Firestone v. Hawker Beechcraft International Service Company et al
MEMORANDUM AND ORDER granting in part and denying in part 69 Plaintiff's Motion for Summary Judgment; granting in part and denying in part 85 Defendant's Motion for Summary Judgment; and denying 112 Motion for Oral Argument. Signed by District Judge John W. Lungstrum on 3/2/2012. (ses)
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF KANSAS
Justin Lee Firestone,
Case No. 10-1404-JWL
Hawker Beechcraft International
Service Company and Hawker Beechcraft
MEMORANDUM AND ORDER
Plaintiff filed this breach of contract action against defendants based on defendants’
alleged breach of the employment agreement executed by the parties. The employment
agreement contains a severance payment provision, which lies at the heart of plaintiff’s claims.
That provision guarantees plaintiff severance pay of $650,000 “if [his] employment at Hawker
Beechcraft Corporation is involuntarily terminated on or before December 31, 2010.” It is
undisputed that plaintiff’s employment was involuntarily terminated prior to December 31, 2010.
Both parties have now moved for summary judgment on plaintiff’s claims. Plaintiff
contends he is entitled to summary judgment finding defendants liable for breach of contract and
owing plaintiff the full severance amount plus an additional $650,000 as a penalty under the
Kansas Wage Payment Act (KWPA). Plaintiff also moves for summary judgment on certain
defenses asserted by defendants. Defendants, in turn, move for summary judgment. in their
favor asserting that plaintiff cannot establish the elements of his claims and, in any event, certain
defenses preclude plaintiff’s claims entirely. Defendants also move for summary judgment on
plaintiff’s KWPA claim on the grounds that the severance pay in this case does not constitute
“wages” within the meaning of the Act. As set forth in more detail below, plaintiff’s motion is
granted in part and denied in part. It is granted on defendants’ faithless servant defense and
mutual mistake defense and is otherwise denied. Defendants’ motion is granted in part and
denied in part. It is granted with respect to plaintiff’s KWPA claim and is otherwise denied.1
The following facts are either uncontroverted or related in the light most favorable to the
non-moving party. On December 2, 2009, the parties entered into an employment agreement that
provided for plaintiff’s employment as “President–Asia Pacific” for defendant Hawker
Beechcraft International Service Company at a starting base salary of $300,000 per year.2
Plaintiff was hired to establish and develop a regional sales office in Hong Kong for the purpose
of marketing and selling general aviation aircraft. The parties’ written agreement further
provides as follows:
If your employment at Hawker Beechcraft Corporation is involuntarily terminated
on or before December 31, 2010, you will receive severance pay of $650,000
payable at your discretion either by lump sum or salary continuance. Salary
continuance includes benefit continuance as prescribed by company policy.
Defendants have requested that the court hear oral argument on defendants’ motion
for summary judgment. Because the court believes that argument would not clarify any
issues in the parties’ submissions or assist the court in any meaningful way, that request is
The employment agreement consists of a detailed “offer letter” of employment sent to
plaintiff, which plaintiff signed on December 2, 2009.
Defendants terminated plaintiff’s employment in October 2010 based on plaintiff’s alleged
misuse of company expense accounts. Plaintiff contends that the severance provision was
triggered by his termination, regardless of whether his termination was deemed a termination
“for cause.” Defendants contend that the severance provision is not triggered by a “for cause”
termination. To date, defendants have not paid plaintiff any severance pay.
The record reflects that defendants pursued and recruited plaintiff for employment.
Plaintiff did not submit a resume to defendants until after the parties executed the December 2,
2009 written agreement and after he began working for defendants. Bill Boisture conducted the
negotiations on behalf of defendants. During the parties’ early negotiations, Mr. Boisture
advised plaintiff that defendants were facing financial difficulties and were laying off employees
in response to an economic turndown. Plaintiff advised Mr. Boisture that he desired a
guaranteed term of employment in exchange for leaving his current employment situation. Mr.
Boisture rejected a guaranteed term of employment for plaintiff but promised, in an e-mail
exchange, to “get [plaintiff] 1 year severance and benefits in the event we terminate you. If you
resign, there is no severance.” Toward that end, the first draft of defendants’ formal written
offer to plaintiff contained the following provision:
If your employment at Hawker Beechcraft Corporation is involuntarily terminated
on or before December 31, 2010, you will receive severance pay equivalent to one
year’s base salary payable at your discretion either by lump sum or salary
According to Mr. Boisture’s deposition testimony, Mr. Boisture understands there to be three
types of employment termination–resignation; involuntary termination; and termination for
cause. In any event, this offer letter, and all subsequent offer letters, also rejected the notion of
a guaranteed term of employment. Plaintiff was required to sign the offer letter just below a
paragraph that stated as follows:
I understand that my acceptance of this offer does not constitute an employment
contract and that my employment with Hawker Beechcraft Corporation may be
terminated, either by my employer or myself at any time, for any reason, with or
Plaintiff sent a red-lined counterproposal to Mr. Boisture in which, among many other things,
he changed the severance provision. He essentially changed the “equivalent to one year’s base
salary” language to the amount of $650,000–a figure which plaintiff asserts accounted for his
base salary plus all potential bonuses.
Defendants’ next offer letter, dated November 2, 2009, incorporated this change to the
severance provision as follows:
If your employment at Hawker Beechcraft Corporation is involuntarily terminated
on or before December 31, 2010, you will receive severance pay of $650,000
payable at your discretion either by lump sum or salary continuance.
This draft offer letter also contained a new provision regarding severance, stating that
“[s]everance is governed by the Company’s Severance Policy in effect at the time of
termination.” According to Mr. Boisture, defendants’ severance policy generally does not
provide severance to employees who are terminated for cause. This statement regarding
defendants’ severance policy does not appear in any subsequent drafts of the offer letter.
After receiving the November 2, 2009 offer letter, plaintiff again sent a counter-offer to
Mr. Boisture. This counter-offer was not a red-lined copy of the offer letter, but rather an e-mail
communication in which plaintiff simply typed his comments concerning various terms of the
offer. In his November 4, 2009 e-mail, plaintiff states, in relevant part, that “I should receive
$650k severance pay if I’m terminated without cause at anytime on or before December 31,
2012.” This is the first instance in which any “cause” language appears in the parties’ written
correspondence. Plaintiff testified that the purpose of this counter-offer was to extend the
severance term to a three-year period. He testified that he inadvertently inserted the “without
cause” language. Shortly thereafter, plaintiff “clarified” with Mr. Boisture that the “cause”
language was language that he inadvertently included from a prior employment agreement he
had with another company. It is unclear whether that clarification was initiated by plaintiff or
in response to an inquiry from Mr. Boisture.
