Opinion
Cause No. 1:03-CV-472-TS.
February 2, 2005
MEMORANDUM OF DECISION AND ORDER
The Plaintiff, Coleen B. Brown, alleges that the Defendant corporation, Dial-X Automated Equipment (Dial-X), withheld rent money from her weekly paycheck in violation of Indiana Code § 22-2-6-1 et seq. The Plaintiff seeks liquidated damages, costs, and attorney's fees under Indiana Code § 22-5-2-2.
On November 10, 2004, the Defendants, Michael Katz and Dial-X, filed a Motion for Summary Judgment [DE 14] seeking dismissal of all the Plaintiff's claims, including the wage assignment claim. On November 12, 2004, the Plaintiff filed her own Motion for Partial Summary Judgment [DE 18] requesting judgment in her favor on the Indiana wage claim. The cross-motions for summary judgment on the wage claim are the subject of this Memorandum and Order.
The Plaintiff also alleged that throughout her employment with Dial-X, the President of the company, Michael Katz, subjected her to sexual harassment. She also alleged that she was retaliated against and constructively discharged, all in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and the tort laws of the state of Indiana. The Defendants' motion for summary judgment on these charges was the subject of a separate memorandum of decision and order.
BACKGROUND
On December 8, 2003, the Plaintiff sued the Defendants in Noble Superior Court for sexual harassment and unlawful wage assignment. On December 19, 2003, the Defendants removed the case to this Court. On January 12, 2004, the Defendants filed their Answer and Affirmative Defenses.On November 10, 2004, the Defendants moved for summary judgment on all the Plaintiff's claims. The Plaintiff filed her own Motion for Partial Summary Judgment on November 12, 2004, on the wage assignment claim. On December 17, 2004, the Defendants responded to the Plaintiff's motion for partial summary judgment. On December 23, 2004, the Plaintiff replied.
SUMMARY JUDGMENT STANDARD
The Federal Rules of Civil Procedure mandate that motions for summary judgment be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). This notion applies equally where, as here, opposing parties each move for summary judgment in their favor pursuant to Rule 56. I.A.E., Inc. v. Shaver, 74 F.3d 768, 774 (7th Cir. 1996). Rule 56(c) further requires the entry of summary judgment, after adequate time for discovery, against a party "who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "[S]ummary judgment is appropriate — in fact, is mandated — where there are no disputed issues of material fact and the movant must prevail as a matter of law. In other words, the record must reveal that no reasonable jury could find for the non-moving party." Dempsey v. Atchison, Topeka, Santa Fe Ry. Co., 16 F.3d 832, 836 (7th Cir. 1994) (citations and quotation marks omitted). "`Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.'" Abrams v. Walker, 307 F.3d 650, 653 (7th Cir. 2002) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
"With cross-motions, [the Court's] review of the record requires that [the Court] construe all inferences in favor of the party against whom the motion under consideration is made." O'Regan v. Arbitration Forums, Inc., 246 F.3d 975, 983 (7th Cir. 2001) (quoting Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998)).
STATEMENT OF FACTS
The Plaintiff began her employment with Dial-X on October 25, 1999, in the Accounting Department. At the time, the Plaintiff was living in Kendallville, but her children attended school in Albion. The Plaintiff wanted to move to Albion to be closer to her children's school and activities. Dial-X is also in Albion and Michael Katz, the owner of Dial-X, owned several rental properties in Albion. The Plaintiff told Katz that she was interested in renting one of the houses he owned. Katz agreed to rent the house to the Plaintiff for $600 a month.
The Plaintiff began renting the house on January 1, 2000, and for several months, wrote a monthly check to Dial-X for her rent. She did not have a written lease agreement. In April or May, the Plaintiff told Barb Fogel, her supervisor in the accounting department, that it would be easier for her to make weekly payments for rent. The Plaintiff does not remember whose idea it was to take the payments directly from her paycheck, but she agreed to the arrangement because it would be easier for her.
