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Adams v. Jersey Central Power & Light Co.

Decided: May 18, 1955.


Hall, J.s.c.


Plaintiffs, who are 161 former employees of defendant in its gas operations, bring suit for severance pay under the provisions of a labor agreement between several locals of the International Brotherhood of Electrical Workers and defendant to the benefits of which plaintiffs were entitled. The amounts of such pay demanded in the complaint aggregate $147,625.13, exclusive of interest and costs. The Appellate Division, in an unreported opinion on an earlier phase of the case held that the controversy was not the subject of arbitration under the agreement.

Defendant now moves for summary judgment and plaintiffs make a cross-motion for judgment interlocutory in character on the issue of liability. R.R. 4:58-3. Voluminous affidavits and other proofs have been submitted by both sides. It is conceded that there is no genuine issue as to any material fact on the overall question of liability.

From the proofs the following pertinent facts are established:

The labor agreement involved was entered into, after a considerable period of negotiation, under date of February 11, 1947, effective as of December 1, 1946, for a period of one year. It contained in section 6.6 these provisions relative to severance pay:

"Severance pay benefits shall be applied as follows:

Regular Employees who have completed one (1) year or more of continuous service and who are permanently released from employment because of reasons beyond the control of the employee concerned, shall be given an allowance of one (1) week's base pay at the rate of pay at the time of release for each full year of continuous service.

Severance pay benefits shall not apply to employees discharged for just cause, resigning (except for bona fide illness in an employee's immediate family requiring a change of location outside the area

served by the Company, for reasons of health), retiring, leaving the employ of the Company because of a compensable disability or leave of absence.

The acceptance of a severance allowance shall serve to abolish and annul any and all seniority ratings or reinstatement privileges. Should a separated employee, after having accepted severance pay, as herein provided, be re-employed by the Company, he shall assume the status of a newly hired employee.

Severance benefits shall be in addition to any earned vacation or sick leave benefits for which the separated employee is eligible."

The contract was extended, unchanged as to these provisions, from time to time and was in effect at 12:01 A.M. on June 3, 1952, the date on which plaintiffs' employment with defendant terminated under circumstances claimed to amount to a permanent release "from employment because of reasons beyond the control of the employee concerned" so as to bring the severance pay section into operation. The proofs do not disclose the date of the last extension. The one preceding it was dated August 30, 1950, extending the contract to August 31, 1951. Extensions before that were dated, respectively, August 12, 1947, November 22, 1948, and January 13, 1950.

The defendant, a New Jersey public utility corporation, was engaged up to June 3, 1952 in the manufacture, production and sale of electricity in two disconnected areas in this State and of gas in three such areas, two of which overlapped in whole or in part the electric service areas. The company was, on September 4, 1941, a subsidiary of Associated Gas and Electric Corporation, along with innumerable other utility corporations in this country and the Philippine Islands. The latter and its parent, Associated Gas and Electric Company, were at that time undergoing reorganization pursuant to chapter X of the Federal Bankruptcy Act. On the 1941 date the Securities and Exchange Commission instituted proceedings before it under section 11(b)(1) of the Public Utility Holding Company Act of 1935 (15 U.S.C.A. , ยง 79 et seq.) to compel the divestiture by the parent of many of these subsidiary companies, in whole or in part, as in violation of the provisions of the statute. Included were the gas

operations of the defendant. The proceeding was not concluded until December 28, 1951. In the interim, in 1942, after contested hearings, the parent was ordered to sever its relationship with some 115 companies, which it did. Jurisdiction was reserved to determine the extent of the retainable interest in properties controlled by the parent in the New York-Pennsylvania-New Jersey area, including those of defendant, and further hearings held. In 1946, following the completion of the bankruptcy reorganization, the parent changed its name to General Public Utilities Corporation ("General"). Early in 1949, the latter voluntarily agreed to divest itself of its New York subsidiaries, but still insisted on its right to retain the Pennsylvania and New Jersey operations, including all those of defendant. Later that year, the Commission again resumed the hearings on this remaining issue, at which General took the position just indicated and introduced extensive evidence in support thereof. At the conclusion of the hearings early in 1951 the divisional staff of the Commission prosecuting the matter stated its views that General's electric properties in Pennsylvania and New Jersey were retainable as an integrated public utility system, but that the gas properties of defendant were not. General's counsel, on May 2, 1951, stated, apparently because it was felt the Commission itself or an appellate court could not be persuaded to the contrary in the light of decisions in other cases, that it would not oppose the entry of an order embodying those views, and a decision and order to that effect were filed by the Commission on December 28, 1951, which directed among other things that General dispose of its interest in the gas properties of defendant serving Cape May, Ocean, Monmouth and Morris Counties. See In re General Public Utilities Corporation , Securities and Exchange Commission Holding Company Act Release No. 10982.

