Washington Federation of State Employees v. State

665 P.2d 1337, 99 Wash. 2d 878, 1983 Wash. LEXIS 1613

• Court: Washington Supreme Court
• Decided: June 23, 1983
• Docket: 48937-8
• Status: Published

Opinions

Williams, C.J.

This matter came before the court on an emergency motion for discretionary review and injunctive relief. Petitioner, Washington Federation of State Employees, Council 28, AFL-CIO (WFSE), asked this court to enjoin respondents from implementing their announced plans to delay the payment of salaries to state employees and officers, described in the pleadings as the "lagged payroll" plan. On August 24, 1982, then Chief Justice Robert F. Brachtenbach heard oral argument on the motion and, pursuant to RAP 8.3, granted the requested relief by enjoining implementation of the lagged payroll plan until the matter could be reviewed by the en banc court. Following oral argument to the en banc court on September 7, 1982, we filed an order dissolving the preliminary injunction and requiring that a trial be held in Thurston County Superior Court within 30 days of that date to resolve the remaining issues. With this opinion, we now set forth the reasons for that order.

On July 16, 1982, Governor John Spellman wrote a letter to all Washington state employees to inform them that effective August 31, 1982, the State would implement a new "lagged payroll" method of payment. This system was to change the traditional payday from the last working day of each month to approximately the 10th day of the following month. The Governor's stated purpose for shifting to a lagged payroll system was to permit the State of Washington to realize an anticipated $4 million profit by investing state employees' salaries for an additional 10-day period.¹ Also on July 16, 1982, Governor Spellman wrote to numerous financial institutions in Washington to inform them of the proposed lagged payroll plan. The letter asked for their cooperation in accommodating state employees during the transition to the lagged payroll system by adjusting payment due dates whenever possible.

Later that same day, July 16, 1982, petitioner WFSE commenced suit in Thurston County Superior Court requesting that the proposed lagged payroll system be declared unlawful and unconstitutional. Petitioner also requested preliminary injunctive relief to preserve the existing method of payment of state employees' salaries until the court could consider and determine the legal issues presented in the complaint.

On August 9, 1982, Thurston County Superior Court Judge Gerry L. Alexander heard the matter on the parties' cross motions for summary judgment. The court found the lagged payroll proposal did not unconstitutionally impair state employees' private contracts because the State did not act affirmatively to impair such contracts. Accordingly, an order of partial summary judgment was entered in favor of respondents on that issue. No appeal was taken as to that determination. The court went on to consider the legality of the proposed lagged payroll system in light of RCW 42.16-.010 and RCW 42.16.017.² After determining a lagged payroll system was authorized under the statutes, the court found questions of fact remained to be determined at trial. These issues centered on whether any alternative lagged payroll system could achieve the same or better payroll accounting efficiency goals without also creating undue hardship to state employees and a windfall profit to the State. Because of these factual issues, the matter was continued for further proceedings so that the record could be supplemented with affidavits bearing on these issues.

On August 20, 1982, the matter was again considered by Judge Alexander. During the interim period, both sides submitted affidavits detailing the costs and expected savings of the lagged payroll plans proposed by each. (WFSE proposed a lagged payroll calling for paydays twice per month.) In the interests of efficiency, both sides permitted the court to rule without live testimony based upon the affidavits alone. The court first restated its determination that a change to a lagged payroll system was authorized under RCW 42.16.010, in conjunction with RCW 42.16.017. The court then held that although Governor Spellman's letter contemplated implementation of the lagged payroll plan for an unauthorized purpose — to raise additional revenues — it also had the authorized effect of facilitating payroll and accounting efficiencies. Therefore, the lagged payroll plan was found to be consistent with the statutory requirements authorizing such action. Petitioner's request for preliminary injunctive relief was denied because the court found that respondents would likely prevail on the merits, both sides would suffer irreparable harm if the other prevailed, and petitioner had failed to make a sufficient showing of harm to warrant injunctive relief.

