Dahl v. Brunswick Corp.

• Decision Date: 14 April 1976
• Docket Number: No. 108,108
• Parties: , 81 Lab.Cas. P 55,020 Antoinette M. DAHL et al. v. BRUNSWICK CORPORATION.
• Court: Maryland Court of Appeals

Page 471

277 Md. 471

356 A.2d 221, 81 Lab.Cas. P 55,020

Antoinette M. DAHL et al. v. BRUNSWICK CORPORATION.

No. 108.

Court of Appeals of Maryland.

April 14, 1976.

Edwin T. Steffy, Jr., Baltimore (Hooper, Kiefer, Cornell & O'Ferrall, Baltimore, on the brief), for appellants.

Henry M. Decker, Jr., Baltimore (David K. Hayes, Baltimore, on the brief), for appellee.

Argued before SINGLEY, SMITH, DIGGES, LEVINE, ELDRIDGE and O'DONNELL, JJ., and J. HODGE SMITH, Special Judge.

DIGGES, Judge.

The plaintiffs-petitioners, 21 former employees of the Concorde Yacht Division of the defendant-respondent Brunswick Corporation, alleging that their employment was involuntarily terminated by the sale of the division to Test Corporation, brought this contract action to recover varying amounts of severance pay, accrued vacation pay and two weeks' pay in lieu of two weeks' prior notice of separation. Judge H. Kemp MacDaniel, sitting without a jury in the Circuit Court for Baltimore County, held that although these employees had had a contract with Brunswick providing for some such compensation, their subsequent acceptance of employment with a subsidiary of Test constituted a novation which abrogated their right to recover against Brunswick. On appeal, we conclude that the petitioners are entitled to severance pay and possibly pay in lieu of notice, but not vacation pay. ¹

The petitioners, while employed in the Concorde Yacht Division, located in Dundalk, Baltimore County, had neither written employment contracts nor a collective bargaining agreement. The employees, however, were included within the scope of written policy statements issued by Brunswick to govern various aspects of their employment; among the subjects covered by these directives were severance and vacation pay. Additionally, Brunswick had an unwritten general practice of providing its employees, in those cases in which they were entitled to severance pay, with two weeks' salary if they were not given two weeks' prior notice of termination. Even though some of the petitioners had not seen copies of Brunswick's directives, all of them were aware of the existence of the company's written and unwritten policies and practices.

Following extensive negotiations, Brunswick, on September 17, 1970, agreed to sell its Concorde Yacht Division to Test Corporation. Under the terms of the sales contract Test was to form a wholly-owned subsidiary corporation, to be known as Test Concorde, Inc., which was to take title to the division's assets and control of its operations on October 1, 1970; additionally, Test was required to continue Brunswick's policies with respect to severance and vacation pay. For its part, the respondent covenanted that it would 'not recruit among the personnel of the Division, or in any manner induce any of the said personnel . . . to remain in the employ of Brunswick.' The division's employees were first informed of the sale at a meeting held in mid-September, 1970, at which time they were told they could not remain with Brunswick but rather, effective October 1, they would be employed by Test Concorde in the same positions, at the same salaries and with the same or better benefits. All of the petitioners accepted jobs with Test Concorde on October 1, 1970, and continued to be employed by that corporation until April 27, 1972, when, due to insolvency, it closed its doors. Although Test Concorde did not provide the petitioners with literally all the fringe benefits they had previously enjoyed, it did pay these employees the same salaries and continued Brunswick's policies with respect to severance pay, vacation pay and two weeks' pay in lieu of prior notice of termination.

