Opinion ID: 2229350
Heading Depth: 1
Heading Rank: 2

Heading: application of the amendment

Text: Assuming for purposes of decision that the no-competition amendment was valid, we reach the dispositive issue in this case. There was no evidence that would have justified divestment of Rosploch's interest under any of the causes of forfeiture in the plan before it was amended on February 8, 1973. It is also undisputed that Rosploch had been employed by Alumatic or its predecessors for more than eleven years before the profit-sharing plan was instituted; that he therefore acquired a 100 percent vested interest in each annual contribution to his Company Contribution Account at the time the contribution was made; and that as of December 31, 1972, Rosploch had in his account the sum of $3,059.73. But for the amendment in question, when Rosploch resigned in October of 1973, he would have been entitled to payment of that sum, the vested equity in his accounts as of the last valuation date preceding the time of [his] resignation . . ., according to one of the alternative modes of payment specified in the plan. The issue is whether the trial court correctly concluded that under the circumstances the amendment could not change this result. [1, 2] The profit-sharing plan herein was in essence a contract between the employer and the employee. Holsen v. Marshall & Ilsley Bank, 52 Wis.2d 281, 284, 190 N.W. 2d 189 (1971). The general rule as to construction of contracts, which applies with equal force here, is that the meaning of particular provisions in the contract is to be ascertained with reference to the contract as a whole. RTE Corp. v. Maryland Casualty Co., 74 Wis.2d 614, 620, 247 N.W.2d 171 (1976). This court has applied the rule that profit-sharing plans are to be liberally construed in favor of the employee, and that conditions precedent are not favored in contracts of this nature. Holsen v. Marshall & Ilsley Bank, supra at p. 286; Voigt v. South Side Laundry & Dry Cleaners, Inc., 24 Wis.2d 114, 116-118, 128 N.W.2d 411 (1964). [2] The plan reserves to Alumatic the right to amend the plan at any time, but qualifies this right as follows: [N]o amendment . . . shall deprive any Participant of his vested equity . . . . The term vested equity is defined in the plan to mean: . . . the full amount of his interest in his Participant Contribution Account plus the percentage of his interest in his Company Contribution Account which has vested under the terms of Article V, sub-paragraph A, 2. These two provisions plainly state that vested interests are protected from impairment by subsequent amendment. But Alumatic, seizing on a phrase from this court's decision in Zimmermann v. Brennan, 56 Wis.2d 623, 202 N.W.2d 923 (1973), argues that it was not the amendment which resulted in the loss of Rosploch's vested equity, but his own act of accepting employment with a competitor, done with knowledge of the nature of the amendment. Though the substance of Zimmermann has little relevance to the instant case, [3] Alumatic's contention has a certain surface plausibility. It overlooks the nature of the contract here in question, however. The plan constituted an offer of deferred additional compensation, to be paid according to its terms, which Rosploch accepted by continuing to work for Alumatic. Zwolanek v. Baker, 150 Wis. 517, 137 N.W. 769 (1912). By virtue of the provision for amendment or termination the offer could have been modified or revoked at any time. However, Rosploch had already accepted the offer and become contractually entitled to the benefits he here seeks by virtue of his working for Alumatic through December 31, 1972. It is not contended that his performance was less than that called for by the plan as it then existed. His contractual right to benefits was of course subject to divestment upon the happening of the events triggering forfeiture specified in the original plan. However, there is no claim that any of those events have occurred. To the extent of Rosploch's vested equity as of December 31, 1972, a unilateral contract existed as defined by the terms of the unamended plan. The amendment had the effect of adding a new and burdensome conditiona limitation on Rosploch's freedom with respect to future employmentupon Rosploch's right to receive the performance by the Company for which he had contracted. In Evo v. Jomac, Inc., 119 N.J. Super. 