Court Opinion

ID: 9598035
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:04:36.421846+00
Date Added: 2024-06-11T12:27:51.305244
License: Public Domain

MULLARKEY, Justice,
specially concurring:
I concur in the majority opinion remanding this case for a new trial on Jet Courier Service, Inc.’s (Jet’s) claim against Anthony Mulei for breach of his duty of loyalty. I agree that the test to be applied on retrial is as stated on page 29 of the majority opinion:
[T]he focus is on whether Mulei acted solely for Jet’s benefit in all matters *503connected with his employment, and whether Mulei competed with Jet during his employment, see Rest. (2d) Agency §§ 387, 393, giving due regard to Mulei’s right to make preparations to compete.
(Emphasis in original.) I write separately to emphasize that this is the appropriate test to determine a breach of loyalty when an employee is acting as the employer’s agent. In this case, there seems to be no question that Mulei was acting as Jet’s agent because of the position he occupied with the company and his duties and responsibilities. However, not every employee is the employer’s agent, and an employee may act as an agent with regard to certain job functions but not with regard to others. See Note, The Implied Covenant of Good Faith and Fair Dealing: Examining Employees’ Good Faith Duties, 39 Hastings L.J. 483, 498 n. 94 (1988). Thus, the duty of loyalty and the test for a breach of that duty may well be different if the employee is not an agent. See id. at 499 n. 102.
I also write separately to amplify the majority’s discussion of the Wage Claim Act (the Act) in Part III.B.
As the majority states at page 501, the Wage Claim Act originally was enacted in 1901 and was entitled “An Act Providing For The Regulation Of The Payment Of Wages, Of Employes Of Corporations And Providing A Penalty For The Violation Thereof.” Ch. 55, 1901 Colo.Sess.Laws 128. Although the Act has been amended periodically, its basic scheme has remained remarkably unchanged. The law always has had two basic components. First, the employer is required to pay the employee at regular intervals. § 8-4-105, 3B C.R.S. (1986). Second, when the employment relationship is terminated, the employer is required to pay the employee for all earned and unpaid wages or compensation. § 8-4-104, 3B C.R.S. (1986). Since its inception, the Act has provided the employee with a private right to sue his employer for failure to pay in accordance with the Act and has imposed penalties in the form of liquidated damages plus attorneys’ fees. The statutory penalty, which was set at five percent in 1901, is now fifty percent of the compensation due. § 8-4-104(3), 3B C.R.S. (1986).
Our present codification of the statute includes a requirement that the employer have funds on hand to pay the employee, § 8-4-103, 3B C.R.S. (1986), and prohibits the payment of wages in scrip, § 8-4-102, 3B C.R.S. (1986). These provisions come from the state’s so-called “Truck System” law which was debated and enacted at about the same time as the Wage Claim Act. See In re House Bill No. 147, 23 Colo. 504, 48 P. 512 (1897). The Wage Claim Act and Truck System law fairly can be considered as companion legislation which should be construed together.
While no legislative history as such exists for laws of this vintage, contemporary decisions by this court give important insight into the purposes and historical context of these laws. The constitutionality of the bill which later became the Wage Claim Act was raised by the Senate in interrogatories which it submitted to this court. In re Senate Bill No. 27, 28 Colo. 359, 65 P. 50 (1901). Although this court declined to answer the interrogatories because only the rights of private parties were at stake, we described the bill, in part, as follows:
[T]he general object of the bill is to require all private corporations doing business within this state ... to pay to their employees the wages earned each and every 15 days in lawful money of the United States, payable on the 5th and 20th of each calendar month, for all wages earned up to and within five days of such payment.
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[Penalties are prescribed for a violation of the provisions of the act, and attorneys’ fees are awarded to the successful party in suits brought by employes to collect their wages thereunder.
Id. at 360, 65 P. at 50-51. We observed that the wage claim bill had the same purpose as an earlier Truck System bill prohibiting payment of employees in scrip, but that the wage claim bill “goes further, and *504also makes mandatory the semimonthly payment of wages.” Id. at 361, 65 P. at 51.
In a case concerning a proposed Truck System bill, we held that the legislature had the power to “enact laws of this character when necessary to prevent oppression and fraud, and for the protection of classes of individuals against unconscionable dealings.” In re House Bill No. 147, 23 Colo. 504, 507, 48 P. 512, 513 (1897). The court recognized the historical background which led to these bills:
We may properly take cognizance of the fact that the most serious disturbances which have occurred in this country for the last 25 years have grown out of controversies between employer and employe. No one doubts the authority or questions the duty of the state to interfere with such force as may be necessary to repress such disturbances and maintain the public peace and tranquility; and as well may the state provide in advance against certain kinds of fraud and oppression, which lead to these outbreaks.

Id.

