At Will Employment
· You can not only terminate employment, but you can change the terms and conditions of the employment at any time (good, bad, or without any cause at all)
Payne v. the Western and Atlantic Railroad Co. (9)
Facts: P owned a store and sold goods to employees at a railroad co. The railroad co. then forbad its employees for buying goods from P. P sued claiming that they were interfering with their business. Railroad Co. provided no reasoning for its decision.
Issue: Did D have the right to discharge employees for trading with P?
· Court looks to whether there is a fixed term of employment or terminable at the will of either party – determines who and who cannot bring an action
o Fixed term (specific duration) – may give rise to breach of contract – there may be reliance on the employer by the employee
§ How about fixed term with at-will?
o If employment is for fixed terms, one can assume discharge was unwarranted
o At will – law cannot compel employees to employee people or keep them employed
Savage v. Spur (90)
Facts: P made an oral agreement with a company that his employment would be permanent and would continue if he satisfactorily performs his duties. His dismissal had nothing to do with is performance.
Issue: Is this verbal contract binding?
Holding: No breach of contract because there was no contract of employment for a definite term
· If you have a contract that is not for a definite term, presumed to be at-will
· What does the court say about permanent? Nothing more that employment will continue subject to the satisfaction of both parties
· When might it not be an indefinite contract? There must be consideration (pay some money, give up something). Court says that P did not provide any consideration.
o P says that he gave up home, moving expenses – Court rejects because employer did not benefit from this and there was no mutual understanding between the parties
Find consideration when: 1) an employee agreed to release a claim for damages, 2) agreed to give up a competing business
Default v. Substantive Rule:
· Courts require additional consideration in order to break the “for-cause” barrier – need to show a deal where both parties knew that they were bargaining for just cause
Guiliano v. Cleo (106)Facts: P was employed at Cleo and he signed a three year employment contract where he would not be fired without a “showing of good cause.” P was effectively let go and his job responsibilities were diminished (D maintains that he was not fired because he was still being paid and can change the functioning of his job at their discretion). P found a new job at higher pay (can claim that he fully mitigated). D maintains that he was paid and he forfeited his money once he sought other employment. Issue: Is P entitled to compensation and the remainder of his agreed upon salary?
Holding: P was constructively terminated from his employment and is entitled to damages
· Rejects D’s argument that they could change his job responsibilities and had the right to do it – For employee, can argue that it is humiliating
· Court looks at severance pay (which requires no breach of contract – doesn’t take into account any mitigated damages) or liquidated damages (which require a breach by D and damages should compensate for injuries should a breach occur)
o Court says that they are liquated damages and P is entitled to 90,125 – as a reasonable estimation of potential damages at the time the parties entered into the contract
o At the time the contract was entered, both parties did not know if P would be hurt by the termination of his contract, whether he would be able to find other employment, and other costs associated with the firing
o Liquidated damages: We don’t know down the road what the damages are going to be so put it into the contract what the damages are going to be
Other scenario: If the contract said nothing about paying until the end of the contract, mitigation measures might have caused P to receive nothing
What is cause? Material breach of the contract
Toussaint v. Blue Cross (112)
Facts: P inquired into job security and was told that he would be with the company “as long as I did my job”
Holding: Oral statements were sufficient for a jury to find the existence of contracts for employment terminable only by cause
· No public policy against job security
· In this case, they negotiated for job security
· If the company wanted, they could have established a company policy that limited their liability
Rowe v. Montgomery Ward and Co (113)
Facts: P hired in a sales position and told she would have a job as long as she met he sales quota. After a disagreement with her supervisor, she was fired
Holding: This did not create a contract
· In this case, she did not negotiate for job security – merely walked into the store
· No reasonable juror would interpret the statements made by D as a promise for termination only for cause implied in fact
· No objective evidence exists that in their minds met on the subject of continued employment
· It was not a specialized position
· Here, no pre-employment negotiations (unlike Toussaint)
Wooley v. Hoffmann-La Roche, Inc. (117)
Facts: P was hired by D. There was no written employment K but was a personnel manual. Company manual provided that P could not be terminated without a showing of cause. Some time down the line P was asked to resign because of loss confidence in him. After asking P several times to resign and having P refuse, D fired him. P filed a complaint alleging breach of K. P claimed that the express and implied promises in the D’s employment manual created a K he could not be fired at will but only for cause, and only after the procedures in the manual were followed. Trial court granted D summary judgment and held that the employment manual was not contractually binding on D. Appellate Division upheld.
Holding: A policy manual that provides for job security grants an important, fundamental protection for workers. If such a commitment is indeed made, obviously an employer should be required to honor it.
· Court looks towards a reasonable employee and determines that it was intended to create a legally binding obligation
· Doesn’t matter that he did not read the contract initially
· The manual was widely distributed among the workforce and supported by consideration
· There was acceptance: The manual created a unilateral contract – the employees’ bargained for action needed to make the offer binding being their continued work when they have no obligation to continue
· Court looks at the manual from the eye’s of its employees
· D’s claim that the manual can be changed at any point, thus making it invalid – Court says given its importance, the manual was up to date and in place of getting a union (you aren’t going to hold these perks out to your employees without impunity)
· Consideration: Looks at benefit/detriment (not only benefit for employer like previous cases)
· Court says that it is a unilateral contract – if you make representations about job security, can create a unilateral contract. The employees’ bargained-for action needed to make the offer binding being their continued work when they had no obligation to continue.
