### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE April 13, 2000 Session BARBARA VARGO v. LINCOLN BRASS WORKS, INC. Appeal from the Circuit Court for Davidson County No. 99C-374 Carol Soloman, Judge

No. M1999-00734-COA-R3-CV - Filed Mar ch 13, 2003

This appeal involves a dispute between an employee a

nd her former employer over se ve ra nc e p ay. After the employee o

btained a $13,750 judgment in the Metropolitan General Sessions Court of Davidson County , the emp loyer per fect ed a de novo appeal to the Circuit Court for Davidson Co un ty. Following a bench trial, the trial court concluded that the employee had a vested right to severance pay under the employe

r’s severance policy

and awarded the employ

ee $15,262.50. The employer has appealed. We have determine d that the employer’ s severance policy contained an enforc eable

co nt ra ct ua l o bl ig at io n t o p ay s ev er an ce pa y t o e ligible employee s. In the absence of proof that the employee w as ineligible, we find that the trialcourt correctly interpreted and

applied the severance policy . Accordingly , we affirm the judgment. Tenn. R. App. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed
W IL LI AM C. K OCH , J R ., J., delivere d the opinion of the court, in which W IL LI AM B. C AIN and P ATRIC IA J. C OTT RELL , JJ., joined. Mark C. Travis, Cookeville, Tennessee, for the appellant, L incoln Brass Works, Inc. Alan D. Johnson, Nashville, Tennessee, for the appellee, Ba rbara Vargo.
OPINION
I.
In March 1988, Barbara Ann Va rgo went to work as a rece ptionist and billing clerk for Linc oln Brass Works, Inc. in its Detroit, Michiga n plant. She was an at-will employee. When Linc oln Brass Wor

ks moved it s sales office from Detroit to Nashville in 1993, Ms. Vargo moved to the new Nashville office and worked there as an office manager

and administrative assistant.
In 1997, L

incoln Brass Works terminated four employ ees as part of a reduction in force. The three employees who ha

d been working

in the Nas hville

office received severa

nce pay . In July 1998, Linc oln Brass Works terminated twenty -one more employ ees in a second r eduction in force . Ms. Vargo was the only Nashville e mployee to lose her job. None of the employee s terminat ed a s a result of this reduction in force received sever ance pay because thecompany

was in a “ cash

crunch.”1 $13,750 [s evera nce pay ] + $1,512. 50 [prej udgment interes t] = $15, 262.50. -2- According to its chief financial officer, Lincoln B rass Works “couldn’t afford severance for any

one” beca use the compan y did not know whether it had e nough funds to meet its obligations for raw materials and other direct labor costs.
In Decemb er 1998, Ms. Varg o sued L incoln B rass Works in t he Metropolitan General Sessions Court of D avidson County se eking severance pay pu rs ua nt to a c om pa ny “ se ve ra nc e p ol ic y” that had been adopted in 1 996. In J anuary 199 9, th e general sessi ons co urt aw arded M s. Var go $13,750, and Lincoln Brass Works perf ected a de novo appeal to the Circuit Court for Davidson Co un ty. Therea

fter, in M arch 199 9, Lincoln Br ass Works f

ormally rescinded its severance

po li cy. Following a bench

trial, the trial cou rt concl uded that Ms. Vargo had

a “vested right to severance pay under the facts” and

awarded Ms. Vargo sever ance pay and prejudgment interest in the amount of $15,262.50. 1 Lincoln Brass Works has appea led.
II.
The pivotal issues in the case inv olve the l egal si gnific ance and meaning of Lincoln Br

ass Works’s 1996 severance pol icy . Ms. Vargo asserts that the policy is part of her contract of employment

and, therefore, that she isentitled t o severa nce pay in accor dance with the termsof this po li cy. For its part, Lincoln Bra ss Works insists that its seve r ance policy was not a contractual obligation, and, ther

efore, that Ms. Va

rgo did not have a vested right to be paid severa nce whenshe was terminated in July 1998.
These issues ar

e purely questionso f la w because they call for the construction and interpretation of Lincol n Brass Works’s 1992 “Policies and Procedures Manual” and its 1996 “Severance

