Appeal from Circuit Court of Vermilion County. No. 00L14. Honorable Craig H. DeArmond, Judge Presiding.
The opinion of the court was delivered by: Justice Appleton
Defendants, Kowa Printing Corporation (Kowa Printing), Thomas W. Kowa, and Huston-Patterson Corporation (Huston-Patterson), appeal the trial court's judgment awarding plaintiffs vacation and severance pay. Plaintiffs are former union employees of Kowa Printing. Defendants argue plaintiffs' claims are preempted by federal law due to the existence of a collective-bargaining agreement and that the provisions of federal law require the employees to exhaust all grievance procedures before filing suit. In the alternative, defendants Kowa and Huston-Patterson claim they are not "employers" within the meaning of the Illinois Wage Payment and Collection Act (Wage Act) (820 ILCS 115/1 through 15 (West 2000)). Kowa Printing claims it did not wilfully violate the Wage Act, and all defendants claim the trial court erred in awarding plaintiffs prejudgment interest and attorney fees. We affirm in part and reverse in part.
Robert Kowa owned and operated Huston-Patterson in Decatur, Illinois, and Kowa Printing in Danville, Illinois. Upon Robert Kowa's death in November 1991, his son, Thomas Kowa, purchased 100% of the shares of Kowa Printing and 97% of the shares of Huston-Patterson (the remaining 3% are owned by Kowa's brother, Steve, who is not individually involved in this appeal).
Since his purchases of the businesses, Kowa has been the sole officer and director of both Kowa Printing and Huston-Patterson. Kowa also owned 100% of the shares of Sygma Graphics Corporation (Sygma Graphics) in Ottawa, Illinois, and Kowa Graphics, Inc., in Champaign, Illinois. In February 1996, Kowa merged Kowa Graphics, Inc., and Kowa Printing and operated the merged companies out of Kowa Printing's facility in Danville. Kowa Printing, Huston-Patterson, and Sygma Graphics, all printing companies, were known under the servicemark The Kowa Group.
The three companies were distinct, separate entities, yet were intertwined for business purposes. For example, sales representatives for each company would market all three companies within The Kowa Group depending on the type of job desired by the customer. Each company performed different printing services.
Huston-Patterson provided management services, including payroll and accounting services, to Kowa Printing and Sygma Graphics under a written management-services agreement. According to Kowa, Huston-Patterson was also considered one of Kowa Printing's biggest customers.
Plaintiffs were all employees of Kowa Printing and were members of one of two union groups, Graphic Communications International Union Local No. 257-C (Local 257-C) and Graphic Communications International Union Local No. 171-B (Local 171-B). Each union had a collective-bargaining agreement with Kowa Printing.
In 1996, it was discovered that Kowa Printing's bookkeeper, an employee of Huston-Patterson, had embezzled over $500,000 from Kowa Printing since 1991. After several months of analyzing the status of the corporation, Kowa discovered that Kowa Printing was in dire financial straits. The company's 1996 tax return showed a loss of $2,267,072.
Kowa Printing's only secured creditor was BankIllinois. As of June 1997, Kowa Printing was in default on the bank's loans, but the bank had agreed in writing to temporarily delay foreclosure. Kowa located a buyer for Kowa Printing. He and the prospective buyer reached an agreement with regard to the sale. Kowa presented a proposal to the two employees' unions involved, but they rejected both that proposal and several modified proposals. Thereafter, the sale fell through.
BankIllinois foreclosed on the loans and seized all of the assets of Kowa Printing on April 16, 1998. Bank representatives arrived at Kowa Printing escorted by officers of the Danville police department, took possession of the facility, and sent the employees home. The closing did not directly affect the operation of Huston-Patterson or Sygma Graphics.
On December 30, 1998, the Illinois Department of Labor (Department), on behalf of plaintiffs, found Kowa Printing, Kowa, and Huston-Patterson liable for $5,274.70 unpaid wages. According to the Department, it had no jurisdiction to evaluate the employees' claims for vacation or severance pay because entitlement to those amounts was covered by the collective-bargaining agreements and thus fell within the jurisdiction of the federal court system pursuant to section 301 of the Labor Management Relations Act (LMRA) (29 U.S.C. §185 (1994)), also known as the Taft-Hartley Act.
On January 23, 2000, plaintiffs, 35 former employees of Kowa Printing, filed a complaint, alleging they were due unpaid vacation and severance pay under their respective collective-bargaining agreements.
On February 25, 2000, defendants filed a notice that they were removing the lawsuit to federal court, claiming plaintiffs' complaint was governed by the LMRA and was thus under the jurisdiction of the United States District Court. On August 9, 2000, the federal court remanded the suit to state court, finding the LMRA did not preempt plaintiffs' claims.