Mr. Boisture then typed in certain responses to plaintiff’s e-mail counter-offer and
submitted those typed responses, along with the original e-mail, to defendants’ human resources
department for the purpose of drafting a revised offer letter. Mr. Boisture did not type a
response to the “without cause” language offered by plaintiff. In his e-mail to the human
resources department forwarding plaintiff’s e-mail and Mr. Boisture’s responsive comments, Mr.
Boisture advised the human resources department: “Also please look at para 7, he says [it] looks
like some severance language was lifted from another doc and is not in this deal.” The revised
offer letter, dated November 5, 2009, does not incorporate the “without cause” language and
does not incorporate the proposed December 31, 2012 date. The severance provision is identical
to the prior offer letter:
If your employment at Hawker Beechcraft Corporation is involuntarily terminated
on or before December 31, 2010, you will receive severance pay of $650,000
payable at your discretion either by lump sum or salary continuance.
All subsequent drafts of the offer letter, including the signed offer letter, contain the same
severance provision. There is no indication that the parties ever discussed again any “cause”
limitation on the severance provision.
Additional facts will be provided as they relate to the parties’ claims, defenses and
specific arguments raised in their submissions.
Summary Judgment Standard
Summary judgment is appropriate if the moving party demonstrates that there is “no
genuine dispute as to any material fact” and that it is “entitled to a judgment as a matter of law.”
Fed. R. Civ. P. 56(a).3 In applying this standard, the court views the evidence and make
inferences in the light most favorable to the non-movant. Kerber v. Qwest Group Life Ins. Plan,
647 F.3d 950, 959 (10th Cir. 2011). A dispute is genuine if “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party” on the issue. Id. (quoting
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). Although the court views the
evidence and draws reasonable inferences therefrom in the light most favorable to the
The legal standard does not change if the parties file cross-motions for summary
judgment. Each party has the burden of establishing the lack of a genuine issue of material
fact and entitlement to judgment as a matter of law. Atlantic Richfield Co. v. Farm Cr. Bank,
226 F.3d 1138, 1148 (10th Cir. 2000).
nonmoving party, “the nonmoving party must present more than a scintilla of evidence in favor
of his position.” Id. (quoting Ford v. Pryor, 552 F.3d 1174, 1177–78 (10th Cir. 2008)).
Whether Defendant has Waived Certain Defenses
As a threshold matter, plaintiff urges that the court must consider his motion for summary
judgment without regard for two specific defenses asserted by defendants that, according to
plaintiff, the court has previously deemed waived. The court rejects this argument. The court
did not deem the defenses “waived” but simply declined to address those defenses in connection
with plaintiff’s earlier motion for summary judgment because the defenses had not yet been
asserted in the Answer and, because the court was denying the motion for partial summary
judgment in any event, there was no prejudice to defendants in declining to address those
defenses at that time.
Plaintiff filed a motion for partial summary judgment just 3 days after the filing of
defendants’ Answer. In response to that motion, defendants, in addition to other arguments,
argued that summary judgment was inappropriate on the grounds of unilateral mistake and that
plaintiff’s claims were barred in any event because plaintiff allegedly falsified his resume. The
court declined to address the merits of those arguments at that juncture because defendants had
not pled either unilateral mistake or fraud in their Answer. Relying on Federal Rule of Civil
Procedure 8(c), the court indicated that the defenses were not “properly before the court”
because they had not been “preserved” by defendants. The court did not indicate that the
defenses had been waived for purposes of the litigation–clearly, such a result would have been
unjust in light of the fact that plaintiff’s motion was filed just 3 days after the filing of
defendants’ answer. The court merely declined to address the merits of the defenses at that
juncture when plaintiff had not been put on notice of the defenses (for purposes of filing his
motion) through preservation in the Answer. Had the court not determined to deny plaintiff’s
motion for partial summary judgment on other grounds it certainly would not have granted
summary judgment to plaintiff at that early juncture without establishing a procedure to take into
account all the asserted defenses, whether preserved in the answer or not. See Ahmad v.
Furlong, 435 F.3d 1196, 1201-02 (10th Cir. 2006) (defendant may raise an affirmative defense
for the first time in a post-answer motion if the defense is raised in sufficient time that there is
no prejudice to the opposing party).
The purposes of Rule 8(c) have now been satisfied and it is appropriate to consider the
defenses in connection with this round of summary judgment briefing. Plaintiff was put on
notice well in advance of trial that defendants intended to assert these two defenses. Defendants
raised them in response to the earlier motion for partial summary judgment; it conducted
discovery on the defenses; and it has attempted to include those defenses in the pretrial order
(albeit over plaintiff’s objection).4 The court rejects plaintiff’s contention that he has been
Although defendants never moved to amend their Answer to include the defenses,
they were not required to do so prior to the pretrial order in light of their “constructive
amendment” of the Answer through their response to plaintiff’s motion for partial summary
judgment. See Ahmad, 435 F.3d at 1202. Therefore, plaintiff’s objection to the pretrial order
in that respect is overruled.
prejudiced because he declined to conduct his own discovery on the defenses in “reliance” on
the court’s earlier order. Ahmad makes clear that those defenses were properly raised even
though the court declined to take them up without notice having been given before plaintiff filed
his motion. Indeed, it appears that, despite having the opportunity to raise the waiver issue in
connection with defendants’ motion to compel discovery responses, plaintiff declined to do so
and, instead, objected to discovery requests concerning the resume fraud defense on substantive
grounds (such as, that defendants should not be permitted to assert a resume fraud defense
because plaintiff did not provide a resume to defendants until after he was hired). Indeed, as
noted by Magistrate Judge Sebelius, plaintiff did not dispute that defendants’ requests were
relevant to defendants’ resume fraud defense and Judge Sebelius ordered plaintiff to produce
documents responsive to those requests. In such circumstances, plaintiff cannot claim prejudice.
For the foregoing reasons, the court concludes that the defenses of resume fraud and
unilateral mistake have not been waived.
In their motion for summary judgment, defendants contend that plaintiff has forfeited the
right to recover on his breach of contract claims because he falsified the resume that he
submitted to defendants. By way of background, plaintiff stated on his resume that he was
named by Sports Illustrated magazine as one of the “Top 30 Marketing Executives in America.”
Defendants, looking to the factors set forth in cases discussing the after-acquired evidence
doctrine, contend that this statement was false; that the misrepresentation was material; that
defendants routinely terminate employees who falsify their resumes; and that they would have
terminated plaintiff’s employment had they known about the misrepresentation on his resume.
Plaintiff contends that defendants cannot rely on a resume fraud defense because defendants
never relied on plaintiff’s resume in making the hiring decision–indeed, plaintiff did not submit
his resume to defendant until after the parties executed the employment agreement and after
plaintiff began his employment with defendants. As will be explained, defendants’ motion for
summary judgment on this defense is denied and, because defendants cannot establish this
defense at trial in light of the undisputed facts, this defense is no longer a part of this case.