Petitioner WFSE filed a motion for discretionary review in this court on August 23, 1982. On August 24, 1982, then Chief Justice Brachtenbach heard oral argument on petitioner's motion for discretionary review and request for preliminary injunctive relief. In an order filed that same day, the Chief Justice granted the motion for discretionary review and, pursuant to RAP 8.3, enjoined implementation of the proposed lagged payroll plan until further order of the court. The order also called for briefing and supporting documentation on the questions of: (1) whether the preliminary injunction should be continued by the en banc court; and (2) the necessity and amount of any bond which might be required of petitioner.

To begin, we point out that the ruling of then Chief Justice Brachtenbach enjoining implementation of the lagged payroll plan was based upon RAP 8.3, which provides: (Italics ours.) The purpose of the above rule is to permit appellate courts to grant preliminary relief in aid of their appellate jurisdiction so as to prevent destruction of the fruits of a successful appeal. See In re Koome, 82 Wn.2d 816, 514 P.2d 520 (1973); Shamley v. Olympia, 47 Wn.2d 124, 286 P.2d 702 (1955). That is precisely what the order enjoining implementation of the lagged payroll plan accomplished. At the time of his emergency ruling, the Chief Justice did not have available to him the trial court's written order, the trial court's oral rulings, or the benefit of legal briefing by the parties. By issuing an order enjoining the proposed change to a lagged payroll system pursuant to RAP 8.3, the Chief Justice merely preserved the status quo in order to insure effective and equitable review by the en banc court. Since the issues now before the court are here upon the referral of the Chief Justice, we treat this matter as an appeal in the nature of a motion to modify his preliminary ruling. See RAP 17.7.

Except when prohibited by statute, the appellate court has authority to issue orders, before or after acceptance of review, to insure effective and equitable review, including authority to grant injunctive or other relief. . .

We take this opportunity to emphasize that our decision is in no way meant to resolve the merits of the underlying lawsuit between petitioner and respondents. Nor is our decision meant to indicate a preference for one payroll method over another. Those issues are not before us. Instead, our decision is limited to deciding whether or not the trial judge abused his discretion in denying preliminary injunctive relief to petitioner WFSE because it failed to meet the requirements of the injunction statute, RCW 7.40.020.³

I

Motion for Receipt of Additional Evidence on Review

As a preliminary matter, we must dispose of respondents' motion to allow additional evidence on review. The additional evidence offered consists of: (1) a memorandum and order of Joe Taller, Director of the Office of Financial Management, dated August 26, 1982, directing all state agencies to implement the proposed lagged payroll plan; and (2) an administrative order of Mr. Taller regarding promulgation and adoption of WAC 82-50, establishing emergency rules for implementation of the lagged payroll plan, along with a notice of intention to adopt permanent rules in accordance with RCW 34.04.025.

Additional evidence on review may be taken by an appellate court, pursuant to RAP 9.11(a), if the following criteria are met:

The appellate court may only on its own initiative direct that additional evidence be taken before the decision of a case on review if: (1) additional proof of facts is needed to fairly resolve the issues on review, (2) the additional evidence would probably change the decision being reviewed, (3) it is equitable to excuse a party's failure to present the evidence to the trial court, (4) the remedy available to a party through post-judgment motions in the trial court is inadequate or unnecessarily expensive, (5) the appellate court remedy of granting a new trial is inadequate or unnecessarily expensive, and (6) it would be inequitable to decide the case solely on the evidence already taken in the trial court.

The above rule permits the taking of new evidence only if all six conditions are met, and then only on the court's own initiative.⁴ Although a literal reading of the rule suggests respondents' motion for receipt of additional evidence cannot be entertained, this court may waive or alter the provisions of any Rule of Appellate Procedure in order to serve the ends of justice. RAP 1.2 and 18.8. Therefore, despite the language of RAP 9.11(a) which indicates that additional evidence may be considered only on our own initiative, we shall alter the provisions of the rule in this case to consider respondents' motion in light of the other six requirements of RAP 9.11(a). See also Washington State Bar Ass'n, Washington Appellate Practice Handbook § 15.16 (1980).

