* Margreta Kilgore v. Shriners Hospitals for Children

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FILED
SEPT. 29,2015
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
MARGRETA KILGORE, a single woman, 	) 	No. 32277-7-111
)
Respondent, 	)
)
v. 	)
)
SHRINERS HOSPITALS FOR 	) 	PUBLISHED OPINION
CHILDREN, a Colorado corporation, 	)
)
Appellant. 	)
BROWN, A.C.J. - 	Margreta Kilgore sued Shriners Hospitals for Children
(Shriners) in September 2010 for wrongful termination after Shriners discharged her in
July 2010. 	Shriners counterclaimed in December 2011, partly asserting Ms. Kilgore
was "liable to Shriners for all damages, and economic loss" caused by her
underpayment of Shriners' employees when Ms. Kilgore was its director of fiscal
services. Clerk's Papers (CP) at 13. The trial court dismissed Shriners' counterclaim at
summary judgment, ruling it had no cognizable legal claim and the action was barred by
the one-year statute of limitations for contribution under RCW 4.22.050. 	In this
interlocutory appeal, Shriners contends its counterclaim is properly characterized as a
tenable implied contractual indemnity claim between employers and employees, not a
contribution claim. We affirm, deciding Shriners has no cognizable legal claim under
federal or state law without reaching the statute of limitations issues.
 	 	 	 	 	 	 	 	 	 	 	 	 	

No. 32277-7-111
Kilgore v. Shriners Hasps. for Children
FACTS
Ms. Kilgore, as the director of fiscal services at Shriners, was responsible for
administering its payroll practices. 	Shriners' policy stated hourly employees had to
clock in/out within seven minutes of the scheduled start/end of their shifts unless
approved by a manager. Administering this policy, Ms. Kilgore edited employee
timecards back to within the seven minute window absent manager approval. 	Ms.
Kilgore and Shriners dispute if Shriners' management knew of Ms. Kilgore's actions.
In June 2010, on Shriners' ethics hotline, an employee anonymously alleged Ms.
Kilgore and another person falsified employee timecards. 	Following an investigation,
Shriners determined the timecard editing violated federal and state wage laws and
terminated Ms. Kilgore on July 24,2010. 	On November 18,2010, Shriners paid
$383,298.76 in back wages to its employees. 1 Ms. Kilgore sued Shriners for wrongful
termination on September 17, 2010. 	On December 29,2011, Shriners asserted a
counterclaim against Ms. Kilgore for damages suffered as a result of her actions.
In December 2013, the trial court dismissed Shriners' counterclaim on Ms.
Kilgore's motion for partial summary judgment. The court concluded (1) no "substantive
grounds" supported Shriners' counterclaim and (2) Shriners' counterclaim was one for
contribution and was barred by the one-year statute of limitations seen in RCW
4.22.050. 	CP at 451. 	Shriners moved for reconsideration, arguing the counterclaim
1 Shriners paid $171,115.00 for wages owed and $212,183.76 in damages plus
interest.
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No. 32277-7-111
Kilgore v. Shriners Hosps. for Children
was for indemnity, not contribution, and was subject to the three-year statute of
limitations seen in RCW 4.16.080. 	The court denied Shriners' motion, ruling:
1. There is no substantive legal basis for [Shriners'] Counterclaim
alleging that [Ms. Kilgore] is liable to [Shriners] for wage payments made
to Shriners' employees based on payroll timecard edits; therefore, there is
no cognizable legal claim that [Shriners] may bring against [Ms. Kilgore].
2. 	[Shriners'] claim against [Ms. Kilgore] for the wage payments
paid to Shriners employees is barred by the one-year statute of limitations
set forth in RCW 4.22.050.
CP at 454.
Urging the ruling involved a controlling question of law, Shriners received trial
court CR 54(b) certification for this appeal.2 This court granted discretionary review.
