Bolling v. Clevepak Corp., E-84-30

• Court: United States Court of Appeals (Ohio)
• Citation: 484 N.E.2d 1367,20 O.B.R. 146,20 Ohio App.3d 113
• Docket Number: No. E-84-30,E-84-30
• Parties: , 20 O.B.R. 146 BOLLING et al., Appellants, v. CLEVEPAK CORPORATION, Appellee.
• Decision Date: 28 December 1984

Page 113

20 Ohio App.3d 113

484 N.E.2d 1367, 20 O.B.R. 146

BOLLING et al., Appellants, v. CLEVEPAK CORPORATION, Appellee.

No. E-84-30.

Court of Appeals of Ohio, Sixth District, Erie County.

Dec. 28, 1984.

Dennis E. Murray and Kirk J. Delli Bovi, Sandusky, for appellants.

Gregory B. Scott and William J. Wahoff, Columbus, for appellee.

Syllabus by the Court

1. When oral or written modifications of the original employment contract satisfy the paradigm elements essential to contract formation--i.e., offer, acceptance, and consideration--binding obligations arise. (Helle v. Landmark, Inc. [1984], 15 Ohio App.3d 1, 472 N.E.2d 765, approved and followed.)

2. Severance pay is an earned benefit, one for which the employees work as much (and as hard) as they work for any other benefit or item of compensation.

3. As deferred compensation, severance pay accrues while it is being earned during the course of the employment relationship.

4. Once earned through their continued work, the employees' right to receive severance pay is, in a sense, vested. Once earned, that right (and the amount of pay theretofore accrued) cannot thereafter be retroactively modified, diminished or eliminated by the employer, except through a valid contractual arrangement to which the employees are a consenting party.

5. Where the only issue regarding an employment manual's severance provisions is one of contract interpretation, that issue is a question of law for the court.

6. If the employer drafts the employment manual's contents, the termination and severance provisions therein will be construed most strongly against the employer.

7. Parties to an employment contract, as with any other contract, are bound toward one another by standards of good faith and fair-dealing.

8. Fraud or bad faith is never presumed, and where two constructions of an employer's writing are possible, one of which requires a finding of fraudulent intent or bad faith, and the other permits a conclusion of good faith, courts never hesitate in giving effect to the latter interpretation.

9. Where the employer-company sold the assets of its plant at which the employees worked to a new successor-employer, the employees became "separated" from the old employer "for reasons other than cause," as defined in the employment manual's provisions regarding "classifications of termination." (Armstrong v. Diamond Shamrock Corp. [1982], 7 Ohio App.3d 296, 455 N.E.2d 702, distinguished.)

10. Once the employees were "separated" from the old employer "for reasons other than cause," the employees were entitled to receive from the old employer, as of the date the plant was sold, accrued severance pay calculable through the severance formula stated in the employment manual.

11. While the "special situations" clause contained in severance provisions of the old employer's manual would permit the employer some leeway in arranging with a successor-employer for full payment of severance benefits, the old employer nevertheless remained primarily liable to the employees for any unpaid (but accrued) severance benefits. Payments made by the new employer through a "50/50" agreement would only create a credit, as against the old employer's primary liability, and not a discharge, until each employee who had qualified under the appropriate "termination" category received the full amount of accrued pay to which he or she was entitled under the severance formula.

12. For a purported "novation" to be effective, all the parties must agree to the substitution of the new debtor for the old one and, therefore, to the new or changed terms pursuant to which the substitution is made.

13. Intent, knowledge and consent are the essential elements in determining whether a purported novation has been accepted.

14. A party's knowledge of and consent to the terms of a novation need not be express, but may be implied from circumstances or conduct. However the evidence of such knowledge and consent must be clear and definite, since a novation is never presumed.

HANDWORK, Judge.

This case is before the court on appeal from a judgment of the Erie County Court of Common Pleas, which granted summary judgment in favor of defendant-appellee, Clevepak Corporation (hereinafter "Clevepak").

