Sweet v. Stormont Vail Regional Medical Center

• Decision Date: 16 July 1982
• Docket Number: No. 53035,53035
• Citation: 647 P.2d 1274,231 Kan. 604
• Parties: , 26 Wage & Hour Cas. (BNA) 1438, 98 Lab.Cas. P 55,395 Theresa D. SWEET and Harvey L. Ludwick, Secretary of Human Resources, Assignee, Appellants, v. STORMONT VAIL REGIONAL MEDICAL CENTER, Appellee.
• Court: Kansas Supreme Court

Page 1274

647 P.2d 1274

231 Kan. 604, 26 Wage & Hour Cas. (BNA) 1438,

98 Lab.Cas. P 55,395

Theresa D. SWEET and Harvey L. Ludwick, Secretary of Human Resources, Assignee, Appellants, v. STORMONT VAIL REGIONAL MEDICAL CENTER, Appellee.

No. 53035.

Supreme Court of Kansas.

July 16, 1982.

Syllabus by the Court

1. Parties have wide discretion in fixing the terms of employment contracts, and when the employment contract is not contrary to law or unreasonable in its terms, it should be honored and enforced by the courts.

2. A condition precedent is something that it is agreed must happen or be performed before a right can accrue to enforce the main contract. It is one without the performance of which the contract, although in form executed and delivered by the parties, cannot be enforced. A condition precedent requires the performance of some act or the happening of some event after the terms of the contract, including the condition precedent, have been agreed on before the contract shall take effect. Following Wallerius v. Hare, 194 Kan. 408, 399 P.2d 543 (1965).

3. In determining the rights which accrue under an employment contract, the entitlement thereto or eligibility therefor, the terms of the contract control so long as they are not unreasonable or illegal.

4. When an employee is made aware of company policy, which is a part of the terms of the employment contract, the employee will be held to those terms 5. In an action by an employee against her employer under K.S.A. 44-313 et seq., to recover payment for accrued vacation time under an employment contract that provides such payment will only be paid on termination of employment if two weeks' advance notice of the intent to terminate is given by the employee, the record is examined and it is held : the trial court did not err in holding (1) that the requirement of giving notice was a condition precedent to receiving payment for accrued vacation time, and (2) that by failing to give the notice required by the employment contract, the employee's accrued vacation time did not constitute "earned wages" under K.S.A. 44-315(a).

Reid Stacey, Asst. Atty. Gen., argued the cause and Robert T. Stephan, Atty. Gen., was with him on the brief, for appellants.

Charles R. Hay, of Goodell, Stratton, Edmonds, Palmer & Wright, Topeka, argued the cause and Arthur E. Palmer, Topeka, of the same firm, was with him on the brief, for appellee.

HOLMES, Justice:

Stormont Vail Regional Medical Center (Stormont Vail), a Topeka general hospital, petitioned this court for review of an unpublished decision of the Court of Appeals in a case involving the claim of a former employee to compensation for vacation time which remained unused at the time of the termination of the employer-employee relationship (Sweet v. Stormont Vail Regional Medical Center, 644 P.2d 998, 1982). We granted review.

Theresa D. Sweet, the original claimant in this action, was employed by Stormont Vail as a food service worker for the period from November 4, 1975, to March 15, 1979. At the time of her original employment Ms. Sweet was provided with a copy of Stormont Vail's employee handbook which set forth the general terms and conditions of employment. No one seriously questions the applicability of the employee handbook to Ms. Sweet's employment. In fact, both parties rely upon the handbook to support their positions and the provisions of the handbook may clearly be considered a part of the employment contract between Ms. Sweet and Stormont Vail. On March 15, 1979, Ms. Sweet terminated her employment with Stormont Vail without giving any prior notice that she intended to do so. Ms. Sweet was paid for her work to the date of termination but Stormont Vail, relying upon certain notice provisions in the employee handbook, refused to pay for vacation time which Ms. Sweet contends constitutes earned wages. She, therefore, filed a claim with the Secretary of Human Resources pursuant to K.S.A. 44-313 et seq. and, following an administrative hearing, the examiner found that the claimant had accrued certain vacation time and was entitled to payment therefor as wages upon the termination of her employment. The amount involved is $148.59. Stormont Vail appealed the examiner's decision to the district court which reversed the examiner and found that due to the notice provisions required by the contract of employment on termination, Ms. Sweet had failed to earn the amount allegedly due for her accrued vacation time. At the time of filing the original claim it was assigned, pursuant to K.S.A. 44-324, to the Secretary of Human Resources. The Secretary appealed the decision of the district court and the Court of Appeals reversed the decision of the district court thereby reinstating the examiner's award.