This case presents a rather unusual situation in that the additional evidence submitted by respondents was created after initiation of this lawsuit and in anticipation of oral argument before the en banc court. Nonetheless, we think those documents are necessary to fairly resolve the issues on review. This is because under RCW 42.16.010 and RCW 42.16.017, the Director of Financial Management is the only state official authorized to establish pay dates at times other than the last day of each month. Even then, he can do so only to facilitate payroll preparation and accounting, and only if he follows the procedures set out in RCW 42.16.017. Since no other state official, including the Governor, can change the pay date to implement the lagged payroll system, Mr. Taller's order and supporting documentation are critical to the decision of this case.

It appears quite reasonable to excuse respondents' failure to present this evidence to the trial court because of the emergency circumstances of this case. This lawsuit was initiated on July 16, 1982, in immediate response to the Governor's announcement that a lagged payroll system would be implemented in August of 1982. As of that time, the Director of Financial Management was still gathering information from state agencies necessary to the issuance of the order. At no time was the lack of an order challenged in superior court. In fact, the trial judge indicated in his oral decision of August 9, 1982, that for purposes of his ruling he would assume the Office of Financial Management would attempt to implement the lagged payroll system. It was not until the emergency hearing on August 24, 1982, that the issue of the necessity for documenting the Director of Financial Management's decision to change the payroll date was first raised by then Chief Justice Brachtenbach. Respondents' motion for receipt of additional evidence on review is aimed at correcting this procedural deficiency which apparently was overlooked until brought to the attention of the parties by the Chief Justice.

We think it would be inequitable to prevent introduction of this additional evidence merely because petitioner filed its complaint before the Director of Financial Management had the opportunity to act. The filing of petitioner's lawsuit did not foreclose Mr. Taller from later acting in accordance with his statutory authority. Further, it is no answer to respondents' motion to say the evidence is too late because it was created for the benefit of this court. The documents are consistent with the arguments previously made by respondents and simply memorialize the decision of the Director of Financial Management to institute the proposed lagged payroll plan.

Finally, we believe recognition of the additional evidence submitted by respondents will serve the goal of judicial economy. Without these documents, which are essential to the implementation of the lagged payroll plan, petitioner would have nothing to enjoin. The proper remedy would be to dismiss this case as premature since without concrete steps taken by the Director of Financial Management to install the lagged payroll system, this would be merely a hypothetical dispute. Obviously, such a remedy would be inadequate and cause undue delay and expense to both parties. Mr. Taller undoubtedly would file new orders regarding the lagged payroll system and petitioner WFSE undoubtedly would file a new lawsuit to enjoin such action. In the interests of judicial economy, we think the issues on review can be decided properly only by admitting the additional evidence submitted by respondents. Therefore, since we find the additional evidence submitted by respondents to meet the requirements of RAP 9.11(a), we grant the motion to allow additional evidence on review.

II

Petitioner's Right to Injunctive Relief

The granting or withholding of an injunction is addressed to the sound discretion of the trial court to be exercised according to the circumstances of each case. Alderwood Assocs. v. Washington Envtl. Coun., 96 Wn.2d 230, 233, 635 P.2d 108 (1981); Blanchard v. Golden Age Brewing Co., 188 Wash. 396, 415-16, 63 P.2d 397 (1936). For purposes of granting or denying injunctive relief, the standard for evaluating the exercise of judicial discretion is whether it is based on untenable grounds, or is manifestly unreasonable, or is arbitrary. State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26, 482 P.2d 775 (1971); Lenhoff v. Birch Bay Real Estate, Inc., 22 Wn. App. 70, 74-75, 587 P.2d 1087 (1978).

