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Essig v. Lai

Court of Appeals of Washington, Division 1

July 8, 2019

DAVID GEORGE ESSIG, Respondent,
v.
MICHAEL LAI AND VEENY VAN, individually and the marital community comprise thereof; MICHAEL LAI d/b/a ML COMPANIES, INC., ML COMPANIES, LLC, a Washington limited liability company; USASIA PACIFIC INC., a Washington corporation; PT HOLDING LLC, a Washington limited liability company; REALITY NETWORK TEAM, INC., a Washington corporation; SEATTLE MODERIN LIVING, LLC, a Washington limited liability company; SEATTLE MODERN LIVING ON 35th LLC, a Washington limited liability company; and JOHN DOE COMPANIES, INC. 1-5, Appellants.

          Hazelrigg-Hernandez, J.

         This case requires us to decide whether the wage rebate act (WRA)[1], authorizes exemplary damages against an employer who fails to pay wages pursuant to a contract when the employee has not performed the actual work. David G. Essig stopped working for Michael Lai when Lai failed to pay him as required in their employment contract. Because the WRA is construed liberally to protect workers, the pay to which Essig was entitled under the contract constituted wages. We hold Essig is entitled to exemplary damages. Affirmed.

         FACTS

         David Essig began working for the Rainier Valley Community Development Fund (CDF) in 2006. Essig managed the real estate investment portion of the fund to create revolving loans and attract development and funds to the Rainier Valley. Through his work with the CDF, Essig met Michael Lai. Lai managed a real estate brokerage. Essig worked with Lai's firm on two successful loan transactions. From the first time they met, Lai periodically approached Essig about working for him. Initially, Lai spoke to Essig about becoming a real estate agent, but Essig was not interested.

         In the fall of 2014, Essig and Lai began to talk about Essig working for Lai in a development capacity. Lai wanted to know if Essig would be willing to partner with him on the developments, but Essig did not have the financial capacity to partner on large scale developments. Lai then asked Essig to consider working as a consultant or independent contractor, but Essig was not interested in working as an independent contractor. Essig stated that his interest was in working as a key employee to build the development organization. Lai asked Essig to draft a proposal for Essig to begin working for him.

         On May 29, 2015, Essig entered into an employment agreement with Lai and a number of business entities under Lai's control. Lai agreed to employ Essig for a minimum of two years, with an annual salary of $114, 000, health and dental benefits for Essig and his spouse, an expense account, office space, office support, and a $5, 000 signing bonus. Lai gave Essig a $5, 000 check, which Essig successfully deposited. Essig was to start work on July 13, 2015. He resigned from the Rainier Valley Community Development Fund in reliance on the employment agreement.

         Essig began performing his duties under the employment agreement on July 13, 2015. Over several weeks, he worked in the field reviewing projects, attending meetings and site visits with Lai, meeting with Lai, and engaging in phone, email, and text message communication with Lai regarding the business. At no point did Lai indicate that Essig was not employed by Lai.

         On July 30, Essig emailed Lai requesting medical insurance and benefits for Essig and his wife, as provided in the employment agreement. On August 18, Essig sent Lai a letter demanding payment of his wages and benefits to that date. Essig continued to work for Lai until August 26.

         Throughout August, Lai suggested changes to the employment agreement, but did not deny the existence of the employment agreement or employment relationship. Lai continued to involve Essig in meetings, phone calls, and communications regarding the business.

         On August 27, Essig notified Lai that he considered Lai in breach, he was stopping work on Lai's behalf, and would seek other employment. Lai sent the following text message on August 28: "I can take care $120, 000, 000 per year next 12 months. Then become employees after that." Essig interpreted that message as an offer to work as an independent contractor. Essig engaged in efforts to find comparable replacement employment, searching in Seattle, Oklahoma City, and other locations nationwide. Essig filed suit.

         The court found Lai in breach of contract, and awarded Essig lost wages of $228, 000, exemplary damages of $228, 000 under the WRA, $13, 263 in medical benefits, attorney fees of $85, 890, and $708.28 in costs. Lai appeals the award of exemplary damages and the court's finding that Essig reasonably mitigated his damages.

         DISCUSSION

         I. Lai is liable for exemplary damages under the WRA

         Under RCW 49.52.050 and .070, employers who pay any employee a lower wage than the employer is obligated to pay, are liable for exemplary damages equal to the unpaid wages. Hill v. Garda CL NW, Inc., 191 Wn.2d 553, 561, 424 P.3d 207 (2018). The employer must withhold the wages willfully, intend to deprive the employee of ...


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