William Sornsin v. Scout Media Inc. ( 2019 )

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).
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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).
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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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