Policy.” Bec ause these are questions of law, the trial court’s interpr etat ion of these document s is not entitled to a presumption of correctness on appeal. Angus v. W estern He ritage Ins. Co. , 48 S.W.3d 728, 730 (Tenn. Ct. App. 2000). Rather, we must review the documents ourselves andmake our

own dete rmination regar ding the ir meaning and legal import. Hillsboro Plaza Enter s. v. Moon , 860 S.W.2d 45, 47 (Tenn. Ct. App. 1993).
III.
An employment relationship is essentially contractual. Hamby v. Genesco, Inc. , 627 S.W.2d 373, 375 (Tenn. Ct. App. 1981). Its terms and conditions are supplied from two sourc es – applica ble federaland state

law and the agreement of the pa rties. An employment ag reement may be written, oral, or a combination of

the two. If written, it may be memorialized in a single document or in a series o f docume

nts.
It is no t u nc om mo n for em pl oye rs to include some, but not all, of t he terms o f their agree ments regarding wag es, hours, and conditions of employment in an e mployee handbook or manual. Accord

ingly , these ha

ndbooks or

manuals may

include c ontract

ually enforceable promises on the part of the employ er. King v. TFE, Inc. , 15 S.W.3d 457, 461 (Ten n. Ct. Ap p. 1999). However, before a particular provision in an employ ee handbook or manualwill be construed to be2 Reed v. Al amo Rent-A-Car, I nc. , 4 S.W.3d 677, 687 (Tenn. Ct. App. 1999) (fi nding an e nforceabl e contrac t in a document stating t

hat it was the “entire ag reem ent of em ploym ent” an d that the emp loyer a greed to abide by al l of its terms a nd co ndition s); Hamby v. Gensco, Inc. , 627 S. W.2d at 376 (f indin g an enf

orceable cont

ract i n an employee handbookstat

ing t hat i t cont ained the employer ’s “ guarant eed polici es, pra ctic es, an d procedures” as long as the emp loyme nt relatio nship c ontinu ed).

3 Guekel v. Cumberland- Swan, Inc. , No. 01A0 1-9410-CV -00482, 199 5 W L 3865 58, at *3 (Tenn. Ct. App. June 30, 199 5) (N o T enn. R . App . P. 11 app lication filed ); Gaines v. Response Graphics , Inc. , No. 01A01- 9204-CV-00181, 1992 WL 319441, at * 2 (Tenn. Ct. App. Nov. 6, 1992) (No Tenn. R. App. P. 11 app lication filed ); Crig ger v . Colu mb ia Power & Water Sy s. , No . 01A 01-9 001 -CV -000 36, 1 990 W L 12 157 0, at *2 (Te nn. Ct. App . Aug. 2 4, 19 90) , perm. app. denied (T enn. Ja n. 28 , 199 1).

4 King v. TFE, Inc. , 15 S.W .3d a t 461 -62; Rose v. Tipton Cou nty Pub. Wo rks Dep’t , 953 S. W.2d at 693- 94; Bringl e v. Methodis t Hosp. , 701 S.W .2d 6 22, 6 24 ( Te nn. Ct. A pp. 1 985 ). -3- contractua lly

binding, the rele

vant lang uage in the manua

l or handb ook, view ed in light of all t h e document s pertaining to the contract of employment, must reflect the employer’s intent to be bound by the particular provision. Rose v. Tipton County Works Dep’t, 953 S.W.2d 690, 6 92 (Tenn . Ct. App. 1997 ); Smith v. M

orris , 778 S.W.2d 857, 858 (Tenn. Ct. App. 1988).
The courts will construe provisions in an em ployee h andbook or manual stating that the employer either g uarantees or unequivocally commits to p

rovide a particular bene

fit or condition of employment

to be contractually

binding on the e mpl oyer. 2 Howeve r, the courts will decline to construe an employ

ee hand book or ma

nual to contain enf

orceab le contr

actu al obligat ions if the handbook or manual states that it is not intended to be a contract3 or that the provisions in the manual are subj ect to uni lateral