The essential facts are undisputed. ¹ Plaintiffs-appellants ² (hereinafter "appellants") were salaried employees of Clevepak. Appellants worked at Clevepak's folding box plant in Sandusky, Ohio. During the period of appellants' employment with Clevepak, the company distributed to its salaried employees a comprehensive personnel manual, entitled: "Clevepak Benefit Plans and Personnel Policies for Salaried Employees." ³

In excess of one hundred pages, the manual contains several sections describing in detail life and accident insurance plans, retirement-pension plans, disability and medical benefits, and the schedules for such benefits. The last section of the manual is entitled "Clevepak's Personnel Policies and Practices." The introductory page to this section states, in part:

"This section * * * has been designed to provide you with a reference which not only explains Clevepak's various Personnel Policies and Practices, but which also serves as a guide to help you in the performance of your daily activities.

"Because we consider you, our employees, to be one of our most vital resources, we have provided a broad spectrum of policies and programs designed to insure your personal and professional development and well-being." (Emphasis added.)

This "personnel policies and practices" section contains a variety of information and representations relating to employment performance, attendance, leaves of absence, vacation and holiday schedules, health services and termination of employment. The subsection entitled "Termination of Employment" provides, in relevant part:

"Termination of Employment

"CLASSIFICATIONS OF TERMINATION

"Whenever an individual leaves the employ of the Company, the termination will be classified as one of the following:

"Resignation: Voluntarily initiated by the employee.

"Separation For Reasons Other Than Cause: Initiated by the company for reasons beyond the control of the employee (reorganization, cutback, relocation, etc.)

"Separation for Cause: Initiated by the Company for failure on the part of the employee to meet satisfactorily the requirements of the assigned job (poor performance, etc.)

"Discharge: Initiated by the Company because of misconduct on the part of the employee (just cause, theft, conflict of interest, actions detrimental to the Company, etc.)

"Normal Retirement: On or after age 65.

"Early Retirement: Between the ages of 55 and 65 with fifteen years of service.

"NOTICE OF TERMINATION

"Customarily, it is expected that written notice of resignation will be given at least two weeks in advance of the anticipated termination date.

"Where the separation is initiated by the Company, as much notice as possible will be given the employee. However, where the discharge is for reasons of serious misconduct, it is possible that the termination will be immediate, without prior notice.

" * * *

"SEVERANCE PAY

"Depending upon the reason for termination, an employee may be eligible for severance pay as outlined below:

"Separation For Reasons Other Than Cause: One week's salary will be paid for each year of Company service with a minimum of two weeks and a maximum of thirteen weeks.

"If, however, an employee scheduled for separation for reasons other than cause declines an offer of a comparable position elsewhere in the Company, severance pay entitlement is one-half week's pay for each year of Company service with a minimum of two weeks and a maximum of thirteen weeks.

"Separation for Cause: As long as the employee has not been discharged for misconduct, severance pay entitlement is one-half week's pay for each year of Company service with a minimum of two weeks and a maximum of thirteen weeks.

"Special Situations: In special situations, such as a mass move of an operating unit, a separate policy covering terminations and severance payments will be established which will be applicable to all affected personnel.

"Resignation, Discharge and Retirement: Employees who resign, are discharged or take a normal or voluntary early retirement are not eligible for any severance pay." (Emphasis added.)

As noted, each salaried employee received a copy of this manual, including the above-quoted sections. Beyond these provisions on severance pay and termination of employment, and insofar as the record discloses, Clevepak's management personnel made no additional oral representations that severance benefits would be paid other than according to the terms of the manual.

In the summer of 1983, Clevepak entered into negotiations for the sale of the assets of the Sandusky plant to PRT Corporation, d.b.a. Sandusky Folding Box Company, Inc. (hereinafter "PRT"). Effective August 31, 1983, a purchase agreement was executed between Clevepak and PRT for the sale of the plant. Executed contemporaneously therewith was a "letter agreement," also dated August 31, 1983, in which PRT agreed to retain Clevepak's salaried personnel (including appellants). The letter agreement further stated:

"It is our [PRT's] intention to hire all of your [Clevepak's] full-time salaried employees, * * *. In the event we fail to hire any of such employees or terminate any of them except for cause on or before November 2, 1983, we shall pay each of such employees a severance allowance in accordance with the Schedule annexed hereto and, on demand, you agree to reimburse us up to an aggregate of $3,500.00 with respect to such payments, it being understood that we will bear the expense of such payments, if any, in excess of $3,500.00. It is understood that we are not hereby undertaking to make any severance payments to any of your employees except as herein explicitly stated and that this Agreement is not intended to be for...