Written by attorney Randy T. Enochs

Wisconsin Court of Appeals Finds Employee Not Entitled to Severance Pay Under Employee Handbook

I was really looking forward to this decision because it had the potential for the Wisconsin Court of Appeals to address the issue of employee handbooks creating contracts and severance agreements but the Court of Appeals was able to uphold the circuit court's grant of summary judgment in favor of the employer on the one, less-interesting issue. The plaintiff-appellant, Bill K. Edwards, was employed by InSTEP, Inc. as a product manager in Mendota Heights, Minnesota. In March 2003, Pacific Cycle of Madison, Wisconsin, acquired InSTEP. Edwards remained as a product manager for Pacific Cycle after the acquisition. After he left Pacific Cycle in November 2003, Edwards learned that the Pacific Cycle-InSTEP Purchase Agreement contained a clause addressing employee severance rights. Paragraph 4.1.d. stated: (d) Employee Severance Matters. In the event that at any time during the one year period from the Closing Date until the first anniversary of the Closing Date (the "Covered Period") the Company terminates the employment (other than a termination for Cause) of an employee of the Company who was an employee of the Company as of the Closing Date, or in the event any such employee resigns for Good Reason during such one year following the Closing, then the Company shall pay to such employee a lump sum amount (subject to applicable tax withholding requirements) equal to the amount set forth for such employee in Schedule 4.1(d) hereto. "Good Reason" is defined in the Purchase Agreement as follows: "Good Reason" means any of the following: (i) a reduction in the cash compensation of the employee; (ii) a material reduction in the benefits provided to the employee (other than pursuant to an organization wide change in benefit programs by Pacific); (iii) a material demotion in responsibilities or duties of the employee; or (iv) a required relocation to a place other than a location within 50 miles of the location at which the employee performed substantially all of his or her duties immediately before the required relocation. Edwards ended up landing a new job in Arizona after not receiving a "promotion" he thought he was promised but claimed he was entitled to severance pay under the quitting for "good reason" clause of the handbook. When Pacific Cycle refused to pay Edwards a severance, he sued in St. Croix County Court and the employer moved for summary judgment claiming, inter alia, that Edwards did not quit for "good reason" as the facts surrounding his departure were undisputed. The circuit court agreed and granted the motion for summary judgment and the Court of Appeals agreed with the circuit court's findings and decision, thus avoiding the need to delve into the other issues on appeal ( (1) he is a third-party beneficiary of the Purchase Agreement's severance provisions, (2) he satisfied the conditions to receive severance from Pacific Cycle, (3) the circuit court should not have dismissed his unjust enrichment and quantum meruit claims that he had a right to receive severance benefits, and (4) the circuit court should not have dismissed his claim that Pacific Cycle defrauded him of his right to severance benefits.)

Additional resources provided by the author

Free Q&A with lawyers in your area

Can’t find what you’re looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer