO Pay Upon Termination.” It states, in

relevant part, ‘Employees will be paid out 70% of PTO they have accrued at

employment end.    .   .   .   Scout reserves the right to withhold any and all PTO time if

an employee neglects to give a two week notice of termination regardless of

position or length of service.”

       In early December 2016, Scout Media filed Chapter 11 bankruptcy

proceedings.1 Later that month, appellants filed a lawsuit against Scout Media,

Scout Media’s former president and former directors, and Pilot Group GP LLC, a

former investor in Scout Media’s parent company (together Scout), claiming

failure to pay wages and unjust enrichment.              Appellants later dismissed their

claim of unjust enrichment and their claim against Pilot Group. Both parties filed

       1Titlell U.S.C.
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No. 78278-9-I / 3

motions for summary judgment.       The court denied appellants’ motion and

granted Scout’s motion. Appellants appeal.

                           STANDARD OF REVIEW

       This court reviews an order granting summary judgment de novo and

performs the same inquiry as the trial court.2       It considers all facts and

reasonable inferences in the light most favorable to the nonmoving party.3 And it

affirms summary judgment only when the evidence presented demonstrates no

genuine issue of material fact and the moving party is entitled to judgment as a

matter of law.4

                                  ANALYSIS

      Appellants make three claims: (1) they have an affirmative statutory right

to payment of their accrued PTO, (2) the individual respondents are liable to

them for the balance of their accrued PTO and for double damages because

Scout’s board of directors instructed Scout not to pay them for their accrued

PTO, and (3) they are entitled to prejudgment interest on their unpaid PTO. We

disagree

      Appellants assert that they have an affirmative statutory entitlement to

payment for their accrued PTO because hours worked determines the amount of

      2 Mohrv. Grant, 153 Wash. 2d 812, 821, 108 P.3d 768 (2005).
      ~ Wilson v. Steinbach, 98 Wash. 2d 434, 437, 656 P.2d 1030 (1982).
      ~ Steinbach, 98 Wash. 2d at 437.
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No. 78278-9-I /4

accrued PTO, placing FTC within the definition of “wages” under former RCW

49.46.010(2) (2011). Scout responds that an employee’s right to PTO is only

contractual.

       Appellants rely on cases where Washington courts have looked to former

RCW 49.46.010(2)’s definition of “wages” to define “wages” in other statutory

provisions.5 RCW 49.46.010(7), formerly RCW 49.46.O10(2),~ defines “wages”

as “compensation due to an employee by reason of employment.” Appellants

assert that McGinnity v. AutoNation, Inc.7 shows that unpaid vacation benefits

are wages under this definition and Naches Valley School District No. JT3 v.

Cruzen8 shows that a sick leave cash-out represents wages. These cases do

not establish an affirmative statutory entitlement to payment for accrued FTC for

two reasons.

       First, each case examined whether the contested benefit was “wages”

within the meaning of RCW 49.48.030, a fee shifting statute allowing an

employee to recover attorney fees in any action in which the employee

successfully recovers wages or salary owed to him.9        RCW 49.48.030 is a

      ~ McGinnity v. AutoNation, 149 Wash. App. 277, 284, 202 P.3d 1009 (2009).
      6 In 2013, the legislature amended the statute and moved the definition of
“wages” from subsection (2) to subsection (7). LAWS OF 2013, ch. 141, § 1.
      ~ 149 Wash. App. 277, 285, 202 P.3d 1009 (2009).
      8 54 Wash. App. 388, 398-99, 775 P.2d 960 (1989).
      ~ McGinnity, 149 Wash. App. at 284-85; Cruzen, 54 Wash. App. at 399.
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No. 78278-9-I I 5

remedial statute that must be construed liberally in favor of the employee.10

McGinnity’s and Cruzen’s characterization of unpaid vacation and sick leave as

wages is specific to this remedial attorney fees statute. It is not at issue here.

       Second, the contested benefits were contractual, not statutory.               In

McGinnity, plaintiffs prevailed on their breach of contract claim for loss of

vacation benefits.11 And in Cruzen, the language of the collective bargaining

agreement (CBA) at issue required that the school district pay teachers for their

sick leave accrued for the contract period.12 Neither case involved failure to pay

a statutorily required amount, like a minimum wage or overtime.

       Next, appellants note a statement in Hisle v. Todd Pacific Shipyards

Corp.13 that RCW 49.46.01 0(7)’s definition of “wages” includes payments that are

“tied to hours worked.” But our Supreme Court cited former RCW 49.46.010(2)’s

definition of “wages” only as context to explain that the Washington Minimum

Wage Act (MWA)14 prohibits employees and employers from bargaining

collectively to establish wages or other conditions less than the statutory

minimum but does not otherwise restrict their freedom to bargain.15 The court

ultimately held that the CBA provision for a retroactive payment, tied to hours

      10 McGinnity, 149 Wash. App. at 284.
      ~ McGinnity, 149 Wash. App. at 281.
      12 Cruzen, 54 Wash. App. at 396.
      13 151 Wash. 2d 853, 868, 93 P.3d 108 (2004).
      14 Ch. 49.46 RCW.
      15 Hisle, 151 Wash. 2d at 861.