Preliminary injunctive relief may be available to a party under the circumstances set forth in the injunction statute, RCW 7.40.020. That section provides in part:

When it appears by the complaint that the plaintiff is entitled to the relief demanded and the relief, or any part thereof, consists in restraining the commission or continuance of some act, the commission or continuance of which during the litigation would produce great injury to the plaintiff; or when during the litigation, it appears that the defendant is doing, or threatened, or is about to do, or is procuring, or is suffering some act to be done in violation of the plaintiff's rights respecting the subject of the action tending to render the judgment ineffectual; or where such relief, or any part thereof, consists in restraining proceedings upon any final order or judgment, an injunction may be granted to restrain such act or proceedings until the further order of the court. . .

RCW 7.40.020. Our most recent opinion outlining the necessary criteria for injunctive relief under the statute is Tyler Pipe Indus., Inc. v. Department of Rev., 96 Wn.2d 785, 638 P.2d 1213 (1982). In Tyler Pipe, we quoted the following criteria from Port of Seattle v. International Longshoremen's Union, 52 Wn.2d 317, 319, 324 P.2d 1099 (1958):

It is an established rule in this jurisdiction that one who seeks relief by temporary or permanent injunction must show (1) that he has a clear legal or equitable right, (2) that he has a well-grounded fear of immediate invasion of that right, and (3) that the acts complained of are either resulting in or will result in actual and substantial injury to him.

Tyler Pipe, at 792. Since all three of these criteria must be satisfied to warrant preliminary injunctive relief, the failure to establish any one or more of the criteria dictates that the requested relief be denied.⁵

A

Clear Legal or Equitable Right

In the case of Isthmian S.S. Co. v. National Marine Eng'rs Beneficial Ass'n, 41 Wn.2d 106, 117, 247 P.2d 549 (1952), this court emphasized the necessity of establishing a clear legal or equitable right and held that an injunction "will not issue in a doubtful case". In Tyler Pipe, we determined that to answer the question of whether a party has a clear right, we must analyze the moving party's likelihood of prevailing on the merits. Of course, in making this determination, we do not adjudicate the ultimate rights of the parties in the lawsuit. Tyler Pipe, at 793.

The trial court judge, in his order of September 1, 1982, specifically found that respondents were likely to prevail on the merits. In so doing, he interpreted the two applicable statutes dealing with payment of state employee salaries to give the Director of Financial Management the right to change the date of payment and to implement a lagged payroll system. RCW 42.16.010 provides:

The salaries of all state officers and employees shall be paid monthly on the last day of each month unless the director of financial management shall establish different dates in accordance with RCW 42.16.017: Provided, That the director of financial management may adopt or authorize adoption of semimonthly or more frequent payment schedules for state agencies, in his discretion: And provided further, That schedules for the payment of compensation more often than semimonthly may be adopted only upon the written requests of state agencies, and only for the purpose of conforming state payment schedules for classes of employees in specific trades or occupations to customary schedules prevailing in private industries.

(Italics ours.) RCW 42.16.017, dealing with payroll preparation and accounting, provides that:

To facilitate payroll preparation and accounting, or to implement the provisions of RCW 42.16.010 through 42.16.017, the director of financial management may adopt customary and necessary procedures including the establishment of pay dates at reasonable times following periods in which payment is earned.

(Italics ours.) From the italicized language of the above statutes, it appears fairly certain that the Director of Financial Management can (1) establish a different date of payment of salaries and (2) establish a method of payment at reasonable times following the periods in which salaries are earned. Consequently, there is no absolute right to be paid on the last day of the month. The only real question is whether the proper procedures were followed in establishing a lagged payroll system and whether it was done for the proper reasons.

Since we have previously decided to grant respondents' motion to allow additional evidence on review, we need only refer to those documents to determine whether the lagged payroll plan was properly adopted. The order of Mr. Taller and the applicable regulations issued by his Office of Financial Management seem to satisfy the procedural requirements of RCW 42.16.017. As for the purposes in switching to a lagged payroll system, we look to the statement of reasons given by Mr. Taller in his order, as well as to the reasons given in the implementation of administrative rules and affidavits filed by members of Mr. Taller's staff. Those documents indicate that a lagged payroll system will be much more effective in reducing payroll and accounting errors and will be less costly to operate than the previous method of payment. These justifications satisfy the statutory requirement of RCW 42.16.017. While the Governor's stated reasons for the lagged payroll are interesting and significant, he was not authorized to implement such a system. Although Mr. Taller may also have had revenue raising in mind, we need not look to the purity of his motives as long as the proper reasons of payroll preparation and accounting efficiency were accomplished.