In support of their motion for summary judgment, defendants rely on the Kansas Supreme
Court’s decision in Gassman v. Evangelical Lutheran Good Samaritan Society, Inc., 261 Kan.
725 (1997). In Gassman, the plaintiff claimed that her employer breached an implied contract
of employment when it terminated her without following certain procedures set forth in an
employee handbook. Id. at 729. During discovery, the employer uncovered evidence, a theft
committed by the plaintiff, which would have justified her termination pursuant to the
employment handbook. Id. at 726-27. Based upon this “after-acquired” evidence, the district
court granted summary judgment in favor of the employer on plaintiff’s breach of contract claim.
Id. at 725-26. On appeal, the Court of Appeals held that an employee is not to entitled to
damages for breach of an implied contract5 if the employer can show that the plaintiff was guilty
of some misconduct of which the employer was unaware; the misconduct would have justified
the discharge; and the employer, had it known of the misconduct, would have discharged the
plaintiff. Id. at 728 (citing Gassman I, 22 Kan. App. 2d 632, 644-45 (1996)). The Kansas
Supreme Court approved the three-prong test, noting that the test is derived from McKennon v.
Nashville Banner Publishing Co., 513 U.S. 352 (1995). Id. at 730.6
Defendants contend that an application of the three-part Gassman test requires summary
judgment in its favor as resume fraud is just another “theory” of the after-acquired evidence
doctrine. Defendant is correct that the Court of Appeals in Gassman I noted three distinct
“theories” of the after-acquired evidence doctrine–fraud, legal excuse and unclean hands. But
Gassman I did not suggest that the three-part test would apply to all theories and, indeed,
Gassman I noted that the theories of legal excuse and unclean hands applied to the facts before
it, while the fraud theory would be “more akin to cases involving resume fraud or material
misrepresentations on employment applications.” 22 Kan. App. 2d at 640 (citing Massey v.
Trum’s Castle Hotel & Casino, 828 F. Supp. 314, 325 (D.N.J. 1993)). In any event, an
application of the Gassman test here simply does not defend against plaintiff’s breach of contract
Although this case involves an express contract rather than an implied contract, the
parties have not suggested and the court does not conclude that such is a distinction which
makes a difference in applying the Gassman analysis.
The Kansas Supreme Court affirmed the application of the after-acquired evidence
doctrine to wrongful discharge cases based on breach of an implied contract where public
policy concerns are not implicated. Gassman, 261 Kan. at 730. Because only private
concerns are implicated by the claim here, the court does not address this issue.
An understanding of the rationale for the Gassman test helps to illuminate why the test
has no bearing on the particular facts of this case. As explained by the court in Gassman I:
The after-acquired evidence doctrine in its purest form allows an employer to be
relieved of liability in a wrongful discharge lawsuit where it is discovered,
normally during litigation, that the employee was guilty of pre-discharge
misconduct sufficient for termination that the employer was unaware of and was
not relying upon for discharge. See Summers v. State Farm Mut. Auto. Ins. Co.,
864 F.2d 700 (10th Cir. 1988); Yoo, The After-Acquired Evidence Doctrine, 25
Colum. Hum. Rts. L. Rev. 219, 228 (Fall 1993) (the Summers rule). The
after-acquired evidence doctrine has its foundation in the logic that an employee
cannot complain about being wrongfully discharged because the individual is no
worse off than he or she would have been had the truth of his or her misconduct
been presented at the outset. See Annot., After- Acquired Evidence of Employee’s
Misconduct as Barring or Limiting Recovery in Action for Wrongful Discharge,
34 A.L.R. 5th 699, 707.
22 Kan. App.2d at 634-35. In other words, the plaintiff in such cases lacks injury because the
after-acquired evidence independently justifies the termination and supplants the initial (if
perhaps unlawful) termination decision. Here, even if defendants can prove that they would
have fired plaintiff had they known of the misrepresentation, plaintiff still has a claim for injury.
Under plaintiff’s theory of the case and his interpretation of the contract, he is entitled to
$650,000 regardless of the reason for his termination. Plaintiff contends (and a jury might well
agree) that he is entitled to the severance pay whether he was fired for resume fraud, for expense
account abuse or no reason at all. To be sure, there will be cases in which the Gassman test
applies to a resume fraud defense–when the employer is using the resume fraud to supplant the
initial termination decision–but those facts are not present here.
The “resume fraud” cases that the Gassman court alluded to (and distinguished) are those
cases (like Massey, the case cited by Gassman I) in which an employer seeks to bar a contract
claim (or, more precisely, to render a contract voidable) where the contract was entered into in
reliance on material representations by the plaintiff. This is, of course, what defendants are
trying to do here. They contend that they are not required to perform any obligations they may
have had under the contract because of plaintiff’s material misrepresentations on his resume.
The Restatement (Second) of Contracts and numerous cases support this position, but require
reliance on those representations before the contract is voidable. See Restatement (Second) of
Contracts § 164 (1981) (“If a party’s manifestation of assent is induced by either a fraudulent
or a material misrepresentation by the other party upon which the recipient is justified in relying,
the contract is voidable by the recipient.”); Schiavello v. Delmarva Sys. Corp., 61 F. Supp. 2d
110 (D. Del. 1999) (under ordinary contract principles, employer could rescind employment
contract and avoid liability for severance pay if it could show that the contract was entered into
in relance on material misrepresentations by the plaintiff); Massey v. Trump’s Castle Hotel &
Casino, 828 F. Supp. 314, 325 (D.N.J. 1993) (employer not liable for breach of employment
contract if it can show contract voidable due to reliance on material misrepresentations). It is
undisputed here that defendants never relied on plaintiff’s resume in making the hiring decision.
Plaintiff did not submit a resume until after the execution of his employment agreement and after
he began his employment with defendants. Defendants’ resume fraud defense, then, cannot
Defendants urge the court to follow Judge Marten’s decision in Walker v. Saga
Communications, Inc., 11 F. Supp. 2d 1292 (D. Kan. 1997), in which Judge Marten concluded
that the Kansas Supreme Court, if faced with the issue directly, would not require actual reliance
in a resume fraud case under the three-part Gassman test. Walker is clearly distinguishable from
this case. In Walker, the plaintiff submitted his resume in connection with the hiring process
(rather than after he began his employment) and Judge Marten concluded that the employer did
not need to prove actual reliance on the resume in making the hiring decision so long as the
omission or misrepresentation was material. One of the primary cases relied upon by Judge
Marten in reaching that conclusion is Crawford Rehabiliation Servs., Inc. v. Weissman, 938 P.2d
540 (Colo. 1997). Crawford, like the other cases relied upon by Judge Marten, is a case in which
the plaintiff’s resume was submitted prior to the start of the employment relationship. In
rejecting a separate reliance element, Crawford explains that reliance is “incorporated into the
inquiry of whether the employer would have regarded the misstated or omitted fact as important.
