Repudiation excuses exhaustion of remedies

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“Had the contract been signed on its effective start date, the employees would have received their raises. … People who worked in the bargaining unit during the term of the agreement are entitled to be paid according to its terms.” Judge Thomas Cane Wisconsin Court of Appeals

When a municipal employer repudiated a collective bargaining agreement (CBA) by refusing to process a grievance, the employees are not required to exhaust contractual remedies before filing suit, the Wisconsin Court of Appeals held on June 3.

The court further held that, in such a case, the statute of limitations begins to run when the municipality notified the union representative that it would not answer the grievance, and that Chapter 109 applies.

Finally, the court held that a retroactive pay increase in a CBA applies to employees who are no longer employed.

Brenda Beaudette, Teresa Col’on, and Mitchell Lang all worked for the Eau Claire County Sheriff’s Department until February or June 1998. They were members of the municipal employees’ union and worked under the terms of CBAs.

After one of these agreements expired on Dec. 31, 1995, its successor was not negotiated until July 1998. The new agreement provided for increased wages and made the increases retroactive. All employees still employed received retroactive wages.

However, on Aug. 5, 1998, the county personnel committee denied retroactive pay to employees who had stopped working for the department during the negotiations. On Sept. 25, the union filed a grievance requesting back pay on the employees’ behalf.

On both Sept. 30 and Oct. 7, the department sent the union correspondence stating that it believed the employees lacked standing to grieve. The union notified the affected employees of the department’s stance on Oct. 10 and did not take any further action on the employees’ behalf.

On July 10, 2000, the employees filed a notice of claim pursuant to sec. 893.80. On Dec. 29, 2000, they commenced a Chapter 109 wage claim. Both parties moved for summary judgment.

Eau Claire County Circuit Court Judge Eric J. Wahl awarded the back pay, concluding the employees did not have to exhaust their remedies under the CBA, because the department had refused to allow their grievance to proceed. The court also held that the two-year statute of limitations did not begin to run until Oct. 10, 1998, when the union representative informed the employees their grievance had been denied.

The court further determined the statute of limitations was tolled by 120 days because the employees filed a notice of claim under sec. 893.80.

The court also awarded $7,872 in back pay. Finally, the court determined that Chapter 109 applied to the employees’ claim, although it refused to award penalties allowed under that chapter and reduced the employees’ claimed attorney fees from $14,087 to $9,500, and awarded costs of $2,312.

Both parties appealed, but the court of appeals affirmed in a decision by Judge Thomas Cane.

Exhaustion of Remedies

The court first held that the employees were not required to exhaust their contractual remedies before filing suit in court.

Under the parties’ CBA, grievances involving the interpretation or application of the CBA must be submitted to the personnel director, who then presents the dispute to the personnel committee. After the committee has made a decision, either party may take the grievance to arbitration by the Wisconsin Employment Relations Commission.

However, when the employer’s conduct amounts to a repudiation of the collective bargaining agreement, the employee may proceed directly against the employer in court. Vaca v. Sipes, 386 U.S. 171, 185 (1967).

Here, the evidence of repudiation was the correspondence with the union, stating, "The county maintains that since neither the union nor the former employees have standing under Article 5 to grieve this matter, the county will not answer the grievance and will not process any further."

Also, in the Oct. 7 letter, the director informed the union representative the matter would not be placed on the next personnel meeting agenda.

The court rejected the department’s argument that the statements were merely part of the "give and take of day to day labor relations," and held that the letters amounted to repudiation.

The court noted that the CBA requires the personnel director to give grievances to the personnel committee to resolve. By refusing to do so, the director frustrated the grievance.

The court stated, "If, for instance, the department had submitted the claim to the personnel committee, and the committee, acting according to the grievance procedures, decided that the employees lacked standing, the department would not have repudiated the contract. Instead, the department refused to follow the agreed upon procedures and as a result, the employees may bypass the contractual remedies."

The court noted that the CBA also provides that a party may take a grievance to arbitration within 30 days of the personnel committee’s decision.

Here, however, there was no such decision, because the department frustrated the attempt.

Statute of Limitations

The court next held that the claim was not barred by the statute of limitations.

Section 893.44(1) requires that any action to recover unpaid wages be commenced within two years of the claim’s accrual. Because the employees filed a notice of claim under sec. 893.80(1)(a), the statute is tolled for an additional 120 days pursuant to Colby v. Columbia County, 202 Wis.2d 342, 357, 550 N.W.2d 124 (1996).

The court rejected the proposed dates for accrual suggested by both parties. The department argued the claim accrued on Aug. 8, 1998, the day the personnel committee denied retroactive pay to former employees.