7, 289 A.2d 551 (1972), relied upon by the trial court, an employee sued his former employer for benefits under a profit-sharing plan which had been in force since 1960, but which had been amended in 1966 to provide that notwithstanding any other provision, engagement by a former employee in a competitive activity would result in forfeiture of all benefits under the plan. The employee resigned in 1967 and entered competition with his former employer, Who thereafter refused to pay benefits according to the plan. The plan reserved a right of amendment, but provided that no amendment shall operate to deprive any participant of any rights or benefits thereto having accrued to him under the plan. . . . The plan did not provide for vesting until employment was actually terminated, and the company argued that since the amendment was passed before the plaintiff resigned, it could properly be applied. However, the court held that the power to amend was limited by the instrument itself to preclude deprivation of accrued benefits, and interpreted accrued to mean accumulated, which did not require actual vesting. The court held that the amendment could be applied only with respect to benefits accruing after the effective date of the amendment. [4] In Rochester Corp. v. Rochester, 450 F.2d 118 (4th Cir. 1971), the plaintiff employee left the Corporation's employ in 1965 after some twenty-four years' service, and engaged in competitive activities in violation of a clause in the employer's pension plan to the effect that such action authorized the board of directors to declare forfeited all rights and benefits under the plan. The plan had been in operation since 1943, but the forfeiture clause was added by amendment in 1960. The plan reserved a right to amend, but provided that no amendment might impair the interest of any member created by or resulting from prior contributions. Under the plan an employee would be entitled to receive benefits upon reaching age sixty-five if he had been employed for a period of ten or more years, but, as in Evo v. Jomac , it appears that rights were not said to become vested until the employee either resigned or retired. The company conceded that it would not have been able to apply the amendment in cases where the employee retired or was terminated before its effective date. However, it argued that as to this employee, its action was proper because the amendment was adopted before he resigned, at a time when his rights were not yet vested. This distinction was rejected, the court holding that the amendment could not be applied to prejudice the employee's rights to benefits accruing prior to the date of its adoption. [5] Though the precise terminology of the Evo and Rochester plans differs from that of Alumatic's plan, we are of the opinion that the differences are insignificant and that the result in those cases is appropriate here. Alumatic appears to concede that if Rosploch had quit before the amendment became effective it could not have amended the plan to affect his status. Thus if Rosploch had resigned and gone to work for a competitor in January of 1973 he would have been entitled to receive full benefits. The company claims, however, that since he did not quit until after February 8, 1973, when the amendment was adopted, a different result must follow. This is precisely the differentiation rejected in the Rochester Case, and we reject it here. Alumatic's profit-sharing plan constituted an offer of the benefits stated therein in exchange for service as an employee. In Rosploch's case, by virtue of his lengthy employment with Alumatic and its predecessors, those benefits took the form of a fully vested interest in the share of the company's contributions which was allocated to him on December 31st of each year. His actual receipt of such payments was not guaranteedpayments could be forfeited as a result of his discharge for theft, insubordination or other of the specified causes. The risk of forfeiture on these grounds was part of the contract created by Rosploch's performance. But to hold that Alumatic could impose the no-competition amendment as an additional condition upon Rosploch's contractual right, after he had earned his account by virtue of his performance, is tantamount to saying that benefits under the plan were merely a gratuity. That view of pension and profit-sharing plans has long been inconsistent with Wisconsin lawat least since Zwolanek v. Baker, supra , decided in 1912. The limitation incorporated in Article X as to the company's power of amendment, construed as it should be in favor of the employee, is ample evidence of an intent to preclude such a result. [3] Alumatic suggests that the trial court's decision herein creates problems as to how long an amendment must be in effect before it is controlling, and further suggests that it leads to undesirable discrimination in the treatment of employees who commence work at different times with respect to the time an amendment is adopted. Both of these contentions lack merit. The amendment (assuming it to be valid) became effective immediately as to all participants in the plan, but only with respect to interests in company contributions which became vested after its adoption. If Rosploch had worked through December 31, 1973, and had additional amounts allocated to his Company Contribution Account for the year 1973, and if he had thereafter left Alumatic to work for a competitor, the amendment (if valid) could have been applied to forfeit the December 31, 1973, allocation. All employees are treated by the same standard. It is simply a coincidence that in the case at bar Rosploch acquired no additional vested rights after the amendment was adopted. By the Court. Judgment affirmed.