BULLOCK v AUTOMOBILE CLUB OF MICHIGAN
Docket No. 78027
Supreme Court of Michigan
June 6, 1989
Rehearing denied 433 Mich 1201
432 MICH 472
Argued March 5, 1987 (Calendar No. 19)
In an opinion by Justice BOYLE, joined by Justices BRICKLEY, CAVANAGH, and ARCHER, the Supreme Court held:
The plaintiff‘s claim is not preëmpted by the National Labor Relations Act. On the basis of the record, the defendant is not entitled to judgment as a matter of law.
The plaintiff pled an action for breach of a verbal contract of employment alleged to have arisen at the commencement of his employment. To the extent that plaintiff relies on policy manuals as the basis for his claim, In re Certified Question, 432 Mich 438 (1989), provides the guidelines for resolution on remand as to whether unilateral change in the policy manuals would be effective. However, defendant‘s assertion of a change in policy manuals does not, on this record, establish that there is no genuine issue of material fact as to whether the plaintiff had an enforceable contract containing a limitation on discharge.
Justice LEVIN, writing separately, stated:
The plaintiff‘s state law claims are not preëmpted by the National Labor Relations Act. The denial of the defendant‘s
Affirmed and remanded for further proceedings.
Justice GRIFFIN, joined by Chief Justice RILEY, concurring in part and dissenting in part, agreed that the plaintiff‘s claim is not preempted by the NLRA and that to the extent that the claim is based upon legitimate expectations grounded in the employer‘s written policy statements guidelines for resolution are provided by In re Certified Question, 432 Mich 438 (1989). The defendant‘s motion for summary judgment should have been granted, however. It is not reasonable to construe the alleged oral assurances by the employer as an enforceable agreement to discharge only for cause. Subjective expectancies of continued employment do not constitute a termination-for-cause contract, and the plaintiff‘s claim should fail as a matter of law.
Caution should be exercised in judging the viability of a breach of contract action based solely on alleged oral representations recalled years after hiring. What is needed is a modicum of realism and common sense. “Lifetime” employment contracts are extraordinary and must be expressed in clear and unequivocal terms. In this case, the allegations are insufficient as a matter of law to provide a basis for a contract of employment that was not terminable at will.
146 Mich App 711; 381 NW2d 793 (1985) affirmed.
John W. Mason, Mary Taylor Zick, and Theodore S. Andris, P.C. (by Thomas H. Bannigan), for the plaintiff.
Fox & Grove (by Kalvin M. Grove, Steven L. Gillman, and Allison C. Blakley) and Finkel, Whitefield & Selik (by Robert J. Finkel) for the defendants.
Amici Curiae:
The Fishman Group (by Steven J. Fishman and
Butzel, Long, Gust, Klein & Van Zile, P.C. (by William M. Saxton and David B. Calzone), for Greater Detroit Chamber of Commerce.
BOYLE, J.
I
This is an interlocutory appeal by the defendant from the trial court‘s denial of its motion for summary judgment pursuant to GCR 1963, 117.2(3),1 alleging that there is no genuine issue of material fact and that AAA is therefore entitled to judgment as a matter of law.2 The motion was filed before defendant‘s answer and before any meaningful discovery.
A motion for summary judgment filed before interrogatories and depositions are taken tests whether a cause of action has been stated, but a motion, filed after depositions and interrogatories, generally tests whether the opposing party‘s appropriate data raises a genuine issue as to any material fact. The function of a court in disposing of a motion for summary judgment is not to decide issues of fact, but to ascertain whether or not there is an issue of fact to be tried, resolving all
The timing of the defendant‘s motion, coupled with the failure of the defendant to specifically identify the issue as to which it believes there is no genuine issue of material fact,3 places this case in an awkward posture for appellate review. Also, the trial court‘s analysis and that of the Court of Appeals focused on the employment-manual exception to employment at will and the question as to whether and under what circumstances an employer may alter policy manuals. However, turning first to the pleadings,4 I find the following, common allegations:
3. That when Plaintiff entered the employ of Defendant he entered the employ of Defendant based upon [sic] the following promises:
a) That he would have a lifetime job as long as he did not steal;
b) that he would work as a commission salesman for Defendant and enjoy the benefits of a seven (7%) percent commission for sales which had been in effect for many years;
c) that if he worked hard and built up his “book of business,” he would be able to earn large sums of money;
d) that if he worked hard and built up his “book of business,” he could enjoy his later working years with Defendant by realizing commissions
from the “book of business,” which “book of business” is the accumulated memberships and policies which a commission salesman builds up over the years. 4. That for many years, Defendant worked very hard and built up his “book of business” in reliance upon the promises of Defendant and in order to enable him to enjoy the benefits of a large salary due to his individual efforts in developing his business.
In addition to these common allegations, count I of the first amended complaint asserts a breach of contract upon the basis of the following actions of AAA:
a) Eliminating commissions as a basis of compensation for sales persons;
b) establishing a “unit compensation” program whereby the commission salesmen would only get a certain amount of money per membership or policy rather than a percentage commission as had been promised to the commission salesmen when they entered the employ of Defendant;
c) establishing non-competitive rates for its product;
d) coercing Plaintiff and other similarly situated out of their employment thereby breaching the express and implied contract between Plaintiff and Defendant.
Finally, paragraph 7 of the first amended complaint alleges that these actions violated plaintiff‘s reasonable expectations based upon defendant‘s “policy statements,” while paragraph 8 alleges a breach of oral promises:
That as a consequence of the breach of the express oral promises of Defendant, Plaintiff has lost a job which was guaranteed to be a lifetime
job in which he was told he would be able to earn large commissions.5
In support of its motion, AAA submitted two affidavits. The affidavit of Gerald Trocchio asserts facts relevant only to the issue of NLRA preëmption. On the other hand, the affidavit of Frederick A. Cruise, Vice President for Corporate Operations, states a number of facts relevant to the state law issues of this appeal. This affidavit essentially admits that plaintiff was discharged for failure to meet minimum production quotas imposed by AAA after reaching impasse in its negotiations with plaintiff‘s union. Of greatest significance, however, are paragraphs 6 and 7 of the affidavit of Mr. Cruise:
6. The Company has continuously reviewed and revised its employment policies. For example, examination of the Company‘s Sales Rules Manual reveals that the entire manual was revised on July 1, 1972, and that particular sections were again revised on November 1, 1973 and July 1, 1975. Def. Exh. A. Similarly, memorandum issued by the Company in 1971 and 1978 pertaining to minimum production requirements reveals that in 1971 sales personnel were required to sell a minimum of thirty memberships per month and in 1978 sales personnel were required to sell a minimum of twenty memberships. Def. Exh. B. Likewise, examination of the Company‘s “Employee Complaint Review Policy” reveals that it was revised in November, 1979, and again in April, 1981. Def. Exh. C.
