Handicapped Children's Education Board v. Lukaszewski
112 Wis. 2d 197, 332 N.W.2d 774 (1983)
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Rule of Law:
Damages for an employee's breach of an employment contract are measured by the employer's expectation interest, which includes the cost of obtaining equivalent services, even if the only available replacement is more qualified and thus more expensive.
Facts:
- In January 1978, the Handicapped Children’s Education Board (the Board) hired Elaine Lukaszewski as a speech therapist.
- The Board offered Lukaszewski a contract for the 1978-79 school year for $10,760, which she accepted.
- In August 1978, before the school year began, Lukaszewski was offered a higher-paying job ($13,000) at the Wee Care Day Care Center, located closer to her home.
- Lukaszewski attempted to resign, but the Board refused to release her from her contract and threatened legal action.
- After returning to work, Lukaszewski experienced stress and was diagnosed by her doctor with high blood pressure, who advised that her condition would not improve unless the stressful situation was removed.
- Lukaszewski resigned on September 13, 1978, citing her health condition, and subsequently returned to work at the Wee Care Day Care Center.
- The Board hired the only qualified applicant available as a replacement, who, due to more experience, had to be paid $1,026.64 more per year than Lukaszewski under the union salary schedule.
Procedural Posture:
- The Handicapped Children's Education Board sued Elaine Lukaszewski in Ozaukee county circuit court (the trial court) for breach of contract.
- The trial court ruled that Lukaszewski had breached her contract and awarded the Board $1,026.64 in damages plus costs.
- Lukaszewski, as appellant, appealed to the court of appeals.
- The court of appeals affirmed the trial court's finding of a breach but reversed the damage award, holding the Board suffered no net loss.
- The Board, as petitioner, was granted a petition for review by the Supreme Court of Wisconsin.
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Issue:
Is an employer entitled to recover as damages the additional salary cost of a replacement employee when that replacement is more qualified and commands a higher salary than the employee who breached the contract?
Opinions:
Majority - Callow, J.
Yes. An employer is entitled to damages for the loss of its bargain, measured by the cost of obtaining equivalent services, and any additional objective value received from a more qualified replacement is irrelevant. The court first affirmed that Lukaszewski breached her contract, finding that a health condition does not excuse nonperformance if it is self-induced. The trial court found her stress was a result of her own actions in repudiating the contract, not harassment by the Board. On the issue of damages, the court held that the correct measure is the non-breaching party's expectation interest. The Board bargained for Lukaszewski's services at an agreed-upon salary and was forced to pay more to get a replacement. The fact that the replacement was more experienced does not negate the Board's loss, as this 'benefit' was imposed upon it. Because the Board took reasonable steps to mitigate its damages by hiring the only available qualified candidate, it is entitled to recover the difference in salary.
Dissenting - Day, J.
The dissent would not reach the issue of damages. The dissent argues that Lukaszewski's resignation was justified and therefore she did not breach the contract. Lukaszewski had a medically certified dangerous health condition—hypertension—which was exacerbated by job-related stress. The majority's distinction that the illness was 'self-induced' is improper; a legitimate health danger should excuse performance regardless of its source. The dissent contends that once a dangerous medical condition is established, performance should be excused unless the employee is malingering, which was not the case here. Therefore, because the resignation was justified for health reasons, there was no breach of contract to support an award of damages.
Analysis:
This decision solidifies the 'benefit of the bargain' principle in the context of employment contract breaches. It clarifies that damages are measured by the non-breaching party's actual costs to secure a substitute, rather than a more abstract assessment of the 'value' received. The ruling prevents a breaching party from arguing that the employer suffered no loss because they ended up with a 'better' employee. This precedent reinforces the sanctity of the original contract terms and places the financial risk of finding a replacement, even a more expensive one, squarely on the party that breached the agreement, provided the employer properly mitigates.
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