Anthony v. Jersey Central Power & Light Co.

• Decision Date: 03 July 1958
• Docket Number: No. A--84,A--84
• Parties: , 1 IER Cases 1 Edward E. ANTHONY et al., Plaintiffs-Respondents, v. JERSEY CENTRAL POWER & LIGHT COMPANY, a public utility corporation of the State of New Jersey, Defendant-Appellant. . Appellate Division
• Court: New Jersey Superior Court — Appellate Division

Page 139

51 N.J.Super. 139

143 A.2d 762, 1 IER Cases 1

Edward E. ANTHONY et al., Plaintiffs-Respondents, v. JERSEY CENTRAL POWER & LIGHT COMPANY, a public utility corporation of the State of New Jersey, Defendant-Appellant.

No. A--84.

Superior Court of New Jersey Appellate Division.

Argued April 8, 1958.

Decided July 3, 1958.

Harry Lane, Jr., Red Bank for defendant-appellant (Autenrieth & Rochester, Newark, attorneys).

Irving Leuchter, Newark, for plaintiffs-respondents (Kapelsohn, Lerner, Leuchter & Reitman, Newark, attorneys).

Before Judges GOLDMANN, FREUND and CONFORD

The opinion of the court was delivered by

CONFORD, J.A.D.

This is an action by 27 former employees of the defendant to recover severance pay contended to be due them attendant upon the sale of defendant's gas business to another company in June 1952 resulting in the termination of their employment with defendant. Twenty-five of them were granted summary judgment in the Superior Court, Law Division. As to two of the plaintiffs, Voorhees and Lonsdale, somewhat different factual questions were involved and their cases were held for trial after the court denied defendant's motion for summary judgment as to them. Defendant's present appeal is both from the grant of summary judgment in favor of the 25 and the denial of summary judgment for the defendant as to the two.

We confine our attention first to the common cause of the 25 plaintiffs who received judgment in the Law Division. These were all supervisory employees of the defendant, engaged exclusively in the gas phase of its business. Defendant was required by an order of the Securities Exchange Commission to divest itself of its gas properties and operations and it complied by a sale thereof to New Jersey Natural Gas Company by contract dated December 3, 1951 and effective June 2, 1952. Plaintiffs were notified by letter dated May 29, 1952 that they were no longer employed by defendant. They all obtained employment with the purchasing company.

On July 1, 1949 defendant issued its 'General Rules,' containing a variety of conditions of employment, compensation and benefits, including the following:

'The Company's plan for severance compensation is set forth in its labor agreements covering classifications of certain employees. This plan likewise applies to employees not covered by those labor agreements. A copy thereof may be obtained from the Personnel Department.'

This provision remained in effect to and including June 2, 1952. The rules were compiled and distributed by the defendant to all the employees, including plaintiffs. On June 2, 1952 there was in effect between defendant and a labor union a collective bargaining agreement which provided for severance pay benefits for union employees at the rate of one week's pay for each full year of continuous service with the company payable to those permanently released from employment after at least a full year of service for reasons beyond the control of the employees. It was settled in Adams v. Jersey Central Power & Light Co., 36 N.J.Super. 53, 114 A.2d 776 (L.Div.1955), affirmed 21 N.J. 8, 120 A.2d 737 (1956), that the circumstances under which union employees of the defendant engaged solely in defendant's gas operations were transferred to the New Jersey Natural Gas Company as a consequence of the transaction referred to did not disentitle them to the severance pay benefits specified in the collective bargaining agreement. Defendant does not contend to the contrary as to the 25 plaintiffs presently involved. There persons were not members of the union and they claim solely under the General Rules. Defendant argues that it was not liable to these plaintiffs for the severance pay then specified, within settled principles of contract law; and, in the alternative, that disputed issues of fact precluded the grant of summary judgment in favor of the plaintiffs.

I.

Defendant's first contention is that insofar as the plaintiffs are concerned the publication and distribution of the severance pay rule was a mere gratuitous promise of a bonus by the employer, not supported by consideration to the employer or detriment to the employees and therefore not enforceable. It is stressed that the employees undertook no new obligations nor where required to forego any rights or privileges in return for the company's promise and were free to quit at will.

