In this action for breach of employment contract, plaintiff employee was wrongfully discharged in violation of Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich. 579; 292 N.W.2d 880 (1980). We are asked to decide whether plaintiff's unemployment compensation benefits should be deducted from his breach of contract damage award. In accordance with accepted principles of contract law, we hold that plaintiff's unemployment compensation benefits must be deducted from his subsequent damage award. Moreover, we conclude that this result best effectuates the intent of the Legislature by preventing the duplication of an employee's wage loss replacement. The judgment of the Court of Appeals is reversed, and the case is remanded to the trial court for entry of an award consistent with this opinion.
Plaintiff William Corl was employed by defendant Huron Castings in July 1981. He remained an employee until he was terminated in May 1988. After his termination, he filed a wrongful discharge claim pursuant to Toussaint, supra.
The case was tried before Judge Knoblock in the Huron Circuit Court. The jury returned a verdict for plaintiff, and, as stipulated, a judgment for $16,500 was entered. Plaintiff then petitioned the court to enhance the award by $6,200. Plaintiff argued that the unemployment compensation benefits were a collateral source and should be added to the contract damage award. On the basis of Pennington v Whiting Tubular Products, Inc, 370 Mich. 590; 122 N.W.2d 692 (1963), the trial judge agreed and added the unemployment compensation benefits to the judgment. The judge conceded that the result was illogical, but felt obligated to follow Pennington.
Defendant appealed, and the Court of Appeals affirmed
We are required to assess plaintiff's damages in this wrongful discharge action. Plaintiff pleaded and proved his case on the basis of Toussaint. In Toussaint, supra at 610, this Court stated: "We hold only that an employer's express agreement to terminate only for cause, or statements of company policy and procedure to that effect, can give rise to rights enforceable in contract." (Emphasis added.)
Cognizant of these principles, we evaluate plaintiff's assertion that the collateral source rule allows full recovery from defendant notwithstanding the unemployment compensation benefits he received. The collateral source rule is a concept of tort law which provides "that the recovery of damages from a tortfeasor is not reduced by the plaintiff's receipt of money in compensation for his injuries from other sources." Tebo v Havlik, 418 Mich. 350, 366; 343 N.W.2d 181 (1984) (emphasis added).
In a unanimous decision by this Court in Ferrett v General Motors Corp, 438 Mich. 235; 475 N.W.2d 243 (1991), we reaffirmed Toussaint, supra, holding that the plaintiff's cause of action was not in tort.
Similarly, in the present case, we are confronted with an employer who impliedly contracted to terminate his employee for just cause.
In order for plaintiff to prevail, we must extend the collateral source rule to principles of contract law.
The present case is also distinguishable from the federal cases on which plaintiff relies. In NLRB v Gullett Gin Co, 340 U.S. 361; 71 S.Ct. 337; 95 L Ed 337 (1951), the United States Supreme Court refused to deduct unemployment compensation benefits from a breach of employment contract damage award. Gullett involved employees who were discharged in violation of the Labor Management Relations Act. Cognizant of its limited power to review, the Court upheld the National Labor Relations Board's refusal to deduct unemployment compensation benefits from the award.
The goals of and the policies surrounding the NLRA distinguish Gullett from the present case. In fact, upon finding an unfair labor practice, the board was obligated to "issue a cease and desist order requiring the guilty party `to take such affirmative action including reinstatement of employees with or without back pay, as will effectuate the policies of [the] Act....'" Id. at 362 (emphasis added). However, here we address a case of wrongful discharge that gives rise to an action for breach of contract only. As such, we are unable to attribute "guilt" to one of the parties in the same manner as in Gullett.
We are persuaded that Gullett is more accurately analyzed in conjunction with United Protective Workers of America v Ford Motor Co, 223 F.2d 49 (CA 7, 1955). In Ford, the United States Court
The court correctly narrowed the focus of its decision to the proper amount of damages for breach of contract. The court noted that if the employee had not been improperly required to retire, he would not have received the social security or annuity payments, and, therefore, if they were not deducted, the employee would receive "more than he would have if the contract had not been breached." Id.
Perhaps more persuasive, the case was distinguished from an action sounding in tort that would be subject to the collateral source rule. In this regard the court held:
Similarly, the present case is governed by principles of common-law contract. Toussaint, supra. Thus, in contrast to Gullett, plaintiff's claim is not governed by statute.
