Oregon Case Law Update: No Attorney Fees for Unlawful Withholding of Wages Where Defendant Acted in Good Faith
From the desk of John M. Kreutzer: Under Oregon law, the trial court or arbitrator may award attorney fees to an employee where the employer unlawfully withholds wages from the employee. But where the employer committed a purely technical violation of law by failing to obtain written authorization from its employee before deducting wages at the employee’s request to pay a traffic fine on behalf of the employee, should the court award attorney fees? Read on to learn more.
Claims Pointer: In this case arising out of a wage dispute, the Oregon Court of Appeals held that it was an abuse of discretion for the arbitrator to award attorney fees for the plaintiff’s unlawful withholding claim when the employer’s unlawful withholding was a purely technical violation, and every factor the arbitrator considered in determining whether to award attorney fees counseled against such an award. The case provides valuable insight into the process by which a court evaluates a discretionary award of attorney fees in an unlawful withholding claim.
Johnson v. O’Malley Brothers Corp., 285 Or App 804 (June 1, 2017)
Johnny Johnson (“Johnson”) worked for about two months as a commercial truck driver for O’Malley Brothers Corporation (“O’Malley”). After Johnson’s employment was terminated, he sent O’Malley a “Notice of Non-Payment of Wages,” which stated that Johnson was not certain of all claims that he had against O’Malley, and that the notice was intended to put O’Malley on notice of all claims, whether specified in the notice or not. The notice also indicated that O’Malley had not paid Johnson all of his earnings. Johnson’s attorney later sent O’Malley a separate “Notice of Wage Claim,” which did not provide any additional details but which enclosed and incorporated the first notice by reference. After reviewing Johnson’s personnel file and concluding that his wage and unlawful withholding claims were unfounded, O’Malley declined to pay Johnson’s demanded sums. Johnson then filed an action against O’Malley, which tracked his presuit notice of nonpayment and alleged damages of $4,924.95. O’Malley denied that Johnson was entitled to any unpaid wages or penalties and denied that Johnson had given O’Malley notice of his claims.
The case went to arbitration, where the arbitrator awarded Johnson $349.30 for unpaid wages. As to Johnson’s unlawful withholding claim, in which Johnson alleged that O’Malley had unlawfully deducted $126.95 from his wages, the arbitrator found that the deduction was made with the full knowledge and consent of Johnson to pay a traffic ticket on his behalf. The arbitrator concluded that the withholding was unlawful solely because O’Malley made the deduction without first obtaining Johnson’s written authorization, and then awarded statutory damages of $200.00. Finally, after finding against Johnson on all remaining claims and allegations, the arbitrator found that O’Malley had not acted willfully in failing to pay Johnson any of the amounts that it owed him. Instead, the arbitrator determined that O’Malley’s actions were either the result of unintentional miscalculation, innocent error, lack of information, or a good faith belief that wages were not due.
Johnson then sought $33,732.00 in attorney fees under two statutory provisions. The first statute, ORS 652.200(2), mandates attorney fees (with certain exceptions) for plaintiffs who prevail on wage claims. The other, ORS 652.615, authorizes attorney fees for the prevailing party in unlawful withholding claims. O’Malley filed written exceptions to Johnson’s request. The arbitrator, ruling that a full award of attorney fees was not reasonable, awarded $16,866.00, half of the requested fees. O’Malley then filed written exceptions with the trial court. The trial court held a hearing and issued an order upholding the arbitrator’s award after summarily concluding that the arbitrator had not abused his discretion and denying O’Malley’s exceptions. The trial court then entered a judgment awarding Johnson $349.30 on his unpaid wage claim, $200.00 in liquidated damages on his unlawful withholding claim, and $16,866.00 in attorney fees. O’Malley appealed.
On appeal, O’Malley argued that ORS 652.200(2) barred an award of attorney fees on the wage action because of insufficient notice. ORS 652.200(2) provides that an award for attorney fees is mandatory when a plaintiff prevails on a wage claim unless either (1) the employee willfully violated the employment contract, or (2) the court finds that the employee’s attorney unreasonably failed to give written notice of the wage claim to the employer before filing the action. O’Malley argued that under this statute, Johnson was not entitled to attorney fees because he failed to provide notice of the particular wage claim on which he ultimately prevailed. The Court of Appeals explained that the procedural posture of the case precluded this argument because the statute requires that the trial court find that the failure to give written notice was unreasonable. Because O’Malley failed to demonstrate that either the arbitrator or the trial court made such a finding, and because O’Malley had the burden of establishing that the exception was applicable, the Court of Appeals rejected the notice argument.
O’Malley also attacked the amount of attorney fees awarded for the unlawful withholding claim under ORS 652.615, contending that it was an abuse of discretion to award fees under that provision after the arbitrator expressly found that O’Malley deducted the small sum from Johnson’s paycheck at Johnson’s express request and solely for Johnson’s benefit. The Court of Appeals noted that this statute, unlike the previously discussed statute, authorizes but does not mandate an attorney fee award. In such a situation, the court must consider certain factors, including the conduct of the parties and the objective reasonableness of the claims and defenses asserted.
The Court of Appeals agreed with O’Malley, pointing out that all of the arbitrator’s findings reflected that O’Malley acted in good faith throughout and simply misunderstood the requirement that Johnson provide written authorization prior to any deduction from his paycheck. According to the court, awarding attorney fees for a purely technical violation would do virtually nothing to protect employees down the line. Moreover, none of the factors to be considered by the court actually weighed in favor of an attorney fee award. The Court of Appeals thus concluded that in light of the arbitrator’s findings and the lack of any apparent factors weighing in favor of an attorney fee award, it was an abuse of discretion to award attorney fees to Johnson for his unlawful withholding claim. The award of fees was reversed, and the case was remanded to the trial court to revise the fee award.
View full opinion at: http://www.publications.ojd.state.or.us/docs/A158261.pdf
Case updates are intended to inform our clients and others about legal matters of current interest. They are not intended as legal advice. Readers should not act upon the information contained in this article without seeking professional counsel.
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