Having sketched the pertinent facts, we will now consider separately the categories of claims made by the petitioners, beginning with severance pay. The first question is whether Brunswick's severance pay policy statement became part of the employment contract between it and its employees. Brunswick concedes, as it should, that its policy directive with respect to severance pay constituted an offer of a unilateral contract of which the employees were aware and, by continuing to work for Brunswick, accepted. This Court, when faced with a policy statement regarding bonuses, ironically issued by this very same company, Brunswick Corporation, held, in MacIntosh v. Brunswick, 241 Md. 24, 30-31, 215 A.2d 222 (1965), that the provision of the directive which imposed certain post-employment restraints on employees was unenforceable and that consequently the plaintiff-employee was contractually entitled to a bonus. Moreover, the Court of Appeals of Michigan, in a case almost identical with the one before us, held that Brunswick's policy statement relating to severance pay had ripened into a contractual obligation of the company. Clarke v. Brunswick Corp., 48 Midh.App. 667, 211 N.W.2d 101, 103 (1973), leave to appeal denied, 391 Mich. 765 (1974). Besides those two cases, there is abundant support for the proposition that employer policy directives regarding aspects of the employment relation become contractual obligations when, with knowledge of their existence, employees start or continue to work for the employer. See, e. g., Chapin v. Fairchild Camera and Instrument Corp., 31 Cal.App.3d 192, 107 Cal.Rptr. 111, 114-15 (1st Dist. 1973); Mace v. Conde Nast Publications, Inc., 155 Conn. 680, 237 A.2d 360, 362-62 (1967); Willets v. Emhart Mfg. Co., 152 Conn. 487, 208 A.2d 546, 547 (1965); Cain v. Allen Electric & Equip. Co., 346 Mich. 568, 78 N.W.2d 296, 298-302 (1956); Gaydos v. White Motor Corp., 54 Mich.App. 143, 220 N.W.2d 697, 700, leave to appeal denied, 392 Mich. 800 (1974); Hinkeldey v. Cities Service Oil Co., 470 S.W.2d 494, 499-501 (Mo.1971); Anthony v. Jersey Central Power & Light Co., 51 N.J.Super. 139, 143 A.2d 762, 764-66 (App.Div.1958); Roberts v. Mays Mills, inc., 184 N.C. 406, 114 S.E. 530, 532-33 (1922); Hercules Powder Co. v. Brookfield, 189 Va. 531, 53 S.E.2d 804, 808-09 (1949); Annot., 40 A.L.R.2d 1044 (1955); cf. Adams v. Jersey Central Power & Light Co., 21 N.J. 8, 120 A.2d 737 (1956) (collective bargaining agreement); Schofield v. Zion's Co-op Mercantile Institution, 85 Utah 281, 39 P.2d 342 (1934) (resolution of board of directors). Since it is therefore clear that Brunswick's severance pay policy directive became a contractual obligation, we must next determine whether the petitioners were entitled to severance pay under the policy statement's provisions.

In September of 1970 Corporate Procedure 1.3331 of Brunswick's Policies and Procedures Manual provided that severance pay would be granted to employees who were involuntarily terminated, defined as

'any separation from the payroll for an indefinite period (more than 30 days) for actions not within the direct control of the employee when no other suitable opening is available.'

The petitioners first assert that they became 'separat(ed) from the payroll for an indefinite period . . . for actions not within (their) direct control' when Brunswick sold its Concorde Yacht Division ho Test and informed its employees that they could no longer work for Brunswick. See Clarke v. Brunswick Corp., supra, 211 N.W.2d at 103. Although there is a dearth of Maryland authority on point, there is ample support elsewhere for the position that when part or all of a company is sold and the employees are told that they cannot remain with their old employer, their employment has been terminated even though they immediately begin to work for the new owner. See, e. g., Chapin v. Fairchild Camera and Instrument Corp., supra, 107 Cal.Rptr. at 115; Willets v. Emhart Mfg. Co., supra, 208 A.2d at 548; Gaydos v. White Motor Corp., supra, 220 N.W.2d at 700-02; Clarke v. Brunswick Corp., supra, 211 N.W.2d at 103; Matthews v. Minnesota Tribune Co., 215 Minn. 369, 10 N.W.2d 230, 232 (1943); Hinkeldey v. Cities Service Oil Co., supra; Adams v. Jersey Central Power & Light Co., supra, 120 A.2d at 740-41; Anthony v. Jersey Central Power & Light Co., supra, 143 A.2d at 763-64. In fact, Brunswick concedes that the petitioners satisfied this first portion of the definition. However, the policy directive also required, in order for there to have been an involuntary termination, that 'no other suitable opening (be) available.' Whether the prerequisite was fulfilled by the petitioners, which depends on how the phrase should be read, is the first contested issue of this severance pay controversy. Although Brunswick's brief seems to suggest that the meaning of the language is clear, we, like the trial court, have no difficulty in accepting the employees' contention that the phrase 'no other suitable opening is available' is ambiguous because it could be referring either to jobs within Brunswick alone, or to positions with Brunswick or any other employer. Under the former construction, which the petitioners assert is correct, terminated employees would not be entitled to severance pay if they were offered suitable jobs by Brunswick but would receive severance pay if they left the respondent's employ, whether or not they were offered work elsewhere; under the latter interpretation, championed by Brunswick, employees would not have a right to severance pay if they were offered equivalent jobs by Brunswick or anyone else.

To support the construction it prefers, Brunswick relies on the fact that the policy statement requires both a 'separation from the payroll' ² and that there be 'no other suitable opening . . . available.' As we understand its argument, Brunswick maintains that if the phrase 'no other suitable opening is available' referred only to job openings with Brunswick, as the employees assert, then the phrase 'separation from the payroll' would be superfluous because every time an employee qualified for severance pay under the former he would necessarily also qualify under the latter, and every time a worker failed to qualify under the former h...