chang e by

the employe

r without t

he employ

ee’s consent. 4
Whether an employee

handbook or manual contains contractually enfor ceable te rms depends upon the specific language used in the h andbook or man ual. Rose v. Tipton County Pub. Works Dep’t , 953 S.W.2d at 692. The interpretive rules used to determine what the lang uage means are the sameas the rules usedto construe contracts. Accordingly , the courts will focus on the four corners of the manual or handbook and the other related employ ment docu

ments and

will const

rue thes e document s as writt en. They will also give the terms in the documents their natural and ordinary meani ng, Williams v. Maremont Corp. , 776 S.W.2d 78, 80 (Tenn. Ct. App. 1988), and will construe these terms in the context of the entire agreement.
The courts will not make a new contract for parties who have spoken for themselves, Petty v. Sloan , 197 Tenn . 630, 640, 277 S.W.2d 35 5, 359 (19 55), and wil l not relieve

parties o f their contractual obligations simply because these obligations later prove to be burdensome or unwise. Boyd v. Comdata Network, Inc. , 88 S.W.3d 203, 223 (Tenn. Ct. App. 2002). Thus, when called upon to interpre

t a contract, the courts will not favor either party. Marshall v. Jackson &Jones Oils, Inc. , 20 S.W.3d 678, 682 (Tenn. Ct. App. 1999). However, when a contra ct contains ambiguous or vague provision s, these provisions will be construed against the party responsible for draf

t ing them

. Hanover Ins. Co. v. Haney , 221 Tenn. 148, 153-54, 425 S.W.2d 59 0, 592-93 (1968); Realty Shop, Inc. v. RR Westminster Holding, Inc

. , 7 S.W.3d 581, 598 (Tenn. Ct. App. 1999).
Neither the 1992 Policies and Procedures Manual nor the 1996 Seve

rance Po licy

explicitly states that Lincoln Brass Works gua rantees thepayment of

severance pay

or any other

benefits. Nor5 An adhe sion co ntract is sim ply a standar d print ed contra ct pre pare d by o ne pa rty to be signed by the p arty in

a weaker bargaining positi on who has lit tle choice about the term s of the co ntract. Buraczy nski v. Eyr ing , 919 S. W.2d 314, 320 (Tenn. 1996) (charact erizi ng an adhesi on contract as a st andardized contract offered on an essenti ally “ take it or leave i t” basis wit

hout affording a reas onable oppo rtunit y to bargain).
6 The Seve rance Policy states that a discharge for cause “shall be for reasons determined by Company management an d shallincl ude, but not be li mited t o, unsat isf actory performance and misconduct .” -4- do they contain a specific disclaime

r that the y a re not inte nded tobe contracts or that they are subject to unilater

al revisi on by

Linc oln Bra ss Works. Th e Severa nce Policy st

ates tha t it “is des igned to provide a period of income after termination to eligible employees” a nd that
Severancepay

ments will

be paid at the rate of one half month’s salary for each full ye ar of employme nt, as of the termination date, with a maximum payment of six months (deductions will be made as required by

law).
It also states that Lincoln Brass Works’s management “has sole discretion to deter mine eligibility for severance pay .”
In the absence of more general langua ge regarding

Lincoln Brass Works’s contractual intentions regar

ding the benefit s offered

in it s P ol ic ie s a nd Pr oc ed ur es Ma nu al or Se ve ra nc e P ol ic y, the most sign

ificant p hrase ill uminating

what L incoln B rass Work s had in mi nd with re gard to severance pay is the statement “[s]everanc e payments will be paid.”The choiceof the phr ase “will be paid” co

uldhave one

of two mea

nings in t his conte xt. First, b ecause

the Policies and Procedures Manual and Severan c e Policy are “ adhesion contracts,” 5 it could reflect Lincoln Br ass Works’s obligation to pay sever

ance benefits. Second, it could express a fu ture contingency . B RYAN A. G ARNER , A D ICTIONARY OF M ODERN LEGAL U SAGE 941-42 (2d ed. 1995). Contracts of adhesion are construed again st

