SCHOLZ v. MONTGOMERY WARD & CO, INCORPORATED

ROWE v MONTGOMERY WARD & CO, INCORPORATED Docket No. 84848. Argued October 2, 1990 (Calendar No. 3). Decided July 31, 1991. Dissenting opinion by Levin, J., filed August 2, 1991. Mary Rowe brought an action in the Kent Circuit Court against Montgomery Ward & Co., Incorporated, alleging wrongful discharge and breach of a contract not to terminate her employment except for cause. The court, Roman J. Snow, J., entered judgment on a jury verdict for the plaintiff. Thereafter, the defendant’s motions for judgment notwithstanding the verdict, a new trial, or remittitur were denied. The Court of Appeals, Maher, P.J., and L. F. Simmons, J. (Gribbs, J., dissenting), reversed in an unpublished opinion per curiam, finding that the plaintiff was an employee at will (Docket No. 93817). The plaintiff appeals. In an opinion by Justice Riley, joined by Justices Brickley and Griffin, and an opinion by Justice Boyle, the Supreme Court held: The plaintiff may not maintain an action for breach of contract as a result of her dismissal. Her proofs are insufficient to support her claim of a promise by the defendant, implied in fact, not to terminate her employment except for just cause. 1. Contracts for permanent employment are for indefinite periods of time and are presumed to provide employment at will unless accompanied by distinguishing features or provisions or additional consideration supporting a term of permanent employment. Termination for just cause may be provided in a contract of employment for indefinite duration by express agreement or may arise as a result of an employee’s legitimate expectations grounded in an employer’s policy statements. Contractual implications arising from oral statements are determined on the basis of the meaning reasonable persons might attach to the language, given the circumstances presented. Any _contractual obligation for permanent employment arising from oral representations must be based on more than an expression of an optimistic hope of a long relationship, and the statements clearly must permit a construction which supports the asserted meaning. In this case, objective evidence was lacking to permit a reasonable juror to find implied in fact a promise of termination only for just cause. The employer expressed a policy in general terms with regard to termination, clearly not intending to form a contract for permanent employment. There was no evidence from which reasonable minds could deduce mutual agreement of employment terminable only for cause. References Am Jur 2d, Master and Servant §§ 32, 45. Comment Note — Validity and duration of contract purporting to be for permanent employment. 60 ALR3d 226. 2. The defendant clearly and unambiguously gave the plaintiff reasonable notice of its policy of termination at will in its handbook, distributed in 1983, which modified any prior expectations of termination only for cause and precluded any legitimate expectation by the plaintiff of discharge only for cause. The fact that the plaintiff failed to sign employment-at-will disclaimers was not determinative. Justice Boyle, concurring, stated that where the parties have not supplied a term of duration, employment at will is inferred, but may be overcome by establishing that a contrary inference is more likely. Enforceable obligations arise from explicit promises, from promises implied in fact, or obligations implied in law. Where the communication between the parties has more than one possible meaning, a court will employ its own criteria for interpretation; where the contract fails to provide for a contingency, courts may fill the gaps to avoid failure for indefiniteness. "As long as” may be interpreted either in a temporal or a qualitative sense. It may be read literally, as an obligation to provide lifetime employment, or as an offer of steady employment. Because it is susceptible of either meaning, it cannot be said that the "plain meaning” of the phrase addresses when or how termination will occur or binds the employer for any particular length of time. Where the parties have failed to set forth a material term, the court must interpret language and conduct to determine the parties’ intent. In the employment context, "as long as,” like "lifetime” and "permanent,” are construed as offers of steady employment. In the context of employment arrangements, a promissory theory of liability is analyzed in the light of the presumption of employment at will. Where it is asserted that the proofs are insufficient to create an issue of fact, a claim of a promise implied in fact requires the court to focus on the words or actions of the defendant to determine whether there is sufficient evidence that a reasonable promisee could believe manifested an intention to make a commitment of job security. Because the defendant’s commitment-making actions do not predominate, the decision of the Court of Appeals should be affirmed. Affirmed. Justice Levin, dissenting, stated