Employment applications are prepared for the employer, and employers are expected to rely
upon them in making employment decisions.” Part of that inquiry, according to Crawford, is
“whether the employee concealed or misrepresented the fact or facts with the intent of creating
a false impression in the mind of the employer.” Id. at 549. All of this underscores the
unmistakable conclusion that Walker does not provide any basis to alter the court’s conclusion
here where the resume was not submitted in connection with the employment decision.
In the end, defendants direct the court to no cases with similar facts (i.e., a case in which
the misleading resume or employment application was not submitted in connection with the
hiring process) in which reliance is not required. For the foregoing reasons, defendants’ motion
for summary judgment on their resume fraud defense is denied and, because defendants will not
be able to establish this defense at trial in light of the undisputed facts, that defense is no longer
a part of this case.
Elements of Plaintiff’s Breach of Contract Claim
The essential elements of a breach of contract claim under Kansas law are as follows:
(1) the existence of a contract between the parties; (2) sufficient consideration to support the
contract; (3) the plaintiff's performance or willingness to perform in compliance with the
contract; (4) the defendant's breach of the contract; and (5) damages to the plaintiff caused by
the breach. Pattern Instructions Kansas 4th, Civil § 124.01-A; Commercial Credit Corp. v.
Harris, 212 Kan. 310, 313 (1973). In their motion for summary judgment, defendants contend
that plaintiff cannot establish certain elements of his breach of contract claim, including the
existence of a contract; plaintiff’s performance or willingness to perform in compliance with the
contract; and defendants’ breach of the contract. More specifically, defendants contend that no
contract exists because the signed offer letter expressly preserves plaintiff’s at-will employment
status and, in any event, any contract that was formed must be rescinded in light of defendants’
Defendants further contend that plaintiff cannot establish his own
performance under the contract in light of plaintiff’s prior material breach of the contract and
that plaintiff cannot establish defendant’s breach because defendant terminated plaintiff for
cause. Plaintiff moves for summary judgment on the first element only–that the December 1,
2009 offer letter constitutes a binding, enforceable agreement.7
Whether the Signed Offer Letter Constitutes an Enforceable Contract
Both parties move for summary judgment on the issue of whether the December 1, 2009
signed offer letter constitutes an enforceable contract. Plaintiff contends that the letter
undisputedly is a binding contract–the offer setting forth detailed terms concerning the rights and
obligations of the parties was signed by defendants’ representative; it was expressly “accepted”
by plaintiff through his signature; and the agreement is supported by adequate consideration.
See M West, Inc. v. Oak Park Mall, LLC, 44 Kan. App. 2d 35, 48 (2010). Defendants contend
that plaintiff’s claims fail as a matter of law because no binding contract exists. Defendants’
argument is based on the following paragraph from the signature page of the offer letter:
I hereby accept this offer of employment and agree to the terms and conditions
described in this letter. I understand that my acceptance of this offer does not
constitute an employment contract and that my employment with Hawker
In an earlier round of summary judgment submissions, defendants asserted the
defense of mutual mistake and, in light of that prior assertion, plaintiff moves for summary
judgment on that defense. Defendants do not address that defense in response to plaintiff’s
motion and they do not address the defense in their own motion for summary judgment.
Clearly, the defense has been abandoned. Plaintiff’s motion for summary judgment on this
defense is granted. Hinsdale v. City of Liberal, Kansas, 19 Fed. Appx. 749, 768-70 (10th
Cir. 2001) (affirming district court’s grant of summary judgment in favor of defendant on
certain claims after concluding that plaintiff had abandoned those claims by failing to address
them in response to the defendant’s motion for summary judgment).
Beechcraft Corporation may be terminated, either by my employer or myself at
any time, for any reason, with or without notice.
According to defendants, the offer letter establishes plaintiff’s at-will employment and
defendants’ ability to terminate plaintiff’s employment at any time for any reason. As will be
explained, defendants have not shown as a matter of law that no contract exists and, moreover,
they have failed to raise any genuine issues of material fact as to whether the signed offer letter
constitutes a binding contract. Plaintiff’s motion on this issue is granted and defendants’ motion
The question for the court is to determine the parties’ meaning in using the phrase “my
acceptance of this offer does not constitute an employment contract.” On its face it could
indicate an intention not to enter into a legally enforceable contract whatsoever. In fact, in
denying plaintiff’s early filed first motion for summary judgment the court acknowledged that
possibility. But, the subsequent course of the litigation, which has fleshed out the totality of the
circumstances concerning the parties’ relationship and their understanding of it has clarified
matters. Both parties throughout this case have consistently construed this language as simply
an effort to preserve defendants’ right to discharge plaintiff at any time during the course of his
employment; that is, that he was an at-will employee. In the pretrial order, for example,
defendants summarize this language as follows: “The offer letter expressly states that it does not
constitute an employment contract, and that plaintiffs is an employee at-will, who may be
terminated at any time for any reason. As such, the offer letter is not a legally enforceable
employment agreement, and plaintiff was an employee at-will.”
submissions on summary judgment focus on plaintiff’s at-will employment status and how that
status might affect the parties’ contractual obligations. Indeed, any other interpretation of the
“does not constitute an employment contract” language (such as, that no contract whatsoever
exists between the parties) would render every other term of the offer letter meaningless and is
inconsistent with how both parties have treated it. Thus, the only reasonable construction of the
“does not constitute an employment contract” language is that one of the terms of the contract
into which the parties entered was that it was for employment at-will.
Defendants maintain that plaintiff’s at-will employment status precludes him from
recovering on his breach of contract claim. In support of their argument, defendants rely
exclusively on Kansas cases examining whether employment handbooks and other employment
documents are sufficient to create express or implied contracts of employment for guaranteed
terms as an exception to the employment at-will doctrine. See, e.g., Kastner v. Blue Cross &
Blue Shield of Kansas, Inc., 21 Kan. App. 2d 16 (1995). In such cases, the discharged employee
asserts a claim for wrongful termination based on an alleged promise of employment for a
specific term or an alleged promise to terminate the employee’s employment only for good
cause. Defendants asserts that this case is “analogous” to Kastner and other “handbook” cases.