This statement of fact is supported by the Plaintiff's deposition. (Pf.'s Dep. at 112.) In its Statement of Facts, the Defendant cites to the Plaintiff's deposition, but misstates that it was the Plaintiff who suggested that her rent be deducted from her paycheck. In any event, the accuracy of this fact is not material to whether the deduction was an illegal assignment of wages under Indiana law, as the statute presumes that deductions are made at the request of the employee. See I.C. § 22-2-6-1(a) (defining an assignment as "[a]ny direction given by an employee to an employer to make a deduction from the wages to be earned by said employee, after said direction is given. . . .").
Karen Harpel, another accounting department employee, and the Plaintiff calculated the amount of the weekly rent deduction. Harpel and the Plaintiff initialed the paper containing the calculations. Beginning with the payroll check issued on May 10, 2000, $150 for rent was deducted from the Plaintiff's paycheck. This continued until July 2002, when the Plaintiff stopped renting the home. If these deductions were not taken out the Plaintiff's paycheck, the Plaintiff would have been required to write a monthly check for rent.
DISCUSSION
The Plaintiff argues that the Defendant's assignment of her wages was in violation of Indiana Code § 22-2-6-1 et seq. because it was accomplished without following the procedures set forth in the statute. Accordingly, she was not paid all the wages due to her and is entitled to treble damages, costs, and attorney's fees under Indiana Code § 22-2-5-2. The Defendant disagrees and maintains that the paper containing the calculations for weekly rent, which was initialed by Harpel, on behalf of Dial-X, and the Plaintiff, "substantially complies with the statutory requirements" for an assignment of wages. (Def.'s Br. at 5.)
Indiana Code § 22-2-6-1 et seq. governs the requirements for deductible assignment of wages. "Any direction given by an employee to an employer to make a deduction from the wages to be earned by said employee, after said direction is given, shall constitute an assignment of the wages of said employee." I.C. § 22-2-6-1(a). An assignment of wages is valid only if it is in writing, signed by the employee, revocable by its terms at any time by the employee upon written notice to the employer, and agreed to in writing by the employer. I.C. § 22-2-6-2(a)(1)(A)-(D). An executed copy of the assignment is to be delivered to the employer within ten days after its execution. I.C. § 22-2-6-2(a)(2). The assignment must also be for a purpose designated in the statute. I.C. § 22-2-6-2(b).
The Defendant submits that the paper containing the weekly rental calculations, which was initialed by the Plaintiff and by Harpel, substantially complies with the statutory requirements for wage assignments. Dial-X admits that the writing does not indicate that the agreement was revocable at any time by the Plaintiff upon written notice to Dial-X, but argues that this requirement does not apply in this case because the Plaintiff was required to make rent payments to Dial-X. Had the deduction not been made, as a convenience to the Plaintiff, she would have been required to write a monthly check to Dial-X for rent.
In E L Rental Equipment, Incorporated v. Bresland, 783 N.E.2d 1068 (Ind.Ct.App. 2003), the court held the employer defendant liable under the Wage Payment Statute for amounts it deducted from the plaintiff's paycheck without meeting the specific statutory requirements for an assignment. The parties did not have a written agreement to deduct the amounts and the deductions were for a purpose not authorized by the statute, to pay for damage to company property. Bresland, 783 N.E.2d at 1071.
The Defendant attempts to distinguish Bresland. The Defendant argues that, unlike in Bresland, the parties have a written document which constitutes substantial compliance. The Defendant also points out that Bresland objected to the wage assignment whereas the Plaintiff, here, did not. The Court does not find the Defendant's arguments persuasive.
First, neither the statute nor the case law supports the conclusion that something less than full compliance is necessary. The Defendant has presented no authority to support its argument that an assignment can be valid despite an employer's failure to comply with all the requirements of the statute.
