Court Opinion

ID: 9745965
Source: CourtListenerOpinion
Date Created: 2023-08-27 13:45:01.679096+00
Date Added: 2024-06-11T07:25:06.851384
License: Public Domain

JUSTICE GARMAN dissenting: When presented with a dispute between divorcing spouses over an item of property, the court must answer four questions. First, is the item in dispute actually property? Second, if it is property, is it marital property? Third, if it is marital property, what is its value? And, finally, how should the property be distributed? In the present case, the circuit court found that the husband’s accrued sick and vacation days are property and that, because the days were earned during the marriage, they are marital property subject to division upon dissolution. The circuit court valued the days at the husband’s current salary, after taxes, and distributed the value of this asset disproportionately to the husband, apparently in recognition of the husband’s recent health problems. The appellate court held that accrued sick and vacation days are not property at all and, thus, found no need to categorize the value of the accrued days as marital or nonmarital property, to assign a value to them, or to include them in the division of marital property. 386 Ill. App. 3d at 730. Although the majority agrees with the appellate court’s analysis in general, the majority opinion does not expressly state whether such accrued days are or are not property. Rather, the majority concludes that, whatever these days are, their value is not divisible upon dissolution. The majority is concerned that the value assigned to such days is “speculative at best.” The majority also concludes that if these days were to be divided as an asset of the marital estate and if the employee spouse were to use any of his vacation or sick time in the future, he would “never collect payment for those days.” 236 Ill. 2d at 265. In my opinion, accrued sick and vacation days can be property. In the present case, the husband’s accrued days are property and, because the days were earned during the marriage, they are marital property. I also believe that the circuit court’s method of valuation was reasonable and the circuit court’s division was not an abuse of discretion. I, therefore, dissent. Property or Nonproperty The threshold question in this case is whether accrued sick and vacation days are property. As the majority notes, this is a question of law. 236 Ill. 2d at 255. I agree with Justice Myerscough, who pointed out in her separate opinion that an employee’s sick days and vacation days “can, but may not always, be marital property.” 386 Ill. App. 3d at 734 (Myerscough, J., concurring in part and dissenting in part). Whether such accrued days are property depends on whether the employee spouse has a vested right to receive payment for them. The wife relies, in part, on the dictionary definition of “property.” 236 Ill. 2d at 256-57. Following the quoted dictionary definition, the law dictionary offers the following quotation as an illustration: “ ‘In its widest sense, property includes all a person’s legal rights, of whatever description. A man’s property is all that is his in law. *** In a second and narrower sense, property includes not all a person’s rights, but only his proprietary as opposed to his personal rights. *** [A] man’s land, chattels, shares, and the debts due to him are his property ***.’ ” (Emphasis in original.) Black’s Law Dictionary 1335-36 (9th ed. 2009), quoting J. Salmond, Jurisprudence 423-24 (10th ed. 1947). In this second sense, sick or vacation days accrued by an employee are his property because they are, in effect, a debt due to him as part of the compensation he has earned for work he has already performed. The law dictionary defines “compensation” as “[r]enumeration and other benefits received in return for services rendered; esp. salary or wages.” Black’s Law Dictionary 322 (9th ed. 2009). By way of example: “ ‘Compensation consists of wages and benefits in return for services. It is payment for work. *** [Compensation] includes wages, stock option plans, profit-sharing, commissions, bonuses, golden parachutes, vacation, sick pay, medical benefits, disability, leaves of absence, and expense reimbursement.’ ” (Emphasis in original.) Black’s Law Dictionary 322 (9th ed. 2009), quoting K. Decker & H. Felix, Drafting and Revising Employment Contracts §3.17, at 68 (1991). Further, “deferred compensation” is defined as “[playment for work performed, to be paid in the future or when some future event occurs.” Black’s Law Dictionary 322 (9th ed. 2009). The most common type of deferred compensation is a pension. Other types of deferred compensation include commissions and bonuses earned but not yet paid, accounts receivable, “comp time” in lieu of overtime, and royalties to be paid in the future on work already performed. Each of these is a form of property and, if earned during a marriage, is marital property. See, e.g., In re Marriage of Schneider, 214 Ill. 2d 152 (2005) (accounts receivable should be included in determining the value of a dental practice); In re Marriage of Peters, 326 Ill. App. 3d 364 (2001) (portion of husband’s potential stock bonus earned during marriage was “marital property,” regardless of its value, where the agreement with the employer was signed shortly after the parties married, husband was working toward the bonus during the marriage, and husband was halfway to the 10-year requirement and was averaging well over what he needed to earn the bonus); In re Marriage of Heinze, 257 Ill. App. 3d 782 (1994) (royalties generated in future by sale of book written by wife during the marriage are marital property subject to division); In re Marriage of Tietz, 238 Ill. App. 3d 965 (1992) (lawyer’s accounts receivable have already been earned and have known value; they are “future income” only in the sense that they will be collected in the future); In re Marriage of Feldman, 199 Ill. App. 3d 1002 (1990) (accounts receivable of medical practice cannot be considered future income); In re Marriage of Rubinstein, 145 Ill. App. 3d 31 (1986) (accounts receivable in completed but unbilled services were asset of husband’s medical practice). Like these other forms of deferred compensation, the employee spouse who has accrued sick and vacation days has already earned the remuneration, but will not realize the benefit until he either uses the time for a permissible purpose or is paid the value of the accrued days upon termination of employment. As a result, this particular asset is not as liquid as other assets such as money in the bank or the contents of a stock portfolio, but this lack of liquidity does not mean that this asset is not property. Under the Illinois Wage Payment and Collection Act (Wage Act) (820 ILCS 115/1 et seq. (West 2008)), an employee’s right to payment for accrued vacation time is vested (with certain exceptions not applicable in the present case). That is, once the days are earned by the employee, the employer is obligated to either grant the employee vacation time with pay or pay the employee for the accrued days upon termination of employment. 