Court: Louisiana Court of Appeal; August 10, 2011; Louisiana; State Appellate Court
Two employees, Johnny Goulas and Vernon Wilkins, filed a claim for unpaid wages against their employer, B. B Oilfield Services, Inc., under Louisiana wage statutes La.R.S. 23:631 and La. R.S. 23:632. The employer countered with an exception claiming the employees' wage claims were novated—one through a written agreement and the other through an oral agreement. The trial court agreed, determining that both employees had entered into novations that replaced the unpaid wage claims with a different type of debt, which could not be pursued via summary proceedings. Consequently, the court granted the employer's exception and dismissed the employees' claims. The employees are appealing this decision.
Goulas and Wilkins, who earned a monthly salary plus commissions, worked for B. B from January 2005 until their resignations in 2009. Wilkins resigned first, and B. B claimed he consented to receive his salary and benefits instead of outstanding commissions, which he disputes, asserting he continued working. Goulas's resignation was later, and he entered into an agreement for his commissions to be paid in installments, but B. B failed to fulfill these payments after the first installment and a property transfer. After filing their petition for unpaid wages in February 2010, B. B's exception was heard alongside the merits of their claims, leading to the trial court's ruling on May 24, 2010, which the employees are now challenging.
Goulas and Wilkins present five assignments of error regarding the trial court's decisions. Key points include:
1. The trial court incorrectly granted B. B Oilfield's exception of unauthorized use of summary proceedings, dismissing their petition for unpaid commissions, penalty wages, and attorney fees. Summary proceedings are authorized for wage claims, and commissions qualify as wages under Louisiana law, making Goulas and Wilkins entitled to this legal remedy.
2. The trial court's ruling of novation contracts that extinguished B. B's obligation to pay commissions is moot since the court's earlier error regarding summary proceedings invalidates the basis for this ruling.
3. The denial of their petition instead of allowing for amendments to cure deficiencies is also moot due to the determination that their case is properly addressed through summary proceedings.
4. The court did not rule on whether the filing of suit constituted a demand for wages under Louisiana law, making this assignment unnecessary to address since the trial court's findings did not clarify whether proper demand was made by Goulas and Wilkins.
In conclusion, the court reverses the trial court's decision on the first assignment of error and finds the subsequent assignments moot or unnecessary for review.
Goulas and Wilkins argue that the trial court erred by not awarding commissions as wages, penalty wages, and attorney fees. The appellate court finds merit in this claim, noting that the trial court's failure to address these issues stemmed from incorrectly granting B. B’s exception regarding the unauthorized use of summary proceedings. Under La.Code Civ. P. art. 2164, the appellate court has the authority to render a just and proper judgment based on the appeal record. Citing Gonzales v. Xerox Corp., the court emphasizes that appellate courts can review both factual and legal matters, a practice supported by judicial economy to avoid delays associated with remanding cases for new trials.
In the merits of Goulas' case, it is undisputed that B. B admitted to owing Goulas earned commissions upon his resignation. A post-resignation agreement was signed, stipulating six installments of $10,127.79, of which only the first was paid; B. B also acknowledged a remaining debt of $40,511.16 for the final four payments. B. B contends that if Goulas' action were converted to ordinary proceedings, they would seek a set-off based on a pending lawsuit against Goulas. However, Goulas is entitled to summary proceedings under La.R.S. 28:681, claiming unpaid wages, penalty wages, and attorney fees as per La.R.S. 23:631 and La.R.S. 23:632. La.R.S. 23:631(A)(1)(b) mandates that upon an employee's resignation, the employer must pay all due amounts by the next regular payday or within fifteen days of resignation, whichever comes first.
Louisiana Revised Statutes 23:632 imposes liability on employers who fail to comply with wage payment requirements. Employers must pay either ninety days' wages or full wages from the date of the employee's demand until payment, whichever is less. Reasonable attorney fees are also recoverable if an employee files a well-founded suit after three days from the initial demand following termination or resignation.
