Lеe ORR, Alfred Smith, and William R. Robinson, Appellants/Respondents (Plaintiffs Below),
v.
WESTMINSTER VILLAGE NORTH, INC., Appellee/Petitioner (Defendant Below).
Supreme Court of Indiana.
*714 Eric D. Johnson, Kightlinger & Gray, Indianapolis, for Appellants/Respondents.
Patrick Miller, Patrick F. Mastrian, III, Goodin & Kraege, Indianapolis, for Appellee/Petitioner.
D. Reed Scism, Barnes & Thornburg, Indianapolis, for Amicus Curiae The Indiana Legal Foundation.
*713 ON PETITION TO TRANSFER
SELBY, Justice.
Westminster Village North, Inc., appellee/petitioner and defendant below ("Westminster" or "defendant"), challenges the decision of the Court of Appeals,
FACTS
Westminster operates a retirement community, which consists of several buildings located on twenty-seven to thirty acres of land in Indianapolis. Westminster employed plaintiff Lee Orr as the grounds foreman or head grounds keeper. Plaintiffs Alfred Smith and William Robinson worked under Orr's direction. On the afternoon of March 22, 1990, Kevin Strunk, the Director of Maintenance, who had oversight responsibility for all buildings and grounds and whо was Orr's *715 immediate supervisor, gave the fire chief and six to eight firefighters from the Lawrence Fire Department a tour of the Westminster facilities. When the group reached the attic of Building A at about 3:00 or 3:30 p.m., Strunk noticed that the door to the attic was ajar about three inches and the piece of wood that usually fastened the door closed was lying on the floor. When the group entered the attic, the light was on and there was a cloud of smoke. Strunk and other members of the group detected an odor of marijuana. The group then separated and walked around the attic. Strunk walked along the catwalk in the east wing and saw Orr hiding in the corner of the attic and signaling him to go back to the main common area. The group then left the attic to call security. Strunk went back down the center stairwell, the only stairwell accessing the attic, to the first floor. Several firefighters remained behind.
When Strunk returned a few minutes later with Bob Rayne, the Director of Security, they entered the attic with the fire chief and a couple of fire personnel. At that time neither Orr nor anyone else was in the attic. The hatch which opens onto the roof, which is only accessible through the attic, was open, and Strunk saw plaintiffs on the roof. According to Strunk, Orr and Smith were walking away from him on the very top of the sloped roof. After Strunk made two requests that the plaintiffs come down from the roof, they complied and, in response to questions, they all denied smoking in the attic. They maintained that maintenance foreman Gordon Counceller, who, like Orr, reported to Kevin Strunk and who also is Orr's uncle, had instructed them to clean pigeon droppings from the gutters of the building.
Westminster immediately conducted a brief investigation and concluded that plaintiffs had no business being in the attic or on the roof that day. They had no safety equipment with them for scaling the sloped roof, which Strunk maintained was wet at the time, and no one saw any equipment with them for removing pigeon droppings. Westminster terminated plaintiffs the same day. Although Westminster suspected that they had beеn smoking marijuana, Westminster terminated them for being in an unauthorized area and also for endangering safety and life in violation of major offense number 4 which is listed in Section V.M. of the Handbook.
Four or five days after the incident, when Strunk questioned Counceller about whether he had told Lee and his men to inspect or do work on the roof that day, he said, "well, what if I did tell them." Strunk did not get a definite answer from Counceller who then went on to simply state that he "may have" asked Orr to inspect or do work on the roof. (R. at 366-68.) Later, at Counceller's deposition, he did say that, earlier in the week of March 22, he had asked his nephew Lee Orr to clean the gutters, and Orr had advised him that it had been schеduled. He also testified that he and others had occasion to be in the attic, because it was a storage area; that no signs saying that it was an unauthorized area or prohibiting smoking were posted until after the incident; that he and others smoked cigarettes in the attic; that there was no requirement for using safety equipment while on the roof; and that they would need a garden tool and generally a hose to clean out the gutters, but would not need any tools simply to inspect the gutters. Plaintiff Smith testified at his deposition that no safety equipment was needed on the roof in question; that, as far as he could determine, the roof was dry on the day of the incident; that he had a garden hand shovel in his back pocket and believes Orr and Robinson had similar tools as well. Plaintiff Orr testified that he was on the east incline of Building A finishing up cleaning out the gutters when he was called off the roof, and that he and his co-workers all had hand shovels, but no other equipment.
