Opinion
No. 4802.
Argued January 5, 1960.
Decided February 29, 1960.
1. Where the defendant employer maintained a profit-sharing plan for the benefit of the employees, by the terms of which any interest in such plan which any employee may have shall terminate upon cessation of his employment, the plaintiff employee by his continued employment with knowledge of the terms and conditions of the plan accepted its provisions and his rights to share thereunder were subject to the conditions of eligibility therein provided.
2. Hence, the rights of the plaintiff employee to share in the undistributed profits under the plan were extinguished by the terms thereof upon his discharge from employment prior to the date of distribution where there was no evidence of fraud or bad faith on the part of the employer.
ASSUMPSIT, to recover a portion of the profits of the defendant company under a profit-sharing incentive plan established by the defendant on September 1, 1955. The terms of the plan were set forth in printed form and distributed to all of the employees, including the plaintiff.
Under this plan the defendant's fiscal year (September 1 — August 31) is divided into four quarters and at the end of each quarter the amount of profits is estimated and one-half of that amount is distributed to eligible employees. The undistributed half of the estimated profits is placed in reserve until the close of the fiscal year when actual profits are determined and a previously determined percentage thereof, less payments already made, is distributed among eligible employees in proportion to their respective earnings.
The general purposes of the plan were described as follows:
"The Company desires to encourage and promote in its employees their strongest efforts and interest in the successful operation of its business, their loyalty to the Company and especially their increased efficiency in their work."
It was further emphasized "that this profit-sharing plan is no Santa Claus. We are giving you, the employees, nothing, and we don't want you to feel that we ever are. We are simply paying you for values which we know we will receive." Among other provisions of the original plan it was provided that any eligible employee who resigned voluntarily or was dismissed between June 1 and August 31 would be ineligible "to receive the balance of his share which otherwise would have been due him on or about November 1." This provision was subsequently amended on November 30, 1956, by striking out the words "between June 1 and August 31."
The company reserved to itself ". . . the exclusive right to interpret the plan and to decide any and all matters arising thereunder or in connection with the administration including, but not limited to question regarding, the eligibility of any persons participating in the plan . . . and its determinations . . . shall be conclusive and binding upon all persons having or claiming to have any right" therein.
It was further provided: "Notwithstanding anything to the contrary contained herein, any right or claim to any interest in the profit sharing fund which any employee may have shall terminate when he is no longer an employee of the Company."
Trial by the Court (Grimes, J.) who found a verdict for the plaintiff in the amount of $193.46. The defendant's exception to the denial of its motion to set aside the verdict on the grounds that it was against the law, the evidence, and the weight of the evidence was reserved and transferred. Other pertinent facts appear in the opinion.
Bernard I. Snierson and John P. Chandler (Mr. Chandler orally), for the plaintiff.
Harold E. Wescott and Peter V. Millham (Mr. Millham orally), for the defendant.
The plaintiff was employed by the defendant on a full-time basis from June 1, 1955 to November 1, 1957, when his employment was "terminated" by the defendant. He had thus been fully employed through the last quarter of the fiscal year which ended August 31, and he was eligible to share in the final distribution which was made on or about November 20, 1957, unless he was precluded by his discharge on November 1, 1957.
The contention of the defendant is that since its officers reserved to themselves the exclusive right to interpret the plan, including the eligibility of any employee thereunder, payment to the plaintiff would be contrary to the purpose of the plan and every applicable section thereunder since he was not an employee on November 20 when final distribution was made.
Although authorities directly in point are not numerous, it has been held that where an offer sufficiently definite to permit ascertainment of its terms has been made to an employee promising a share in employer's profits, an enforceable contract is created between the parties in accordance with the terms of the offer, provided such employee accepts the same by continuing his employment.
Some of the authorities permitting recovery have held the agreement for a bonus or profit-sharing too vague to enforce but have permitted recovery in quantum meruit. Anno. 18 A.L.R. (2d) 211. See Petersen v. Pilgrim Village, 256 Wis. 621; Van Reitzenstein v. Tomlinson, 249 N.Y. 60. In other cases where the plaintiff was wrongfully discharged, recovery was allowed. Roberts v. Mills, 184 N.C. 406; George A. Fuller Co. v. Brown, 15 F.2d 672 (4th Cir. 1926). However, the question of fraud or bad faith is not before us since the parties agree that plaintiff was not discharged for the specific purpose of depriving him of whatever rights he had acquired in the profits.
The plaintiff was aware of the terms and conditions of the plan, and his continued employment signified an acceptance of its terms. Whatever rights may have accrued before his discharge were subject to the conditions of eligibility to participate as set forth in the plan. In the absence of a showing of fraud or bad faith, the plaintiff must be held to the terms thereof. See anno. 28 A.L.R. 346; note 70 Harv. L. Rev. 490, 495. "It is difficult for plaintiff to extricate himself from the conditions of employment which he has voluntarily assumed, for even though the forfeiture provisions seem harsh, we can only interpret the contract which the parties have made." Muir v. Leonard Refrigerator Co., 269 Mich. 406, 408. See also, Coleman v. Graybar Electric Co., 195 F.2d 374 (5th Cir. 1952); Hurd v. Ill. Bell Tel. Co., 136 F. Supp. 125 (N. D. Ill. 1955), affirmed 234 F.2d 942 (7th Cir. 1956). It is our view that plaintiff has failed to qualify in accordance with the terms of the plan, since his rights were extinguished when his employment terminated. Harding v. Montgomery Ward Co., (Ohio App. 1944) 58 N.E.2d 75; Montgomery Ward Co. v. Guignet, 112 Ind. App. 661; Fontius Shoe Co. v. Lamberton, 78 Colo. 250.
Judgment for the defendant.
All concurred.