Plaintiff, relying on Pennington, supra, argues that unemployment compensation benefits may not be deducted from a contract damage award. For this reason, a careful reevaluation of the applicability and underlying integrity of Pennington is necessary. We cautiously review this Court's decision in Pennington mindful of stare decisis principles:
The employees alleged that the two newly formed entities were organized in order to take over the business of Whiting, and that both companies were wholly controlled by Whiting who acted as a sales representative. The plaintiffs alleged that the reorganization was executed so that Whiting could avoid its obligations under its employment contracts.
The primary issue on appeal involved the sufficiency of proof with regard to each claim.
This language in Pennington was premised on the fact that the Legislature gave no indication whether unemployment compensation replaced wage loss.
However, the Legislature has subsequently manifested its intent to construe unemployment compensation as redress for wage loss.
It is clear that the Worker's Disability Compensation Act compensates for wage loss.
Finally, plaintiff urges that allowing a setoff for unemployment compensation benefits will result in a windfall for defendant. Review of MCL 421.19; MSA 17.520 assuages this concern. The Legislature
Plaintiff disagrees with this analysis, arguing that the employer's costs are merely passed to the public through price increases and wage reductions.
Further, assuming that the public, in essence, subsidizes the unemployment compensation fund, a similar argument may be made that allowing
Thus, we conclude that plaintiff's damage award should be reduced by the amount he received in unemployment compensation benefits. This is a wrongful discharge action, and as such plaintiff's rights are enforceable in contract. Toussaint, supra. The collateral source rule does not apply in cases of common-law contract. The award to plaintiff should be in an amount equal to his total damages, reduced by any payments already received from the unemployment commission. The judgment of the Court of Appeals is reversed, and the case remanded for entry of an award consistent with this opinion.
BRICKLEY, C.J., and MALLETT and WEAVER, JJ., concurred with RILEY, J.
CAVANAGH, J. (dissenting).
In overruling this
The doctrine of legislative acquiescence is well established in our jurisprudence. See McEvoy v City of Sault Ste Marie, 136 Mich. 172, 182-183; 98 NW 1006 (1904). We have characterized it as "a wisely self-imposed limitation of the appellate process." Magreta v Ambassador Steel Co, 380 Mich. 513, 518; 158 N.W.2d 473 (1968). The doctrine is grounded in our "duty ... to ascertain and give effect to the legislative intent" and the presumption that, when revising or amending a statute, the Legislature is aware of previous interpretations of that statute by the appellate judiciary. Gwitt v Foss, 230 Mich. 8, 12; 203 NW 151 (1925); Magreta, supra at 519-520. The controlling precept of the doctrine is that when the Legislature amends or otherwise revises a statute, failure to revise provisions of that statute previously construed by the appellate judiciary compels our "assum[ption] that it was content with the construction which had been placed on th[ose] ... provisions...." Gwitt, supra at 12.
The majority attempts to undermine the authoritative effect of the Pennington decision by opining that the Court "held, in what may be characterized as dicta, that it was error for the trial judge to instruct the jury that payments received by the
Dictum is defined as "an observation or remark ... concerning some rule, principle, or application of law, or the solution of a question suggested by the case at bar, but not necessarily involved in the case or essential to its determination; any statement of the law enunciated by the court merely by way of illustration, argument, analogy, or suggestion."
Justice Cardozo's pragmatic standard is more logical and realistic than the distinction between holding and dictum employed by the majority, especially under the specific circumstances of the Pennington decision.
The majority opines that the Pennington Court's conclusion of law "that the trial judge was in error in his direction to the jury [that any unemployment compensation benefits received by the plaintiffs should be deducted from any damages award]," id. at 600, "was unnecessary ... because the Court held that the verdict could not stand." Ante at 633-634, n 24. In my opinion, the majority ignores the true procedural context of the Pennington
Considered in its true context, then, it is obvious that the Pennington Court's legal conclusion with regard to the propriety of deducting unemployment benefits from the ultimate damages awards was stated in anticipation of the remand for further proceedings. The majority's narrow definition of that holding denies us the authority to decide legal questions that necessarily will be at issue in the subsequent proceedings.
The majority's assertion that the Pennington opinion "acknowledged" that it was unnecessary to reach the issue whether unemployment benefits should be deducted evidences a misapprehension of
The "course" of action referred to was the plaintiffs' argument "that in the event of a decision by this Court that judgment should be entered on the verdict of the jury, the amount of such deductions should be added and this Court should order the entry of judgment in the increased amount." Pennington, supra at 600. The reason the Pennington Court did not need to discuss that suggested course of action was because "the report by the jury with reference to the awards of damages made to the individual plaintiffs receiving such made no mention of deductions, but it may be presumed that the direction of the court was followed." Id. As demonstrated above, the Pennington Court's legal determination that unemployment benefits need not be deducted from the ultimate damages awards was stated with the intent that it be heeded by the trial court on remand.