In March 2002, the parties filed cross-motions for summary judgment. Both were denied. The trial court conducted a bench trial on April 29, 2002. Because we summarize the facts and other evidence throughout this decision, a detailed summary of the evidence presented at trial is not necessary. However, it is important to note that at the trial, the parties presented the court with a stipulation of the amounts due each plaintiff.
Approximately one year after the trial, on April 21, 2003, the court entered its decision, finding defendants Kowa and Huston-Patterson "employers" within the meaning of the Wage Act and liable, along with Kowa Printing, to all plaintiffs for the amounts stipulated.
On April 30, 2003, plaintiffs moved for an award of attorney fees and prejudgment interest. On September 29, 2003, the trial court entered the final judgment, incorporating its findings from its April 21, 2003, decision and adding prejudgment interest from April 21, 2003, to September 29, 2003. The judgment also awarded plaintiffs David L. Kelley and Bruce M. Overstreet $28,289.53 in attorney fees pursuant to section 1 of the Attorneys Fees in Wage Actions Act (Attorney Fees Act) (705 ILCS 225/1 (West 2000)) because the judgment amount awarded to those plaintiffs exceeded their presuit demand. This appeal followed.
Because we decide questions of law--whether the state court had subject-matter jurisdiction, whether defendants were "employers" within the meaning of the Wage Act, whether defendants wilfully violated the Wage Act, and whether the awards of prejudgment interest and attorney fees were proper, our review is de novo. Metzger v. DaRosa, 209 Ill. 2d 30, 34, 805 N.E.2d 1165, 1167 (2004).
B. Preemption by Federal Law
Defendants appeal the trial court's judgment, arguing that it erred in applying the Wage Act and by not finding that the LMRA preempted plaintiffs' suit. Defendants rely on National Metalcrafters v. McNeil, 784 F.2d 817 (7th Cir. 1986), for their argument that the existence of the collective-bargaining agreements between plaintiffs and their employer placed disputes between the two within the purview of the LMRA, not state law.
Plaintiffs, on the other hand, rely, inter alia, on Livadas v. Bradshaw, 512 U.S. 107, 123, 129 L.Ed. 2d 93, 110, 114 S.Ct. 2068, 2078 (1994), Lingle v. Norge Division of Magic Chef, Inc., 486 U.S. 399, 409-10, 100 L.Ed. 2d 410, 421, 108 S.Ct. 1877, 1883 (1988), and Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 211, 85 L.Ed. 2d 206, 215, 105 S.Ct. 1904, 1911 (1985), which held an employee's claim is not always preempted by federal law when there is a collective-bargaining agreement. Each case held that federal preemption occurs only when the terms of the collective-bargaining agreements are at issue and must be interpreted. Livadas, 512 U.S. at 125, 129 L.Ed. 2d at 110, 114 S.Ct. at 2079; Lingle, 486 U.S. at 411, 100 L.Ed. 2d at 423, 108 S.Ct. at 1884; Lueck, 471 U.S. at 218-19, 85 L.Ed. 2d at 220, 105 S.Ct. at 1915. Plaintiffs maintain that defendants' liability is a statutory question rather than a matter of contract interpretation.
Plaintiffs' claim was brought pursuant to section 5 of the Wage Act (820 ILCS 115/5 (West 2000)), which provides that "[e]very employer shall pay the final compensation of separated employees in full, at the time of separation, if possible, but in no case later than the next regularly scheduled payday." "Final compensation" is defined as "wages, salaries, *** and the monetary equivalent of earned vacation *** and any other compensation owed the employee by the employer pursuant to an employment contract or agreement between the [two] parties." 820 ILCS 115/2 (West 2000).
We agree with plaintiffs and hold that under the specific facts of this case, their claim under the Wage Act was a proper vehicle for their requested relief and federal preemption was not required. Accordingly, we find the trial court had subject-matter jurisdiction over plaintiffs' claims.
National Metalcrafters, Livadas, Lueck, and Lingle make it clear that preemption occurs when an interpretation of the collective-bargaining agreement is necessary. National Metalcrafters, 784 F.2d at 824; Livadas, 512 U.S. at 125, 129 L.Ed. 2d at 110, 114 S.Ct. at 2079; Lingle, 486 U.S. at 411, 100 L.Ed. 2d at 423, 108 S.Ct. at 1884; Lueck, 471 U.S. at 218-19, 85 L.Ed. 2d at 220, 105 S.Ct. at 1915. The parties must engage in a good-faith dispute or debate over the meaning of terms within the contract in order for preemption to be triggered. The mere existence of a contract is not enough for preemption. Indeed, the National Metalcrafters court stated:
"Section 301 expresses a strongly held policy in favor of applying uniform federal principles to the interpretation of collective[-] bargaining contracts. This policy reflects the national commitment to limiting state regulation of labor relations that grows out of the history of hostility in some states to ...