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Truchan v. Condumex6/21/2002
e the handbook specifically disclaims any intent to create contractual or binding obligations to employees. Here, once again, the Condumex handbook specifically stated that it should not be construed as creating a contract for employment for any specified or definite period of time and that it did not guarantee benefits, working conditions, or privileges of employment.
D. Severance Pay And "Vested Rights"
Plaintiffs here, however, argue that severance pay involves a "vested right" and would assert, in the language of the Dumas opinion, that "a change in a compensation policy which affects vested rights already accrued may give rise to a cause of action in contract." Indeed, the trial court referred in its ruling below to cases dealing with accrued leave. The most important was Cain v Allied Electric & Equipment Co. Cain involved a former employee's claim to severance pay after the defendant company discharged him. Defendant Allen Electric had a written set of policies applicable to employees that included a reference to severance pay, evidently in lieu of notice of discharge, "' hen it becomes necessary to terminate the services of an office employee on a permanent basis . . . .'" Nevertheless, another section of the policies indicated that they were not "complete and [were] subject to change or amendments either through necessity created by laws or for other reasons that may come to our [Allen Electric's] attention." Further, Allen later sent out a communication to all its office employees informing them that, "Recently, management approved a permanent personnel policy for termination pay and vacation pay." As the Court described it, this communication stated a "termination pay policy." The Court stated that:
The pertinent part thereof (insofar as this litigation is concerned) provided that an "executive" having 5 to 10 years employment should be entitled to 2 months termination. It is stipulated [by the parties] that [Cain] was classified as an "executive" employee and that he had knowledge of the personnel policies of [Allen Electric] at the time they were "adopted and exhibited" to all its supervisory and office employees, including [Cain].
Plaintiff Robert Cain decided, for personal reasons, to leave his employment with Allen Electric and gave two months' notice in writing. However, only two days later, Allen Electric terminated his employment. A short time later, Allen Electric's board of directors passed a resolution declaring that Cain would not receive any severance pay, ostensibly, as Allen Electric argued in the subsequent lawsuit, because Cain had voluntarily terminated his own employment.
When the trial court awarded Cain his severance pay, Allen Electric appealed to the Michigan Supreme Court. One of the issues the Supreme Court addressed was whether Allen Electric's policies gave Cain a contractual right to severance pay. Allen Electric argued that the severance policy was "'a mere gratuitous statement of policy or intent,'" and was not enforceable. The Supreme Court, however, disagreed that the severance policy was effectively the prospect of a gift at separation from employment that could be given or withheld at the company's discretion. Quoting a variety of sources for the proposition that severance policies and other employee benefits serve the interests of employers by creating goodwill from the public's perspective, content and loyal employees, and are an easy way to clear employment rolls of individuals no longer useful, the Supreme Court held that the severance pay was enforceable under contract law. In particular, the Supreme Court concluded that the policy made an offer to employees, like Cain. Employees who accep
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