Second, even if strict adherence to the statute is not required in all instances, this case does not present a scenario that justifies deviating from the statute. The writing, a piece of paper with some calculations and initials, does not represent substantial compliance. Specifically, it does not indicate, "by its terms," that the assignment is revocable at any time by the employee upon written notice to the employer. The Defendant argues that the revocable term is not necessary in this case, but does not explain how the fact that the Plaintiff owed the rent, regardless of whether it was deducted, differs from wage assignments contemplated for other reasons in the statute. For example, the statute allows deductions for the payment of insurance premiums, the purchase price of bonds or securities, dues owed to a labor organization, and the purchase price of merchandise the employer sold to the employee. There is no suggestion that an employee would not owe the amounts deducted for these purposes absent the wage assignment. The statute simply gives the employee the power to revoke a particular method of payment; it does not address the employer's right to the monies or any other method of payment.
Third, the Defendant does not attempt to fit the reason for the deduction, to pay rent, into one of the authorized purposes listed in § 22-2-6-2(b).
(b) A wage assignment under this section may be made for the purpose of paying any of the following:
(1) Premium on a policy of insurance obtained for the employee by the employer.
(2) Pledge or contribution of the employee to a charitable or nonprofit organization.
(3) Purchase price of bonds or securities, issued or guaranteed by the United States.
(4) Purchase price of shares of stock, or fractional interests therein, of the employing company, or of a company owning the majority of the issued and outstanding stock of the employing company, whether purchased from such company, in the open market or otherwise. However, if such shares are to be purchased on installments pursuant to a written purchase agreement, the employee has the right under the purchase agreement at any time before completing purchase of such shares to cancel said agreement and to have repaid promptly the amount of all installment payments which theretofore have been made.
(5) Dues to become owing by the employee to a labor organization of which the employee is a member.
(6) Purchase price of merchandise sold by the employer to the employee, at the written request of the employee.
(7) Amount of a loan made to the employee by the employer and evidenced by a written instrument executed by the employee subject to the amount limits set forth in section 4(c) of this chapter.
(8) Contributions, assessments, or dues of the employee to a hospital service or a surgical or medical expense plan or to an employees' association, trust, or plan existing for the purpose of paying pensions or other benefits to said employee or to others designated by the employee.
(9) Payment to any credit union, nonprofit organizations, or associations of employees of such employer organized under any law of this state or of the United States.
(10) Payment to any person or organization regulated under the Uniform Consumer Credit Code (IC 24-4.5) for deposit or credit to the employee's account by electronic transfer or as otherwise designated by the employee.
(11) Premiums on policies of insurance and annuities purchased by the employee on the employee's life.
(12) The purchase price of shares or fractional interest in shares in one (1) or more mutual funds.
(13) A judgment owed by the employee if the payment:
(A) is made in accordance with an agreement between the employee and the creditor; and
(B) is not a garnishment under IC 34-25-3.
I.C. § 22-2-6-2(b).
For all these reasons, the Court finds that the weekly deduction of $150 from the Plaintiff's paycheck to pay for rent was an improper assignment of wages. The Plaintiff asserts that because the wage assignment was improper, the Plaintiff was not paid "the amount due" to her, as required under the Wage Payment Statute. Accordingly, the penalty provision of the statute, § 22-2-5-2, is triggered and requires the Defendant to pay liquidated damages, costs, and attorney's fees. The Plaintiff submits that there is no good faith exception to the Wage Payment Statute and any such exception would run afoul of Indiana's public policy "favoring prompt payment of wages owed to employees." (Pf.'s Reply at 2-3) (citing Bresland, 782 N.E.2d at 1071)). The Defendant does not address the Wage Payment Statute.