The employees argued the claim accrued on either Sept. 25, 1998, the date they initiated their grievance, or Oct. 10, 1998, the date the union representative notified the employees that their grievance had been rejected.

The employees argued, and the circuit court had agreed, that the claim accrued on Oct. 10, because until then, they did not have knowledge of the refusal to bring suit.

Instead, the court of appeals set the accrual date at Sept. 30, 1998, the date the department notified the union representative of its position that the employees lacked standing to grieve and that it would not answer the grievance or process it any further.

The court reasoned, "This was the date the department repudiated the contractual remedies. Before this date, the department would have been able to defend the claim on the basis of the employees’ failure to exhaust the agreement’s remedies, and a circuit court would have been unable to hear the case."

Accordingly, the court
found the suit was timely filed.

Chapter 109

The court then held that the provisions of Chapter 109 were applicable to the action. The chapter permits employees to bring claims for unpaid wages and collect penalties under certain circumstances.

The department argued that the chapter did not apply, because it is only an enforcement mechanism that should not be used to resolve the underlying dispute of whether wages are owed under a CBA.

Rejecting the argument, the court concluded, "We would agree with the department, at least in the collective bargaining context, if the department had not repudiated the contractual remedies. If, for instance, the dispute had proceeded to arbitration, the employees had prevailed, and the department refused to pay the back pay, then Wis. Stat. ch. 109 would be an enforcement mechanism only. Because the department repudiated the contractual remedies, allowing the employees to proceed directly to court, we conclude that ch. 109 is an appropriate vehicle to resolve the underlying dispute whether the wages were owed."

The court added, "The repudiation allowed the employees to bypass the contractual remedies and proceed directly to court. Thus, they were entitled to resolve any dispute whether they would have been entitled to back pay in court. It would be a waste of judicial resources to require the employees to bring an action to interpret the contract and then, if they prevailed, a separate wage claim. When an employer repudiates the contractual remedies of a collective bargaining agreement, employees are allowed to proceed under ch. 109 if they are seeking back pay."

Back Pay

Finally, the court turned to whether the employees are entitled to back pay, and held that they are.

Finding the issue to be one of first impression in Wisconsin, the court looked to an Oregon case, and adopted its reasoning.

In Springer v. Powder Power Tool Corp., 348 P.2d 1112, 1116 (Or.1960), the court faced a nearly identical situation, and held as follows: "The agreement in this case states ‘This agreement shall become effective on April 1, 1953 and shall remain in full force and effect for a period of one (1) year.’ It specifies that wage rates ‘shall be effective during the term of this agreement.’ We believe this language is clear and free from ambiguity.

Since the parties have agreed that the contract should be effective as of April 1, 1953, we are bound to construe it as if it were made on that date. If it had been entered into on April 1, 1953, plaintiff’s assignors without question would have been entitled to pay at the new rate for they were then employees of the company. By providing that the contract should be retroactive to that date, the same result was accomplished and employees for whose benefit this action is brought are entitled to the retroactive pay."

Applying Springer to the case, the court concluded "It is undisputed the employees worked for the department during this time period. Had the contract been signed on its effective start date, the employees would have received their raises. We do not discern any ambiguity in the contract because of its failure to address retroactivity. Instead, the contract is unambiguous. People who worked in the bargaining unit during the term of the agreement are entitled to be paid according to its terms."

Attorney Fees

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Finally, the court affirmed the circuit court’s award of only $9,500, of the $14,000 requested.

The court of appeals noted, "In making its decision, the [circuit] court first noted that its decision was difficult because of the amount of requested fees, $14,087, was greater than the amount in controversy, $7,031.24, and that courts in general have a hard time determining what is reasonable in terms of the time expended on wage claims. Next, the court pointed out that the employees’ three attorneys spent 112 hours o
n the case, much of which was devoted to research and intraoffice conferences. The court then stated, ‘When all is said and done, there really is not much law to research on the subject.’ The court also noted there was a lack of case law regarding attorney fees in wage claim cases. Next, the court weighed the fact an attorney fees award was appropriate in order to give attorneys incentive to accept wage claims with the fact that it would be unfair to penalize the employer in this case because it thought it had a valid defense to the employees’ claims. The court then listed the twelve factors found in 42 U.S.C. sec. 1988 used to assess the reasonableness of attorney fees. Finally, the court added, ‘After considerable reflection; weighing the above factors; and bearing in mind that this is a straight forward case that did not require extensive discovery; this court believes the plaintiffs should recover attorney’s fees of $9,500.00 plus out of pocket costs of $2,312.18.’"

The court of appeals found that the holding demonstrated that the circuit court did not erroneously exercise its discretion and affirmed.

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David Ziemer can be reached by email.