Hamilton v. Memorex Telex Corp.

• Decision Date: 21 February 1995
• Docket Number: No. 9310SC1081,9310SC1081
• Citation: 454 S.E.2d 278,118 N.C.App. 1
• Court: North Carolina Court of Appeals
• Parties: , 2 Wage & Hour Cas.2d (BNA) 1078 Harold G. HAMILTON, Patricia Perrone Sanders, and all others similarly situated v. MEMOREX TELEX CORPORATION.

Page 278

454 S.E.2d 278

118 N.C.App. 1, 2 Wage & Hour Cas.2d (BNA) 1078

Harold G. HAMILTON, Patricia Perrone Sanders, and all others

similarly situated v. MEMOREX TELEX CORPORATION.

No. 9310SC1081.

Court of Appeals of North Carolina.

Feb. 21, 1995.

Patterson, Harkavy & Lawrence by Donnell Van Noppen, III, Greensboro, and Gulley and Calhoun by Michael D. Calhoun, Durham, for plaintiff-appellees.

Poyner & Spruill, L.L.P. by Cecil W. Harrison, Jr., and Robin T. Morris, Raleigh, for defendant-appellant.

Thomas A. Harris, Director, Wage & Hour Div., and Atty. Gen. Michael F. Easley by Associate Atty. Gen. John A. Greenlee, for Com'r of Labor Harry E. Payne, Jr., Raleigh, amicus curiae.

ARNOLD, Chief Judge.

Defendant presents eleven arguments based upon thirty assignments of error and plaintiffs offer one argument based upon two assignments of error.

Plaintiffs are all former employees of defendant who had been employed by defendant at any time prior to 21 December 1988 and were terminated after 31 December of that year. Prior to 21 December 1988, the defendant's vacation policy (the old policy), which had been adopted in 1986, provided as follows: If an employee was hired prior to 1 August of a given year, the employee was entitled to five days of paid vacation during that year. However these days could not be taken until the employee had completed three months of continuous employment. If an employee was hired on or after 1 August, the employee was entitled to no vacation days in that year, but would be entitled to take ten days of vacation the next year, after completing six months of continuous employment. If an employee was terminated after completing six months of service, he would be paid for any unused vacation that was earned and payable on 1 January of that year.

On 21 December 1988, defendant notified all of its employees that, as of 1 January 1989, the vacation policy (the new policy) would be as follows: Vacation would be advanced on 1 January for use in that year. Vacation days were available for immediate use, but were "earned" over the course of the year. Upon termination, employees would be paid for the unused days they had earned up to that point in the year.

Plaintiffs contend that under the old policy they earned vacation in each year for use in the next. Thus, they contend that by working in 1988 they had earned their vacation for 1989, which would have vested on 1 January 1989. The change in policy meant that in 1989 they were entitled to those days they had earned in 1988, in addition to whatever days they earned in 1989 under the new policy. Plaintiffs contend that the defendant failed to pay them for the days they had accrued under the old policy when they were terminated.

On the other hand, defendants maintain that under the old policy the employees earned the vacation for each year merely by being in its employ on 31 December of one year and working on the first day in January of the next year. Under that interpretation, vacation was advanced at the beginning of each year, not earned in the previous one. The change in policy reflected only an accounting change, allowing the defendant to take the charges on its accounts over the course of the year, rather than on 1 January of each year.

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Defendant's Appeal

I.

First, defendant argues that the trial court erred in failing to determine that the statute of limitations barred plaintiffs' claim under the North Carolina Wage and Hour Act (the Act), N.C.Gen.Stat. §§ 95-25.1 to -25.25 (1989). We disagree.

Plaintiffs brought this action, at least partly, under the Act to recover for vacation days they had not taken before they were terminated. The Act provides:

No employer is required to provide vacation for employees. However, if an employer provides vacation for employees, the employer shall give all vacation time off or payment in lieu of time off in accordance with the company policy or practice. Employees shall be notified in accordance with G.S. 95-25.13 of any policy or practice which requires or results in loss or forfeiture of vacation time or pay.

N.C.G.S. § 95-25.12. "Employees whose employment is discontinued for any reason shall be paid all wages due on or before the next regular payday...." N.C.G.S. § 95-25.7. Vacation pay is included within the definition of "wage." N.C.G.S. § 95-25.2. Claims for unpaid wages and benefits under the Act are subject to a two year statute of limitations. N.C.G.S. § 95-25.22(f).

