WA Legal Roundup - Washington Supreme Court
Employers cannot willfully withhold their employees' pay. Doing so subjects you to attorney's fees, costs, and exemplary damages under RCW 49.52.070. So what happens when you have a bankruptcy involved?
Turns out Funster's Casino opened its doors in poor financial shape. Things got worse, and the CFO and CEO failed to pay wages during a Chapter 11 bankruptcy. The Bankruptcy Court then converted the assets and didn't pay wages out of seized cash. The question is thus: Can you voluntarily withhold wages while in Chapter 11. The answer. No, you're on the hook personally for the withholding:
In an action for unpaid wages, it must be determined whether the failure to pay was willful and done with the intent to deprive the employee of wages owed. Schilling, 136 Wn.2d at 159. RCW 49.52.070 provides the civil remedy where the failure to pay wages owed was willful:
Any employer and any officer, vice principal or agent of any employer who shall violate any of the provisions of [RCW 49.52.050(1) and (2)] shall be liable in a civil action by the aggrieved employee or his assignee to judgment for twice the amount of the wages unlawfully rebated or withheld by way of exemplary damages, together with costs of suit and a reasonable sum for attorney's fees: PROVIDED, HOWEVER, That the benefits of this section shall not be available to any employee who has knowingly submitted to such violations.
RCW 49.52.050 provides that where "[a]ny employer or officer, vice principal or agent of any employer . . . who . . . (2) [w]ilfully and with intent to deprive the employee of any part of his wages, shall pay any employee a lower wage than the wage such employer is obligated to pay such employee by any statute, ordinance, or contract."
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Here, Kingen and Switzer argue the payment of wages was beyond their control because the bankruptcy trustee froze Funsters' assets and would not permit the payment of wages with the frozen assets. But this fact does not help them. Kingen (Funsters' president and CEO) and Switzer (Funsters' general manager and CFO) both had authority over the payment of wages. And the wages owed were accrued prior to the chapter 7 conversion. As such, Ellerman does not support a lack of control defense for Kingen and Switzer, nor does it negate the personal liability imposed under the statute.
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The directors have the choice to file bankruptcy or, say, close the business and pay its debts (including wages). The directors decide whether to continue running an inadequately capitalized corporation while hoping for a change in financial position. In other words, the directors control the choices over how the corporation's money is used, and (in cases of unpaid wage claims) RCW 49.52.070 imposes personal liability when the directors choose not to pay wages owed. Such a choice is willful and intentional.
On a side note, the Court did not abuse its discretion in failing to award a multiplier on the fees for the class.