Eakins v. Hanna Cylinders, LLC, 2015 IL App (2d) 140944 is the third in a trio of recent Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq., (“Wage Act”) cases that address an employee’s rights to recover future damages after an employer prematurely terminates a multi-year contract.
(The other two cases – Majmundar v. House of Spices (India), Inc., 2013 IL App (1st) 130292 and Elsener v. Brown, 2013 IL App (2d) 120209 are summarized here and here.)
The Eakins plaintiff sued after he was fired 14 months into a 24-month contract to serve as a plant manager for the industrial company defendant. The employment contract was silent on grounds for termination. The plaintiff sought as damages, compensation for the ten month remaining on the employment contract under a breach of contract theory and he joined a Wage Act claim. The trial court entered summary judgment for the defendant on both claims and the plaintiff appealed.
Held: Breach of contract judgment reversed; Wage Act judgment for employer affirmed.
Q: Why?
A: The appeals court reversed the breach of contract judgment for the defendant employer. In Illinois, an employment agreement with no fixed duration can be ended at the will of either party. The contract here was clearly for a fixed term, 24 months, and so wasn’t at will. By firing the plaintiff 14 months into the contract term, the defendant breached.
The court rejected defendant’s argument that the plaintiff’s failure to meet certain performance metrics (e.g. keep costs down, grow market share, meet sales quotas, etc.) justified defendant’s premature termination of the plaintiff. The court found that since the contract didn’t specify poor performance (as opposed to outright failure to perform – e.g. by not showing up to work) as a ground for contractual cancellation, the defendant breached by firing plaintiff before the 24 months was up.
Otherwise, according to the court, any employer could transmute a fixed-term contract into an at-will one by claiming the employee didn’t meet the employer’s performance requirements. The court remanded to the lower court so it could decide plaintiff’s money damages. (¶¶ 23-29).
The court did affirm judgment for the defendant on the Wage Act claim though. Looking to Majmundar for guidance, the court held that unpaid future compensations coming due under an untimely ended employment contract doesn’t qualify as “final compensation” under the Wage Act. The reason for this is that once an employee is fired, he no longer performs any services for the employer. So the employer isn’t receiving anything of value from the employee to support an obligation to make future payments. (¶¶ 31-32).
Take-aways:
Where a contract is for a fixed term and doesn’t provide for “for cause” firing or otherwise spell out grounds for termination, the contract will be enforced as written in the employee’s favor and his failure to meet an employer’s subjective work standards won’t constitute a basis for nullifying the contract;
Future payments due under a fixed-term contract aren’t considered final compensation under the Wage Act since there is no reciprocal exchange (services for wages) once an employee is fired;
Procedurally, the case makes clear that the denial of a summary judgment motion is appealable so long as there are cross-motions for summary judgment filed and the disposition of those motions resolves all issues in a given case.