The majority further supports its attack on Pennington with defendant's argument that the Legislature's enactment of a setoff provision in the Worker's Disability Compensation Act
This setoff provision provides that any benefits payable under the relevant provisions of the WDCA "shall be reduced by 100% of the amount of benefits paid or payable to the injured employee under the Michigan employment security act...." MCL 418.358; MSA 17.237(358). The superficial appeal of the majority's reliance on this provision, however, does not survive close analysis.
In Bartels v Ford Motor Co, 292 Mich. 40; 289 NW 322 (1939), this Court rejected the defendant's claim that it should not be required to make disability payments to the claimant for the period during which the claimant was also receiving unemployment compensation benefits. In rejecting the defendant's claim, this Court noted that "[t]he legislative intent was to set up two independent organizations for the administration of two kinds of compensation, payable from different funds or sources.... The contingency which has arisen in this case has come about by reason of the passage of the unemployment compensation act. The remedy lies with the Legislature." Id. at 46 (emphasis added).
The Employment Security Act also contains a
This provision applies only in cases in which the beneficiary was not entitled to unemployment benefits in the first place, a situation clearly inapplicable to the case at bar. Even defendant concedes that this provision is inapplicable to this case.
In general, these two setoff provisions weigh heavily against judicial imposition of such a setoff in the case at bar because they provide unequivocal evidence that the Legislature is aware of the possibility of arguably overlapping benefits and knows how to correct those situations it feels are improper or unwise. And in light of this Court's recent affirmation of "the distinct character and objectives" of the worker's compensation and unemployment compensation systems, see Paschke v Retool Industries, 445 Mich. 502, 511-512; 519 N.W.2d 441 (1994), the setoff provision of the WDCA is particularly persuasive evidence that the Legislature sees no need to reduce damage awards in wrongful discharge cases by the amount of unemployment compensation benefits received.
The majority's final attempt to discredit Pennington is the assertion that "its underpinnings remain suspect. In Pennington, the Court stated that an analogous issue was decided in Kurta v
The majority apparently believes that the Pennington Court's reference to Kurta was inadvertent, that all eight members of this Court who joined the Pennington opinion were unaware that Kurta dealt with a personal injury claim. This belief, however, is gainsaid by the actual language of Pennington: "An analogous question was decided in Kurta v Probelske, 324 Mich. 179, an action for damages for personal injuries...." Pennington at 601. The Pennington Court's analogy to Kurta was conscious and deliberate.
The majority's substantive disagreement with this analogy must be based on the assumption that all contracts are fungible for purposes of fashioning a remedy for breach, that commercial contracts between merchants are representative of all contracts, and that tort and contract are totally discrete bodies of doctrine with no overlap whatsoever. This assumption is not supported by our case law.
In Kewin v Massachusetts Mut Life Ins Co, 409 Mich. 401, 420; 295 N.W.2d 50 (1980), we expressly recognized the distinction between commercial contracts and marriage contracts and noted that "[t]here are exceptions to the general rule limiting the recovery for breach of contract." Id. at 415 (citing, inter alia, 5 Corbin, Contracts, § 1076, p 427). We also referred to "an exception recognized in Stewart v Rudner, 349 Mich. 459; 84 N.W.2d 816 (1957)," which involved a contract between a doctor
In my opinion, the Pennington Court purposefully established another exception, and did so in accord with the previously established principle that there are exceptions to the general, but not immutable, rule of recovery in breach-of-contract actions. Therefore, because of the clear evidence of legislative acquiescence in that decision, I would affirm the judgment of the Court of Appeals.
As a general consideration, the evidence of legislative acquiescence alone is sufficient to compel our continued application of the rule established in Pennington. However, the specific facts in this case also argue against the result reached by the majority.
The majority correctly notes that a breach-of-employment-contract
The legislative purpose of the Employment Security Act is to combat the "[e]conomic insecurity due to unemployment [that] is a serious menace to the health, morals, and welfare of the people of this state."