*What happens if D revokes the manual? Does he have a right to just-cause employment? This court, yes because they were trying to avoid the union
Anderson v. Douglas (123)Facts: On P’s first day, he attended a 6 hour orientation and was given a 53 page employee handbook which he only read the first few pages to. After company personal found a box of pencils in his truck, he was asked to resign. After refusing to do so, he was fired. P then filed a breach of K claim against D claiming D did not follow the progressive discipline policies outlined in its handbook.
Issue: Did a contract exist?
Holding: A manual is contractually enforceable
· An employee handbook is a unilateral K when 3 elements are present:
1. the handbook is sufficiently definite in its terms to create an offer
2. the handbook is communicated to and accepted by the employee so as to constitute acceptance;
3. the employee provides consideration.
· Employee does not have to have knowledge of the promise (P only read first few pages of manual)
· Reject the idea that a disclaimer automatically bars: Look towards the language and context of the disclaimer
1. is it mere guidelines or statements of policy, or are they directives?
2. is the language detailed and definite or general and vague?
3. does employer have the power to alter the procedures at will or are they invariable?
· In this case, it was stated in the manual that rules were designed as information and guidance, as well as D had the power to alter the procedures at will
*Employer says there is no acceptance because he did not read policy
*Receipt of handbook is sufficient to create an acceptance
*How does at-will doctrine form court’s opinion on whether acceptance requires him to read contract? Court says that acceptance is consistent with the judicially created at-will presumption – courts gave employers at-will and it’s a give back to employees, it’s only fair that employees get to rely on handbook
*Court says it is an objective analysis – what a reasonable employee would believe – whether it was an offer or not? Under that test, would the handbook create by a reasonable belief of an offer
to get rid of him. Rule: Marital Status defined as “whether a person is married.” – the statute protects status, not conduct
Holding: The employment discrimination provision of the Civil Rights Act protects only the consideration of an employee’s marital status, not the employee’s conduct
· Discrimination claim based on employee’s adultery would provide no recovery under this act
· McCready II – Provides sufficient evidence of marital status discrimination (D refused to rent his property to unmarried cohabitants claiming that they were engaging in lewd behavior) to survive D’s motion for summary disposition
· D in this case seeks summary disposition – Court remands without answering whether there is sufficient evidence because the lower court did not consider P’s evidence
o Where these is no direct evidence of discrimination based on the protected characteristics, burden is on P to establish a link between the conduct and protected status
o This link can be inferred from the totality of relevant facts – demands a sensitive inquiry into such circumstantial and direct evidence of intent as may be available
Dissent: Conduct and status are often inextricably linked, and there is not per se rule attempting to assert otherwise
· Believes McCready should control – D’s terminated P’s employment because it felt P’s behavior was immoral, an act condemned only because he was married
o Believes that it is “not a right to cohabitate” but rather gives the right to be free from discrimination on the basis of acts found immoral solely because of one’s status
o Conduct and status are linked – creating a per se rule excluding conduct is just unworkable because oftentimes status and conduct are linked
*Is this employment termination by not renewing his contract? It’s an employment decision (not renewing contract) – the act of not renewing is an employment action and the burden shift to employer and they have to have a legitimate non-retaliatory reason
*He said he was fired because he was a divorced person
*TC says cohabitation is not a protected status and if there was discrimination it was based on his cohabitation with the mistress, not the pending divorce (TC ignored an affidavit that 3 of 8 members called him a slut)
*Marital status is not defined by statute but defined as whether a person is married as opposed to whom they are married to (not marital status discrimination if a company forbids two employees from getting married – company is distinguishing to whom you are married to)
*Marital status protects status, not conduct – living with someone is conduct, not status (nothing in act that talks about marital status)
*Lower court did not look at whether pending divorce was a factor in the firing
*Why is the court worried about pending divorce? Why is that a consideration? Because he was married and he engaged in the affair, that’s why he was fired. Whether or not your married, is that a motivating factor?
· On the alternative, there is no indication that the board was concerned about whether he was married or unmarried (in this case, conduct)
*Limit inquiry to actions taken because of this status and not look at actions taken that are not unlawful – status and conduct are separate and create a larger act than is on the books
*Dissent says this is creating a per se rule of excluding conduct
Feick v. County of Monroe (Supplement)
Facts: Employee, a former county chief assistant prosecuting attorney, brought suit under the MCRA alleging that they discriminated against her on the basis of her gender and age.
Rule: Prima face case of employment discrimination by showing (1) that the P was a member of the protected class, (2) that an adverse employment action was taken against the P, (3) that the P was qualified for the position, and (4) the P was replaced by one who was not a member of the protected class