The resolution of the issues before us requires an examination of the applicable statutes and regulations, the employment agreement, and the prior decisions of the Kansas appellate courts.

K.S.A. 44-313(c) provides:

" 'Wages' means compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis less authorized withholding and deductions."

K.S.A. 44-315(a) provides in pertinent part:

"Whenever an employer discharges an employee or whenever an employee quits or resigns, the employer shall pay the employee's earned wages not later than the next regular payday upon which he or she would have been paid if still employed ...." (Emphasis added.)

In regulations adopted by the Department of Human Resources "or other basis" is defined as:

" 'Or other basis', within the meaning of K.S.A. 44-313(c), shall include all agreed compensation for services including, but not limited to, profit sharing and fringe benefits for which the conditions required for entitlement, eligibility, accrual or earning have been met by the employee. Conditions subsequent to such entitlement, eligibility, accrual or earning resulting in a forfeiture or loss of such earned wage shall be ineffective and unenforceable." K.A.R. 49-20-1F.

The Stormont Vail employees' handbook clearly sets forth the vacation policy of the employer and the requirements for receiving such vacation. It provides that employees who have worked from one to three years are entitled to two weeks' annual vacation which must be scheduled by the employee with his or her department to accommodate the work requirements of the department as well as the employee's preferences. The handbook further provides:

"Employees resigning from the hospital are expected to give their supervisor 2 weeks' written notice .... Any unused accumulated vacation that does not exceed 11/2 times an employee's annual vacation benefit will be paid to an employee who resigns and gives the proper notice." (Emphasis added.)

Thus we are faced with a twofold question: (1) is accrued vacation time a fringe benefit and therefore wages as defined in K.A.R. 49-20-1F, and (2) if so, did Ms. Sweet's accrued vacation time constitute "earned wages" as contemplated by K.S.A. 44-315(a) and the parties' employment agreement? We think the second portion of the question must be answered in the negative.

The trial court found, based upon Benjamin v. Manpower, Inc. of Wichita, 3 Kan.App.2d 657, 600 P.2d 148 (1979), that accrued vacation time was included in the term "compensation for labor or services rendered," (K.S.A. 44-313(c) ), but that it had not been "earned" (K.S.A. 44-315(a) ) in this case. The Court of Appeals agreed that the vacation time constituted wages but disagreed that such wages had not been earned. The Court of Appeals, as had the examiner, further found that the requirement for two weeks' notice of intention to quit was a condition subsequent resulting in a forfeiture and therefore unenforceable under K.A.R. 49-20-1F.

In Benjamin the issue before the court was whether the refusal of Manpower, Inc. to pay Benjamin for two weeks' vacation upon his termination of employment constituted a willful violation entitling the employee to recover statutory penalties under K.S.A. 44-315(b). The trial court had held that Benjamin's accrued vacation constituted wages and that finding was not appealed. However, in discussing the nature of vacation pay the court stated:

"The Supreme Court decided in Erickson v. General Motors Corporation, 177 Kan. 90, 276 P.2d 376 (1954), that holiday pay was 'wages' and, in discussing holiday pay, stated at 98-99, 276 P.2d 376:

'It was a condition of his employment, and he had to work to get it, and he got it as part of his compensation. If that be not true, then the employee received something to which he was not strictly entitled, a thing ordinarily called a bonus, and if it was a bonus, it was still wages under the statutory definition of wages.'

Although the statute under consideration in Erickson specifically listed a 'bonus' as wages, we do not deem it of significance in this case as we are of the opinion that vacation pay due pursuant to an employment contract constitutes 'wages' as defined by K.S.A. 1978 Supp. 44-313(c ); and if an employer willfully refuses to pay the same after demand is made therefor, that employer is subject to the statutory penalty." 3 Kan.App.2d p. 659, 600 P.2d 148,

and

"In the absence of a valid contract provision authorizing forfeiture, vacation pay cannot be forfeited once the worker has earned the same. In this case there was no valid dispute over the contract provision for a paid vacation; the contract term had passed without the employer complaining to the worker about the quantity or quality of his work. The trial court found the worker was entitled to a paid vacation as of March 12, 1977. The employer thereafter had no legal right to declare the vacation wages forfeited or to refuse to pay the same. The employee requested that he be paid, as he had a right to do under his contract of employment, and his employer refused to pay." p. 661, 600 P.2d 148.

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