their drafters. Griffin v. Shelter Mut. Ins. Co. , 18 S.W.3d 195, 199-200 (Tenn. 2000). Accordingly , we construe the Severance Policy against Lincoln Br

ass Works and find that it embodies an enforceable obligation to pay severance benefits to “eligible e mployees.”
The discreti on that L

incoln B rass Work s retaine d in the Severance Policy did not involve determining whether or not to pa y s everance pay but rather involved determining whether a particular employee wa s “eligible” to receive sever ance pay . According to the policy , an employee’s eligibil ity to receive severance pay

did notdepend on the company’s c ash flow but rather on whether the employee ha

d voluntarily terminated his or her employment or had bee

n “discharged

for cause.” 6 T hus, Linc oln Bra ss Works’s r eserva tion of its p

rerog ative to d

etermine whether a particular employee was eligible to receive se veranc e pay

is not incons istent with

our conc lusion tha

t eligible employeeshad a vested

right to receive severance pay

from the time the policy wa s adopted until the time it was formally rescinded.
The cases relied on by

Lincoln Brass Works do not support its argument that retaining the discretion to determine wh ether a n emp loyee is eligible to receive severance pay permits an employer to deny sever

ance pay to otherwise eligible employees. MacDougal v. Sear s, Roebuck & Co. , 624 F. Sup

p. 756 (E. D. Tenn. 1985) invo lves a n employee who soug

ht severance pay

even7 Earlier in it s opinion, thi s court noted that the emp loyees were d ischarg ed w hen K ellwoo d C omp any so ld its plant as a go ing co ncern to Ac tive G enera tion, I nc . and that many of t he discharged Kellwood emp loyees were imme diately hir ed by Active Ge neratio n, Inc. with out an y interrup tion in the ir work

. Abbott v. Kel lwood Co. , 1 98 5 WL 661896, at

*1.
8 Th is court also stated th at the “p olicy” of t he l abor con tra ct “ indi cate d” th at t here was n o meeti ng of

the minds with respect

to sever ance pay becaus e t he deci sion to gi ve se veran ce pay was “ uni lat eral ,” t he empl oyees “di d not
con tribute to secur e the r ight ,” and t he “res ervati on is abs olute. ” Abbott v. Kel lwood Co. , 1985 WL 661896 , a t * 4. Bec ause the opin ion does not set out the di sputed s everance pay section, we cannot determi ne reliably what language prompted the conclusion t hat decisions regardi ng severance pay were unilat eral or that t he res ervat

ion [ of the obl igat

ion to pa y severa nce p ay] was abso lute.

9 We declin e to fol low Ab bott v. Kell wood Com pany to the extent that its outcome may hav e been predicat ed
on t he compan y’ s re serv ati on of t he ri ghtto dec ide wh ethe r an e mploy ee was eli gibl e to r ecei ve se veran ce pa y. A n emp loyer’s reserv ation o f the right to d eterm ine an e mplo yee’s eligib ility to receiv e an em ploym ent ben efit does not
nece ssarily mean that

eli gible employees do not have an enf

orceable cont

ractua l right to tha t bene fit. Und er the fac ts in t he Abb ott

v. Kel lwood opinion, the employ ees seeking s everance pay were not elig ible to receive it because they alread y had n ew em ploym ent lined up. -5- thou gh he had been terminated for “wro ngful conduct.” The United States District Court gra nted the employer’s motion for summary judgme nt and dismissed the claim because (1) the personnel manual stated that severance pay would not be given to employ ees terminated for willful misconduct and(2) the ma

nual itself specif

ically disclaimed providing employ ees “an y a dditional r

ights to employment or employ

ment benefits.” MacDougal v. Sears Roebuck & Co. , 624 F. Supp. at 759.
Abbott v. Kellwood Co. , Gibs on Law. No . 1, 19 85 WL 66 1896 ( Tenn. Ct. A pp. Au g. 23 , 1985) involved a group of employ ees who were discharged whe n a manufacturing plant was sold as a going concer n to another

