Zwolanek v. Baker Mfg. Co.

• Decision Date: 08 October 1912
• Parties: ZWOLANEK v. BAKER MFG. CO.
• Court: Wisconsin Supreme Court

150 Wis. 517

137 N.W. 769

ZWOLANEK

v.BAKER MFG. CO.

Supreme Court of Wisconsin.

Oct. 8, 1912.

Appeal from Circuit Court, Rock County; George Grimm, Judge.

Action by Joseph Zwolanek against the Baker Manufacturing Company. From a judgment on a directed verdict for defendant, plaintiff appeals. Reversed and remanded.

The plaintiff and the defendant entered into a written contract, whereby the plaintiff agreed to work for the defendant from June 1, 1907, to June 1, 1908, at the agreed price of 20 cents an hour to October 1, 1907, 25 cents an hour thereafter to January 1, 1908, and 30 cents an hour thereafter. The contract provided that it could not be terminated by either party during the period stated, without the consent of the other, except that, if either party failed in the performance of duty, then the other party might terminate the contract by giving one month's notice. It further provided that, if the contract was not renewed at the date fixed for its expiration, then it was to continue indefinitely, but could be terminated by either party giving three months' notice to the other, except that, if either party failed in the performance of his duty, the contract might be terminated upon one month's notice by the other.

The plaintiff went to work under this contract. No new contract was made on June 1, 1908, but the parties continued their relations under the terms of the original contract. This original contract was apparently modified on December 31, 1908, by increasing the wages of the plaintiff to 35 cents an hour. The plaintiff continued in the employ of the defendant until December 30, 1909, when he was discharged. About January 3, 1910, the plaintiff went to work under what is claimed to be a new contract, and continued to work until the 25th of the same month, when he quit the defendant's employ. Plaintiff was paid the amount which it was stipulated in the contract he was to receive, as well as the amount which he was entitled to recover under the subsequent modifications of that contract.

On February 24, 1899, the defendant adopted what is referred to as a by-law, which recited that the Baker Manufacturing Company recognized “that the earnings of capital and labor are determined by competition and believe that after both have been paid the prices so determined all surplus earnings should be divided between capital and labor in proportion to the amounts received by each.” The alleged by-law then proceeded to state the manner in which the surplus earnings were to be divided between capital and labor, and provided, among other things, that “any person who shall have been in the regular employ of the company for 4,500 hours during 100 consecutive weeks shall thereupon begin to participate in profit sharing, provided he does not quit the employ of the company or is not discharged prior to January 1 of any year.”

The complaint alleges, in substance, that the plaintiff worked more than 4,500 hours during 100 consecutive weeks immediately prior to January 1, 1910, and that he was entitled to his pro rata share of the profits of the company for the year 1909, which share, it was alleged, amounted to $854. The defendant by way of answer alleged: That the written contract governed the amount of compensation which plaintiff was to receive for his services, and that he was not entitled to receive any other or further sum. That the by-law referred to was not a part of the contract of employment, and that the same was binding solely on the members of the corporation and did not affect third persons. Alleged that said defendant had the right to and did discharge the plaintiff on December 30, 1909, and that the plaintiff consented to such discharge and agreed that the relation of employer and employé should cease at that time. That the plaintiff breached his contract by tendering his resignation on December 24, 1909, to take effect January 25, 1910. That the work performed by the plaintiff from January 3, 1910, to January 25, 1910, was performed under a new and independent contract, and that plaintiff was not entitled to participate in any share of the profits of the defendant earned during the year 1909. There was no testimony to the effect that the plaintiff, when he entered upon his employment, relied on the alleged by-law, or that the same furnished any inducement to him to enter into or to continue in the employment of the defendant. The plaintiff did testify that, when his contract was so modified in December, 1908, as to raise his wages, he informed the defendant that such raise was satisfactory, provided he would be allowed to participate in the profits of the company in accordance with the terms of the alleged by-law, and that he was informed that he would be entitled to so participate.

At the close of the testimony, the trial court directed a verdict for the defendant, because the written contract made no reference to any profit-sharing by-law or practice of the company. The court further held that, although the plaintiff was informed of the existence of the by-law when the original contract was made, he refrained from stating that it affected him, or formed a consideration or an inducement to enter into the written contract, and that a by-law which ordinarily deals with the internal affairs of a corporation and affects the officers and stockholders thereof would not affect the plaintiff, in the absence of a showing that it formed some consideration or inducement to the plaintiff to enter the employ of the defendant. The court further held that, if any contract was entered into between the parties in reference to profit sharing, it was not to be performed within one year, and was therefore void under the statute of frauds. From a judgment dismissing the complaint on a directed verdict, plaintiff appeals.

Charles E. Hammersley, of Milwaukee, for appellant.

Olin, Butler & Curkeet, of Madison, for respondent.

BARNES, J. (after stating the facts as above).

There are a number of questions discussed in the briefs of counsel which it is unnecessaryto consider in view of the conclusion reached. The case deals with a transaction which is somewhat uncommon, but raises no novel points. While the practice initiated by the defendant is beneficial to its employés, it is not difficult to see wherein it is also beneficial to the employer. It tends to induce employés to remain continuously in the employ of the same master, and to render efficient services, so as to minimize the possibility of discharge. It also tends to relieve the employer of the annoyance of hiring and breaking in new men to take the place of those who might otherwise voluntarily quit. and to insure a full working force at times when jobs are plentiful and labor is scarce.

[1] It is argued at considerable length by the respondent that the profit-sharing plan of the defendant was initiated by means of the passage of a by-law, and that by-laws are made for the internal government and regulation of the corporation and its stockholders, and that third parties can assert no rights thereunder. The general rule contended for has its limitations; and it is not claimed that it would apply to a case where the by-law was communicated to the employé, with the design and purpose of having him act upon it, and where he in fact did rely and act upon it. To allow the employer in such a case to repudiate liability on the ground stated would come perilously near conniving at the perpetration of a fraud; and no court should say that in such a case the by-law merely affected the corporation, and not third persons. The rule contended for was not established to meet such a situation, and does not meet it. If corporations desire to have their so-called “by-laws” affect only the corporation and its shareholders, then they should refrain from exploiting them to third persons, for the purpose of inducing such persons to act in reliance thereon.

[2] We regard this by-law as being simply the offer of a reward to employés for constant and continuous service. The defendant made an offer of extra or additional compensation to any employé who performed a certain number of hours' service within a given period, provided net profits were earned, and provided the employé did not quit or was not discharged before a stated time. There is no dispute upon the point that this offer was communicated to the plaintiff when he made his original contract of employment; and the evidence tends to shows that when the contract was modified in December, 1908, the plaintiff advised the defendant that the raise made in wages was satisfactory, provided he would be permitted to share in the profits, and that he was informed that he could participate therein.

[3] “A reward is a sum of money or other compensation offered to the public generally or to a class of persons for the performance of a designated service.” 34 Cyc. 1730. A reward is a recompense or premium offered by the government or an individual...