that the plaintiff’s claim for wrongful. discharge based on an express contract does not depend on Montgomery Ward’s written policy statements or on terms left to inference, but rather on Montgomery Ward’s offer, subject to the Rules of Personal Conduct that enumerated grounds for discharge, to employ her to sell appliances at a stated compensation for as long as she was able to do the work. Because the promise by the employer stated a term of duration and required no performance by the plaintiff ether than that she sell, she could be discharged only for a failure to sell, or for a cause stated in the Rules of Personal Conduct, or for a cause the employer might seek to establish by implication. Contracts with "as long as” durational terms are express contracts. By its terms such a promise is not for permanent or lifetime employment, but rather for employment for a term coextensive with the time that the employee is able to do the work. An offer by an employer to employ a person for stated compensation as long as the person is able to do the work defines clearly, specifically, and unambiguously the work to be done, the compensation to be paid, and the term of the contract, so that the trier of fact may find, upon acceptance, an express contract of employment was formed for as long as the employee is able to do the work. Because the contract provides a method for determining the length of the engagement, the duration of the contract is determinable. The duration is sufficiently definite, even though it is uncertain how long the employee will be able to do the work. The promise to provide the employee with work at a stated compensation for as long as the employee is able to do the work is express, not implied, overcoming a presumption of employment at will. The correct focus is not on what the promisor actually intended, but on what a reasonable promisee would conclude the offer meant. The question whether the words used by the parties are sufficient to support a finding of a contract of employment does not depend on whether the words are in writing or are expressed orally. There is no rule of law requiring objective support in the form of a manual or other writing, or other corroborative evidence for an oral term of a contract of employment. A term of duration of an employment contract is not negated, as a matter of law, by evidence that the employee when hired did not inquire about or negotiate for job security, or by evidence that the employee was seeking a sales position rather than a singular, executive job position. Chief Justice Cavanagh, dissenting, stated that the relevant issue regarding the terms of the plaintiff’s oral employment contract, including the durational or job security term, is what terms in fact were agreed to, not how or whether they were negotiated. To the extent that objective support for the express oral contract is relevant, such factors support the plaintiff. The majority’s newly invented requirement of objective support for an express oral employment contract from policy manuals or statements alters and misapplies the holding and reasoning in Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579 (1980), and its companion case, Ebling. While it is true that Toussaint was given a manual specifically providing termination only for just cause, it was not relied on to support the existence of the oral contract providing termination only for just cause, but was relevant only to his separate claim that his dismissal without cause was barred by the legitimate expectations created by the manual. Whether two parties, by express oral statements, have entered into a contract providing termination only for just cause is a question of fact for the jury. That determination should not be disturbed unless, considering the record in the light most favorable to the verdict, there is neither competent nor sufficient evidence from which reasonable minds could reach the jury’s conclusion. In this case, the oral contract enjoys sufficient factual support to justify the jury’s verdict. For all relevant and dispositive purposes, this case is legally and factually indistinguishable from Toussaint. Justice Mallett took no part in the decision of this case. Master and Servant — Employment at Will — Termination for Cause — Implied Contracts. Termination for just cause may be provided in a contract of employment for indefinite duration by express agreement or may arise as a result of an employee’s legitimate expectations grounded in an employer’s policy statements; contractual implications arising from oral statements are to be determined on the basis of the meaning reasonable persons might attach to the language, given the circumstances presented; any contractual obligation for permanent employment arising from oral representations must be based on more than an expression of an optimistic hope of a long relationship and the statements clearly must permit a construction which supports the asserted meaning. Meana, Spruit & Bedevia, P.C. (by Richard M. Spruit), for the plaintiff. Dykema, Gossett (by Charles C. DeWitt, Jr.) for the defendant. Amici Curiae: Mark Granzotto, Monica Farris Linkner, and Charles P. Burbach for the Michigan Trial Lawyers Association. Clark, Klein & Beaumont (by Dwight H. Vincent, J. Walker Henry, and Rachelle G. Silberberg) for Michigan Manufacturers Association. Miller, Canñeld, Paddock & Stone (by Diane M. Soubly) for American Society of Employers, Motor Vehicle Manufacturers Association of the United States, Inc., Greater Detroit Chamber of Commerce, and Michigan State Chamber of Commerce. Riley, J. In Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579; 292 NW2d 880 (1980), this Court joined the forefront of a nationwide experiment in which, under varying theories, courts extended job security to nonunionized employees. In the vast outpouring of ensuing cases, there are indeed situations in which employers have in reality agreed to limit managerial discretion. However, the theory remains troubling because of those instances in which application of contract law is a transparent invitation to the factfinder to decide not what the "contract” was, but what "fairness” requires. That courts have not been successful in unraveling the logic of the theory to produce principles that distinguish the first category of cases from the second, is not necessarily a reason to abandon the experiment. As Justice Griffin put it in In re Certified Question, Bankey v Storer Broadcasting Co, 432 Mich 438, 457; 443 NW2d 112 (1989), "[fjairness suggests that a discharge-for-cause policy announced with flourishes and fanfare at noonday should not- be revoked by a pennywhistle trill at midnight.” But unless the theory has some relation to the reality, calling something a contract that is in no sense a contract cannot advance respect for the law. Thus, we seek a resolution which is consistent with contract law relative to the employment setting while minimizing the possibility of abuse by either party to the employment relationship. It is in this context that we address the question presented in this appeal: whether an employer’s oral statements and written policy statements created an employment contract terminable only for cause. FACTS AND PROCEEDINGS In August of 1976, plaintiff applied for a sales position at defendant’s North Kent Mall store in Grand Rapids. Plaintiff was interviewed by Mr. Vern Harryman who, according to plaintiff, told her that she would have a job at Montgomery Ward & Co., Incorporated, as long as she achieved her sales quota. With regard to his meeting with plaintiff, Mr. Harryman testified: When we hired commission salespeople, that’s sort of a different type of employee than a time-card person. Their main objective, the number one thing was that they must attain their draw of a hundred and twenty-six dollars a week, and generally, as long as they generated sales and were honest, why, they had a job at Wards, and that’s the way we used to hire our people. At the time of her hiring, plaintiff signed a sheet entitled "Rules of Personal Conduct.” The sheet stated that adherence to company policies would help an employee to achieve "growth, profit, security, [and a] successful career.” The rules further provided that anyone involved in the following activities would be immediately dismissed. Several years later, in January of 1982, defendant issued to all employees a handbook entitled "Welcome to Wards.” The handbook contained disciplinary guidelines which classified infractions according to severity, and allowed four types of discipline for transgression: "1) Written Warning(s); 2) Suspension without Pay; 3) Probation . . . ; and 4) Separation.” In the back of the handbook was a form designated the "New Employee Sign-Off Sheet.” The sheet provided in part: I have read and fully understand the rules governing my employment with Montgomery Ward. I agree to employment with Montgomery Ward under the conditions explained. I understand these conditions can be changed by the Company, without notice, at any time. I also understand and agree that my employment is for no definite period and may, regardless of the time and manner of payment of my wages and salary, be terminated at any time, with or without cause, and without any previous notice. Although a personnel employee informed plaintiff that the sheet was. applicable to her, plaintiff refused to sign the form. Plaintiff claimed that it applied only to new employees, and she did not "feel it’s right that you can fire somebody for no reason, at all.” Plaintiff noted on the back of the sign-off sheet, "Read and do not wish to sign. 5-20-82. [s] Mary Rowe.” Defendant issued another employee handbook to its work force in August of 1982. The August, 1982 handbook also contained an "Employee Sign-off Sheet” providing for termination with or without cause. Plaintiff received but did not sign this sheet. All Montgomery Ward employees, including plaintiff, received