820 ILCS 115/5 (West 2008). Thus, accrued vacation days are a form of property, in the same sense that other forms of deferred compensation are an employee’s property. The Wage Act does not contain a similar provision protecting the employee’s right to receive payment for accrued sick days. However, depending on the facts of the particular case, accrued sick days may also constitute the employee’s property. If the employee is entitled to payment for accrued sick days upon termination of employment, the sick days are, indeed, a form of deferred compensation. If, however, the employer’s sick day policy is of the “use it or lose it” variety, it is not a form of property because the employee has no vested right to payment if he does not find it necessary to use the sick days for their intended purpose. The majority’s concerns about the difficulty in valuing sick and vacation days are not relevant at this stage of the analysis. Many forms of property are difficult to value, but this difficulty does not render them nonproperty. For example, courts are frequently called upon to determine the present value of a future stream of income, crops in the field, or some form of intangible property. In the present case, the trial court correctly determined that the husband’s accrued vacation and sick days are property because they are a form of deferred compensation that he has a vested right to receive either during his remaining years of employment or upon the termination of the employment relationship. Marital or Nonmarital Property If the answer to the first question is that the item in dispute is property, the second question is presented— whether the property is marital property. This is a question of fact, subject to review under the manifest weight of the evidence standard. In re Marriage of Smith, 265 Ill. App. 3d 249, 252-53 (1994). Section 503(a) of the Illinois Marriage and Dissolution of Marriage Act (Act) defines “marital property” as “all property acquired by either spouse subsequent to the marriage,” with certain exceptions not applicable in the present case. 750 ILCS 5/503(a) (West 2004). The parties in the present case do not dispute that the husband accumulated 115 sick days and 42 vacation days during the marriage. Thus, the circuit court’s finding that the husband’s accrued sick and vacation days are marital property is not against the manifest weight of the evidence. Valuation Once this determination is made, the next step for the circuit court is to establish the value of the accrued days. In re Marriage of Schneider, 214 Ill. 2d 152 (2005) (circuit court must establish the value of the parties’ assets in order to be able to divide the marital property in just proportions). The circuit court in the present case assigned value based on the husband’s present salary, after taxes. This is an entirely rational approach to valuation. If the husband were to retire or leave his job tomorrow, this is the value the days would have. Although his salary may rise in the future, making the days more valuable when he is eventually paid, the wife has not argued for a greater value. Further, in other contexts, the circuit court is not concerned with the possibility that the value of an item of marital property may increase or decrease after it is awarded to one of the spouses. If one spouse is awarded a piece of artwork and the other is awarded a boat of equal value, it is immaterial that the piece of art may appreciate in value and the boat will depreciate. It is the value of the asset at the time of distribution that the circuit court must consider when dividing marital property. In re Marriage of Weiler, 258 Ill. App. 3d 454, 460-61 (1994). The majority concludes that the value of the accrued days is speculative because “it is possible that in some cases, an employer might change its policy concerning the right to receive compensation for accrued vacation and sick days.” 236 Ill. 2d at 266. This statement is incorrect as a matter of law, at least with respect to vacation days. An Illinois employer is certainly free to change its policy regarding sick and vacation days going forward— awarding fewer days, capping the number of days that can be accrued, even eliminating sick or vacation days altogether. Most employers, however, are prohibited by law from cancelling or refusing to pay the employee for vacation days already earned. Under section 5 of the Wage Act: “Unless otherwise provided in a collective bargaining agreement, whenever a contract of employment or employment policy provides for paid vacations, and an employee resigns or is terminated without having taken all vacation time earned in accordance with such contract of employment or employment policy, the monetary equivalent of all earned vacation shall be paid to him or her as part of his or her final compensation at his or her final rate of pay and no employment contract or employment policy shall provide for forfeiture of earned vacation time upon separation.” (Emphasis added.) 