Hamilton v. Air Jamaica, Ltd.

• Decision Date: 02 November 1990
• Docket Number: Civ. A. No. 89-6133.
• Parties: Robert L. HAMILTON v. AIR JAMAICA, LTD.
• Court: U.S. District Court — Eastern District of Pennsylvania

750 F. Supp. 1259

Robert L. HAMILTON v. AIR JAMAICA, LTD.

Civ. A. No. 89-6133.

United States District Court, E.D. Pennsylvania.

November 2, 1990.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Robert G. Leino, Eagleville, Pa., for plaintiff.

James M. Penny Jr. and Marjorie H. Gordon, Obermayer, Rebmann, Maxwell & Hippel, Philadelphia, Pa., for defendant.

OPINION

GAWTHROP, District Judge.

Plaintiff, Robert Hamilton, brought this action against his former employer, defendant, Air Jamaica, Ltd., seeking additional severance pay under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1002 et seq., and additional vacation pay under Pennsylvania contract law. After conducting a bench trial on the merits of these claims, I find for plaintiff on the severance-pay claim and for defendant on the vacation-pay claim.

FINDINGS OF FACT

1. Plaintiff began working for defendant, Air Jamaica, Ltd., as a sales representative in August, 1976. Plaintiff was promoted to account executive in 1985 and was working in that position in Philadelphia when Air Jamaica terminated his employment on May 31, 1989.

2. Air Jamaica terminated plaintiff's position as part of a corporate reorganization brought on by budgetary problems. See Testimony of Oswald Simpson, Air Jamaica Director of Industrial Relations, Transcript at 76.

3. At the time of his termination, plaintiff was an "exempt" employee, as defined on page 2 of the "Policies and Procedures" section of Air Jamaica's Employee Handbook ("Handbook"). See Plaintiff's Exhibit One.

4. Air Jamaica distributed the Handbook — a written document outlining the components of Air Jamaica's employee benefits program, including vacation benefits and separation pay benefits — to all of its employees early in 1989. Plaintiff received his copy of the Handbook early in March, 1989. See Plaintiff's Exhibit One, cover letter dated 3/06/89.

5. The Handbook contains a description of a policy to pay employees separation pay. The Handbook states that "if termination occurs due to job elimination or reorganization, a non-exempt employee will receive 2 weeks a year for each full year worked and an exempt employee will receive four weeks for each full year worked." See Plaintiff's Exhibit One, Policies and Procedures at 7.

6. The separation pay policy described in the handbook was not the policy that Air Jamaica intended to be included therein. Air Jamaica has a longstanding separation pay practice, as evidenced by its conduct prior to and after plaintiff's termination, to pay separation pay in the amount of two weeks pay for each full year of employment, with a maximum payment of three months. See testimony of Simpson, transcript at 78-81.

7. Air Jamaica retained the consulting firm of Foster-Higgins, to help prepare the Handbook. The incorrect statement of Air Jamaica's separation pay policy was written into the Handbook by Linden Dunn, a Foster-Higgins employee, during production at Foster-Higgins. See testimony of Simpson, transcript at 83. Air Jamaica failed to discover the mistake during proofreading of the Handbook. Id. at 91-92.

8. Air Jamaica's preparation of the Handbook, including supervision over and copy-editing of its contents, was frustrated by a tight deadline, personal tragedy and natural disaster. The officer who spearheaded the project was murdered in the summer of 1988 in the course of a labor dispute with Air Jamaica pilots. Testimony of Simpson, transcript at 86. His assistant died in the same week of natural causes. Id. In September, 1988, Jamaica was ravaged by Hurricane Gilbert, shutting down Air Jamaica operations for a full two weeks and putting the Handbook project on hold until late in the year. Id., at 90. During the entire course of the project, Air Jamaica officers were preoccupied with the company's medical benefits package, which was undergoing change, and a desire to release the Handbook concurrent with this change at the beginning of 1989. Id., at 89-91.

9. Air Jamaica discovered the mistake in the Handbook regarding Air Jamaica's separation pay policy after the decision to terminate plaintiff's employment. Mr. Simpson first became aware of the error on May 25, 1989, while in the Philadelphia office to personally inform plaintiff of the termination. See testimony of Simpson, transcript at 93, 108.

10. Mr. Simpson gave plaintiff a letter on 25, 1989, memorializing the terms of plaintiff's termination, to become effective on May 31, 1989. The letter indicated that plaintiff would be paid a "terminal gratuity" based on the formula of "two weeks pay for each year of employment to a maximum of three months' payment". See Plaintiff's Exhibit Two.