7. Defendant‘s Exhibits A, B, and C to Defen-
dant‘s Memorandum of Law in Support of Defendant‘s Motion to Dismiss are true and correct copies of documents maintained by Defendant in the ordinary course of its business.
After reviewing the pleadings and affidavits, the trial court denied defendant‘s motion for summary judgment. Bullock submitted his own affidavit in the Court of Appeals, stating in part:
7. The Company never reserved the right to unilaterally change Company rules regarding grounds for demotion and/or discharge. I was clearly told by the Company at the time I was hired and many times thereafter that nobody gets fired unless they steal.
8. The Sales Rules Manual distributed to commission sales representatives, to the extent they [sic] contained any language regarding termination of employees, were [sic] not followed. During the fifteen (15) years I was with the Company, no sales representative was ever terminated for unsatisfactory performance, although some employees were admittedly not producing. The Company had both a direct promise and custom and practice that no one would get fired unless they stole.
The defendant‘s motion to strike this affidavit was denied by the Court of Appeals on February 2, 1985. The defendant has not renewed its motion in this Court.
The Court of Appeals affirmed the trial court‘s denial of the defendant‘s motion for summary judgment.6
II
We agree with part II of Justice LEVIN‘s opinion,
III
Without identifying the nature or elements of Bullock‘s claim, AAA argues in support of its general assertion that no genuine issue of material fact precluded the trial court from granting its summary judgment motion. What at first blush might be oversight is undoubtedly due to a desire to preserve a position when an answer is filed, both as to the formation of the contract pled by Bullock and the existence of such a contract at the time of Bullock‘s discharge. The defendant‘s efforts to preserve these questions are sound strategy, but the pleadings and affidavits currently before us present undisputed oral promises made to Bullock at the time he entered defendant‘s employ. These must be deemed true.7
The defendant argues that a right to amend employment policies is fully consistent with the presumption of employment at will. We agree. This observation, however, is most pertinent to the plaintiff having pled in part that defendant‘s actions violated his reasonable expectations based on “policy statements” of the defendant, the origin and precise nature of which have not yet been identified. Bullock has also pled that the defendant‘s actions breached an express oral promise.
The majority in Toussaint carefully pointed out that the enforceability of personnel policies did not turn on whether negotiations had taken place, the parties’ minds had not met on the subject, the employee knew nothing of the particulars, or that the employer could change the policies unilaterally. Policy manuals in this situation were enforceable not as express promises, in quasi contract, or because of promissory estoppel, but because the Court under its common-law authority recognized the enforceability of “a situation instinct with an obligation,” id., p 613, an obligation distinct from and independent of contract analysis.
In Toussaint and Ebling, the Court held that there was sufficient evidence of an express agreement to justify submission to a jury. Toussaint, supra, p 598. While the Court in Toussaint also held that there was sufficient evidence of Toussaint‘s legitimate expectations grounded in the policy manual to submit to the jury, id., p 599, apart from the employment manual upon which Toussaint‘s legitimate expectations were based,
In Ebling, the corporate vice president, Richard Manoogian, promised that, if anything detrimental came up between Ebling and his immediate supervisor regarding Ebling‘s performance, Manoogian would personally review Ebling‘s performance and give him a chance to “correct things.” The plaintiff testified that Manoogian further promised Ebling that, if he was doing the job, he would not be discharged. Id., p 626 (separate opinion of RYAN, J.). All members of the Court, Chief Justice COLEMAN, and Justices KAVANAUGH, WILLIAMS, MOODY, LEVIN, RYAN, and FITZGERALD, agreed that this testimony created a jury-submissible issue as to whether plaintiff‘s employment was not terminable at will but only for cause. Id., pp 633-644.
To paraphrase the language in Toussaint, p 611, and illustrate the distinction between the alternative theories of “enforceability” there recognized, suppose that a policy manual providing for employment at will was extant at the time an employee was hired. Could it be said that such a manual, as a matter of law, precluded the enforceability of a later written contract providing “in so many words” that the employee could not be discharged except for cause? We think not. Likewise, it cannot be said that where an express agreement is alleged preceding an employment manual, the alleged promise is, as a matter of law, unenforceable.8
In In re Certified Question, Bankey v Storer Broadcasting, 432 Mich 438; 443 NW2d 112 (1989), we have today said that the obligation recognized by the policy manual leg of Toussaint does not preclude employers from amending employment manuals. In re Certified Question does not, however, do more than establish that discharge-for-cause policy provisions may be modified on the basis of “reasonable notice of the change . . . uniformly given to affected employees,” issues which the defendant‘s affidavit understandably does not address. It does not establish that amendments to employment manuals must be construed to be modifications of a distinct, express, or implied-in-fact contract. As the pleadings and affidavits stand, Bullock alleges an oral contract for hire in which the employer limited his right to terminate, not employment at will.
It is true, as the defendant contends, that indefinite hirings have been considered to be terminable at will. 9 Williston, Contracts, § 1017, p 131. However, as recognized by both the Toussaint majority and dissent, this rule, properly conceived, has never been more than one of construction.9 Toussaint, supra, pp 597, 650. Bullock has alleged an oral contract of employment containing a discharge-for-cause provision and the defendant‘s affidavits do not rebut that allegation. This allegation sets forth a claim under the holding in Toussaint that the express promise of the employer apart from the employment manual may create a jury-submissible issue.