820 ILCS 115/5 (West 2008). It is notable that the last clause was amended in 1984. Until that time, employers were permitted to have employment contracts or policies that provided for forfeiture of earned vacation time upon separation from employment. Thus, it violates the state and the public policy of the State of Illinois as expressed by the statute to treat earned vacation time as anything other than a property right of the employee. See, e.g., Prettyman v. Commonwealth Edison Co., 273 Ill. App. 3d 1090 (1995) (employer violates Wage Act by adopting policy providing that an employee loses unused vacation time upon separation). Thus, to the extent that the majority’s position relies on out-of-state cases utilizing this rationale to avoid distributing this property, it is in error. Valuation of sick days presents a slightly more difficult question because the employer is not prohibited by law from changing its sick day policy in a manner that results in the forfeiture of accrued sick days. However, in the absence of evidence that this was likely to occur in this particular case, the circuit court properly valued the accrued sick days at the employee spouse’s present salary, after taxes. Thus, the circuit court’s valuation of the sick and vacation days was not against the manifest weight of the evidence. In re Marriage of Hubbs, 363 Ill. App. 3d 696, 699-700 (2006) (circuit court’s valuation of marital assets is reviewed under manifest weight of the evidence standard, while division of property between spouses is reviewed for abuse of discretion). Distribution of Property Upon Dissolution Section 503(d) of the Act requires the circuit court to divide the couple’s marital property between them in “just proportions considering all relevant factors.” 750 ILCS 5/503(d) (West 2004). Ignoring the existence of a form of deferred compensation operates to the detriment of the nonemployee spouse and is inequitable. For example, a wife may work for an employer who provides a generous retirement plan, but who gives only 10 vacation days per year that she is not allowed to carry over to the next year. Her husband, in contrast, may earn five weeks of paid vacation per year, which he is allowed to accumulate to a total of 200 days, but his employer makes no contribution to his pension. Upon their divorce, her pension will be valued and included in the division of marital property. Under the majority’s rule, the husband in this example would reap the entire benefit of his accrued vacation days, even though they were earned during the marriage. Equity requires that she share in this form of deferred compensation, just as he will share in her pension. Once it is determined that sick and vacation days are marital property, they must be included in the division of marital property. The nonemployee spouse cannot be awarded any of the accrued days, as such, because the employee spouse is the only person entitled to utilize them. Thus, the nonemployee spouse must be awarded some other item of marital property to offset the award of the accrued days to the employee spouse. Therefore, if the circuit court determines that a just division of marital property is a 50/50 split, the employee spouse should be awarded all accrued days and the non-employee spouse should be awarded some other asset of approximately equal value. If the circuit court determines that the just proportion is other than 50/50, the nonemployee spouse should be awarded other assets of somewhat greater or lesser value, as necessary to achieve the just division. In the present case, the circuit court exercised its discretion to award the husband a greater share of this particular asset (45 sick days “off the top,” plus half of the value of the remaining sick and vacation days), in consideration of his recent health problems. In my opinion, this is not an abuse of discretion. However, the majority is also concerned that if the accrued days are included in the division of marital property and if the husband “uses any of the sick or vacation days awarded to him prior to retirement or termination of his employment, [he] will never collect payment for those days.” 236 Ill. 2d at 265. This concern is misplaced. In the future, the husband’s share of the marital estate will not be “diminished every time he uses a sick day or vacation day.” 236 Ill. 2d at 265. Rather, when he is paid for taking a sick day or a vacation day or when he receives a lump-sum payment upon termination of his employment, he will be paid in full by his employer, thereby getting the full benefit of the marital property awarded to him, just as if he were taking money out of the bank. Indeed, if his salary has risen in the interim, he will receive more than the amount the wife received for “her share” of these days in the division of property. Finally, rather than asking whether the right to receive the days or payment of the their value is vested in the employee spouse at the time of dissolution, the majority would divide the days as a marital asset only if the payment is actually received by the employee spouse prior to the entry of judgment. 236 Ill. 2d at 266. Of course, if the employee spouse has actually received payment for previously accrued sick and vacation days, there are no longer any sick or vacation days to talk about; there is just cash that was earned during the marriage and is obviously marital property. Under the majority’s approach, if the employee spouse receives payment for these days one day before dissolution, it is marital property; if he receives payment one day after dissolution, it is not. This is inconsistent and illogical and not in keeping with the intent of the legislature as expressed in section 503 of the Act. Conclusion The majority has adopted a one-size-fits-all rule to resolve an issue that deserves case-by-case consideration. I conclude that under section 5 of the Wage Payment Act, vacation days are property and, if earned by a spouse during the marriage, are marital property subject to division upon divorce. Sick days are property if the employee spouse is entitled to receive payment for accrued days upon termination of employment. The circuit court’s finding that the husband’s accrued sick and vacation days are marital property was not against the manifest weight of the evidence and its division of marital property was not an abuse of discretion. I, therefore, would reverse the appellate court and affirm the circuit court’s judgment. JUSTICES KILBRIDE and BURKE join in this dissent.