another handbook in May of 1983. In the 1983 handbook, there was further language providing for employment at will. Virtually the same disciplinary guidelines were included in all the handbooks. The Court of Appeals opinion aptly describes the facts surrounding plaintiff’s termination. On March 8, 1984, plaintiff was scheduled to work from 1 p.m. to 9 p.m. At 2 p.m., she was observed leaving the store from an unauthorized exit by security personnel. She returned approximately four hours later. Plaintiff did not receive permission to leave the store from her supervisor, although she claimed that she attempted to contact him several times since the previous day but was unable. She did tell her co-workers that she had to leave on an emergency but did not say where she was going or how long she would be gone. Further, even though the salaries of commissioned salespersons are not do. indent upon the hours worked, plaintiff failed t_. punch out when she left or punch in when she returned, as required by company policy. Neither did she make note of her four-hour absence on the time card which she turned in at the end of the work week. Two days later, plaintiff was called into the office of the store manager to answer for the unauthorized absence. She allegedly gave no explanation for leaving the store and refused to provide a written statement on the matter. She said only that she could not remember where she was for those four hours. As a result of this incident, plaintiff was terminated from defendant’s employ. On May 14, 1984, plaintiff filed a complaint against defendant in the Kent Circuit Court asserting claims for wrongful discharge, breach of contract, and several other causes of action which are not relevant for purposes of this appeal. A jury trial on the matter was held on February 18 and 19, 1986. At the conclusion of plaintiff’s proofs, defendant moved for a directed verdict on the ground that she was an at-will employee who was subject to dismissal at any time without cause. The court denied that motion, reasoning that an issue of fact existed for the jury to determine whether there was a just-cause employment contract or whether plaintiff’s employ was terminable at the will of defendant. The trial then continued and eventually concluded in a jury verdict of $86,500 plus interest in favor of plaintiff. A judgment to that effect was thereafter entered by the court. On May 1, 1986, defendant filed motions for judgment notwithstanding the verdict (JNOV), a new trial, or remittitur. By court order dated June 19, 1986, each of those motions was denied.[] Defendant appealed the decision, and the Court of Appeals reversed, finding that plaintiff was an employee at will. Plaintiff appealed in this Court, and we ordered Rowe held in abeyance pending resolution of In re Certified Question, supra, and Bullock v Automobile Club of Michigan, 432 Mich 472; 444 NW2d 114 (1989). On May 2, 1990, this Court granted leave to appeal. 434 Mich 910 (1990). i The issue posed by this case is whether defendant employer’s oral statements and written policy statements directed at plaintiff may be interpreted to permit a promise implied in fact not to terminate except for cause. We find that plaintiff’s allegations are insufficient to support her contention of a promise implied in fact limiting the defendant’s right to terminate her employment. Thus, plaintiff cannot maintain an action for breach of contract as a result of her dismissal. This Court has held that contracts for permanent employment are for an indefinite period of time and are presumptively construed to provide employment at will. Lynas v Maxwell Farms, 279 Mich 684, 687; 273 NW 315 (1937). When contract claims rest on proofs of oral representations, the presumption provides assurance that oral contracts for an indefinite term, which fall outside the statute of frauds, will be recognized only where circumstances suggest both parties intended to be bound. The presumption may be overcome by proof of an express contract for a definite term or a provision forbidding discharge in the absence of just cause, or it may be overcome by proofs which permit a promise implied in fact of employment security, i.e., for a particular period of time or to terminate only for just cause. In Lynas, the Court declined to imply a durational term where the plaintiff accepted an offer of a "permanent lifetime position with the defendant.” The Court observed, however, that the presumption of employment at will can be overcome if a contract is accompanied by "distinguishing features or provisions,” or additional consideration supporting a term of permanent employment. Again, in Toussaint v Blue Cross & Blue Shield of Michigan, supra, p 600, the Court stated that "[b]ecause the parties began with complete freer dom, the court will presume that they intended to obligate themselves to a relationship at will.” In general, parties to an employment contract "remain free to provide, or not to prov