Thus, it is clear that the intent of these labor laws was to protect employees from exploitation, fraud and oppression by requiring employers to pay workers in United States currency at regular intervals. At present, section 8-4-105(1), 3B C.R.S. (1986), requires that pay periods be “of no greater duration than one calendar month or thirty days, whichever is longer,” and regular paydays must occur “no later than ten days following the close of each pay period.” The employer and the employee are permitted to “mutually agree on any other alternative period of wage or salary payments.” § 8-4-105(1). On a monthly basis or at the time each payment of wages or compensation is due, the employer is required to furnish the employee with an itemized pay statement showing, among other things, the gross and net wages earned during the pay period. § 8-4-105(4), 3B C.R.S. (1986). If the employee is fired by his employer, he must be paid immediately for all wages or compensation earned and unpaid at the time of his discharge. § 8-4-104(1), 3B C.R.S. (1986). As the majority notes at page 501, the scheme of the Act, which has remained constant from its beginning, is to require regular, periodic payments of an employee throughout his employment and to provide that the final wage payment be made immediately if the employer discharges the employee. .
Since the employer must make periodic wage payments under section 8-4-105, only the final payment can be at issue under section 8-4-104 when the employment relationship is terminated. Nothing in the Act permits an employer to withhold any earlier payment for any reason. To allow withholding of past-due compensation for any reason would be contrary to the main purpose of the Act which, as we said in In re Senate Bill No. 27, was to make mandatory the periodic payment of wages. 28 Colo. at 361, 65 P. at 51.
Under section 8-4-105 of the Act, Mulei was entitled to a quarterly accounting of his bonus and was entitled to have his bonus paid on a quarterly basis. The facts of this case, of course, will be determined on retrial. If it is found, as it appears from this record, that Jet violated the Act by failing to make the quarterly bonus payments in 1981 and 1982, then Jet has no “good faith legal justification” under section 8-4-104(3) for withholding payment of those amounts when Mulei was fired. An employer cannot violate the terms of the Act by failing to make periodic payments and, at the same time, shelter the unpaid compensation by claiming the protection of the set-off provision of the Act. If the 1981 and 1982 bonuses are not subject to Jet’s set-off claim, Mulei should recover his bonuses for those years plus the fifty percent statutory penalty.
The question remains to be decided on retrial whether Mulei’s salary for March 1983 and his bonus for the first quarter of 1983 are subject to section 8-4-104(2), 3B C.R.S. (1986), which permits an employer to “set off any lawful charges or indebtedness owing by the employee to the employer.” Wage set-offs are strongly disfavored under Colorado law, as is indicated by our decision in Finance Acceptance Co. v. *505Breaux, 160 Colo. 510, 419 P.2d 955 (1966). There, an employer sued a former employee who had defaulted on a promissory note and the employee counterclaimed for unpaid wages. Because the employee was judgment-proof, the employer sought to set off the wage claim against the much larger amount which the employee owed on the promissory note. We held that only part of the wage claim could be set off against the unpaid loan because state law prohibited attachment of more than thirty percent of an employee’s wages, an amount which is now twenty-five percent. See § 13-54-104(2)(a), 6A C.R.S. (1987).
Set-offs against wage claims are disfavored because of the inherent economic inequity between the employer and employee. Withholding an employee’s paycheck is a form of employer self-help which permits the employer to obtain relief immediately without submitting its claim to adjudication. The adverse economic impact on the employee is direct and potentially devastating while the economic benefit to the employer is relatively insignificant. The Wage Claim Act recognizes that many employees live from paycheck to paycheck and that a set-off against wages is a drastic remedy which must be strictly limited.
In 1986, our legislature considered the operation of the set-off provision in the Wage Claim Act. By adding a definition of “lawful charges and indebtedness” in section 8-4-101(7.5), 3B C.R.S. (1986), the legislature clarified what type of employer claims may be set off against unpaid wages when an employee is terminated. Ch. 65, sec. 1, § 8-4-101(7.5), 1986 Colo.Sess.Laws 504. The new definition reads:
“Lawful charges or indebtedness” shall not include deductions made from an employee’s wages or compensation for any of the following reasons: Cash or inventory shortages except for shortages caused by theft, breakage, alleged negligent acts, dishonored customer credit charges or checks, workmen’s compensation, or penalties assessed for infractions or for violating employer policies except for previously established written policies.
(emphasis added). The underscored language of the amendment, which took effect after the events in this case, prohibits future employer set-offs for an alleged breach of an employee’s implied common law duty of loyalty. The legislative history shows that the amendment to the Act was intended to identify permissible employer set-offs and to curtail what the legislators regarded as widespread abuses of the Act’s set-off provision. See Tape Recording of Testimony Before House Business Affairs and Labor Committee on House Bill 1231, February 11, 1986, 55th General Assembly.
I do not read the majority opinion as deciding whether Jet has a valid set-off claim. Rather that issue is left to the determination of the trial court. At 501. I simply emphasize my view that no such set-off claim is permitted after the effective date of the 1986 amendments.
For these reasons, I specially concur in the majority opinion.