Finally, in his oral decision the trial judge determined that a triable issue of fact existed as to whether a twice monthly lagged payroll was as efficient or more efficient than a monthly lagged payroll. Although there may be some question as to the relative merits of either system, we believe the separation of powers doctrine prevents the judiciary from examining the wisdom of one method of payment over another as long as the method chosen fulfills the permissible statutory purpose. See, e.g., State Pub. Employees' Bd. v. Cook, 88 Wn.2d 200, 206-07, 559 P.2d 991 (1977), adhered to on rehearing, 90 Wn.2d 89, 579 P.2d 359 (1978); Salstrom's Vehicles, Inc. v. Department of Motor Vehicles, 87 Wn.2d 686, 692-93, 555 P.2d 1361 (1976). We leave such decisions to the Legislature and Governor.

After reviewing the facts and documents, we conclude that petitioner has not made the requisite showing of likelihood of success on the merits. Therefore, we hold petitioner has not established a clear legal or equitable right.

B

Well Grounded Fear of Invasion

It appears that both sides agree that if there is a right to be paid at the end of the month or a right to have the lagged payroll implemented in accordance with petitioner's views, there would be a well grounded fear of invasion of this right,

C

Actual and Substantial Injury

The record contains a number of affidavits detailing the potential hardships to be suffered by state employees and by programs designed to serve state employees' interests (e.g., retirement funds and pension funds). Petitioner contends there is no remedy at law that would restore the affected state employees to the status quo ante if their homes or cars are repossessed, or if their health insurance and retirement systems are depleted or canceled. This assertion is well nigh irrefutable.

Unfortunately, petitioner fails to set forth proof of such injuries to be suffered by state employees. Nowhere in the record do we find an affidavit on behalf of any state employee who may be injured. Neither can we take judicial notice of such potential hardships because such facts are not of the type that can be judicially noticed under ER 201:⁶

Judicial notice, of which courts may take cognizance, is composed of facts capable of immediate and accurate demonstration by resort to easily accessible sources of indisputable accuracy and verifiable certainty. The court may

"... resort to encyclopedias, authoritative works upon the subject, reports of committees, scientific bodies, and any source of information that is generally considered accurate and reliable ..."

(Citation omitted.) State ex rel. Humiston v. Meyers, 61 Wn.2d 772, 779, 380 P.2d 735 (1963). In short, after reviewing the facts and evidence available to us, we must conclude petitioner has failed to prove an actual and substantial harm in its request for an injunction.⁷

After applying the criteria of Tyler Pipe to the facts of this case, we must conclude petitioner WFSE has failed to establish the prerequisites for injunctive relief. Therefore, the trial judge did not abuse his discretion in denying such relief. Under these circumstances, the preliminary injunc-tive relief ordered under RAP 8.3 was dissolved.

Utter, Dolliver, Dimmick, and Pearson, JJ., and Cunningham, J. Pro Tern., concur.

1 Specifically, Governor Spellman's letter stated, in part: " [LJagging the payroll will yield $4 million for the remainder of this biennium — $4 million that, by legislative mandate, I must find and that could otherwise be found only by mandatory temporary or permanent additional reductions in personnel, programs, and/or incremental and merit pay increases." (Italics omitted.) Letter dated July 16, 1982, from Governor Spellman to all state employees. Clerk's Papers, at 7.

2 RCW 42.16.010 reads as follows:

"The salaries of all state officers and employees shall be paid monthly on the last day of each month unless the director of financial management shall establish different dates in accordance with RCW 42.16.017: Provided, That the director of financial management may adopt or authorize adoption of semimonthly or more frequent payment schedules for state agencies, in his discretion: And provided further, That schedules for the payment of compensation more often than semimonthly may be adopted only upon the written requests of state agencies, and only for the purpose of conforming state payment schedules for classes of employees in specific trades or occupations to customary schedules prevailing in private industries."