It is not. Plaintiff here is not asserting a claim for wrongful termination; he is not challenging
defendants’ ability to terminate his employment at any time for any reason; and he does not
contend that he is entitled to continued employment under his contract with defendants. He
contends that he is entitled to enforce the severance pay provision of the parties’ agreement
regardless of defendants’ undisputed ability to terminate plaintiff’s employment at any time for
Without question, the terms contained in the December 1, 2009 signed offer letter,
including the severance pay provision, constitute a binding agreement. The at-will provision
isolated by defendants is simply one term of that agreement. To be sure, an at-will employment
contract is nonetheless a contract and plaintiff is entitled to whatever he was promised under that
contract. In other words, while an at-will employment contract does not include terms or
promises with respect to the timing or manner of termination, it may nonetheless include terms
relating to wages, benefits, duties and working conditions. As the Seventh Circuit has explained:
The lack of a fixed duration of employment does not make the relationship
any less contractual. . . . [A]t-will employees, though capable of losing or quitting
their employment at any time, are not totally without enforceable contractual
rights: “Wages, benefits, duties, working conditions, and all (but one) of the other
terms are specified and a breach of any of them will give the employee a cause of
action for breach of contract.”
Walker v. Abbott Laboratories, 340 F.3d 471, 476 (7th Cir. 2003) (quotation omitted).
Plaintiff’s motion for summary judgment on this issue is granted and defendants’ motion for
summary judgment on this issue is denied.
Whether the Agreement Must be Rescinded in light of Defendants’ Unilateral Mistake
Defendants next contend that they are entitled to rescission based on the theory of
unilateral mistake coupled with plaintiff’s fraudulent or inequitable conduct. See Andres v.
Claassen, 238 Kan. 732, 740 (1986) (“It has long been the law that a written instrument may be
reformed where there is ignorance or a mistake on one side and fraud or inequitable conduct on
the other, as where one party to an instrument has made a mistake and the other knows it and
fails to inform him of the mistake or conceals the truth from him.”); PIK–Civil 4th 145.05B (A
party may be relieved of his or her contractual responsibility if he or she has made a mistake
concerning a basic assumption or material fact upon which the contract was based, and the other
party to the contract knew of that mistake, had reason to know of the mistake, or caused the
mistake.). In response to defendants’ motion, plaintiff contends that no mistake was made; that
parol evidence of defendants’ alleged mistake is not admissible such that the contract must be
enforced as written; and, in any event, that the contract must nonetheless be enforced because
the record shows no fraud or inequitable conduct on his part in that he had no reason to believe
that the contract as written did not reflect defendants’ intent. As described in more detail below,
genuine issues of material fact concerning defendants’ unilateral mistake defense preclude
granting summary judgment.
Defendants’ Purported Mistake
According to defendants, the uncontroverted facts demonstrate that defendants assumed
that the offer letter did not entitle plaintiff to severance if he was terminated for cause and that
they never intended plaintiff to collect severance pay if he was terminated for cause. In support
of their argument, defendants highlight that a November 2, 2009 offer letter extended to plaintiff
contained a provision stating that “[s]everance is governed by the Company’s Severance Policy
in effect at the time of termination.” While this provision does not appear in any subsequent
offer letters to plaintiff (there is no evidence in the record that the parties ever discussed this
provision and no evidence concerning why the provision was removed from future drafts),
defendants contend that it supports their argument that any severance extended to plaintiff was
intended to comport with defendants’ severance policy. Pursuant to that policy, according to Mr.
Boisture, who testified that he was familiar with the policy, defendants generally do not provide
severance to employees who are terminated for cause. Mr. Boisture further testified that he did
not intend for the executed agreement to provide severance to plaintiff if he was terminated for
cause and that, as an officer of the company, he would not agree to such a provision in light of
his obligation to ensure that company funds are spent appropriately and wisely. Finally,
defendants point to an April 23, 2010 nonqualified stock option agreement executed by the
parties which provides that plaintiff’s stock option would be terminated if he is terminated for
cause. According to defendants, it makes no sense for the company to include the “for cause”
limitation in the stock option agreement but to intentionally exclude that limitation for purposes
of the severance agreement. In essence, defendants concede that a “for cause” limitation on the
severance provision was never negotiated with plaintiff, but that defendants’ officers assumed
that the provision would not apply if plaintiff was terminated for cause.8
Plaintiff objects to the admissibility of certain evidence proffered by defendants in
support of their motion for summary judgment–primarily the testimony of Mr. Boisture
procured through the use of leading questions and a KPMG audit report detailing plaintiff’s
alleged abuse of defendants’ travel and expense policy. The court need not resolve these
evidentiary questions now. The court has not relied at all on the KPMG report in resolving
Plaintiff, in response, contends that defendants cannot establish a unilateral mistake
because, unlike those cases in which a party seeks rescission based on a negotiated provision that
was omitted from the final contract, defendants here simply failed to propose or negotiate
language at the outset that in hindsight they wish they had negotiated. Stated another way,
plaintiff contends that the unilateral mistake defense does not extend to mistakes of business
judgment such as, according to plaintiff, occurred here. The court concludes, however, that
plaintiff has not demonstrated as a matter of law that only a mistake of judgment occurred. This
issue, then, cannot be resolved on the summary judgment submissions presently before the court.
Plaintiff also contends that defendants’ evidence concerning Mr. Boisture’s intent, the
November 2, 2009 agreement and the stock option agreement is inadmissible parol evidence,
particularly in light of the integration clause contained in the December 1, 2009 signed offer
letter. This argument is not persuasive. See Rosenbaum v. Texas Energies, Inc., 241 Kan. 295,
298 (1987) (“The rule that parol evidence is inadmissible to contradict or vary a written contract
presupposes an action involving a valid existing obligation.”); Blackledge v. Allison, 431 U.S.
63, 75 n.6 (1977) (integration clause carries great weight, but does not bar parol evidence and
can be set aside on grounds of mistake).
Plaintiff’s Knowledge of the Purported Mistake
any issues raised by the parties’ motions and the court has denied defendants’ motion on the
issues that pertain to Mr. Boisture’s testimony such that there is no prejudice to plaintiff.
As noted above, defendants’ unilateral mistake defense also requires proof that plaintiff
knew of defendants’ mistake or had reason to know of the mistake. Defendants assert that
plaintiff should have known about the mistake because, in the absence of a “for cause” limitation
on the severance payment, the provision provides a perverse incentive for plaintiff to
intentionally and quickly get fired based on misconduct so that he could collect the $650,000 and
then seek employment elsewhere–essentially collecting 2 paychecks at the same time.
Defendants further assert that plaintiff had knowledge of defendants’ precarious financial
condition and, in light of such knowledge, should have known that defendants would never have
agreed to a $650,000 severance payment in the event plaintiff was terminated for cause.