Plaintiffs contend that they were wrongfully discharged because Westminster did not follow the disciplinary procedures set out in the Handbook. The contents of that Handbook are not in dispute. In the first few pages of the Handbook issued October 1988, under Section I.B. captioned "Purpose and Use of the Handbook," the following statement appears: "Its contents represent an official statement of the facility policy; however, the handbook is not a contract with the *716 facility because it is subject to change." (R. at 18; emphasis added.)
The Handbook also contains numerous other provisions covering standards of conduct, policies and procedures, and benefits. Among these is Section II.M., captioned "Employee Disciplinary Guidelines and Grievances Procedure," which provides in pertinent part as follows:
If you fail to follow established guidelines or violate the rules and policies of Westminster Village North, you will be subject to disciplinary action. In most cases, disciplinary action will begin with an oral warning from your supervisor. ....
....
The disciplinary action taken will be determined by the seriousness of the violation. Therefore, if warranted, the oral warning may be omitted and the written warning or dismissal may occur immediately. ...
(R. at 33; emphasis added.) This Section also provides that "to resolve any misunderstandings, problems or grievances which arise in connection with disciplinary action or with your job in general," the employee grievance "should be presented either orally or in writing to your immediate supervisor/Department Head within five (5) working days following the incident in question." The Section further provides that the supervisor "must answer" the grievance "in writing within three (3) working days." (R. at 33.) If still not satisfied, the employee may take the grievance "within five (5) working days" to the Staff Council who will make a recommendation to the Executive Direсtor. The Executive Director "will make a final determination and provide the employee with a written response." (R. at 34.)
Section V.M. of the Handbook, captioned "Rules of Employee Conduct," lists numerous violations under the subheadings of "minor" and "major" rule violations, and states at the end of the Section: "The foregoing list is not intended to be all inclusive." (R. at 81-83, 83.) Examples of major violations listed are number 2 which prohibits "[b]ringing or consuming alcohol or drugs on the premises, or reporting for duty under the influence of alcohol or drugs," and number 4 which prohibits "[a]ny act or omission which might endanger the safety or life of residents, employees or self." (R. at 82.) With regard to minor violations, the Handbook states that they "can result in either verbal or written warnings which if not corrected can result in dismissal." (R. at 81.) With regard to major violations, the Handbook expressly states that "your continued employment may not be deemed desirable," and that such violations "can result in immediate discharge without warning." (R. at 82.)
Section II.A. of the Handbook creates three categories of employees: an "orientation employee," who is in the initial three months of employment or re-employment, a "regular employee," who has completed the orientation period and been evaluated for continued employment, and a "probation employee," who has been put on probation for disciplinary problems. (R. at 21). Section II. G. provides for annual performance evaluations, and Section VI.A., captioned "What Employees Can Expect from Westminster Village North," states: "You have job security and opportunity for advancement." (R. at 84-85.)
It also is not disputed that Westminster's procedure is to have employees review the Handbook and sign an accompanying "Personnel Handbook Statement" ("Statement"), which is referenced in that Handbook, at the time they are hired, and that Orr, Smith, and Robinson each reviewed the Handbook and signed the Statement.[2] Just above the signature and date lines of the Statement, the following certificatiоn appears:
This is to certify that I have read and understand the contents of the current Personnel Handbook for employees of Westminster Village North, Inc. The handbook *717 is subject to change and therefore is not considered a contract with Westminster Village North, Inc. ...
(R. at 426, 683.) It is also undisputed that plaintiffs did not avail themselves of the grievance procedures outlined in the Handbook;[3] that plaintiffs have no written contract of employment with Westminster (unless the Handbook is construed as a contract); that they offered no independent consideration to convert their at-will relationship to an employment relationship requiring Westminster to dismiss for cause only; and that thеy did not assert promissory estoppel or that they relied to their detriment upon the Handbooks or any other written or oral statements.
DISCUSSION
The sole question in this case is whether the Handbook served to convert plaintiffs' otherwise at-will employment relationship with Westminster into an employment relationship that required Westminster to terminate them only for good cause. We conclude that it does not. Accordingly, we reverse the decision of the Court of Appeals and reinstate the trial court's decision granting summary judgment for Westminster.
