Opinion ID: 2612203
Heading Depth: 1
Heading Rank: 2

Heading: 544 vacation entitlement on termination

Text: 544.1 Dismissal for Cause 544.11 No vacation pay. 544.2 Dismissal and Release []544.21 An employee who is released or dismissed for reason other than cause as explained in 543.11 with vacation time earned but not yet taken, will be paid for that time. 544.3 Resignation []544.31 If an employee resigns with vacation time earned but not yet taken, he/she will be paid for that time, provided proper notice of intent to resign is given as explained in 543.43. Both parties moved for summary judgment. The trial court found that the requirement that an employee be employed on his anniversary date was a condition precedent to his entitlement to vacation for that year and granted the employer's motion for summary judgment. An employer is free to set the terms and conditions of the work and of the compensation and the employee may accept or reject those conditions. There is no question that this employment contract was terminable at will by either party at any time. Neither party claims that this contract is ambiguous, and we agree that it is unambiguous. The employment contract itself will control the employee's right to vacation. Sabin v. Willamette-Western Corp., 276 Or. 1083, 557 P.2d 1344 (1976). We find that a fair reading of this contract reveals that if an employee is terminated before his anniversary date, even though his discharge is not for cause, he has earned no vacation time for the year, and the employer does not need to pay wages in lieu of vacation time for the full year or on a pro rata basis. An employee is entitled to a paid vacation or wages in lieu of vacation only if he is employed on his anniversary. If the phrase and an employee does not earn vacation on a pro rata basis had been inserted into this contract, it would not change the contract in any respect. [1] This holding is consistent with Rose City Transit v. City of Portland, 18 Or. App. 369, 525 P.2d 1325 (1974). In that case, the Court of Appeals found that when the business was sold, employees who had not met the requirements of a pension plan in terms of age and service requirements were not entitled to pension benefits on a pro rata basis. Those requirements were correctly interpreted as conditions precedent that must have been met before the employer was obligated to provide pension benefits. We modified this case on a separate issue and did not disturb this holding. Rose City Transit v. City of Portland, 271 Or. 588, 533 P.2d 339 (1975). We expressly approve it now. The state relies heavily on Thompson v. Burr, 260 Or. 329, 490 P.2d 157 (1971). In Thompson the employment contract stated that if an employee worked throughout a calendar year, and was still employed on April 15, he would be eligible for a bonus based on the gross earnings of the previous calendar year. That employer terminated the employment of the worker on March 12. We held that the employee nevertheless was entitled to the bonus because he had earned it by his employment through the preceding calendar year. The requirement that he be employed on April 15 was not a condition precedent to earning the compensation, but rather a payment date. Also in Thompson there were allegations and findings that the employee was not terminated for bona fide business reasons. Our present case would be analogous to Thompson if Hoglen had been discharged after his anniversary date, and had not yet taken the vacation time he had earned by being employed on his anniversary date. The state argues that the vacation plan is a unilateral employment contract which cannot be revoked after the offeree has begun performance. It contends that this is identical to the hypothetical situation in which A offers B $10 to cross the Brooklyn Bridge and attempts to revoke or actively renders his performance impossible when B is almost to the end of the bridge. It is correct that under general contract law this attempt at revocation would not be effective and A would be in breach of contract. This, however, is not the present case. It is true that this plan offering vacation pay is somewhat like a unilateral contract, in that the employer would not have the power to alter the conditions or rescind the original offer in the middle of the year, if the employee remained on the job because of the original offer. However, as we said in Walker v. American Optical Corp., 265 Or. 327, 330, 509 P.2d 439 (1973), concerning a unilateral contract for a bonus, it does not follow that just because this is a unilateral contract the employee automatically becomes entitled to the additional compensation by remaining employed for part of the contract period. There, as here, the employer's obligation to pay the compensation arises only on the occurrence of the condition precedent as described in the contract. In both cases, the condition precedent is the employee's employment on a certain named day. [2] The employee's rights only vest when he has satisfied all conditions precedent. McHorse v. Portland General Electric Co., 268 Or. 323, 331, 521 P.2d 315 (1974). The point that the state ignores is that the principal contract was a contract for employment at will, which was terminable by either party at any time for almost any reason. [3] The terms of this vacation contract are qualified by and subject to the terms of the employment contract as a whole. The vacation plan was a secondary contract which stated if and only if the employee were employed on his anniversary date, the employer then would have a duty to grant further compensation in the form of paid vacation. This duty only arises when the condition precedent is met. After the employee's anniversary date, the employer could not refuse to grant this compensation unless otherwise provided in the contract. [4] The state, in its argument alleging a unilateral contract, is attempting to change this at will contract into a one year employment contract. This cannot be done. Were there no express, unambiguous contract in the present case, the dissent's interpretation of the respective rights and duties would probably be correct. However, we are not free to ignore the contract. Because the employment was at will, and either party could terminate it at any time, employment on an employee's anniversary date under this contract is a condition precedent to paid vacation time, and because the employee was not employed on his anniversary date, he is not entitled to wages in lieu of vacation time. Because of our decision, the employer is necessarily not liable for penalties, attorney fees or costs.