In the case of Goulas vs. B. B, it is established that B. B owes Goulas wages amounting to $40,511.16 in unpaid commissions. Goulas has satisfied the criteria for penalty wages under La.R.S. 23:632, as B. B has acknowledged the debt, Goulas made a proper demand for payment, and B. B failed to pay. Although the statute suggests that penalty wages are mandatory, the Louisiana Supreme Court has interpreted it as a penal statute that can yield to equitable defenses under certain circumstances.
B. B claims a set-off for unpaid commissions as an equitable defense. However, this claim is unsupported by evidence, as the testimony provided was vague and did not substantiate any claim against Goulas. The court emphasizes that equitable defenses depend on the specifics of each case and must be grounded in solid evidence. Therefore, B. B's assertion of a set-off lacks merit, and the court can only rule based on the record presented, which does not indicate any valid claim for set-off.
Goulas cannot be denied penalty wages due to a potential set-off with B. B. The court finds B. B's claim of an equitable defense based on a post-resignation contract with Goulas to be unfounded. According to Louisiana Civil Code Article 1879, novation requires a clear and unequivocal intention to extinguish an existing obligation through a new one, which cannot be presumed. Novation occurs if an agreement substitutes a new performance or cause for the original obligation, and if any substantial part of the original performance remains, novation does not occur. The burden of proof lies with the party asserting novation. The trial court erroneously concluded that the post-resignation agreement constituted a novation. The agreement included a clear accounting of what B. B owed Goulas and specific payment terms but lacked any indication of Goulas' intent to extinguish B. B's debt under the employment contract or create a new debt. Instead, it merely modified the payment terms of the existing debt.
Goulas is to be compensated through installments for his commissions, similar to his previous employment terms. B. B owes Goulas significant amounts under the existing performance obligations, indicating no novation has occurred. The post-resignation agreement merely modifies the original obligation without extinguishing it, contradicting B. B's claim that the agreement signifies a good-faith novation of Goulas's claims under La.R.S. 23:631 and La.R.S. 23:632. As a sophisticated entity, B. B should have recognized that the agreement does not absolve it from its payment obligations to Goulas.
Subsequently, the court required supplemental briefs regarding La.Civ. Code art. 2030 and the case Henderson v. Kentwood Spring Water, Inc. This was prompted by the absence of discussion on whether employers can contractually evade duties under La.R.S. 23:631 without incurring penalties. La.Civ. Code art. 2030 states that contracts violating public order are absolutely null and cannot be confirmed, with such nullity being raised by any party or the court itself.
In Henderson, the court deemed an agreement between employer and employee that postponed a final paycheck as invalid, reinforcing that personal rights cannot be waived if they contravene public interest laws. La.R.S. 23:631 is categorized as such a law, rendering agreements that attempt to bypass it void. The current agreement with B. B is seen as undermining the legislative intent behind La.R.S. 23:631, thus invalidating any equitable defense based on it.
B. B's arguments distinguishing Henderson, based on the timing of contract execution and the disadvantage of the parties, were deemed unconvincing. The court asserted that the timing of a null contract does not alter its validity, and the nature of the agreements with Goulas and Wilkins also contravened public policy, aimed at protecting public interest as articulated in La.R.S. 23:681.
The trial court's finding of novation involving B. B. is deemed invalid, as the agreements made post-resignation violate La.R.S. 23:631, reflecting B. B.'s attempt to evade its statutory responsibilities. Testimony from Ricky James Poche, a former president of B. B., reveals that Goulas was pressured to accept his commissions over six months instead of in full, indicating B. B.'s leverage over him. The court aligns its decision with precedent, concluding that the agreements are null and against public policy, thus invalidating the claim of novation. B. B.’s argument for an equitable defense based on reliance on counsel is rejected, as it assumes the validity of the post-resignation agreement, which is not recognized. Consequently, Goulas is entitled to recover penalty wages amounting to $40,909.09 for unpaid wages. Furthermore, B. B.’s claim to be exempt from paying attorney fees is unfounded, as courts mandate such fees under La.R.S. 23:632 for successful wage recovery suits, irrespective of any asserted equitable defenses.