Indiana Code § 22-2-5 is commonly referred to as the Wage Payment Statute. It governs both the frequency and amount an employer must pay its employees. I.C. § 22-2-5-1(a) ("Every . . . corporation . . . shall pay each employee at least semimonthly or biweekly, if requested, the amount due the employee. . . ."); St. Vincent Hosp. and Health Care Ctr., Inc. v. Steele, 766 N.E.2d 699, 703-04 (Ind. 2002) (resolving appellate court split regarding whether Wage Payment Statute governs amount, as well as frequency, of pay). The statute contains a penalty provision for employers who fail to make wage payments in accordance with the statute. I.C. § 22-2-5-2 (allowing for liquidated damages not to exceed double the amount of wages due, costs, and attorney's fees); Valadez v. R.T. Enters., Inc., 647 N.E.2d 331, 333 (Ind.Ct.App. 1995) (provision is punitive in nature and its purpose is to ensure that employees are promptly paid).
The Court finds that the circumstances of this case do not implicate the punitive provision of the statute. In St. Vincent Hospital, the Indiana Supreme Court expressed no opinion regarding whether there is a "good faith" exception under the Wage Payment Statute. 766 N.E.2d at 701 n. 2. Recently, the Indiana Court of Appeals declined to apply the Wage Payment Statute to a "good faith" dispute regarding wages. David A. Ryker Painting Co. v. Nunamker, 818 N.E.2d 989, 992 (Ind.Ct.App. 2004). The Court reasoned that the purpose of the Wage Payment Statute was to punish employers for "converting" their employees's services by stealing their wages. Id. (citing Valadez v. R.T. Enters., Inc., 647 N.E.2d 331, 333 (Ind.Ct.App. 1995)). Thus, it should not be applied where there is merely a dispute as to the amount owned, which is not tantamount to a conversion. Id.
Civil conversion has been defined as exerting dominion over another's property to the exclusion and in defiance of the owner's right, under an inconsistent claim of title. In a good faith dispute, one does not act in defiance of the owner's right, but rather asserts one's own claim of ownership.Id. at 992 n. 1 (citations omitted)."There is no need to punish an employer that genuinely believes that it has done the right thing in the frequency and amount of compensation it gives its employees." Id. at 992.
Although Nunamaker involved a good faith dispute as to wages, which differs from the facts presented here, the case highlights that the Wage Payment Statute, and its penalty provision, is not applicable in all instances in which the employer did not pay the employee all that she was owed. 818 N.E.2d at 992. Rather, the circumstances of the employer's failure are relevant. Here, there is no evidence that Dial-X believed that it was doing anything other than making it convenient for the Plaintiff to pay her rent. This case is not like Valdez, where the employer wrongfully withheld compensation from the employee after repeated demands for payment. See Nunamaker, 818 N.E.2d at 992 (comparing Valadez in this way). Indeed, the Plaintiff does not even dispute that she owed Dial-X the money it deducted. If a good faith dispute over property (i.e., money) does not trigger the statute, Nunamaker, 818 N.E.2d at 992, n. 1, it stands to reason that when there is no dispute, there is also no conversion and no justification to penalize the employer.
Justice Boehm, concurring with the majority in St. Vincent Hospital, observed that the penalty provision was understandable as applied to the "vast majority of workers who are dependent on their paychecks for their day-to-day expenses. . . . A statute providing one party with treble damages and attorney's fees is a very substantial deterrent to an employer's playing fast and loose with wage obligations." 766 N.E.2d at 706. In this case, the deduction did not detract from the Plaintiff's ability to pay day-to-day expenses, but actually enhanced it. The deduction was applied to her rent payment for the house where she lived. This does not represent a case where the employer played fast and loose with wage obligations, such that a deterrent is necessary.
The Wage Payment Statute does not apply to this case and the Plaintiff is entitled to neither treble damages nor attorney's fees. However, the rent deduction was an illegal wage assignment under Indiana Code § 22-2-6-1 et seq. Additional briefs, or a hearing, will be necessary to determine damages. Final judgment will be withheld until after a determination of damages.
CONCLUSION
For the foregoing reasons, the Plaintiff's Motion for Partial Summary Judgment [DE 18] is GRANTED, as to liability. The Defendant's Motion for Summary Judgment [DE 14] is DENIED as to the wage assignment claim.
SO ORDERED.