The determination of the effect of these manuals on Bullock‘s allegations must await further discovery and perhaps trial. We do not, at this point, know basic facts such as who made the alleged promises to Bullock and under what circumstances the promises were made. Nor do we know whether the policy manuals referenced in the Cruise affidavit constituted an offer of modification, and, if so, whether there is a genuine issue of fact as to whether Bullock accepted the offer.10 Finally, we
In sum, to the extent that plaintiff relies on policy manuals as the basis for his claim, In re Certified Question provides the guidelines for resolution on remand as to whether unilateral change in the policy manuals would be effective. However, defendant‘s assertion of a change in policy manuals does not, on this record, establish that there is no genuine issue of material fact as to whether the plaintiff had an enforceable contract containing a
IV
CONCLUSION
Bullock has pled an action for a breach of an oral contract of employment alleged to have arisen at the commencement of his employment. The defendant‘s affidavits in regard to its policy manuals do not entitle the defendant to judgment under GCR 1963, 117.2(3).
We affirm the decisions of the trial court and the Court of Appeals denying the defendant‘s motion for summary judgment and remand the case to the trial court for further proceedings consistent with this opinion and In re Certified Question.12 We do not retain jurisdiction.
BRICKLEY, CAVANAGH, and ARCHER, JJ., concurred with BOYLE, J.
LEVIN, J. William J. Bullock claims that the Automobile Club of Michigan breached an oral contract of employment when it discharged him for failing to achieve production standards set forth in a revision of its sales rules manual. AAA asserts that it had the right to revise minimum production standards, although the right to do so was not expressly reserved in the manual, and that, in all events, Bullock‘s claim is preëmpted by the National Labor Relations Act.
The instant case was argued together with In re Certified Question, Bankey v Storer Broadcasting, 432 Mich 438; 443 NW2d 112 (1989), also decided
In In re Certified Question, there was no dispute concerning the terms of the employment contract. The stated question posited that the terms of the employee manual had become terms of the employment contract. The dispute was whether the employer could unilaterally change a policy stated in the employee‘s manual that had become a term of the employment contract. Here, the central question is what were the terms of the employment contract, specifically, whether the provisions of the sales rules manual concerning minimum production standards were terms of the employment contract, as claimed by AAA, or whether, as claimed by Bullock, the provisions of the sales rules manual were inconsistent with an orally agreed upon employment contract and not terms of the contract.
A majority of the Court agrees with the circuit judge and the Court of Appeals1 that the question what were the terms of the employment contract should not have been decided on the motion for summary disposition. The question should be decided by the trier of fact following a trial at which employer and employee witnesses testify.
We all agree with the circuit judge and the Court of Appeals that Bullock‘s claim is not preëmpted by the National Labor Relations Act. The National Labor Relations Act does not address the state law claims set forth in Bullock‘s complaint. Bullock‘s claims do not concern conduct
I
AAA terminated Bullock‘s employment as a commission sales representative after employing him in that capacity for nearly fourteen years. Bullock remained at AAA working as a salaried sales employee, a member advisor. Bullock commenced this action alleging that the termination of his employment as a commission sales representative and changes in his compensation breached his oral contract of employment. Bullock based his claim of an oral employment contract on statements assertedly made to him when he was employed as a sales representative with AAA in May, 1968. According to Bullock, he was told that (1) he would have a lifetime job with AAA as long as he did not steal; (2) he could work as a commission sales representative for AAA and continue to receive a seven percent commission for insurance sales; and (3) if he worked hard and built up his “book of business,” he would enjoy his later working years by realizing substantial commissions from that “book of business.”
In 1978, AAA changed its method of compensation for commission sales representatives, substituting a “unit compensation plan” for the straight seven percent commission system. In September, 1981, AAA adopted production standards and a
Bullock contends that the production standards were not imposed to increase productivity, but were part of a scheme to “eliminate senior and older commission sales representatives from the staff” because the standards did not take “into consideration the fact that the senior commission salesmen had to spend disproportionate amounts of their time in servicing existing accounts, rather than seeking out new business.” Bullock asserts that AAA decided to eliminate senior commission salesmen and replace them with “younger, lower paid salaried personnel.” In addition to pleading a claim for breach of contract, Bullock also claimed that AAA is liable for unjust enrichment,3 conversion,4 age discrimination,5 and negligent evaluation.6
The circuit judge found that Bullock‘s claims were not preëmpted by federal law and denied AAA‘s motion for accelerated judgment. He also rejected the arguments made in support of AAA‘S motion for summary judgment. The Court of Appeals affirmed.8
AAA raises the following questions in this Court:
1. May an employer revise its personnel practices, including required standards of job performance, notwithstanding that some employees might not have been aware that the policies previously in effect were subject to revision?
3. May employees-on whose behalf a union has negotiated wages, hours and working conditions-invoke preunion, individual contract rights to supersede the lawful results of the negotiations?
A majority of the Court affirms the Court of Appeals and the circuit court denials of AAA‘S motion for accelerated and summary judgment.
II
We first address the question whether the circuit court lacked jurisdiction of the subject matter because Bullock‘s state law claims were preëmpted by the NLRA.
A
When Bullock was hired in 1968, AAA‘s sales employees were not represented by a union. On February 7, 1978, the Michigan AAA Sales Association was certified as the exclusive bargaining representative for AAA‘s commission sales representatives. Although AAA and the union met numerous times to negotiate a collective bargaining agreement, they failed to reach an agreement because the union would not accede to AAA‘s demand that the agreement contain minimum production standards. AAA‘s final offer included a proposal for minimum production standards. On August 5, 1981, the union rejected this final offer at a general meeting of its membership, thus creating an impasse in the bargaining. After further attempts to negotiate a collective bargaining agreement failed, the union was decertified in October, 1982.
AAA contends that Bullock‘s termination was lawful because he was discharged for failing to meet AAA‘s production standards after AAA followed the steps outlined in its disciplinary procedure. AAA and the amicus curiae, Michigan State Chamber of Commerce, argue that Bullock‘s claim is preempted for two reasons: (1) AAA‘s right to impose production standards is within the exclusive jurisdiction of the National Labor Relations Board, and (2) Bullock‘s state law claims disrupt the collective bargaining process by attempting to deprive AAA of an economic weapon of self-help, namely, the right to implement a final offer after an impasse.
Bullock responds that state courts retain jurisdiction of state law claims where the parties have not entered into a collective bargaining agreement and where the litigation does not concern federal interests, but rather discrete state interests.