ANALYSIS
The issue is whether the trial court properly dismissed Shriners' counterclaim for
damages on summary judgment. 	Shriners contends the trial court incorrectly (1) found
Shriners had no cognizable legal claim and (2) characterized Shriners' counterclaim as
one for contribution and found Shriners' claim barred by the one-year statute of
limitations under RCW 4.22.050. 	Shriners argues its counterclaim is based on implied
contractual indemnity arising out of the employer-employee relationship and is thus
subject to the three-year statute of limitations of RCW 4.16.080(3).
We review questions of law and summary judgment rulings de novo. 	Lyons v.
u.s. Bank Nat. Ass'n, 181 Wn.2d 775, 783, 336 P.3d 1142 (2014). 	Our inquiry is the
same as the trial court. 	Id. All facts and inferences are interpreted in the light most
2 The proceedings below have been stayed pending the result of this appeal.
3 	t
II
 	 	 	 	 	 	 	 	 	 	 	 	 	

No. 32277-7-111
Kilgore v. Shriners Hosps. for Children
favorable to the nonmoving party, Shriners. 	Id. 	"Summary judgment is appropriate
only if the record demonstrates there is no genuine issue of material fact and the
moving party is entitled to judgment as a matter of law." Id.
Shriners correctly argues implied contractual indemnity survived the adoption of
the Tort Reform Act. 	See Central Wash. Refrigeration, Inc. v. Barbee, 133 Wn.2d 509,
513 n.3, 946 P~2d 760 (1997) (implied contractual indemnity rights survived RCW
4.22.040(3)'s abolition of common law indemnity between joint tortfeasors); Sabey v.
Howard Johnson & Co., 101 Wn. App. 575, 590-91, 5 P .3d 730 (2000) (clarifying that
RCW 4.22.040 abolished only the common law right of indemnity between joint
tortfeasors and only to the extent it replaced those rights with contribution rights); Toste
v. Durham & Bates Agencies, Inc., 116 Wn. App. 516, 520, 67 P.3d 506 (2003)
("Contractual indemnity and indemnity between non-joint tortfeasors survived the
adoption of RCW 4.22.040."). 	Even so, Shriners has no cognizable legal claim.
Shriners alleges Ms. Kilgore violated sections 207 and 216(b) of the Fair Labor
Standards Act of 1938 (FLSA), 29 U.S.C. §§ 201-219. 	29 U.S.C. § 216(b) provides
"[a]ny employer who violates the provisions of ... section 207 of this title shall be liable
to the employee or employees affected in the amount of ... their unpaid overtime
compensation, ... and in an additional equal amount as liquidated damages."
Additionally, Shriners alleges Ms. Kilgore violated Washington's Minimum Wage Act
(MWA), chapter 49.46 RCW. 	But Shriners has not presented, nor has our research
disclosed, any federal statutory or case law authority for maintaining an action in
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indemnity against Ms. Kilgore; rather, Shriners' argument rests entirely upon
Washington law.
In LeCompte v. Chrysler Credit Corporation, 780 F.2d 1260, 1264 (5th Cir. 1986),
the court held the district court properly dismissed the employer's indemnity claim
notwithstanding the employer's evidence that supervisory personnel regularly ignored
the employer's policy prohibiting unauthorized overtime. 	Initially, the court noted the
FLSA presently does not contain a cause of action for indemnity and has never
historically embraced such a cause of action. 	Id. 	The court explained that allowing a
claim for indemnity would frustrate Congress' purpose in enacting the FLSA because an
employer who believed any violation of the FLSA's overtime or minimum wage
provisions could be recovered from its employees would have a diminished incentive to
comply with the FLSA. 	Id.
Other federal appellate courts having considered the issue agree with the
LeCompte court's reasoning. See, e.g., Lyle v. Food Lion Inc., 954 F.2d 984, 987 (4th
Cir. 1992) (affirming dismissal of employer's counterclaim and third-party complaint for
indemnity against plaintiff-supervisor for plaintiff's FLSA claims). 	The Tenth Circuit
similarly held an employer's third-party complaint seeking indemnity from an employee
for alleged FLSA violations was preempted, stating indemnity actions were "not part of
the comprehensive statutory scheme set forth by Congress." Marlin v. Gingerbread
House, Inc., 977 F.2d 1405, 1408 (10th Cir. 1992); see also Herman v. RSR Sec.
