Cheek v. City of Greensboro

152 F. Supp. 3d 473, 2015 WL 4393067
CourtDistrict Court, M.D. North Carolina
DecidedJuly 15, 2015
DocketNos. 1:12-CV-981, 1:12-CV-1110, 1:12-CV-1311, 1:12-CV-888
StatusPublished
Cited by1 cases

This text of 152 F. Supp. 3d 473 (Cheek v. City of Greensboro) is published on Counsel Stack Legal Research, covering District Court, M.D. North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cheek v. City of Greensboro, 152 F. Supp. 3d 473, 2015 WL 4393067 (M.D.N.C. 2015).

Opinion

MEMORANDUM OPINION AND ORDER

CATHERINE C. EAGLES, District Judge.

Before the Court are cross motions for summary judgment filed in- four lawsuit? brought by certain firefighters and police officers against the City of Greensboro. These cases raise issues related to compensation and benefits. This opinion addresses claims in all four lawsuits that the City is contractually obligated to provide longevity payments to employees when they reach certain milestones and that the City can never reduce or end these payments. Because the City made no offer to provide the plaintiffs with longevity payments for their entire careers,- the Court will grant the City’s motion in each, lawsuit [476]*476as to all claims that depend on the existence of such a contract.

OVERVIEW

For many years, the City paid its employees, including police officers and firefighters, a base salary and, after a certain number of years of service, an annual longevity payment that was calculated as a percentage of salary. The percentage rose every five years and thus resulted in what was essentially a series of annual pay raises or bonuses for experienced employees.

In 2010, the City froze increases in longevity payments for current employees and ended longevity payments completely for new employees. As a result, when current employees reached their next five-year milestone, their annual longevity payment remained the same and did not increase.

In 2012, the City replaced the longevity program with a “service bonus program.” Under this program, the City stopped longevity payments in favor of an optional bonus. This change immediately affected employees’ overtime compensation, as longevity payments had been taken into account in calculating overtime pay while service bonus payments were not. The change also had a cascading effect on retirement benefits, which are calculated as a percentage of total annual compensation, including overtime pay. If the City opts not to pay a bonus in a particular year, the financial effect will be even larger.

The plaintiffs contend that they had a contract with the City for annual longevity payments and for regular increases in these payments at certain five-year,intervals for their entire careers and that the City breached this contract when it froze longevity pay in 2010 and again when it terminated the longevity program in 2012. The plaintiffs assert several other causes of action that depend on the existence of this contract.

None of the plaintiffs had or have written employment contracts with the City. The plaintiffs contend that the City offered longevity payments when it published a schedule of those payments in certain Benefits Books, that they accepted the City’s offer by continuing their employment, and that they thereafter had contractual rights to longevity payments for the rest of their careers. The plaintiffs contend in the alternative that their rights in the longevity program were “vested” such that, after they reached their first five-year milestone, the City could never change the program’s terms, or, in another alternative, that the City was contractually obligated to continue making longevity payments because it previously determined that longevity payments were non-discretionary under the Fair Labor Standards Act. The City contends that the longevity program was discretionary and could be changed at any time.

LEGAL BACKGROUND

North Carolina law authorizes city councils to set compensation rates for city employees and to offer employee benefits. See N.C. Gen.Stat. § 160A-162. One such benefit, longevity pay, “is a plan under which employees receive additional wages based on [their] number of years of service.” Diane M. Juffras, Employee Benefits Law for North Carolina Local Government Employers 27 (2009). Many cities provide longevity pay as an offered benefit, though state law does not require them to do so. See id. at 166.

Cities “may generally alter benefits, make them more generous or less generous, or eliminate any or all of them— just as they may give pay raises or order across-the-board salary freezes or cuts.” Id. at 13-14; see also Abeyounis v. Town of Wrightsville Beach, 102 N.C.App. 341, 344, 401 S.E.2d 847, 849 (1991). However, [477]*477North Carolina law “protects employees’ expectations about what they are to receive in return for a day’s work.” Juffras, supra, at 14. If an employer distributes materials that promise certain benefits, “the promises are enforceable, and the employer must provide the benefits promised until it clearly informs employees of a change in the benefits offered.” ' See id.; see also White v. Hugh Chatham Mem’l Hosp., Inc., 97 N.C.App. 130, 131-32, 387 S.E.2d 80, 81 (1990); Roberts v. Mays Mills, Inc., 184 N.C. 406, 114 S.E. 530, 533-34 (1922). Thus, when a city adds, eliminates, or changes a benefit, “the [city] must update any employee handbook dr manual that describes the benefits that the [city] offers its employees, and it' must be sure that each employee receives a revised copy.” Juffras, supra, at 14. “Once the employer changes its handbook or policy and publicizes the changes to employees, the employer is no longer liable for the benefit. When employees report to work, they know that their compensation for the work they do on that day and in the future no longer includes the eliminated benefit.” Id. at 15; cf. White, 97 N.C.App. at 131-32, 387 S.E.2d at 81; Brooks v. Carolina Tel. & Tel. Co., 56 N.C.App. 801, 804-05, 290 S.E.2d 370, 372 (1982).

Under North Carolina law, a party making a breach of contract claim must show: (1) the “existence of a valid contract and (2) breach of the terms of that contract.” One Beacon Ins. Co. v. United Mech. Corp., 207 N.C.App. 483, 487, 700 S.E.2d 121, 124 (2010) (citation omitted). In employment-at-will situations, North Carolina courts often use the “unilateral contract” theory to describe the contractual relationship created when' an employer promises to provide benefits in its employment materials. See, e.g., White, 97 N.C.App. at 131-32, 387 S.E.2d at 81.

“[T]he distinctive features of [a] unilateral contract are that the offeror is the master of his offer and can withdraw it at any time before it is accepted by performance, and that while the offer is still outstanding the offeree can accept it by meeting its conditions.” Id. at 132, 387 S.E.2d at 81. In the employment benefits context, an employee accepts an employer’s unilateral offer to provide benefits by entering or continuing employment. See, e.g., Leone v. Tyco Elecs. Corp., 407 Fed.Appx. 749, 751 (4th Cir.2011); Hamilton v. Memorex Telex Corp., 118 N.C.App. 1, 10-11, 454 S.E.2d 278, 283 (1995); Roberts, 184 N.C. 406, 114 S.E. at 533-34. North Carolina courts have applied the “unilateral contract theory with, respect to various types of employment benefits.” Garcia v. Frog Island Seafood, Inc., 644 F.Supp.2d 696, 719 (E.D.N.C.2009); see also Hamilton, 118 N.C.App.

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Bluebook (online)
152 F. Supp. 3d 473, 2015 WL 4393067, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cheek-v-city-of-greensboro-ncmd-2015.