B
The United States Supreme Court has developed two doctrines for determining whether a state claim is preempted by the
The second preemption doctrine originated in Machinists v Wisconsin Employment Relations Comm, 427 US 132; 96 S Ct 2548; 49 L Ed 2d 396 (1976), and was “designed, at least initially, to govern pre-emption questions that arose concerning activity that was neither arguably protected from employer interference by §§ 7 and 8(a)(1) of the
AAA and the amicus curiae, MSCC, argue that Bullock‘s action is preempted under both the Garmon and Machinists branches of NLRA preemption doctrine.
C
We first examine Bullock‘s state law claims in light of the Garmon doctrine of preemption. Garmon provides:
When an activity is arguably subject to
§ 7 or§ 8 of the Act, the States as well as the federal courts must defer to the exclusive competence of the National Labor Relations Board if the danger of state interference with national policy is to be averted.13
AAA and MSCC assert that implementation of
The United States Supreme Court declared in Sears, Roebuck & Co v Carpenters, 436 US 180, 197; 98 S Ct 1745; 56 L Ed 2d 209 (1978), that preemption analysis should focus on whether the state court controversy is identical with or different from that which could have been presented to the NLRB:
The critical inquiry, therefore, is not whether the State is enforcing a law relating specifically to labor relations or one of general application but whether the controversy presented to the state court is identical to . . . or different from . . . that which could have been, but was not, presented to the Labor Board. For it is only in the former situation that a state court‘s exercise of jurisdiction necessarily involves a risk of interference with the unfair labor practice jurisdiction of the Board which the arguably prohibited branch of the Garmon doctrine was designed to avoid. [Emphasis added.]
In Belknap, Inc v Hale, 463 US 491; 103 S Ct 3172; 77 L Ed 2d 798 (1983), the United States Supreme Court ruled that employees hired to replace striking workers could pursue causes of action for misrepresentation and breach of contract
Following the Belknap and Sears analyses, we conclude that the substance of Bullock‘s state law claims significantly differ from any claims he could have presented to the NLRB. The state law claims require a determination of what were the terms of Bullock‘s employment contract and whether certain actions by AAA19 breached that contract. The NLRB, on the other hand, is concerned with the process of bargaining. The board would decide whether an impasse in bargaining had occurred before AAA‘s implementation of the production standards contained in its last offer at the bargaining table. The NLRB would not look at any particular provision of an employment contract in evaluating the question whether an impasse had occurred.20
Bullock‘s state law claims could not have been presented to the NLRB because the NLRB would not and could not determine Bullock‘s state law claims. The NLRB would not have provided a rem-
D
AAA and MSCC also contend that Bullock‘s claims are preempted under the Machinists rationale because maintenance of a state law action would thwart the effective implementation of the
Machinists preemption becomes relevant where the action lies outside the reach of Garmon. It “protects against state interference with policies implicated by the structure of the [NLRA] itself, by pre-empting state law and state causes of action concerning conduct that Congress intended to be unregulated.” Metropolitan Life Ins Co v Massachusetts, 471 US 724, 749; 105 S Ct 2380; 85 L Ed 2d 728 (1985). Under the Machinists doctrine,
Whether self-help economic activities are employed by employer or union, the crucial inquiry regarding pre-emption is the same: whether “the exercise of plenary state authority to curtail or entirely prohibit self-help would frustrate effective implementation of the Act‘s processes.”21
The interests of the Board and the
NLRA , on the one hand, and the interest of the State in providing a remedy to its citizens for breach of contract, on the other, are “discrete” concerns . . . . We see no basis for holding that permitting the contract cause of action will conflict with the rights of either the strikers or the employer or would frustrate any policy of the federal labor laws. [Id., p 512.]
E
The MSCC maintains that once a union is certified, the terms and conditions of employment are covered exclusively by federal labor law, not state law. Because Bullock was discharged for failure to meet the production standards, the MSCC reasons that the circumstances surrounding the implementation of those standards is central to Bullock‘s state law claims and necessitates a finding of preemption. We disagree.
The selection of a union representative did not instantly extinguish Bullock‘s state law claims or contract rights. Employees would hesitate to cast their lot with a union if they were deemed to have forgiven their common-law contract and other claims when a collective bargaining agent was certified without regard to whether a collective bargaining agreement is entered into. The United States Supreme Court, in JI Case Co v NLRB, 321 US 332, 336-337; 64 S Ct 576; 88 L Ed 762 (1944), said:
Care has been taken in the opinions of the Court to reserve a field for the individual contract, even
in industries covered by the National Labor Relations Act, not merely as an act or evidence of hiring, but also in the sense of a completely individually bargained contract setting out terms of employment, because there are circumstances in which it may legally be used, in fact, in which there is no alternative. Without limiting the possibilities, instances such as the following will occur: Men may continue work after a collective agreement expires and, despite negotiation in good faith, the negotiation may be deadlocked or delayed; in the interim express or implied individual agreements may be held to govern. [Emphasis added.]
When a collective bargaining agreement expires and the parties are unable to agree on the terms of a new agreement, an employer may implement its final offer after impasse. In the instant case, however, no collective bargaining agreement was ever agreed upon and the union was decertified, albeit after Bullock was discharged.22 Where no agreement is reached, enforcement pursuant to state law of preexisting state law contract rights and other state law claims does not “frustrate any policy of the federal labor laws.” Belknap, supra, p 512.
In sum, we conclude that state court jurisdiction of Bullock‘s state law claims is not preempted under the Garmon branch or the Machinists branch of federal preemption doctrine. The circuit court has jurisdiction of the subject matter.
III
AAA claims that it is entitled to summary judg-
A
A motion for summary judgment for failure to state a claim “seeks to test the genuineness of a claim by challenging the legal adequacy of the pleadings.”23 The standard in evaluating such a motion “is whether plaintiff‘s claim, on the pleadings, is so clearly unenforceable as a matter of law that no factual development can possibly justify a right to recovery.”24 In assessing the motion, the trial court “does not act as a factfinder, nor does the court attempt to probe the parties’ ability to prove their allegations.”25 The court thus “accepts as true all well-pleaded facts.”26
Toussaint held enforceable contractual rights grounded in an employee‘s legitimate expectations generated by an employer‘s statements of policy.27
We are bound to accept all well-pleaded facts as true when reviewing the ruling on AAA‘S motion for summary judgment. The oral employment contract, as described by Bullock, supports a claim for breach of contract. Bullock alleged that his oral contract of employment provided that AAA would terminate him only if he were caught stealing and that he would be compensated on a seven percent commission plan based on his book of business.” Bullock‘s pleadings presented questions of fact whether AAA breached the alleged contractual provisions. Bullock has sufficiently stated a claim on which relief could be granted.