Servs. Ltd., 172 F.3d 132, 144 (2d Cir. 1999) (holding no right of contribution or
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indemnification existed for employers found liable under the FLSA because the FLSA's
text makes no provision for it, employers are not members of the class for whose benefit
the FLSA was enacted, the FLSA has a comprehensive remedial scheme, and the
FLSA's history is silent on a right to contribution or indemnification).
Nonetheless, Shriners argues (1) Washington law recognizes a claim for implied
contractual indemnity and (2) Shriners has alleged sufficient facts to warrant submission
of its counterclaim to a jury. 	But Shriners again fails to present authority supporting its
position that Washington law recognizes employers' claims for indemnity under the
MWA. As mentioned, the cases cited by Shriners support its proposition that a claim for
implied contractual indemnity survives the Tort Reform Act. 	Shriners properly cites
case law holding an employer has a right to seek indemnity and/or contribution from
their employees when employees commit wrongful acts. 	See Glover v. Richardson &
Elmer Co., 64 Wash. 403, 409-10,116 P. 861 (1911); Gaffner v. Johnson, 39 Wash.
437,438-39, 81 P. 859 (1905). 	But none of the cited cases set out the elements of a
claim for implied contractual indemnity in the context of the MWA.
Arguments similar to Shriners have been rejected in other jurisdictions. The Fifth
Circuit rejected the application of state-law indemnity principles, reasoning creation of a
state-law based indemnity remedy on behalf of employers would not serve the purpose
of national minimum wage standards and would similarly diminish employer incentive to
comply with the FLSA. 	LeCompte, 780 F.2d at 1264 ("To engraft an indemnity action
upon this otherwise comprehensive federal statute would run afoul of the Supremacy
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Clause of the Constitution [and] would undermine employers' incentive to abide by the
[FLSA]."); see also Martin, 977 F.2d at 1408 (stating "[t]he conflict between the
purposes of federal law and a state cause of action require the latter to yield"); Herman,
172 F.3d at 144 (not allowing an indemnity or contribution claim under state law
because "the FLSA's remedial scheme is sufficiently comprehensive as to preempt
state law in this respect").
When construing the provisions of the MWA, courts "may consider interpretations
of comparable provisions of the [FLSA] as persuasive authority." Inniss v. Tandy Corp.,
141 Wn.2d 517,524,7 P.3d 807 (2000). 	Like the FLSA, the MWA embodies a public
policy to establish a minimum for employee compensation. 	Id. (citing RCW 49.46.005);
Drinkwitz v. Alliant Techsystems, Inc., 140 Wn.2d 291, 298, 996 P.2d 582 (2000) ("The
FLSA is intended to be a floor below which employers may not drop.") (internal
quotation marks omitted). 	Thus, as with the FLSA, the MWA's statutory goals would be
undermined by diminishing the employer's compliance incentives if an employer were
permitted to seek indemnity from its employees for statutory violations.3 Therefore,
Shriners does not have a cognizable legal claim under the FLSA or the MWA, and
summary judgment was appropriate. 	Because Shriners cannot maintain a cause of
3 The parties argue the applicability of RCW 49.52.050(2) and RCW 49.52.070.
While RCW 49.52.070 does provide for civil liability of an agent or vice principal of an
employer, it does so solely in actions brought by aggrieved employees. 	Nothing
suggests the legislature intended to permit an indemnification or contribution claim to be
brought by the employer against the agent or vice principal.
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. action against Ms. Kilgore under either the FLSA or the MWA and does not prevail, we
do not reach the statute of limitations issues or Shriners' RAP 14 attorney fees request.
Affirmed.
WE CONCUR:
Fearing, J.
8