DeMelle Plumbing & Heating, Inc. v. Lloyd

Decision Date21 July 1987
Citation412 N.W.2d 902,140 Wis.2d 867
CourtWisconsin Court of Appeals
PartiesNOTICE: UNPUBLISHED OPINION. RULE 809.23(3), RULES OF CIVIL PROCEDURE, PROVIDE THAT UNPUBLISHED OPINIONS ARE OF NO PRECEDENTIAL VALUE AND MAY NOT BE CITED EXCEPT IN LIMITED INSTANCES. DeMELLE PLUMBING & HEATING, INC., Plaintiff-Appellant, v. DAVID G. LLOYD, Defendant-Respondent. 86-1939.

Circuit Court, Door County

Affirmed

Appeal from a judgment of the circuit court for Door county: Edwin C. Stephan, Judge.

Before CANE, P.J., LaROCQUE and MYSE, JJ.

LaROCQUE, Judge.

DeMelle Plumbing & Heating, Inc., appeals a summary judgment dismissing its claim for enforcement or reformation of a stock redemption agreement with its former employee, David G. Lloyd. The circuit court held the agreement invalid and unenforceable because it contained a clause that interfered with the rights of Lloyd and his wife to claim unemployment compensation benefits. Because we conclude that this provision is agaisnt public policy and therefore unenforceable, we affirm. 1

The facts are not in dispute. Both Lloyd and his wife were employees of DeMelle, and Lloyd was also a shareholder of the company. When the Lloyds left DeMelle, Lloyd entered into an agreement that defined the terms and conditions for the redemption of Lloyd's stock in DeMelle. The agreement set the price that the company would pay Lloyd for his shares, and stated that the amount was made in consideration of the Lloyds not claiming unemployment compensation and thereby eliminating a contribution by DeMelle to the unemployment compensation fund. The document set forth the parties' acknowledgment that compromising the Lloyds' rights to unemployment benefits would be against public policy. However, the agreement also provided that if either of the Lloyds claimed benefits, David Lloyd would reimburse DeMelle for its contributions.

Following the signing of the agreement, Lloyd's wife applied for and received unemployment compensation benefits. Thereafter, DeMelle filed this action to enforce the reimbursement provision of the stock redemption agreement.

If the facts are undisputed, as here, summary judgment is appropriate, and the trial court should make a determination if the law is clear. Taterka v. Ford Motor Co., 86 Wis.2d 140, 144, 271 N.W.2d 653, 654 (1978). Whether a contract is unenforceable as against public policy expressed in statute is a question of law appropriately decided on summary judgment. See Perry v. Milwaukee Bd., 131 Wis.2d 380, 385, 388 N.W.2d 638, 640 (Ct. App. 1986). We do not defer to the circuit court's determination of questions of law. Green Scapular Crusade, Inc. v. Town of Palmyra, 118 Wis.2d 135, 138, 345 N.W.2d 523, 525-26 (Ct. App. 1984).

We begin our review of this case by restating the general rule that contracts that impose obligations contrary to public policy are unenforceable. Grams v. Melrose-Mindoro Joint School Dist. No. 1, 78 Wis.2d 569, 578, 254 N.W.2d 730, 735 (1977); Griffith v. Harris, 17 Wis.2d 255, 259, 116 N.W.2d 133, 136 (1962); Schaal v. Great Lakes Mut. Fire & Marine Ins. Co., 6 Wis.2d 350, 356, 94 N.W.2d 646, 649 (1959). We must therefore consider whether this particular contract is contrary to public policy as expressed in statute or case law.

The public policy behind the Wisconsin Unemployment Compensation Act is set forth in sec. 108.01, Stats. The Act is designed to shift a portion of the burden of unemployment from the employee to the employer, as far as possible. Section 108.01, Stats. In order to better 'the economic life of the entire state,' sec. 108.01(1), Stats., the legislature enacted this comprehensive plan for employer contributions, employee eligibility, and procedures for collecting benefits and challenging denials of those benefits. See generally ch. 108, Stats. The Department of Industry, Labor and Human Relations is charged with administering the system. Sections 15.221, 108.02(10), and 108.14, Stats.

Chapter 108 contains a number of provisions discouraging or prohibiting interference with the unemployment compensation system by private actions or agreements. For example, sec. 108.12, Stats., provides: 'No agreement by an employe to waive his right to benefits or any other rights under this chapter shall be valid.' Section 108.13(1), Stats., states that, except for purposes of collection of child support obligations, 'no claim for benefits . . . nor any interest in the fund is assignable before payment.' Finally, sec. 108.24(3), Stats., provides:

Any person . . . who, directly or indirectly by promise of reemployment or by threat not to employ or not to reemploy or by any other means, attempts to induce an employe to refrain from claiming or accepting benefits or to waive any other right under this chapter, . . . shall be fined not less than $100 nor more than $500 or imprisoned not more than 90 days, or both; . . . and each such attempt to induce constitutes a separate offense.

These statutory sections demonstrate a strong public policy against private interference with the right to claim and collect unemployment compensation benefits. The courts of this state have repeatedly acknowledged the strength of this statutorily-expressed public policy. In Roberts v. Industrial Comm'n, 2 Wis.2d 399, 403, 86 N.W.2d 406, 408 (1957), the court stated that an employment contract must be declared void if 'by [the] private agreement a party who refuses reasonable employment is entitled to unemployment benefits,' because this 'would make his eligibility dependent on negotiation between the employer and the employee or his bargaining agent rather than on the statute, administered by the Industrial Commission.' Similarly, in Graebel Moving & Storage v. LIRC, 131 Wis.2d 353, 355, 389 N.W.2d 37, 38 (Ct. App. 1986), the court of appeals held that LIRC was not bound by the parties' designation of a worker as an independent contractor. Rather, whether an individual is an 'employee' is a matter to be determined, not by private agreement, but under the applicable statutory provisions. Id.; see also Streeter v. Industrial Comm'n, 269 Wis. 412, 416, 69 N.W.2d 583, 585 (1955); National Guardian Life Ins. Co. v. Industrial Comm'n, 26 Wis.2d 198, 206, 131 N.W.2d 896, 900 (1965).

The stock redemption agreement between Lloyd and DeMelle is precisely the type of agreement meant to be invalidated by ch. 108. In subsection 1. of the agreement, the parties agreed that if Lloyd applied for unemployment benefits, he would immediately reimburse the corporation for its expenditures. Despite the disclaimer to the contrary, this is an agreement to relinquish his right to unemployment benefits in contravention of sec. 108.12. While Lloyd is not barred from receiving unemployment compensation per se, he is required by the agreement to...

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