Nor did the oral statements made to Bullock at the time of hiring necessarily lack the definiteness required to form a binding contract as a matter of law. Oral statements may be as binding as written statements.
AAA filed an affidavit in support of its motion for summary judgment, asserting that it had continuously reviewed and revised its employment policies. The affidavit stated that the sales rules manual was revised in July, 1972, November, 1973, and July, 1975, and that memoranda issued by AAA in 1971 and 1978 required 1971 sales personnel to sell a minimum of thirty memberships per month, and 1978 sales personnel to sell a minimum of twenty memberships.
Bullock relies on an oral contract of employment allegedly entered into when he was hired in May,
Preliminary and central questions are whether the terms alleged by Bullock in his complaint were the terms of the contract of employment, and whether and to what extent provisions of the sales rules manual, consistent or inconsistent with the terms alleged, were part of the contract of employment. It is a separate question whether provisions of the sales rules manual that were in fact part of the contract could, consistent with legitimate expectations generated by AAA‘s policy statements set forth in the sales rules manual, be revised in the manner AAA claims it had the right to revise them.
B
AAA asserts that, under Toussaint, it was enti-
AAA further reasons that just as employers have a common-law right to terminate an employee at will who is hired for an indefinite term, they may similarly rescind at will a personnel policy implemented for an unspecified period where the employer has not demonstrated an intention of maintaining such a policy permanently. AAA suggests that while an employee can reasonably expect that an employer will apply its current policies uniformly, an employee cannot, given the routine changes that businesses must periodically make, expect that policies will continue to be in force indefinitely.
While Toussaint did state that the employer could make unilateral policy changes,28 that statement should be read in light of Toussaint‘s primary holding that an employee may enforce legitimate expectations that have been generated by an employer‘s statements of policy.29
There will be situations where the employer‘s unilateral changes in policy are consistent with its employees’ legitimate expectations without regard to whether the employer has given explicit notice that its policies are subject to change or has established a pattern of revising its policies periodically. Notice is not the critical issue, although it may be a relevant factor.
The proper focus is the legitimate expectations of the reasonable employee. Certain policies may not involve subject matter of sufficient significance to engender legitimate expectations worthy of enforcement. Similarly, changes, even when made with respect to critical terms of employment, may be so minor that there is little or negligible interference with employee legitimate expectations.
In determining what a reasonable employee in Bullock‘s position might legitimately expect, the court might consider, among other things, such factors as the nature of the change, whether changes in that regard have previously been made and implemented, length of employment and job status before and after the policy change.31 Be-
In joining in the affirmance of the Court of Appeals conclusion that summary judgment was properly denied, I do not wish to be understood as stating that an employer may only make unilateral changes where the employees have been given specific notice that the employer has reserved the right to do so. An employer retains the right to unilaterally modify its policies where the change will not defeat the legitimate expectations of its employees.
IV
AAA maintains that unilateral contract principles bind Bullock to AAA‘s revisions regardless of the original terms of the employment contract. Under this analysis, when an employer unilaterally changes its policies, an employee‘s continued performance constitutes consideration for, and acceptance of, the new terms of employment. An employee is then bound by the new terms and can no longer rely on the employer‘s prior policies.
In In re Certified Question, this Court considered unilateral contract analysis in a case concerning an employer‘s unilateral change from a discharge-for-cause policy to a termination-at-will policy, and
Even if the revision in the manual in In re Certified Question from discharge for cause to termination at will was an offer by Storer Broadcasting Company of a change in the employment contract, there was no reason to suppose that the plaintiff, Kenneth Bankey, accepted such an offer. See Thompson v Kings Entertainment, 653 F Supp 871 (ED Va, 1987), where the court said that the employer failed to show that the employee had accepted the revision in policy from dismissal for cause to termination at will. In Pine River State Bank v Mettille, 333 NW2d 622 (Minn, 1983), and Duldulao v St Mary of Nazareth Hosp Ctr, 115 Ill 2d 482; 505 NE2d 314 (1987), the employers distributed manuals that conferred greater rights on the employees. In such a case, it is ordinarily reasonable to find that the employee accepted the beneficial terms.
V
AAA is concerned that the Court of Appeals decision in Bullock provides an employee access to a jury if he merely claims that he interpreted his employer‘s oral statements or practices as establishing policies inducing his reliance. Amicus curiae also expresses concern that submitting such issues to a jury will inevitably strip employers of the right to change their policies. Both AAA and amicus curiae maintain that juries are inherently biased toward employees and thus are incapable of rendering a just verdict in this context. They fear that employment discharge cases ask juries of laymen to second-guess the complicated decision-
The preliminary and central question of what the terms of the employment contract in fact are is clearly a question for the trier of fact, a jury where one has been requested. Contract interpretation may present a question of law.33 Once the trier of fact has determined what are the terms of the employment contract, the separate question of what legitimate employee expectations were generated by employer policy statements found to be a part of the contract is a question of law for the Court.35
VI
The dissenting opinion would dismiss the complaint for failure to state a claim on a ground not
The dissenting opinion, recognizing that oral assurances were held in Toussaint to be sufficient to require submitting the question whether there was a contract to a jury,37 states that “not all oral assurances merit jury consideration.”38 It is suggested that the expressions relied on by Bullock were not “‘clear and unequivocal.’ ”39 It is said that Bullock could not have reasonably relied on the oral assurances he alleged as a means of creating a contract of employment which was not
The dissenting opinion states:
Furthermore, the rule of construction set forth in Lynas, which is preserved by Toussaint,3 provides that a lifetime employment contract, even if agreed to, is generally construed as an indefinite hiring, terminable at the will of either party, in the absence of distinguishing features or special consideration in addition to the services to be rendered.
Toussaint states, however:
[A] provision of an employment contract providing that an employee shall not be discharged except for cause is legally enforceable although the contract is not for a definite term—the term is “indefinite. . . .” [Id., p 598. Emphasis added.]