RCW 42.16.017 reads as follows:

"To facilitate payroll preparation and accounting, or to implement the provisions of RCW 42.16.010 through 42.16.017, the director of financial management may adopt customary and necessary procedures including the establishment of pay dates at reasonable times following periods in which payment is earned."

3 We specifically note that our decision in this case is intended only to resolve the issues between the parties now before us. Although Justice Stafford's dissenting opinion at pages 901-02 contains an argument regarding the state constitutional pay protections afforded to certain state officers, we must point out that those state officers are neither represented by petitioner WFSE, nor are they parties to this lawsuit. Therefore, such considerations are irrelevant to the case before us. We express no view on the propriety of the lagged payroll system as applied to those state officers covered by Const. art. 3, § 25 and Const. art. 28, § 1 as amended by Const. art. 30, § 1.

4 On page 896 of his dissenting opinion, Justice Stafford misstates the majority's position regarding RAP 9.11(a). The opinion does not concede the six conditions of the rule were not met. Rather, the majority opinion concedes only that the requirement that additional evidence be taken "on our own initiative" was not met. In fact, after altering the requirements of the rule to allow respondents to move for the receipt of additional evidence, we granted the motion only upon determining that the six conditions of RAP 9.11(a) were satisfied.

5 Justice Dore's dissenting opinion relies on Dore v. Kinnear, 79 Wn.2d 755, 489 P.2d 898 (1971) as authority for the issuance of a preliminary injunction until a trial could be conducted to resolve the merits of this case. Unfortunately, Kin-near provides no support for this proposition. In Kinnear, we granted a temporary injunction to preserve the status quo pending a final determination on the merits of appellants' direct appeal from the trial court decision dismissing the action. (The same relief would be available now under RAP 8.3.) The preliminary relief granted in Kinnear was intended to assure an effective and equitable appellate review by simply maintaining the existing conditions in a case we had already accepted for review and were about to hear on appeal. Nothing in Kinnear or RAP 8.3 supports the granting of preliminary injunctive relief to preserve the status quo in a case not yet accepted for review simply because it has the potential for someday ripening into an appeal. Therefore, cases such as the one now before us must be evaluated in light of the injunction statute, RCW 7.40.020.

6 We find it interesting to note that after castigating the majority for engaging in unwarranted factfinding, Justice Stafford's dissent seems to blaze new trails and reach new frontiers in the area of judicial notice regarding the issue of substantial injury to state employees. We are aware of no authority, nor is any cited by Justice Stafford in his dissent, which permits judicial notice of the the underlying facts to which he applies his "simple arithmetic and pencil and paper". See dissenting opinion of Stafford, J., at 900-02.

7 Justice Stafford contends in his dissenting opinion at pages 900-01, that the simple use of paper and pencil would disclose the lagged payroll system will adversely affect state employees' federal income tax liabilities and their eligibility for full state retirement benefits. As for the tax effect calculations, reference to the Internal Revenue Code would disclose that 1982 tax liability actually would be decreased because there would be less taxable income in that year and one would find 1983 tax rates will be lower tban in 1982, both factors the dissent neglects to mention. As for Justice Stafford's contention that state employees would be penalized for retiring in the 2-year period following implementation of the lagged payroll system, the plain language of the applicable statute, RCW 41.40.010(15)(a), reveals Justice Stafford's interpretation is patently incorrect. The statute refers to the "annual average of the greatest compensation earnable by a [retirement system] member during any consecutive two year period of service for which service credit is allowed; . . ." (Italics ours.) RCW 41.40.010(15)(a). The word "earnable" includes at least that which has been earned by the individual on the day of retirement, whether or not it actually has been paid. Thus, retirement at the end of a month under the new lagged payroll plan will have no adverse impact on a state employee's eligibility for full retirement benefits.