In anticipation of the final order of the Commission, defendant sought to sell its gas properties, resulting in the execution of a contract of sale therefor, dated December 3, 1951, between it and County Gas Company, the name of which was later changed to New Jersey Natural Gas Company

("New Jersey"). The buyers had no former connection with the seller. The sale was approved by the Securities and Exchange Commission on April 29, 1952 and consummated as of 12:01 A.M. on June 3, 1952. Section 1 of Article IX of this contract contained the only provisions thereof relating to employees of defendant in the gas operations and properties sold, including plaintiffs, and read as follows:

"Seller and Purchaser are desirous that, in the operation of the properties which are the subject of this agreement by Purchaser, Purchaser will endeavor to employ the personnel presently employed by Seller in such operation and Purchaser will endeavor to make due provision therefor. As promptly as practicable Purchaser will advise Seller of any such employees of Seller which Purchaser will be unable thus to employ. Nothing herein set forth shall obligate Seller to release any of its personnel for employment with Purchaser nor to obtain the acceptance, by any of its employees, of employment by Purchaser. Purchaser will give credit under its pension plan to all of Seller's employees transferred to it for all periods of service rendered by such employees to Seller and its predecessors and affiliates as if such service had been rendered to Purchaser, and it is Purchaser's intention that the benefits to be provided under Purchaser's pension plan for the employees thus transferred to it will be substantially comparable to those provided under Seller's pension plan as in force at the date of this agreement."

Neither these employees nor their unions were parties to the agreement in any way. It is to be noted that the quoted section amounts to no more than an expression of desire and intention without any binding commitment for the benefit of the employees concerned by either contracting party.

The proofs do not disclose exactly what transpired between defendant and New Jersey after the execution of the contract of sale with reference to employees of the former, but apparently some kind of an arrangement was made between the companies for New Jersey to take over defendant's employees engaged in the gas operations which it was conducting. Apparently also, certain of defendant's employees who were engaged in both gas and electric operations were given the option of staying with defendant or going with New Jersey. All but two of the plaintiffs are clearly in the former category. These two (plaintiffs Saunders and Wolcott), according to

defendant's uncontradicted affidavits, had the option and elected to go with New Jersey.

Under date of May 29, 1952 each employee of defendant who was going into the employ of New Jersey when the sale was consummated received a letter from the president of defendant reading, in part, as follows:

"The sale of our gas property to the New Jersey Natural Gas Company, which has been awaiting approval of governmental agencies for quite some time, has now been approved and consummated. This sale, as you know, is not voluntary on the part of Your Company. It is the result of an Order by the Securities and Exchange Commission that the Company divest itself of its gas properties. It means that 386 Jersey Central employees, who are working in the Gas Department, will be transferred to the new Company as of June 3, 1952 and will no longer be a part of the Jersey Central Power & Light organization.

You are one of these employees to be so transferred and I can truthfully say that I regret that it becomes necessary for you to leave this Company.

You will soon receive compensation covering the redemption of your unused Sick Leave credit which I have agreed to do for all gas employees. You also will be refunded all the money you have contributed to the Additional Allowance provision of our Pension Plan with accumulated interest.

Your new employer has indicated that you will receive from them substantially the same benefits in insurance, pension, sick leave, vacation rights, etc. as you now enjoy and I hope your relationship with them will continue on the same amicable basis as it has with us in the past.

On your leaving the Company, I want again to express my appreciation for your loyal service to this Company in the past and offer you my best wishes for your ...

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