Goulas successfully filed a lawsuit for unpaid wages, leading to an award of $10,000 in attorney fees for trial work and an additional $5,000 for appeal-related work, in accordance with La.R.S. 23:632. It is established that when attorney fees are awarded at the trial level, additional fees for appellate work are appropriate to maintain consistency with the trial judgment, as illustrated in the case of Wilczewski v. Brookshire Grocery Store.
In a separate case involving Wilkins, there is a dispute regarding the nature of wages and benefits he received after resigning from B. B. Wilkins argues these were compensation for continued employment, while B. B. contends they were payments for commissions owed under an oral agreement. The trial court determined that the payments were indeed for commissions rather than employment compensation, a finding Wilkins has appealed. The standard for reviewing such factual determinations is the "manifest error or clearly wrong" standard, as established in Rosell v. ESCO. Testimony from Poche indicated that Wilkins had proposed to stay on payroll for a transition period to cover health insurance while accepting salary in lieu of commissions, with the understanding that he would retain a vehicle as part of this arrangement.
Poche's testimony, supported by Mark Comeaux, the former CFO of B. B, reveals that there were discussions regarding the terms of Mr. Wilkins' departure. Comeaux indicated that Wilkins was to receive commissions due as of December 31, 2008, but instead requested to receive his salary and medical benefits from January 1 to March 31, 2009. Consequently, Comeaux did not accrue commissions payable to Wilkins, which led to the trial court concluding that the payments made during this period were commissions rather than wages for work done. The court found no error in this interpretation, as it allowed for two reasonable views of the evidence.
B. B's argument that these payments satisfied its obligations to Wilkins was deemed incorrect, but it was entitled to a set-off for the amount paid during that time. Wilkins is thus awarded his outstanding commissions after deducting what B. B paid him. Regarding penalty wages under La.R.S. 28:682, Wilkins met all criteria: wages were owed, he made a demand for payment, and B. B failed to pay. While B. B claimed an equitable defense of novation, the court found the situations of Wilkins and another similar case, Goulas, differed significantly. Unlike in Goulas, both parties in Wilkins' case appeared to believe they entered into a novation regarding the outstanding commissions.
B. B acted in good faith and complied with an invalid agreement, resulting in Wilkins receiving benefits, including health insurance and salary from January to March 2009. Wilkins is awarded all outstanding commissions as wages and attorney fees for trial and appellate work, totaling $10,000 for trial and $5,000 for appeal. The court denies Wilkins penalty wages, stating that while penalty wages typically deter misconduct, B. B's actions stemmed from a mistaken belief about the agreement. The refusal to award penalty wages serves greater justice in this unique case. Additionally, B. B's argument against paying attorney fees based on equitable defenses is rejected, as attorney fees are mandatory under La.R.S. 23:632 for a well-founded wage suit. The court found the trial court erred in granting B. B's exception of unauthorized use of a summary proceeding and in determining novation occurred, as such contracts violate public policy. The court reverses the trial court’s finding on novation and awards John Goulas $40,511.16 in unpaid wages and $40,909.09 in penalty wages, while Vernon Wilkins is entitled to outstanding commissions, offset by the amounts already paid to him.
Vernon Wilkins' request for penalty wages is denied based on the trial court's findings, which indicated that both B. B. and Wilkins believed they had entered into a legal novation regarding Wilkins' outstanding commissions. The court awarded John Goulas and Vernon Wilkins $10,000 each for attorney fees at the trial level under La.R.S. 23:632 and $5,000 each for the appeal. The judgment is affirmed in part, reversed in part, and rendered accordingly. Judge Ezell, Judge Painter, and Judge Genovese concur with the result for reasons assigned, while Judge Gremillion concurs in part and dissents in part, providing written reasons. Judge Genovese emphasizes that the reliance on the Henderson v. Kentwood Spring Water, Inc. case is inappropriate because the circumstances differ significantly; unlike in Henderson, neither Goulas nor Wilkins was compelled to waive any rights under La.R.S. 23:631. Louisiana Revised Statutes 23:631(B) allows employees to file wage claims, with Louisiana Code of Civil Procedure Article 2592 permitting summary proceedings. The calculation of Goulas' wage involves dividing his monthly salary by the average number of workdays to establish a daily wage rate, which is then multiplied by ninety as per La.R.S. 23:632.