The fallacy in the foregoing argument is the assumption therein that the company's offer was susceptible of acceptance only by the rendition of a promise or undertaking by the employee in exchange, I.e., that it contemplated the consummation of a bilateral contract. Its natural construction, however, is the submission of an offer in return for rendition of services in employment by the employee until the occurrence of the condition stipulated--a unilateral contract. This is the general present-day construction of employment stipulations for severance pay, bonuses or similar incentive plans. Chinn v. China National Aviation Corporation, 138 Cal.App.2d 98, 291 P.2d 91 (D.Ct.App.1955); Hunter v. Sparling, 87 Cal.App.2d 711, 197 P.2d 807 (D.Ct.App.1948); Bullock v. Sterling Drug, 93 F.Supp. 371 (D.C.E.D.Pa.1950), affirmed 187 F.2d 145 (3 Cir. 1951); Roberts v. Mays Mills, 184 N.C. 406, 114 S.E. 530, 28 A.L.R. 338 (Sup.Ct.1922); Hercules Powder Co. v. Bookfield, 189 Va. 531, 53 S.E.2d 804 (Sup.Ct.1949); Cain v. Allen Electric etc. Company, 346 Mich. 568, 78 N.W.2d 296 (Sup.Ct.1956); Schofield v. Zion's Co-op Mercantile Institution, 85 Utah 281, 39 P.2d 342, 96 A.L.R. 1083 (Sup.Ct.1934). Thus, plaintiffs' remaining in the employ of the defendant until the occurrence of the stipulation for severance pay matured the contractual obligation of the employer incepted by the proposal effected by its distribution of the Rules to the employees. See 1 Corbin on Contracts (1950), § 65, pp. 203, 204, § 70, p. 221. Cf. Byerly v Duke Power Co., 217 F.2d 803 (4 Cir. 1954). Where all the services have already been rendered by the employee and he is at retirement age a promise to pay him benefits is unenforceable as no longer being susceptible of acceptance by the rendition of further services until the stipulated event. See Dolan v. Heller Bros. Co., 30 N.J.Super. 440, 104 A.2d 860 (Ch.Div.1954).

Most of the cases cited by defendant are distinguishable on the ground that the employees were not entitled to the benefits, under the terms of the plan as construed by the court. To the extent that they follow the philosophy that such benefits are in any case unenforceable gratuities they do not represent the enlightened and generally prevailing viewpoint of the cases cited above.

It is unreal to contend that the employer received no benefit from the employees in return for the promise sued on. Many courts have recognized that, like other of the so-called 'fringe benefits,' the availability of severance pay tends to better employee morale, improve performance and lessen turnover, all to the distinct advantage of the employer. Chinn v. China National Aviation Corporation, supra (291 P.2d at page 92); Cain v. Allen Electric etc. Company, supra (78 N.W.2d at page 299). Our Supreme Court has said that severance pay '(i)n a real sense * * * is remuneration for the service rendered during the period covered by the agreement,' Owens v. Press Publishing Co., 20 N.J. 537, 546, 120 A.2d 442, 446 (1956); and see Adams v. Jersey Central Power & Light Co., supra (21 N.J. at page 15, 120 A.2d at page 741). Nor is it accurate to regard the benefit thus derived by the employer as not having been contributed by the employees. The employer was not gearing its plan to tangible, measurable bettered performance by employees as individuals but to the amelioration of the conditions mentioned for the employer's benefit on a mass or plant basis. It is to be presumed that the employer's objectives were realized and that the services of all the employees, collectively, contributed thereto. There was, therefore, both benefit to the employer and detriment to the employees. But either alone would have been sufficient if intended by the promisor as the price of his agreement. Joseph Lande & Son, Inc., v. Wellsco Realty, Inc., 131 N.J.L. 191, 198, 34 A.2d 418 (E. & A.1943).

To be distinguished is the situation where the employee has already contracted to give the service before receiving the promise. Here it has been argued that the promise of a bonus or other additional stipend is a gratuity as the promisee is already bound to render the performance. 1 Williston on Contracts (rev.ed.1936), § 130B, p. 452 (p. 543 in the 3d ed. 1957). In the instant case that principle is not applicable as the employment was concededly at will. We need not decide here whether, even where the contract of employment is for a term, the employer may be held on a promise given during the term of an additional benefit to the employee on the theory of the supplemental benefit to the employer from presumably improved morale and service by the employee.

Defendant also argues that there is no evidence that plaintiffs relied upon the promise of severance pay in continuing their employment with defendant and that in the absence of such reliance the promise is not actionable. As authority defendant cites the section of Williston on Contracts referred to above wherein it is said (§ 130B, p. 452) (p. 546 in 1957 ed.): 'But, if the purpose and effect of the executory promise of a bonus is to induce the employee to refrain from exercising his liberty of quitting and, in reliance thereon, he does so refrain for the period specified, there is sufficient consideration to render the promise enforceable.' But this comment by the author, as will be seen from the entirety of the section quoted, is merely by way of contrasting the remaining in employment after...