Plaintiff contends that the motion must be denied because there is no evidence that
plaintiff should have known about defendants’ alleged mistake. Plaintiff is a sophisticated
executive with at least one prior employment agreement containing a “for cause” limitation on
severance. Moreover, there was at least some discussion or communication between the parties
here as to whether the severance provision in this agreement should apply only if plaintiff was
terminated “without cause.” A reasonable jury, then, could conclude that plaintiff had reason
to know that defendants did not intend to negotiate a severance provision under which plaintiff
would receive $650,000 if he was terminated for cause even days after his employment began.
A trial, then, is required to determine the nature and extent of plaintiff’s knowledge concerning
whether defendants intended the severance provision to apply in the event of a “for cause”
termination. If the jury concludes that defendants were operating under a mistaken assumption
as to the application of the provision and that plaintiff knew or had reason to know of that
mistake and sought to take advantage of that mistake, then defendants would be entitled to
rescission of the contract.).9
Whether Plaintiff Can Establish that He Performed in Compliance with the Contract
In their motion for summary judgment, defendants contend that plaintiff’s claims must
fail because plaintiff’s prior material breach of the employment agreement excused defendants
from further performance under the agreement.10 In the pretrial order, defendants have asserted
three specific alleged prior breaches by plaintiff–plaintiff’s violation of defendants’ travel and
expense policy (defendants contend, for example, that plaintiff routinely submitted expenses for
expensive hotel rooms and business class airfare without seeking prior approval for such
expenses and submitted personal expenses for reimbursement); that plaintiff’s job performance
and skill set was inadequate (essentially, defendants contend that plaintiff was incompetent for
the position); and that plaintiff did not ensure that his tax returns were timely filed. As will be
To the extent defendants suggest in their summary judgment submissions that there is
a separate defense based on “unilateral error,” no such defense exists in this case. The case
relied upon by defendants, Squires v. Woodbury, 5 Kan. App. 2d 596, 599 (1980), simply
discusses alternative contexts in which the defense of unilateral mistake might be applied
and, in doing so, substituted the word “error” for “mistake” in describing those different
contexts. Moreover, in the pretrial order, defendants have preserved a defense of unilateral
mistake based solely on their mistake coupled with plaintiff’s knowledge of that mistake.
They have not preserved a theory of unilateral mistake based on undue hardship or
unconscionability–or of “unilateral error.”
Defendants also frame this issue as plaintiff’s failure to demonstrate his willingness
to perform under the contract.
explained, defendants have not shown, for purposes of summary judgment, that they are entitled
to rescind the contract based on plaintiff’s prior material breach of the agreement. At a
minimum, defendants have not shown the absence of material factual issues with respect to
whether plaintiff committed a prior material breach of the contract. Moreover, defendants have
rendered an analysis of their motion more difficult by failing to marshal the evidence relating
to this defense as it pertains to the specific terms of the parties’ contract.
Under Kansas law, the rescission of a contract or the discharge of obligations under a
contract does not arise from every prior breach. Rather,
[t]he breach must be material and the failure to perform so substantial as to defeat
the object of the parties in making the agreement. A breach which goes to only
a part of the consideration, which is incidental and subordinate to the main
purpose of a contract, does not warrant rescission.
In re Johnson’s Estate, 202 Kan. 684, 691-92 (Kan. 1969). Defendants have not shown, as a
matter of law, that plaintiff’s alleged breaches of the contract are so substantial as to warrant
rescission. With respect to plaintiff’s alleged breach of the travel and expense policy and his
poor performance, the materiality question is complicated by defendants’ failure to identify any
specific contractual provisions which plaintiff’s conduct allegedly breached. The December 1,
2009 letter agreement does not reference defendants’ travel and expenses policy and does not
appear to require adherence to any particular policies whatsoever. While the letter does mention
adherence to performance objectives, those objectives are tied only to incentive compensation.
Thus, with respect to plaintiff’s alleged violation of the travel and expense policy and his
allegedly deficient performance, it is unclear how defendants believe that plaintiff was in default
of his obligations under the agreement. To the extent defendants are able to flesh out this
argument at trial, the jury will need to determine whether the alleged breaches are material. See
E. Allan Farnsworth, Contracts § 8.16, at 638 (2d ed. 1990); Almena State Bank v. Enfield, 24
Kan. App. 2d 834, 838 (1998) (substantial performance [a particular application of the doctrine
of materiality] is a question of fact).
With respect to plaintiff’s alleged failure to ensure that his tax returns were timely filed,
the letter agreement states as follows: “The Company will provide for assistance in preparing
income tax returns but the employee continues to be personally responsible for the timely filing
of tax returns and should assure that such filings are made.” But while defendants have tied
plaintiff’s alleged breach to a particular contractual provision, they have not shown as a matter
of law that the alleged breach is a material one, particularly where this provision is identified in
the letter agreement as a “benefit” to plaintiff rather than an obligation. In any event, a
reasonable jury could conclude that the tax filing provision in the agreement was not of “such
importance” to the contract that the contract “would not have been made without it.” See 14
Williston on Contracts § 43:6 (4th ed. 2004).
For the foregoing reason, defendants have not demonstrated that they are entitled to
summary judgment in light of plaintiff’s prior material breach of the agreement. Questions of
fact remain for resolution at trial.
Whether Plaintiff Can Establish Defendants’ Breach of the Contract
Defendants’ last argument concerning the elements of plaintiff’s contract claim is that
plaintiff cannot establish a breach because defendants terminated plaintiff’s employment for
cause. According to defendants, extrinsic evidence demonstrates that the intent and purpose of
the severance provision was not to provide plaintiff with severance pay if he was terminated for
cause. Defendants contend that because plaintiff undisputedly was terminated for cause, plaintiff
cannot establish a breach of the contract. This argument is rejected for two reasons. First, as
noted earlier, genuine issues of material fact exist as to whether the severance provision is
triggered only upon a termination without cause or whether it is also triggered by a termination
with cause. Thus, even assuming that plaintiff undisputedly was terminated for cause,
defendants have not shown for purposes of summary judgment that no breach by them occurred.
Second, plaintiff has come forward with evidence from which a jury could reasonably
conclude that plaintiff was terminated without cause and that defendants exaggerated their
concern over plaintiff’s expense accounts only after realizing that they would otherwise have to
pay severance to plaintiff. Specifically, plaintiff’s evidence shows that plaintiff’s termination
letter was dated October 10, 2010–the same date that defendants announced that 350 office
employees and 800 production employees had been laid off as a cost-cutting measure.
Moreover, plaintiff was never replaced in his job position with defendants and his duties were
simply absorbed by Mr. Vick.
Defendants, then, have not shown that they are entitled to summary judgment on the
grounds that plaintiff was terminated for cause.