Defendant contends that the statute started to run on 21 December 1988 when it gave notice of the change in the vacation policy in accordance with section 95-25.12.

As was recently made plain in Glover v. First Union National Bank, 109 N.C.App. 451, 428 S.E.2d 206 (1993), defendant's argument is meritless. In that case the plaintiff sued the defendant to recover retirement benefits he was allegedly owed. The defendant argued that the statute of limitations barred his claim because any loss the plaintiff had suffered had occurred over twenty years previously when the retirement plan was amended. This Court rejected that argument, stating: "The statute begins to run on the date the promise is broken. In no event can the limitations period begin to run until the injured party is at liberty to sue." Id. at 455, 428 S.E.2d at 208 (citation omitted).

In this case, the plaintiffs suffered no injury until the defendant failed to pay them for the vacation days they had allegedly earned in 1988. Defendant's policy did not require it to pay cash for any unused vacation days until the employment was terminated. Therefore, no individual plaintiff had a cause of action until the next pay day after termination. The trial court correctly found that only those plaintiffs whose pay date next following termination preceded 3 April 1989 (two years prior to the filing of this action) were barred by section 95-25.22. We reject defendant's first argument.

Secondly, defendant argues that the Act displaces all other remedies in this situation so that its statute of limitations, which is shorter than those for plaintiffs' common law actions, bars the entire action. Having found that the Act's statute of limitations does not bar this action, we need not address the defendant's preemption argument.

II.

Defendant next argues that the trial court erred in concluding that it had breached any obligation to the plaintiffs, because the old policy unambiguously provided that employees did not earn vacation in one year for use in the next. We disagree.

Defendant's old vacation policy provided:

First Year of Employment

If you are hired prior to August 1, you are eligible for five (5) days of vacation during the current calendar year after you have completed three (3) months of continuous service. You may take ten (10) days of vacation during the following calendar year.

If you are hired on or after August 1, you are eligible for ten (10) days of vacation to be taken during the following calendar year after you have completed six (6) months of continuous service.

....

In the event your employment is terminated ... you will be paid for any untaken vacation that was earned and payable on January 1 of that calendar year.

First, the trial court properly found that the defendant violated the Act by failing to pay plaintiffs for vacation days they had earned in 1988. Interpreted in its natural and ordinary meaning:

[T]he Wage and Hour Act requires an employer to notify the employee in advance of the wages and benefits which he will earn and the conditions which must be met to earn them, and to pay those wages and benefits due when the employee has actually performed the work required to earn them.

Narron v. Hardee's Food Systems, Inc., 75 N.C.App. 579, 583, 331 S.E.2d 205, 208, disc. review denied, 314 N.C. 542, 335 S.E.2d 316 (1985). However, once the employee has earned the wages and benefits under this statutory scheme the employer may not rescind them, except that certain benefits, including vacation pay, may be made subject to forfeiture so long as the employer notifies the employee of the conditions of such a forfeiture prior to the time he earns such benefits. Id.

We believe that Narron controls our analysis in this situation. Like the trial court, we construe defendant's old policy to mean that by working for any time in one year, an employee earned the right to a full year's vacation in the next year, subject only to the requirement that he work six months before actually using the vacation days. Once the employees met the conditions, i.e. working in the previous year and being employed on 1 January of the next year, defendant could not rescind the benefits. The trial court properly found that defendant's refusal to pay plaintiffs for vacation days they earned under the old policy on 1 January 1989 was a violation of the Act.

As an alternative theory for its judgment, the trial court found that the defendant breached a unilateral contract with plaintiffs when it refused to pay them for all of their unused vacation days. Again, we agree with the trial court's construction of defendant's policy.

As our Supreme Court established in Roberts v. Mays Mills, 184 N.C. 406, 114 S.E. 530 (1922), when an employer represents to an employee that he will receive a benefit after working a certain period of time, the employee may accept by entering or maintaining employment, and the employer cannot thereafter disavow the promise once the employee has started to work in reliance thereon. It matters not that the benefit is earned in the present but to be enjoyed in the future. Defendant's old policy constituted a unilateral promise to grant an employee vacation in the next year if he worked in the previous one. All of the plaintiffs accepted defendant's offer by working in 1988 and continuing to work through 1 January 1989, and they could not thereafter be divested of the promised vacation days.

Defendant argues that the interpretation ...