11. Air Jamaica sent a memorandum, dated May 30, 1989, to all affected employees, advising them that there was an error in the Handbook's description of the separation pay policy. Testimony of Simpson, transcript at 93. The memorandum advised that the Handbook should state that employees terminated due to job elimination or reorganization will receive "a terminal gratuity based on two weeks' basic pay per year for each full year worked up to maximum of three months' pay." See plaintiff's Exhibit Five.

12. Plaintiff received the errata memorandum on May 30, 1989. See testimony of Hamilton, transcript at 56.

13. Air Jamaica paid defendant a terminal gratuity amounting to three months pay.

14. Plaintiff made a demand to Air Jamaica on June 3 requesting a severance payment in accord with the policy described in the Handbook. See Plaintiff's Exhibit Three. By letter of July 14, Air Jamaica indicated that its policy is to pay severance in the amount of two weeks per year worked with a maximum payment of three months. See plaintiff's Exhibit 4.

15. The Handbook contains a disclaimer, whereby Air Jamaica reserved the right in individual cases and generally, "to alter, reduce or eliminate any pay practice, policy or benefit, in whole or in part, without notice". See plaintiff's exhibit one, Policies and Procedures at 1. The Handbook further contains a "statement of understanding", which employees are instructed to date, sign and return to their supervisors, indicating that they have reviewed the policies and procedures section of the Handbook and understood the disclaimer contained therein. Id., Policies and Procedures at 8.

16. Plaintiff did not sign and return the statement of understanding because he did not wish to consent to the powers Air Jamaica reserved for itself through the disclaimer. See testimony of Hamilton, transcript at 13-14.

17. Air Jamaica has a policy, and had a policy at the time of plaintiff's termination, to pay terminated employees for accrued vacation time. See testimony of Simpson, transcript at 95-97. The policy allows carryover from one year to the next, but does not allow an employee to carry over in one year more than one year's vacation entitlement. Id., at 95.

18. Air Jamaica keeps, and kept at the time of plaintiff's termination, records of available vacation time for all of its North American employees. At the conclusion of each year, individual reports stating the accrued vacation time for each employee are sent to the employees' departments and distributed to the employees for review. Employees that disagree with the report are to notify their supervisors so necessary adjustments can be made. See testimony of Simpson, transcript at 96-97; testimony of Frank Carter, Regional Director of Air Jamaica's Philadelphia Office, transcript at 118.

19. Plaintiff was given a report, stating the vacation days earned by him, in January, 1989. See testimony of Carter, transcript at 118; contra testimony of Hamilton, transcript at 34.

20. Air Jamaica records showed that plaintiff was due 12 vacation days at the time of his termination. Testimony of Simpson, transcript at 102.

21. Plaintiff kept his own personal record of accrued vacation days in a daily work log. Plaintiff did not take Air Jamaica's carry-over policy into consideration when calculating accrued vacation time in his work log. See testimony of Hamilton, transcript at 36-38. At the time of his termination, plaintiff's personal records showed that he was entitled to pay for 26 vacation days. Id., at 28.

22. Air Jamaica paid plaintiff in full for 12 vacation days.

23. Plaintiff made a demand to Air Jamaica for payment for 14 additional vacation days. See plaintiff's Exhibit Three. In a letter by Oswald Simpson dated July 14, 1989 Air Jamaica agreed that plaintiff was entitled to 26 days vacation pay and promised to pay the balance no later than July 31, 1989. See plaintiff's Exhibit Four. Mr. Simpson later determined that this concession was in error, in that he had erroneously considered plaintiff entitled to a full vacation allotment for 1989, when in fact plaintiff was entitled only to a proportional allotment for 1989 measured by the percentage of 1989 in which plaintiff worked for Air Jamaica. Testimony of Simpson, transcript at 101.

DISCUSSION

I. Jurisdiction and Applicable Law

ERISA provides a cause of action under federal law to any participant or beneficiary of a benefit plan to recover benefits due under the plan, if the plan falls within the scope of the statute. 29 U.S.C. § 1132(a)(1)(B). The statute covers two types of plans, pension plans, 29 U.S.C. § 1002(2)(A), and welfare plans, 29 U.S.C. § 1002(1). Welfare plans include any "plan, fund, or program" established or maintained by an employer for the purpose of providing certain benefits to its employees or their beneficiaries. Benefit plans providing severance pay are considered welfare plans covered by ERISA. See Massachusetts v. Morash, 490 U.S. 107, 109 S.Ct. 1668, 1673, 104 L.Ed.2d 98, 109 (1989); Pane v. RCA Corp., 868 F.2d 631, 635 (3rd Cir.1989); Blau v. Del Monte Corp., 748 F.2d 1348, 1352 (2d Cir.1984). This is true whether or not the severance benefits are paid out of a separately established fund. Gilbert v. Burlington...