No authority is cited by Blue Cross, Masco or our colleague for the proposition that where an employer has agreed that an employee hired for an indefinite term shall not be discharged except for cause the employer may, nevertheless, terminate the employment without cause. [Id., p 609. Emphasis added.]
Putting aside that there is a suggestion in one of the briefs that Bullock may have left the employ of another employer to accept employment with AAA, which, if true, might constitute a distinguishing feature or provision or special consideration, there is no rule of law requiring that a contract that need not be in writing be more specific or clear and less equivocal when it is oral than when it is in writing. Also putting aside that the disposition proposed in the dissenting opinion has not been explored at the trial level, AAA has not answered or denied the allegations that such a contract was entered into, there is no rule making unenforceable as a matter of law the contract alleged by Bullock.
While the dissenters may find it incredible that an employer would undertake to employ a person on the terms alleged by Bullock, issues of credibility are to be resolved by the trier of fact. In this connection, it is significant that a number of other former AAA employees have made similar allegations.41
The law implies terms of written and oral contracts. Bullock was not discharged because he was “inefficient, absent, tardy, slovenly, reckless, nonproductive” or “violent.”42 If AAA had sought to discharge him for one of those undesirable traits or for criminal activity other than thievery, the
VII
In conclusion, the determinations of the circuit court and Court of Appeals that Bullock‘s state law claims are not preempted by federal labor law are affirmed. Also affirmed is the denial of AAA‘S motion for summary judgment. Bullock has sufficiently stated a claim on which relief can be granted. AAA has failed to demonstrate that it is entitled to judgment as a matter of law. Critical questions of fact remain undeveloped and should be developed at trial.
The cause is remanded to the circuit court.
GRIFFIN, J. (concurring in part and dissenting in part). I concur that plaintiff‘s claim is not preempted by the
Plaintiff‘s claim of a termination-for-cause agree-
I conclude that it simply is not reasonable to construe such an assertion as an enforceable agreement to discharge only for cause. Subjective expectancies of continued employment do not constitute a termination-for-cause contract under Toussaint, and plaintiff‘s claim should fail as a matter of law.
I
It is still the general rule that employment for an indefinite term is presumed to be terminable at the will of either party.
Contracts for permanent employment or for life have been construed by the courts on many occasions. In general it may be said that in the absence of distinguishing features or provisions or a consideration in addition to the services to be rendered, such contracts are indefinite hirings, terminable at the will of either party. [Lynas v Maxwell Farms, 279 Mich 684, 687; 273 NW 315 (1937).]
See also anno: Right to discharge allegedly “at-will” employee as affected by employer‘s promulgation of employment policies as to discharge, 33 ALR4th 120. The underlying rationale for this rule is that “[b]ecause the parties began with complete freedom, the court will presume that they intended to obligate themselves to a relationship at will.” Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579, 600; 292 NW2d 880 (1980).2 (Emphasis added.)
(1) a provision of an employment contract providing that an employee shall not be discharged except for cause is legally enforceable although the contract is not for a definite term—the term is “indefinite,” and
(2) such a provision may become part of the contract either by express agreement, oral or written, or as a result of an employee‘s legitimate expectations grounded in an employer‘s policy statements. [Id. at 598.]
The Toussaint decision neither vitiated the employment-at-will presumption nor did it create new or special rights. As explained in Valentine v General American Credit, Inc, 420 Mich 256, 258-259; 362 NW2d 628 (1984),
Toussaint makes employment contracts which provide that an employee will not be dismissed except for cause enforceable in the same manner as other contracts. It did not recognize employment as a fundamental right or create a new
“special” right. The only right held in Toussaint to be enforceable was the right that arose out of the promise not to terminate except for cause. Employers and employees remain free to provide, or not to provide, for job security. Absent a contractual provision for job security, either the employer or the employee may ordinarily terminate an employment contract at any time for any, or no, reason. The obligation that gave rise to this action is based on the agreement of the parties; it is not an obligation imposed on the employer by law. [Emphasis added.]
At one point the Toussaint Court emphasized the limits of its ruling:
We hold only that an employer‘s express agreement to terminate only for cause, or statements of company policy and procedure to that effect, can give rise to rights enforceable in contract. [Toussaint, supra, at 610. Emphasis supplied.]
However, it cannot be denied that Toussaint pushed heavily against and through the boundaries of employment contract law with such language as:
It is enough that the employer chooses, presumably in its own interest, to create an environment in which the employee believes that, whatever the personnel policies and practices, they are established and official at any given time, purport to be fair, and are applied consistently and uniformly to each employee. The employer has then created a situation “instinct with an obligation.”
* * *
We hold that employer statements of policy . . . can give rise to contractual rights in employees without evidence that the parties mutually agreed that the policy statements would create contractual rights in the employee, and, hence, although
the statement of policy is signed by neither party, can be unilaterally amended by the employer without notice to the employee, and contains no reference to a specific employee, his job description or compensation, and although no reference was made to the policy statement in preemployment interviews and the employee does not learn of its existence until after his hiring. [Id., pp 613, 614-615.]
When mutual assent is replaced by the “expectations” of one party as the measure of contract viability, an invitation to litigate is heralded, loud and clear. We need look only at the stampede to the courts which has followed in the wake of Toussaint to realize, nine years later, that some lines of reasonable limitation must be drawn. A reasonable limit was recognized today in In re Certified Question with the holding that a termination-for-cause policy set forth in a manual may be changed, even though the employer had not expressly reserved the right to do so.
The case at hand presents a further important opportunity to provide reasonable definition for what has come to be known as the Toussaint doctrine. Plaintiff claims to have an employment contract for the rest of his life, on the basis of an oral statement allegedly made at hiring that he would “have a lifetime job as long as he did not steal.” Plaintiff contends that a jury should now be allowed to decide whether such a purported assurance gave rise to an enforceable contract terminable only for the single cause of thievery.
To be sure, in some situations lower courts and federal courts have held that rather general statements may go to the jury as the basis of a termination-for-cause contract. See, e.g., Cowdrey v AT Transport, 141 Mich App 617; 367 NW2d 433 (1985) (the employee testified that he was promised
However, other courts have held, sensibly, that not all oral assurances merit jury consideration. In Broussard v Caci, Inc, 780 F2d 162, 163 (CA 1, 1986), the court distinguished between “puffery and promise“:
Employment negotiations resulting in employment are by definition conducted in an atmosphere of optimism and mutual hope. The air is redolent with expectation of duration on the part of the employee and of satisfactory performance by the employer. But to equate general expressions of hope for a long relationship with an express promise to discharge only for good cause would effectively eliminate [the rule] . . . that contracts for indefinite employment are, without more, terminable at will.