We review the trial court's decision granting summary judgment for Westminster, as did the court below, to determine whether the trial court correctly conсluded that "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Trial Rule 56(C); Greathouse v. Armstrong,
I.
Historically, Indiana has recognizеd two basic forms of employment: (1) employment for a definite or ascertainable term; and (2) employment at-will. If there is an employment contract for a definite term, and the employer has not reserved the right to terminate the employment before the conclusion of the contract, the employer generally may not terminate the employment relationship before the end of the specified term except for cause or by mutual agreement.[4] If there is no definite or ascertainable term of employment, then the employment is at-will, and is presumptively terminable at any time, with or without cause, by either party. Wior v. Anchor Industries, Inc.,
The employment-at-will doctrine is a rule of contract construction, not a rule imposing substantive limitations on the parties' freedom to contract. Streckfus v. Gardenside Terrace Co-Op., Inc.,
This Court has recognized only three ways to avoid or rebut the presumption of at-will employment, or stated another way, three exceptions to the employment-at-will doctrine. First, if an employee establishеs that "adequate independent consideration" supports the employment contract, the Court generally will conclude that the parties intended to establish a relationship in which the employer may terminate the employee only for good cause. See Romack v. Public Service Co.,
Second, we have recognized a public policy exception to the employment-at-will doctrine if a clear statutory expression of a right or duty is contravened. Wior,
Third, this Court has recognized that, in certain instances, an employee may invoke the doctrine of promissory estoppel. To do so effectively, the employee must plead or assert the doctrine with particularity.[6] The employee must assert and demonstrate that the employer made a promise to the employee; that the employee relied on that promise to his detriment; and that the promise otherwise fits within the Restatement test for promissory estoppel.[7]See Jarboe v. Landmark Community Newspapers of Indiana, Inc.,
In their opposition to Westminster's transfer petition before this Court, plaintiffs do not rely on the public policy exception to the employment-at-will doctrine. They also have not asserted the doctrine of promissory estoppel, and, in any event, the record is devoid of any meaningful evidence that they relied to their detriment upon the Handbook or any other statements by Westminster.[9] Moreover, *719 plaintiffs have made no effort to establish that they provided Westminster with adequate independent consideration so as to support an employment relationship that is terminable for good cause, perhaps because none of the plaintiffs left jobs with assured permanency to accept work at Westminster[10] or provided anything to Westminster other than their services.
Plaintiffs argue instead quite simply that the employment-at-will doctrine is harsh and outdated, and that we should construe the Handbook as a unilateral contract[11] allowing Westminster to discharge them only for good cause. Stated another way, plaintiffs urge us to establish a broad new exception to the at-will doctrine for employee handbooks. We are aware that there has been substantial criticism of the at-will doctrine and a significant amount of commentary and litigation regarding whether employee handbooks constitute valid contracts and, if so, under what circumstances.[12] We are also aware that this Court has not expressly addressed and resolved the question of whether unilateral contracts in the employment context always require adequate independent consideration[13] and whether an *720 employee handbook can ever constitute a unilateral contract serving to modify the otherwise at-will employment relationship.[14]See Wior v. Anchor Industries, Inc.,
II.
