Feb. 8, 2010 – Although an at-will employee may be fired for virtually any reason, the employer cannot terminate the employee as a way to avoid paying benefits that had already accrued.
In Phillips v. U.S. Bank, 2009AP246, the Wisconsin Court of Appeals remarked that no prior decision had dealt with this particular set of facts. When Deanne Phillips worked for U.S. Bank in various financial planning positions, Phillips had participated in a benefit plan under which she would no longer qualify for benefits if fired. When the bank fired her for an alleged breach of the company’s code of ethics, Phillips alleged the true motivation was to avoid paying her those benefits that had already accrued.
The Feb. 2 opinion authored by Judge Ralph A. Fine faulted the circuit court for granting summary judgment to the bank on the theory that “termination alone precludes her entitlement to the bonus.” The circuit court reasoned that it did not have to resolve a factual dispute as to whether or not Phillips violated the ethics code.
Reviewing the evidentiary record, the court of appeals found that a jury should have decided whether Phillips truthfully denied that a bank official had ever asked her what she knew of a co-worker’s plans to start work for a competitor, taking clients with him. The bank alleged that Phillips was asked and answered falsely.
Applying principles of agency law, the court of appeals said Phillips is entitled to benefits she had already earned if a jury agreed with Phillips and found the firing was merely an effort to escape liability for payment. The court cited Leen v. Butter Co., 177 Wis. 2d 150 (Ct. App. 1993), which resolved a dispute over sales commissions in accordance with Restatement (Second) of Agency sec. 454. “[W]hen the agent accomplishes the result for which he or she was retained a principal cannot avoid paying commissions by merely terminating the agency,” the Leen court held.
The court of appeals acknowledged the bank’s point that there is no “duty to terminate in good faith,” following Brockmeyer v. Dun & Bradstreet, 113 Wis. 2d 561 (1983). But the court observed that “the requirement that parties act in ‘good faith’ inheres in every contract and, therefore, an employer must comply in good faith, with its ‘contractual obligations.”
“Here, U.S. Bank contracted to pay employees benefits under the Plan so long as the employees fulfilled the Plan’s prerequisites and were employed when payment of those benefits were due,” the court wrote. “As we have seen, U.S. Bank does not contest that Phillips fulfilled the Plan requirements. Under Leen, U.S. Bank cannot avoid paying Phillips benefits that accrued under the Plan if it fired her in order to not pay her.”
The bank unsuccessfully argued that Leen should not apply in this case because the benefits in question should be considered a “bonus,” and not a “commission.” However the payments for past performance are characterized, the court said the terminology was immaterial. “The Plan payments could, therefore, be characterized with equal accuracy as a ‘bonus’ for a job well done, or as a ‘commission’ for work well fulfilled,” the court wrote. “Here, at least, this is a difference between twilight and dusk.”
