Case ID: so2d_424/html/0367-02.html
Source: Caselaw Access Project
Author: {"author": "MARVIN, Judge. \n      SEXTON, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Calvin J. CORNET, Jr., Plaintiff-Appellee, v. CAHN ELECTRIC COMPANY, INC., Defendant-Appellant.
    No. 15067-CA.
    Court of Appeal of Louisiana, Second Circuit.
    Nov. 29, 1982.
    
      Wiener, Weiss, Madison & Howell by James R. Madison, Shreveport, for defendant-appellant.
    Smitherman, Lunn, Hussey & Chastain by Richard S. Schmidt, Shreveport, for plaintiff-appellee.
    Before HALL, MARVIN and SEXTON, JJ.
   MARVIN, Judge.

This appeal presents the same legal issue raised in Langford v. Cahn Elec. Co., Inc., 403 So.2d 833 (La.App. 2d Cir.1981).

Cornet, like Langford, an employee of the appellant corporation, was paid an annual bonus and was required to contribute 70 percent of each bonus to the investment fund. Cornet quit his job and sued for the amounts he contributed to the plan.

The employer urges that we should reconsider and overrule Langford, because we did not have the opportunity to do so on a rehearing of that case, and because we “seriously misconstrued the rationale and holding of Morse v. J. Ray McDermott & Co., Inc., 344 So.2d 1353 (La.1976)

The employer does not argue here, as it did in Langford that the bonuses paid were not earned, but apparently now concedes that the bonuses, from which Cornet and Langford made the required 70 percent contribution to the plan, were earned by, and were paid to, the employee for past services rendered the employer. This is the pivotal question in our opinion.

We noted in Langford that Morse emphasized the fact that Morse was fired by his employer, but observe that Morse also emphasized that the bonus or award credited to Morse had been irrevocably set aside and that the employer was obligated to pay him the remaining portion of the amounts “awarded” Morse. The Cahn plan is different and we need not speculate what the Morse result would have been if Morse had voluntarily terminated his employment. The Morse plan can be read to say that Morse would not fully earn the award until he remained with his employer for four years after the award was made.

Professor LeVan notes the obvious distinction between this plan and the Morse plan in his most recent comment:

“We have had some problem with Morse particularly as it relates to highly compensated employees. One can read the plan in Morse to say that the bonus was not earned until completion of future employment. In Langford, however, the bonus was earned, taxed and then recon-tributed. Like it or not the Supreme Court has spoken forcefully on this issue and the Second Circuit seems to have listened. Perhaps current bonus plans should be reviewed and perhaps revised by the insertion of some vesting schedule which answers the pivotal question: when was the compensation ‘earned?’ ” Vol. 8, NO. 4, La. Estate Planner, at p. 251 (August 1982).

In Langford, we said:

“Nothing we have said here prevents an employer from designing and contributing directly to an employee retirement plan which contains the scheme of deferring compensation and vesting of credits based on longevity and continuity of service. We hold only that an employer may not pay an employee a bonus, which is taxable to the employee, and is for past services rendered, and contractually require that employee to contribute a portion of that bonus to a common fund and to forfeit that contribution if the employee terminates his employment for any reason other than death, disability, or retirement before a stated age.” 403 So.2d at p. 838.

At appellant’s cost, the judgment is AFFIRMED.

SEXTON, J., dissents with written reasons.

SEXTON, Judge,

dissenting.

The majority here again finds for a plaintiff who has voluntarily left the employment of this defendant and who then sued to obtain funds paid by him into a deferred compensation plan. In so doing, the majority relies on Morse v. J. Ray McDermott & Co., Inc., 344 So.2d 1353 (La.1976), LSA-R.S. 23:634, as well as Langford v. Cahn Elec. Co., Inc., 403 So.2d 833 (La.App. 2d Cir.1981), the first case involving this defendant.

I do not believe that Morse is sufficient authority for the finding by the majority in Langford, and thus here. A significant difference between Morse and these Cahn Electric cases is that in Morse the employee was terminated because of economic conditions. Also, though of less significance, is the apparent fact that in Morse the action of the company in paying the supplemental compensation was unilateral, requiring no action by the employee. In these Cahn cases the employees were invited to join and did so voluntarily. The purpose of the plan here is to reward continued service and to induce the employees involved to remain with the company. The employee benefits, of course, by virtue of the additional compensation. In so doing, he agrees that if he terminates his employment that he will forfeit the bonuses which have previously been paid to him and which he has, under the contract he entered, paid into the compensation fund. These bonuses, in short, are conditional from the outset upon the employee’s continued service.

The majority in Morse relied heavily on LSA-C.C. Art. 2040, noting that:

“Plaintiff in this latter respect has performed and was ready and willing to continue his employment with the company. The plan’s forfeiture clause therefore is manifestly unjust, contrary to public order and public policy, and unenforceable where sought to be applied in a circumstance where, as here, by unilateral act of the employer, the employee is prevented from performing his part of the bargain, ...” Morse, supra, at 1368. (emphasis added).

That court then noted that the public policy being enforced was LSA-R.S. 23:634 and held that when applying LSA-C.C. Art. 2040 under these circumstances:

“... that this obligor, McDermott, is not allowed under our law to defeat its obligation to pay the remaining portions of Morse’s compensation awards by preventing Morse from continuing his employment by terminating that employment without cause.” Morse, supra, at 1368. (emphasis added).

In my view, Langford, supra, is an erroneous extension of Morse as the employment there (and here) was terminated by the employee. Therefore, LSA-C.C. Art. 2040 is not applicable. The sole question, as I view it, is whether LSA-R.S. 23:634 standing alone can void the forfeiture provisions of this contract when the employee resigns of his own volition. I believe that it does not. That statute is almost 70 years old (Act 62 of 1914) and says that an employer may not require an employee to sign a contract by which the employee must forfeit wages if discharged or if the employee resigns. The key phrase is require. In this case, as in Langford, the plaintiff was not required to join the plan. They both did so voluntarily. This statute was enacted for another era and was obviously designed to protect low ranking employees from oppressive employer action.

There was nothing unjust, contrary to public order, unfair or unilateral on the part of the company. On the contrary, it seems that the unfair — and certainly the unilateral action — was taken by the plaintiff.

I respectfully dissent. 
      
      . In Morse, the employer made no contributions to the employee, but contributed directly to the plan.
     
      
      . LSA-C.C. Art. 2040. Fulfillment prevented by party bound to perform
      The condition is considered as fulfilled, when the fulfillment of it has been prevented by the party bound to perform it.
     
      
      . LSA-R.S. 23:634. Contract forfeiting wages on discharge unlawful
      No person, acting either for himself or as agent or otherwise, shall require any of his employees to sign contracts by which the employees shall forfeit their wages if discharged before the contract is completed or if the employees resign their employment before the contract is completed; but in all such cases the employees shall be entitled to the wages actually earned up to the time of their discharge or resignation, (emphasis added).