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No. 78278-9-lI 6

worked, was subject to the overtime provisions of the MWA.16 Hisle does not

concern accrued PTO or a statutory right to PTO.                       Instead, it involves a

contractual wage entitlement to which the MWA applied.                     Appellants neither

claim a contractual right to payment of their PTO nor claim a statutory right based

on a specific statutory guaranty like the MWA’s overtime provision.

       Appellants cite no case, treatise, or other authority directly supporting their

claim that they have an affirmative statutory entitlement to payment for their

accrued PTO.

       Scout claims that an employee’s right to payment for accrued PTO is only

contractual and additionally asserts that Scout’s manual is a contract that

establishes appellants’ PTO rights.               First, Scout relies on Walters v. Center

Electric, Inc.,17 in which Walters claimed that he had a right to vacation pay in lieu

of vacation time. In rejecting this argument, Division Two stated, “The amount of

vacation time to which an employee is entitled is determined by the terms of the

employment contract.     .   .   .   There   is   nothing   in   Mr.   Walters’   contract of

employment which expressly grants the right to extra compensation.”18 Second,

Scout cites Teamsters, Local 117 v. Northwest Beverages, Inc.,19 in which this

court stated that the collective bargaining agreement did not provide for a cash

      16 Hisle, 151 Wash. 2d at 862-63.
      178 Wash. App. 322, 326, 506 P.2d 883 (1973).
      18 Walters, 8 Wash. App. at 326-27.
      19 95 Wash. App. 767, 768, 976 P.2d 1262 (1999).

                                      -6-
No. 78278-9-I I 7

out of accrued but unused sick leave. And “[njo statute, ordinance, or any source

directs this employer to cash out accrued but unused sick leave.”20 This court

reasoned, “Cruzen does not support a conclusion that sick leave is a form of

wages when the CBA does not have a cashout provision.” “[A]ccrued sick leave

is a contingent benefit that does not constitute wages under this statute unless it

is so defined by another source.”21 Appellants cite no authority to counter the

proposition that in Washington an employee’s right to payment for accrued PTQ

is only contractual.

       Although appellants claim that the manual is not a contract, they do not

identify any other contract providing them with PTO payment rights. And they

assert that the manual’s PTO pay-upon-termination policy conflicts with

Washington wage law because it limits payment to 70 percent of an employee’s

accrued PTO and conditions payment on the employee giving two weeks’ notice

of his termination.     This argument conflicts with the Washington State

Department of Labor & Industries (DLI) guidance on workplace rights. The DLI

advises,

       Paid vacation, holiday, and severance pay are considered voluntary
       benefits that a business may choose to offer workers. Washington
       State law does not require a business to provide these benefits.
       Even though there is no state law requiring a business to pay these
       benefits upon termination, if the business promises workers these

      20Nw. Beveracjes, 95 Wash. App. at 768.
      21 Nw. Beverages, 95 Wash. App. at 768-69.

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No. 78278-9-I I 8

       benefits and does not follow through, workers can contact an
       attorney or file in small claims court for their unpaid benefitsJ221

       In addition, Scout cites two cases from other jurisdictions to persuade this

court that an employer may condition payment of accrued benefits on conditions

precedent. In Chipman v. Northwest Healthcare Corp., Applied Health Services,

Inc~23 the Supreme Court of Montana stated, “The right to earn compensation for

personal time may be subject to reasonable restrictions and conditions

precedent.” And in Lee v. Fresenius Medical Care, Inc.,24 the Supreme Court of

Minnesota stated, “[E]mployers are permitted to set conditions that employees

must meet in order to exercise their earned right to vacation time with pay[,

including] the right to accrued vacation ‘wages,’ whether in the form of actual

paid time off or payment in lieu of paid time off.” Scout’s appellate counsel stated

during oral argument that he is unaware of any in-state or out-of-state authority

prohibiting an employer from conditioning payment for accrued PTO. Appellants

have not cited any. And appellants did not comply with the manual’s requirement

that employees provide two weeks’ notice of termination to receive 70 percent of

their accrued PTO.

      22      Washington     State   Department    of   Labor   &    Industries
https://www. Ini .wa.govlWorkplaceRightslVVages/PayReq/FinalPay/default.asp.
(last visited Oct. 7, 2019).
        232014 MT 15, ~ 22, 373 Mont. 360, 317 P.3d 182.
        24741 N.W.2d 117, 126 (2007).
                                        -8-
No. 78278-9-I I 9

       Because appellants do not show that they have an affirmative statutory

entitlement to payment for their accrued PTO, we need not review their claims of

respondents’ derivative liability and their entitlement to prejudgment interest.

                                  CONCLUSION

      We affirm.

WE CONCUR:

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