Whether Plaintiff Was a “Faithless Servant”
Both parties move for summary judgment with respect to the application of the “faithless
servant” doctrine. According to defendants, plaintiff’s claims are barred in their entirety by the
faithless servant doctrine and, more specifically, plaintiff’s failure to act as a good and loyal
servant during his employment.
Plaintiff also moves for summary judgment on this
issue–seeking a ruling that the doctrine does not apply to the facts of this case. As will be
explained, the evidence in the record would not permit a reasonable jury to conclude that
plaintiff was a “faithless servant” during his employment with defendants. Thus, defendants
motion is denied and plaintiff’s motion is granted on this issue.
Under the faithless servant doctrine, if an employee’s actions “are so disloyal or dishonest
that they permeate his service to his employer,” the employee forfeits the compensation to which
he would otherwise be entitled. Hein v. TechAmerica Group, Inc., 17 F.3d 1278, 1282 (10th Cir.
1994) (citing Bessman v. Bessman, 520 P.2d 1210, 1217-20 (Kan. 1974)). As explained by the
Kansas Supreme Court in Bessman, a servant can be faithless in a number of ways, including:
where the employee is guilty of gross misconduct, or misconduct substantially
affecting the contract of employment, in the course of his employment, or has
practiced an intentional fraud on his employer, or has proved disloyal to him in a
manner substantially affecting the contract of employment, or has assaulted his
employer, or has falsified his accounts, or has stolen or embezzled the money of
his employer, or has committed other criminal offenses, although not immediately
injurious to the person or property of the employer.
Bessman, 520 P.2d at 1215 . The Kansas Supreme Court noted the historical rationale for this
rule: “[W]here . . . the employer alleges facts sufficient to show dishonesty and disloyalty on
the part of his employee which permeates the employee’s service in its most material and
substantial part, the [employee] cannot recover the agreed compensation; for he has failed
essentially to give stipulated consideration for the agreed compensation, and is asking for pay
for his own wrongdoing.” Id.; accord Burton Enterprises, Inc. v. Wheeler, 643 F. Supp. 588,
591 (D. Kan. 1986) (faithless servant doctrine covers not only situations when employee diverts
financial gain that should have gone to the employer but a variety of unfaithful conduct).
Defendants urge an application of the doctrine based on plaintiff’s “forcing his luxurious
lifestyle onto the company’s accounting ledger while the company was cutting costs and laying
off employees.” According to defendants, plaintiff routinely submitted expenses for expensive
hotel rooms and business class airfare in contravention of defendants’ policy that required preapproval for such expenses. Defendants further allege that plaintiff submitted expenses for car
services without prior approval and that, on one occasion, he submitted personal expenses for
company reimbursement when he and his spouse spent the weekend in New York in advance of
company meetings. Defendants maintain that plaintiff received a personal benefit to the
detriment of the company by traveling in high style at the company’s expense while the company
was attempting to reduce costs. Plaintiff does not dispute these facts, but adds that the company
reimbursed each and every expense submitted by plaintiff and that the expenses were
undisputedly incurred in pursuit of his job duties.
Although defendants rely on Bessman and Wheeler in support of their motion, the facts
in Bessman and Wheeler are readily distinguishable from the facts here. In Bessman, the
doctrine was applied to defeat the claims of an employee who had pocketed bribes from various
contractors while managing the refurbishment of his employer’s property. In Wheeler, the court
applied the doctrine to bar the claims of an employee who, while employed by the employer, had
conspired to establish a competing business. In contrast, there is no evidence (or suggestion)
here that plaintiff submitted bogus expenses. Defendants do not dispute that plaintiff actually
incurred the expenses for which he sought reimbursement and they do not dispute that those
expenses were incurred in connection with plaintiff’s job duties (with the possible exception of
the personal weekend with his spouse, which they reimbursed anyway). The court has not
uncovered (and the parties have not cited) any cases from other jurisdictions that might shed
light on the application of the faithless servant doctrine to these facts. In the absence of such
guidance, the court returns to the language in Bessman and finds that no reasonable jury–on
these facts–could conclude that plaintiff’s conduct was so disloyal or dishonest as “to permeate
his service” to defendants. Indeed, the record reflects that plaintiff’s conduct–while inconsistent
with company expectations–did not even generate a written warning or written admonishment
of any kind. His supervisor discussed the issue with him on a handful of occasions, but
defendants reimbursed each and every expense. Defendants have established, at most, that
plaintiff had little regard for his own role in the company’s efforts to cut costs. They have not
shown that he was faithless servant and, on these facts, no jury could reasonably draw that
conclusion. Defendants’ motion on this issue is denied; plaintiff’s motion is granted.
Whether the Unpaid Severance Constitutes Wages for Purposes of the KWPA
The court turns, then, to the issue of whether the unpaid severance in this case constitutes
“wages” for purposes of the KWPA. The KWPA gives employees the right to receive their
“wages due” and concerns when and how those wages are paid. See K.S.A. § 44–314. In those
instances when an employer willfully fails to pay an employee his or her wages, the KWPA
provides that the employer is liable for both the wages due and a penalty in an amount up to
100% of the unpaid wages. See id. § 44–315(b). The KWPA defines “wages” as “compensation
for labor or services rendered by an employee, whether the amount is determined on a time, task,
piece, commission or other basis less authorized withholding and deductions.” Id. § 44-313(c).
Kansas Administrative Regulations defines “or other basis” within the meaning of K.S.A. §
all agreed compensation for services for which the conditions required for
entitlement, eligibility, accrual or earning have been met by the employee. Such
compensation may include, but is not limited to, profit sharing, fringe benefits, or
compensation due as a result of services performed under an employment contract
that has a wage rate required or implied by state or federal law. Conditions
subsequent to such entitlement, eligibility, accrual or earning resulting in a
forfeiture or loss of such earned wage shall be ineffective and unenforceable.
K.A.R. § 49-20-1(d).
To date, Kansas courts have not directly addressed the issue of whether or in what
circumstances severance pay constitutes “wages” for purposes of the KWPA. In Commodore
v. Armour & Co., 210 Kan. 412 (1968), the court was faced with a determination of whether an
assignment of separation pay was tantamount to an assignment of future wages for purposes of
the general rule that wages earned after a bankruptcy adjudication become the property of the
bankrupt clear of the claims of all creditors. See id. at 418-419. The court ultimately concluded
that the plaintiff’s separation pay constituted wages under the terms of the applicable collective
bargaining agreement. See id. at 420-21. According to plaintiff, Commodore supports the same
Commodore, however, is distinguishable in several important respects. First, the court
in Commodore was not addressing the meaning of the terms “wages” as used in the KWPA and
no statutory scheme was at issue in that case. Second, the severance pay provision in
Commodore was contained in a collective bargaining agreement and the court noted in its
analysis that “separation pay is generally considered wages when provided for by collective
bargaining agreements.” Id. at 420. But most importantly, the collective bargaining agreement
in Commodore expressly defined separation pay as “earned during periods of employment with
the Company,” and it was calculated based upon an employee’s wage history and length of
employment such that the longer an employee worked for the Company, the higher that
employee’s severance allowance climbed. Id. at 417, 420. As explained by the court:
Under the terms of the agreement in question, plaintiff’s continuing, in a
satisfactory manner, his services in Armour’s employment was an important part
of the consideration for separation pay. He was paid weekly wages for his
ordinary services. Separation pay constituted additional wages for continuing in
employment until termination . . . Entitlement to separation pay required
substantial services by way of continued employment and termination thereof
under the required conditions on the part of plaintiff subsequent to his
adjudication in bankruptcy.