Yet another court has made this distinction:
Since Toussaint, the Court has been faced with a number of cases where the plaintiff has claimed a Toussaint contractual obligation arising out of the employer‘s hiring agent telling plaintiff at the time of employment that plaintiff could be employed “as long as he did the job” or similar expressions such as “as long as there is work to do,” “as long as your work is satisfactory,” “as long as you want,” etc. When you examine these
statements, each, standing alone, simply does not constitute a contract or agreement with any specific duration. Each was clearly within the policy of the Lynas case where an employment agreement for an indefinite term such as each of these was held to be an employment at will. After all Lynas as well as reality compels recognition of the fact that neither party to the beginning of an employment relationship expects it to be unsatisfactory, and both hope it will have a significant duration. This hope and noncontractual wish is expressed in terms of language such as “as long as you do the job.” Hence, the Toussaint exception to Lynas must mean more than merely this language. While it is true that as the economy and society change, we can expect employment durational rules will be altered. That was probably the basis for the specific recognition in Toussaint that the employer will be held accountable for allowing a hiree to reasonably believe that there was a specific durational term to the employment; but it must be based on more than the expression of an optimistic hope of a long relationship. [Carpenter v American Excelsior Co, 650 F Supp 933, 936, n 6 (ED Mich, 1987).]
Such an admonition is warranted. Caution should be exercised in judging the viability of a breach of contract action based solely on an alleged oral representation recalled with remarkable specificity long years after the time of hiring.
The present case presents an intriguing example. Plaintiff claims a “lifetime job . . . as long as he did not steal.” If we take the employer at his word, this precatory phrase sets forth an inherently indefinite term of employment (a lifetime); yet it simultaneously provides for discharge only for a single cause (thievery). As plaintiff would have it, he could be inefficient, absent, tardy, slovenly, reckless, nonproductive and even violent—to mention only a few undesirable traits; how-
Surely, a modicum of realism and common sense is needed. An assurance such as that alleged in the instant case simply cannot be separated from the realities of the working world. It should be recognized that “lifetime” employment contracts are extraordinary and, being so, “must be expressed in clear and unequivocal terms before a court will conclude that an employer intended to enter into such a weighty obligation.” Chastain v Kelly-Springfield Tire Co, 733 F2d 1479, 1484 (CA 11, 1984). See also Naz Agency, Inc v US Fidelity & Guaranty Co, 277 F2d 640, 641 (CA 6, 1960). Otherwise stated, “A casual remark made at a meeting, a phrase plucked out of context, is too fragile a base on which to rest such a heavy obligation inherent in such a contract.” Brown v Safeway Stores, Inc, 190 F Supp 295, 299-300 (ED NY, 1960).
Whether or not Bullock carried a subjective expectancy that he would work for this employer for the rest of his life, it is difficult to believe that any reasonable person would rely on such an oral assurance as the basis of an interminable employment contract “as long as he did not steal.” I would hold that the allegations put forth in the instant case are insufficient as a matter of law to provide the basis for an employment contract that is not terminable at will.
Furthermore, the rule of construction set forth in Lynas, which is preserved by Toussaint,3 provides that a lifetime employment contract, even if agreed to, is generally construed as an indefinite hiring, terminable at the will of either party, in
Accordingly, in conformity with Lynas, the motion for summary disposition should have been granted.
II
Although the majority opinion appropriately focuses only upon plaintiff‘s claim of wrongful discharge, ante, p 477, n 5, plaintiff‘s complaint includes claims that reach into other areas of the employment relationship. For example, he contends that he was orally assured at hiring that he “would work as a commission salesman for Defendant and enjoy the benefits of a seven (7%) percent commission for sales . . . ,” and that “if he worked hard and built up his ‘book of business,’ he would be able to earn large sums of money . . . and could enjoy his later working years . . . .”
I address these ancillary claims for the purpose of explaining why they also fail as a matter of law, and to emphasize that the Toussaint rationale has been confined by this Court to claims of wrongful discharge.
Plaintiff began his employment with defendant in 1968. Ten years later, in 1978, defendant changed the method by which it compensated sales personnel, replacing the straight seven percent
Plaintiff now complains that by modifying its method of compensation in 1978, and by instituting production standards in 1981, defendant breached an oral contract purportedly entered into when he was hired. Specifically, plaintiff alleges that defendant “breached said promises and changed its policies without advising Plaintiff when Plaintiff came into the employ of Defendant that Defendant was reserving the right to do so . . . .”
Of course, a promise to pay commissions on sales actually made is enforceable, even when the underlying agreement is for an indefinite duration. Reed v Kurdziel, 352 Mich 287, 295; 89 NW2d 479 (1958). Depending on the terms agreed upon, commissions on sales originally procured could continue to accrue even after an employee is terminated. Accordingly, plaintiff might have a valid claim concerning defendant‘s obligation to pay commissions accruing from the book of business established by the plaintiff prior to defendant‘s change in the method of compensating its sales staff. However, the assertions in plaintiff‘s complaint do not support a claim that defendant abrogated its managerial prerogatives to modify the method of compensating its sales personnel.
An employer‘s intention to give up permanently
Furthermore, there is no basis for an inference that the compensation method in effect at hire would forever remain unchanged. On the contrary, the fact that policies set out in distributed manuals were later modified rebuts such an inference.
Since I would conclude under part I that plaintiff was an employee at will, it logically follows that the right of an employer to terminate the relationship “necessarily includes the right to insist upon changes in the compensation arrangements as a condition of continued employment.” Green v Edward J Bettinger Co, 608 F Supp 35, 42 (ED Pa, 1984), aff‘d, 791 F2d 917 (1986), cert den, 479 US 1069 (1987). Thus, an employee in a termination-at-will relationship, once informed of a change in compensation rates, can either accept the new rates or exercise his own right to terminate the relationship. Hathaway v General Mills, Inc, 711 SW2d 227 (Tex, 1986); Facelli v Southeast Marketing Co, 327 SE2d 338 (SC, 1985). If an employee continues to work with knowledge of the changes, he impliedly accepts the modification. Hathaway, supra; Albrant v Sterling Furniture Co, 85 Or App 272; 736 P2d 201 (1987).
