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Kulins v. Malco





Appeal from the Circuit Court of Cook County; the Hon. Albert S. Porter, Judge, presiding.


In a class action suit seeking adjudication of employee termination allowances, plaintiffs, ex-employees of defendant corporation (Malco), moved for a summary judgment as to their right to recover severance pay under Malco's original severance pay policy (1967 policy) rather than under its modified policy (1975 policy) which acted to substantially decrease severance pay benefits. After numerous hearings, the trial court certified the class and held, as a matter of law, that the terms of the 1975 policy were to be applied prospectively only, commencing February 1, 1975, and the plaintiffs were entitled to severance pay benefits earned under the 1967 policy prior to that date.

On appeal, Malco contends that: (1) the trial court erred in granting plaintiffs' motion for summary judgment on the ground that plaintiffs did not have a vested right to severance pay under the 1967 policy; (2) the trial court erroneously certified the class; and (3) in the alternative, the trial court erred in granting summary judgment as to class members, George Walter and Fred Faje on the ground that genuine issues as to material facts exist regarding their claims for severance pay. For the reasons that follow, we affirm the judgment of the trial court as to plaintiffs' right to severance pay governed by the terms of the 1967 policy and as to class certification, and reverse its judgment to George Walter and Fred Faje.

On March 14, 1967, Malco's predecessor corporation, Malco Manufacturing Company, Inc., instituted a severance pay policy covering all salaried-exempt employees who had completed 90 days of service. This policy provided, inter alia, that upon termination of employment for the reasons therein stated, an eligible employee would receive one regular week's pay (40 hours) for each complete year of service. On January 28, 1981, Microdot purchased the assets and assumed all the liabilities of Malco Manufacturing Company, Inc., which formally dissolved in April 1971. Five months later, the company's name was changed to Malco, a Microdot Company, Inc. On October 1, 1972, Malco issued a modified severance pay policy which decreased severance pay benefits to one week's pay for up to 12 months' service and two weeks' pay for over 12 months' service. However, as the following illustrates, the modified benefits did not act to decrease benefits earned under the 1967 policy:

"The current severance pay policy (effective October 1, 1972) will not apply to employees retaining two weeks or more of severance pay eligibility under the old policy.

Maintenance of the previous Malco/Mandex severance policy is intended as recognition of the benefits accumulated by long service employees.

Should new Malco/Mandex benefits be provided which will supersede this former policy (policy prior to October 1, 1972), it may be terminated at the discretion of management."

Effective February 1, 1975, Malco's severance pay benefits were further modified so as to provide:

"From six months to one year of service - one week At least one year but less than five - two weeks At least five years but less than ten - three weeks At least ten years but less than twenty - four weeks More than twenty years - five weeks"

In addition, the 1975 modification contained the following provision:

"Previous severance policy and all amendments relating thereto for Malco Chicago and Mandex are hereby rescinded."

Proper notification of the modifications was sent to all eligible salaried-exempt employees, including plaintiffs.

Within two weeks after the 1975 policy was put into effect, Malco began laying off large numbers of employees. With one exception, members of the plaintiff class were laid off during the eight-month period from February 1975 through October 1976. All were paid severance pay benefits pursuant to the provisions of the 1975 policy, i.e., a maximum of five weeks' pay. Plaintiffs allege that they were improperly deprived of accrued severance pay benefits earned during the term of the 1967 policy, which was in effect as to them until shortly before their termination. Plaintiffs do not contend that the 1975 modification was ineffective. Rather, they assert that its provisions cannot be applied retroactively to divest them of their rights to severance pay accrued during the term of the 1967 policy.

In November 1975, plaintiffs filed their class action suit seeking adjudication of employees' termination allowances. Thereafter, the trial court denied defendant's motion to dismiss, certified the class, and found that its members were entitled to severance pay pursuant to the provisions of defendant's 1967 policy. However, the trial court retained jurisdiction to consider and rule upon questions relating to notice to the class, computation of liability and related matters. Defendant's ensuing appeal was dismissed for lack of jurisdiction, predicated on the fact that matters of substantial controversy remained to be resolved by the trial court. (Kulins v. Malco, Inc. (1979), 79 Ill. App.3d 982, 398 N.E.2d 1144.) Plaintiffs then filed an amended motion for judgment on the pleadings, seeking: (1) a limited expansion of the class; (2) computation judgment pursuant to the previous findings; (3) prejudgment interest; and (4) costs and reasonable attorney fees. Defendant responded by filing its motion for rescission of orders previously entered and for summary judgment in its favor. The trial court denied plaintiffs' motion to modify the class as well as defendants' motions for rescission and for summary judgment. Plaintiffs then moved to amend the complaint so as to include a small number of additional employees. The motion was granted and the expanded class was certified on April 1, 1981, as:

"Each and every salaried non-exempt employee * * * employed by defendant on or about October 1, 1972 and subject to the terms of defendant's 1967 severance pay plan ("plan"), and the modifications of the plan which were not held void or unenforceable by the Court, and who was severed by defendant from its payroll after that date, but not ...

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