co mp an y. T he em pl oye es fi le d s ui t s ee ki ng va ca ti on an d s ev er an ce pa y. The tr ia l c ou rt de te rm in ed th at th e l ab or co nt ra ct in di ca te d t ha t s ev er an ce pa y “ was intended only to be paid w

here the employ ees did not have new employ ment lined

up” and th at e ach emp loyee suing for seve

rance p ay had, in fa

ct, been hired by th e pur chaser

of the pla

nt. 7 Because the employeesseeking severance pay had “new employ

ment lined up,” this court concluded that the trial court “had a reasonable basis upon which to deny seve

rance pay .” Abbott v. Kellwood Co. , 1985 WL 661896, at *3. 8
In Abbott v. Kellwood Company , we co n cluded th at the emp loy ees coul d not “re asonably rely on the promise of severance pay except in the discretion of the company .” Abbott v. Kellwood Co. , 1985 WL 661896, at *4. 9 Based on the specific langua ge in the 1996 Severance Policy , we findthat Linc oln Brass Works’s employees could reasonably rely on the compa

ny’s promise

of severance pay except when the com

pany, i n its discr

etion, de termined that an e mployee was not eligib le to it. Under the terms of the Severance Policy , an employee ’s eligibil ity to rece ive severance pay

depended only on the circumstanc es surrounding his or her termination. Employees who quit voluntarily or who were terminated for cause we re no t eligible to receive severance pay. Because this record contains no evidence that Ms. Vargo quit voluntarily or was terminated for cause, we c onclude that the trial court had a reasonable factua l basis for determining that she was entitled to severance pay under Lincoln Bra ss Works’s Severance Policy.-6-

Written contracts whose terms are plain and unambig uous should be enforced

accordingto their plain ter ms. Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc. , 521 S.W.2d 578, 580 (Tenn. 1975); Pitt v. Tyree Org. Ltd. , 90 S.W.3d 244, 252 (Tenn. Ct. App. 2002). Ac co rd in gl y, the post-contracting conduct of the parties does not figure prominently in the analysis when a

court is calledupon to co nstrue a nd giv e effect to an unambiguous contract. However, whe n a particular contractual provision is ambiguous, the “rule of practical construction” pe rmits the courts to use the contracting parties’ conduct a nd stateme

nts regarding the disputed provision as g uides in construing andenforcing the contract. Fidelity-Phenix Fire Ins. Co. v . Jacks on , 181 Tenn. 453, 466-67, 181 S.W.2d 625, 631 ( 1944); American Barge Line. Co. v. Jones & Laughlin SteelCorp. , 179 Tenn. 156, 173-74, 163 S.W.2d 50 2, 509 (19 42); Willia mson County

Broadcas ting Co. v. Intermedia Partne rs , 987 S.W.2d 550, 552 (Tenn. Ct. App. 1998).
We have alr

eady noted tha t the Seve rance Po licy ’s use of

the phra se “[s]eve

rance p ayments will be pa id ” i s a mb ig uo us be ca us e i t c ou ld co nn ot e e it he r a n o bl ig at io n o r a fu tu re co nt in ge nc y. Our construction of this language as connoting a contractual obligation

to pay severance pa

y to eligible employees is buttressed by the evidence regarding

Lincoln Brass Works’s interpreta tion and application of the clause after its adoption in 1996. Prior t o t he 1998 r eduction in force , Linc oln Brass Works had consiste ntly paid severance benefits to employ ees who had not quit voluntarily or who had not

been terminated for cause. Business e mployers are

rarely gratuitous when

it comes to their employ ees’ sa lary and ben efits. Accordingly , the company’s pr actice of consistently

paying eligible employees seve

rance pay fairly re flects its understanding that it was contractually obligated to do so.
IV.
We affirm the judgment and remand the ca se t o the trial court for fur ther p roceed ings con sistentwith this opinion. We tax the costs of this appeal to Lincoln Brass Work s, In c. and it s surety for w

hich execution, if necessary , may issue.

_____________________________ WILL IAM C. KOCH, JR., JUDGE