Id. at 421.
By contrast, the parties’ agreement here provides for a payment of $650,000 to plaintiff
if his employment is involuntarily terminated before December 31, 2010. Unlike Commodore,
then, plaintiff’s severance is in no way tied to his continued employment. Indeed, if he remained
employed after December 31, 2010, he was entitled to no severance at all under the agreement
and, conversely, he was entitled to the full amount of severance if his employment was
involuntarily terminated just one day into his employment. In that regard, plaintiff’s entitlement
to severance pay did not require any services on the part of plaintiff. Clearly, then, plaintiff was
not “earning” severance pay over the course of his employment as in Commodore.
Because Kansas courts have not directly addressed the issue here, the court looks to other
jurisdictions to see whether and when courts have treated severance pay as “wages” for purposes
of wage payment statutes with language analogous to the KWPA. Plaintiff directs the court to
cases in Texas, Colorado and Pennsylvania to support his contention that severance pay
constitutes wages under the KWPA. These cases are not persuasive to the court. The Texas
case, General Electric Capital Corp. v. ICO, Inc., 230 S.W.3d 702 (Tex. App. 2007), concerns
not whether severance pay constitutes “wages” but whether it constitutes “compensation for
personal service” for purposes of establishing an exemption in a garnishment proceeding. The
Colorado case relied upon by plaintiff concerns a prior version of the Colorado Wage Collection
Act. See Fang v. Showa Entetsu Co., 91 P.3d 419 (Colo. App. 2003). But while the Fang court
concluded that the severance pay at issue in that case constituted wages within the meaning of
the prior version of the CWCA, the court recognized that “not all severance payments” constitute
wages, particularly when the payment is not connected to the work performed by the employee.
See id. at 422. Moreover, the CWCA has since been amended to specifically exclude severance
pay as wages. See Colo. Rev. Stat. § 8-4-101(8)(b). Finally, the Pennsylvania case relied upon
by plaintiff, Denton v. Silver Stream Nursing & Rehab. Center, 739 A.2d 571 (Pa. Super. 1999)
is not helpful because the definition of “wages” within the Pennsylvania Wage Payment and
Collection Law expressly includes “fringe benefits or wage supplements,” see 43 P.S. § 260.2a,
and the KWPA definition is simply not that broad.
The cases that are more persuasive to the court are those in which the definition of
“wages” in the particular state’s Wage Payment statute mirrors the definition of “wages” in the
KWPA. Connecticut’s Wage Payment statute, for example, defines “wages” as “compensation
for labor or services rendered by an employee, whether the amount is determined on a time, task,
piece, commission or other basis of calculation.” C.G.S.A.§ 31-71a. Colorado state courts and
federal courts sitting in Colorado have routinely held that severance pay is generally not
recoverable as “wages” in a civil action under § 31-72. See Drybrough v. Acxiom Corp., 172
F. Supp. 2d 366, 371 (D. Conn. 2001); Eddlemon v. Stauffer Chem. Co., 1990 WL 138214, at
*5-6 (D. Conn. 1990); Mangiofico v. McKelvey, 2005 WL 1155194, at *3 (Conn. Super. 2005);
see also McGowan v. Administrator, 220 A.2d 284, 286 (Conn. 1966) (severance pay not
considered wages for purposes of unemployment compensation statute because “wages cease
when employment does”).
Similarly, Indiana’s Wage Statute defines “wages” as “all amounts at which the labor or
service rendered is recompensed, whether the amount is fixed or ascertained on a time, task,
piece or commission basis, or in any other method of calculating such amount.” See Design
Indus., Inc. v. Cassano, 776 N.E.2d 398, 401-02 (Ind. App. 2002). In Cassano, the court held
that a severance payment did not constitute wages for purposes of the Wage Statute because the
payment applied only in the event of a termination and, in such circumstances, could not be
considered earned wages for services performed. Id. at 402. Nebraska’s Wage Payment and
Collection Act is also analogous to the KWPA, although it includes fringe benefits. It defines
“wages” as “compensation for labor or services rendered by an employee, including fringe
benefits, when previously agreed to and conditions stipulated have been met by the employee,
whether the amount is determined on a time, task, fee, commission, or other basis.” See
Heimbouch v. Victorio Ins. Serv., Inc., 369 N.W.2d 620 (Neb. 1985). In Heimbouch, the court
held that a severance payment is not compensation for services rendered but more akin to
liquidated damages due upon termination of the agreement. Id. at 624.
Ultimately, the court believes that the Kansas Supreme Court, if faced with the issue,
would conclude that the severance payment under the particular employment agreement in this
case does not constitute “compensation for labor or services rendered” within the meaning of the
KWPA. The payment is not tied to plaintiff’s continued employment in any way; he did not earn
the severance pay over the course of his employment; and he owed no services in exchange for
the severance pay. In such circumstances, the court will not read the term “wages” so broadly
as to include the severance pay at issue here within the narrow definition of wages under the
KWPA. See Prozinski v. Northeast Real Estate Servs., LLC, 797 N.E.2d 415, 421 (Mass. App.
Ct. 2003) (any argument that the term “wages” in Wage Payment Act should be construed
broadly to include severance is properly addressed to the Legislature). Defendants’ motion for
summary judgment on plaintiff’s KWPA claim is granted and plaintiff’s motion is denied.11
IT IS THEREFORE ORDERED BY THE COURT THAT plaintiff’s motion for
summary judgment (doc. 69) is granted in part and denied in part; defendants’ motion for
summary judgment (doc. 85) is granted in part and denied in part; defendants’ motion for oral
argument (doc. 112) is denied.
IT IS SO ORDERED.
Dated this 2nd day of March, 2012, at Kansas City, Kansas.
s/ John W. Lungstrum
John W. Lungstrum
United States District Judge
Because the court has granted defendants’ motion in any event, it declines to address
defendants’ argument that the KWPA does not apply to high-level executives.
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