Surely, where an employee continues to work under a revised compensation system for nearly
Furthermore, In re Certified Question, supra, decided today, supports the proposition that an employer may unilaterally make such a policy change although the right to do so has not been expressly reserved. If even a just-cause termination policy can be modified or revoked, surely policies of lesser import may also be changed.
It is noteworthy that during a period of more than nine years since Toussaint, its rationale has been confined by this Court to claims of wrongful discharge. The point was reiterated in Valentine, supra, p 258, where this Court stated: “[t]he only right held in Toussaint to be enforceable was the right that arose out of the promise not to terminate except for cause.”
Our lower courts, whose experience with Toussaint-based claims is extensive, have shown understandable reluctance to extend Toussaint beyond wrongful discharge disputes. For example, see Dyer v Dep‘t of State Police, 119 Mich App 121; 326 NW2d 447 (1982) (rejecting the plaintiffs’ claim that department policy and practice had given rise to a contractual right to nonduty use of state vehicles, on the basis that rights and duties of the parties relative to vehicle use were not regulated by implications), and Engquist v Livingston Co, 139 Mich App 280; 361 NW2d 794 (1984) (rejecting the plaintiff‘s claim that a fourteen-year history of step increases had given rise to a Toussaint-based entitlement to step increases).
Even if it can be said that policy considerations were sufficient to justify the Toussaint intervention to protect job security, it is difficult to imagine the scope of difficulties and mischief that would be
III
Defendant has argued in this Court that plaintiff‘s claim of lifetime employment based on an oral promise should be barred as in violation of the Michigan statute of frauds.5 Because Bullock‘s assertion of a “lifetime contract” is exactly the sort of promise that courts should generally decline to enforce unless it is in writing, I feel compelled to make the following observations.
It is one of the curiosities of the common law that contracts for permanent or lifetime employment have been held to fall outside the scope of the statute of frauds. On its face the statute appears to require that promises contemplating long-term commitments, such as that alleged in the instant case, be validated by written evidence in order to be enforceable:
In the following cases an agreement, contract or promise shall be void, unless that agreement, contract, or promise, or a note or memorandum thereof is in writing and signed by the party to be charged therewith, or by a person authorized by him:
(a) An agreement that, by its terms, is not to be performed within 1 year from the making thereof. [
MCL 566.132(a) ; MSA 26.922(a). Emphasis supplied.]
Since enactment of the original English statute in 1676,6 however, courts have chafed under its restrictions.7 The undisputed trend of authority has been to interpret the “one year” provision as applying only to contracts that have no possibility of being completed within a year, even if the parties to the contract in fact contemplated a longer period.8 Michigan‘s case law has followed that trend by applying the nonstatutory “capable of performance” exception to the one-year provision of the statute of frauds.9
Significantly, the primary reason used to explain the result in the case of an oral contract for permanent or lifetime employment is that such contracts are terminable at will. See, for example, Sax v Detroit, GH & MR Co, 125 Mich 252, 255-256; 84 NW 314 (1900). This rationale was typified in Adolph v Cookware Co of America, 283 Mich 561, 568; 278 NW 687 (1938):
Plaintiff‘s proofs, taken as true, showed a contract for permanent employment. Such a contract is for an indefinite period and, unless for a consid-
eration other than promise of services, the employment was terminable at the will of either party. Lynas v Maxwell Farms, 279 Mich 684, and cases there cited.
Prior to Toussaint, the implications of such an interpretation were not ominous. Although an employment contract for an indefinite period fell outside the statute of frauds, the well-established termination-at-will doctrine had the counter-balancing effect of providing protection from fraudulent allegations of oral promises.
It is not surprising that, faced with the problems of proof presented since Toussaint by erosion of the employment-at-will doctrine, some courts have begun to question the wisdom of exempting employment contracts from the requirement that they be in writing where it is clear that performance beyond a year is contemplated. See, for example, Molder v Southwestern Bell Telephone Co, 665 SW2d 175 (Tex App, 1983); Evans v Floor Distribution Co, 799 F2d 364 (CA 7, 1986); Hodge v Evans Financial, 262 US App DC 151, 163; 823 F2d 559 (1987) (MacKinnon, J., dissenting).
In Michigan, a trial court recently found that several wrongful discharge claims brought against the instant defendant, alleging promises virtually the same as Bullock‘s, were barred by the statute of frauds. However, the Court of Appeals reversed, relying on the “capable of performance” exception as expressed in Adolph, supra, p 568. Dumas v Auto Club Ins Ass‘n, 168 Mich App 619, 631; 425 NW2d 480 (1988).
In California, an appellate court has recognized that the statute of frauds issue can no longer be routinely avoided given recent developments in employment law:
The traditional view is that such a contract could conceivably be performed within one year by termination of the employment agreement by one
party or the other. Since such an employment agreement has long been interpreted as being for an indefinite period, it is terminable at will by either party. . . . Appellant alleges that respondent did not have the option of terminating him at will without good cause. . . .
Appellant cannot have it both ways. Either his employment relationship was a contract in which both parties had equal rights to terminate at will (in which case it was not in violation of the statute of frauds), or it was a contract where the employer did not have the right to terminate at will, and there was a reasonable expectation of employment for more than one year (in which case the statute of frauds does apply, barring this action). [Newfield v Ins Co of the West, 156 Cal App 3d 440, 446; 203 Cal Rptr 9 (1984). Emphasis supplied.]10
The statute of frauds “reflects a judgment that parol evidence of certain types of agreements is so inherently suspect that it should not even be presented to a jury, an institution otherwise generally considered capable of distinguishing fact from invention.” Thompson v Stuckey, 300 SE2d 295, 298 (W Va, 1983).
The oral promise of a lifetime job alleged in this case by Bullock certainly falls within that category. As I see it, the time has come to revisit this antiquated interpretation of the statute of frauds which makes no sense in the post-Toussaint era. If this Court does not do so, it is hoped the Legislature will see the wisdom of making needed adjustments of the statute.
RILEY, C.J., concurred with GRIFFIN, J.