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Forty-eight Insulations, Inc. v. Acevedo

OPINION FILED JANUARY 8, 1986.

FORTY-EIGHT INSULATIONS, INC., PLAINTIFF AND COUNTERDEFENDANT-APPELLEE,

v.

ANTONIO ACEVEDO ET AL., DEFENDANTS AND COUNTERPLAINTIFFS-APPELLANTS (DON W. PETERSON ET AL., DEFENDANTS).



Appeal from the Circuit Court of Kane County; the Hon. Paul W. Schnake, Judge, presiding.

JUSTICE REINHARD DELIVERED THE OPINION OF THE COURT:

Defendants and counterplaintiffs, 25 former employees of Forty-Eight Insulations, Inc. (Employees), appeal from a judgment of the circuit court of Kane County granting plaintiff-counterdefendant's, Forty-Eight Insulations, Inc. (Forty-Eight), requested relief in its declaratory action denying Employees' claim for separation pay under Forty-Eight's separation pay policy.

Employees raise the following issues on appeal: (1) whether the trial court erred as a matter of law in finding that the language of Standard Practice Bulletins D-20 issued in 1974 and 1977 must be interpreted as discretionary rather than mandatory; (2) whether the finding by the trial court that in actual practice the policy was administered in discretionary fashion was against the manifest weight of the evidence; (3) whether the trial court erred as a matter of law in finding that the separation of Employees occasioned by cessation of business by Forty-Eight was not contemplated in Forty-Eight's separation pay policies; and (4) whether the trial court erred in admitting evidence offered by Forty-Eight to show its intention and understanding as to the meaning and application of the Standard Practice bulletins regarding separation pay.

Employees are all former full-time managerial personnel with Forty-Eight. Four members of Employees, however, were not classified as "exempt salaried personnel" under the separation pay policy, but were hourly wage personnel. Whether these four were entitled to severance pay, as well, was disputed below, but is not an issue on appeal. Forty-Eight is an Illinois corporation which was in the business of manufacturing insulation and at one time manufactured items which contained asbestos. Forty-Eight ceased manufacturing operations on May 31, 1982. All Employees became employed by Fibrex, Incorporated (Fibrex), on June 1, 1982.

On August 30, 1982, Employees, through their attorneys, sent a letter to Forty-Eight demanding that the separation pay due and owing them under the law and under their employment contracts be paid to them immediately. Forty-Eight apparently did not respond to this letter, but instead, on September 2, 1982, filed a complaint for declaratory judgment requesting the circuit court to declare that it had no duty to pay involuntary separation pay to Employees in connection with Forty-Eight's termination of Employees and its cessation of manufacturing activities effective June 1, 1982. Employees answered Forty-Eight's complaint, responding that they are entitled to separation pay pursuant to the provisions of certain policy bulletins distributed by Forty-Eight, and additionally, asserted an affirmative defense stating that Forty-Eight is estopped from denying its mandatory obligation to make severance payments to Employees. Forty-Eight replied that it had no mandatory obligation to pay severance pay to any of the Employees. Employees counterclaimed for separation pay and their attorney fees.

The following information was adduced at a bench trial through exhibits and testimony. Employees operated under an oral employment contract which incorporated an Employee Handbook published in 1980 that described the various activities and benefits involved with employment at Forty-Eight. The handbook also indicated that it did not include all the policies and procedures of the company, and any additional company policies or procedures would control over provisions in the handbook.

The handbook did not have a provision concerning separation pay. On March 28, 1974, however, Forty-Eight issued Standard Practice Bulletin D-20 entitled "Involuntary Separation-Exempt Salaried Personnel," which included the following provision:

"The company recognizes the importance to the welfare of employees involuntarily separated and feels a responsibility to the individual in these circumstances, so the following procedure has been established.

1. The company will pay the individual who is separated at the company's option in accordance with the following schedule, either in a single lump sum payment or semi-monthly for the duration of the separation period."

The schedule of payment was set forth therein. There were also provisions concerning the payment of earned bonuses, the continuation of an individual's group insurance coverage, the payment of retirement benefits, and the payment for accrued vacation time. This was to replace a similar policy issued on January 21, 1974, which could not be located and produced for trial. The exact language of that policy is unknown.

On August 8, 1977, Forty-Eight issued a new Bulletin D-20 entitled "Involuntary Separation-Exempt Salaried Personnel" purporting to cancel the one issued on March 28, 1974. This policy was substantially the same as the 1974 policy except that it no longer required Forty-Eight to continue an individual's group insurance coverage, but only allowed for it. In addition, the 1977 bulletin did not contain an introductory "purpose" paragraph, but instead immediately began with the following provision:

"1. A manager may authorize payment to an individual who involuntarily is separated at the company's option, only in accordance with the following schedule, either in a single lump sum payment or semi-monthly for the duration of the separation period."

The schedule of payment, however, remained the same.

Prior to the issuance of the 1977 Bulletin D-20, Forty-Eight issued Bulletin D-22 on February 16, 1977, setting forth its "General Policy on Compensation." This included a reference to separation pay as being a form of compensation for the individual's contributions to the welfare of the company. Both the 1977 Bulletins, D-20 and D-22, were reviewed and ...


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