My colleagues in the majority apparently agree with the view of the circuit court and the Court of Appeals that the Pennington rule seems illogical, but, unlike those courts, feel they are not bound to accede to policy determinations made by the Legislature. Because of the unequivocal evidence that the Legislature knowingly has chosen not to require the setoff mandated by the majority, and because recouping wages alone does not put plaintiff in as good a position as he would have been had the employment contract been fully performed, I dissent.
LEVIN, J., concurred with CAVANAGH, J.
I respectfully dissent. I agree with the conclusion that the Legislature's failure to provide for a setoff of unemployment benefits requires application of the collateral source rule. Although I agree with Justice CAVANAGH'S result, I write separately to state my reasons for joining in that conclusion.
As the majority recognizes, we have limited damages for the claim created in Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich. 579; 292 N.W.2d 880 (1980), to those recoverable in contract. Ante at 625. However, I disagree that that limitation requires offset of the benefits in question. Ante at 630-631. The doctrinal foundation of the Toussaint claim is neither fish nor fowl, neither wholly contractual nor wholly fault-based. Thus, the answer to the question before us cannot be found in rote application of the distinction
At common law, employers could dismiss their employees at will "for good cause, for no cause or even for cause morally wrong, without being thereby guilty of legal wrong." Payne v Western & A R Co, 81 Tenn 507, 519-520 (1884). Toussaint changed the common law, holding that personnel policies and practices could create a just-cause employment contract, even when no preemployment negotiations take place and there is no mutual assent on the subject of job security. 408 Mich. 613. Toussaint imposes a duty on employers to "adhere to stated company policies and goals" and entitles plaintiffs to pursue a cause of action when employers breach this duty. 408 Mich. 615. Although we have characterized Toussaint as a contract action for some purposes, we distort history if we fail to recognize that Toussaint's sole ratio decidendi is that, in some circumstances, termination at will is unfair. Thus, rejection of the collateral source rule in this context cannot rest on a semantic distinction between fault-based causes of action and Toussaint claims.
Secondly, Toussaint claims involve a contract for labor that may be fairly characterized as a judicially created cousin to an unfair labor practice in which the principle item of recovery is lost earnings, Valentine, supra. While based on statute, it has been recognized that unemployment benefits are not earnings under the National Labor Relations Act, Marshall Field & Co v NLRB, 318 U.S. 253; 63 S.Ct. 585; 87 L Ed 744 (1943), or under title VII, which traces its damage roots to the labor act. Ford Motor Co v EEOC, 458 U.S. 219, 228-230; 102 S.Ct. 3057; 73 L Ed 2d 721 (1982). These remedies
Thirdly, allowing a setoff of the entire amount of unemployment benefits received by plaintiff is an overcredit. Ante at 637. Michigan employers do not pay into the unemployment benefits fund dollar for dollar what the employee takes out. As the majority accurately observes, "[t]he Legislature has developed a complex formula for the funding of unemployment compensation benefits." Ante at 637-638 (emphasis added). In addition, although in some sense paid for by the employer in the form of a tax, the unemployment benefits were not paid by the employer to the plaintiff, but, rather, were paid by the state out of state funds. To judicially approve a full deduction to the employer is to grant more credit than is due and to preclude reimbursement of the fund.
Finally, and most importantly, we have not been provided any information that would permit a satisfactory formulation of the true amount paid by the employer or appellate review of that finding. Thus, the amount deducted would be essentially arbitrary, a factor that has influenced courts denying the claimed offset. Brown v A J Gerrard Mfg Co, 715 F.2d 1549, 1551 (CA 11, 1983) (en banc).
These observations do not suggest that the Legislature could not provide for a full or partial credit or for recoupment by the state. They do
The failure to amend the Employment Security Act, while amending the Worker's Disability Compensation Act
This Court upheld the trial judge's ruling, stating that it was each plaintiff's obligation to establish entitlement to employment at the new locations.
Drouillard is not, however, this Court's first pronouncement in this regard. We have previously recognized that the purpose of the Employment Security Act is to compensate for wage loss. On rehearing this Court, affirming General Motors Corp v Erves (On Rehearing), 399 Mich. 241, 260; 249 N.W.2d 41 (1976), stated in the lead opinion by Justice COLEMAN that the objective was "to compensate employes for loss of wages," and that "[a] literal and commonsense reading of the Employment Security Act dictates the finding that defendants are not entitled to back-to-work pay." Additionally, in Koziol v Kelvinator, Inc, 52 Mich.App. 391, 393; 217 N.W.2d 406 (1974), the Court of Appeals held that the "primary purpose of the Employment Security Act is to compensate workers for lost wages." Koziol citing Erves, supra.