Even if we were to conclude that an employee handbook, under some circumstances, can constitute a valid unilateral contract in the absence of adequate independent considerationand we do not do so today Westminster's Handbook could not constitute such a unilateral contract and, in fact, cannot meet the requirements set forth in Duldulao v. Saint Mary of Nazareth Hosp. Center,
Under the Duldulao rule, an employee handbook may constitute a unilateral contract and bind the employer if the following three criteria are met: (1) the language of the employee handbook must contain "a promise clear enough that an employee would reasonably believe that an offer had been made;" (2) the employee handbook must be disseminated to the employee in such a manner that the employee is aware of its contents and reasonably believes it to be an offer; and (3) the employee must accept the offer by commencing or continuing work after learning of the terms of the employee handbook. Id. Here, we need go no further than the first step under Duldulao. The Handbook certainly cannot be said to contain *721 a "clear promise" which plaintiffs could reasonably believe constitutes an "offer." Not only is a statement that employees will only be discharged for just or good cause absent from the Handbook, but also the Handbook expressly states that while "in most cases, disciplinary action will begin with an oral warning .... if warranted ... dismissal may occur immediately." (R. at 33.) The Handbook also states that the list of violations "is not intended to be all inclusive," (R. at 83) and emphasizes that major violations in particular "can result in immediate discharge without warning," (R. at 82). Thus, there is no clear promise to follow a progressive disciplinary approach, and, in fact, there are clear statements which provide that Westminster, in appropriate circumstances, may discharge employees without warning. Under such circumstances, Illinois courts interpreting Duldulao have concluded that, as a matter of law, the employee handbook does not create enforceable contract rights because the handbook has prescribеd no "specific procedures" by "positive and mandatory language." St. Peters v. Shell Oil Co.,
If this were not enough, the Handbook also contains a disclaimer, which is placed towards the front of the Handbook and which clearly states that the Handbook is not a contract and that its terms can be changed at any time. A similar disclaimer is included in the Personnel Handbook Statement which accompanied, and was referenced in, the Handbook and which Westminster required plaintiffs to sign. Again, even under the Duldulao rule, an employee handbook bearing or accompanied by such disclaimers, particularly when the employee signs one of the disclaimers, generally, as a matter of law, doеs not create a unilateral contract. See Robinson v. Christopher Greater Area Rural Health Planning Corp.,
The Handbook's vague and general statements about categories of employees, annual performance reviews, and job security, when weighed against the clear and specific language giving Westminster broad discretion in disciplinary matters and the prominent disclaimers, are simply not enough to create an issue of material fact as to whether the Handbook constituted a valid offer under a unilateral contract analysis. See Lee v. Canuteson,
Moreover, even if the Handbook could be construed as a clear promise sufficient to constitute an offer supporting a unilateral contract, there is a significant question as to whether plaintiffs could argue successfully that the unilateral contract had been breached when they themselves did not comply with thе grievance procedures set out in the Handbook. A number of cases have held that plaintiffs cannot assert a breach under *722 their asserted employment contract, that is, the employee handbook, and yet fail to follow the grievance procedures set forth in that handbook, procedures that may have provided relief from the asserted unfair treatment or breach.[17] Stated another way, these cases hold that employees must exhaust their remedies as set forth in the contract or handbook before resorting to the courts. Plaintiffs here have not done so.
CONCLUSION
We re-affirm the vitality of the employment-at-will doctrine in Indiana and the general rulе that adequate independent consideration is necessary to convert an at-will relationship into an employment relationship requiring an employer to discharge an employee for good cause. We decline plaintiffs' invitation to construe employee handbooks as unilateral contracts and to adopt a broad new exception to the at-will doctrine for such handbooks. We conclude that, even if we were to adopt an exception to the at-will doctrine, Westminster's Handbook does not constitute a clear offer supporting a binding unilateral contract because its language regarding progressive discipline procedures is suggestive rather than mandatory and because the Handbook includes a prominent disclaimer and was accompanied by a second disclaimer, which is referenced in the Handbook and which was signed by plaintiffs. Accordingly, we reverse the Court of Appeals' decision and reinstate the trial court's decision granting summary judgment in Westminster's favor.
SHEPARD, C.J., and DICKSON, SULLIVAN and BOEHM, JJ., concur.
NOTES
Notes
[1] The complaint below, in addition to alleging wrongful discharge because of a breach of contract, here, the Handbook, also included three other counts. Plaintiffs alleged that Westminster breached an implied covenant of fair dealing, that Westminster negligently investigated the incident which rеsulted in plaintiffs' discharge, and that Westminster defamed plaintiffs. Plaintiffs did not seek summary judgment on the defamation claim, which remains pending. Plaintiffs did not press in the Court of Appeals the other claims, which had been before the trial court on defendant's partial summary judgment motion, and these issues are now waived. See Ind. Appellate Rule 8.3(A)(7) (1997). Moreover, in their opposition to Westminster's transfer brief, plaintiffs have not challenged that portion of the Court of Appeals' decision which concluded that Ind. Code § 22-6-3-1 (1993) (requiring an employer, upon request, to provide a letter to the employee stating "for what cause, if any, such employee has quit or been discharged") did not create an additional public policy exception to the at-will doctrine, and, therefore, we summarily affirm on that issue. See Kimberlin v. DeLong,
[2] Robinson signed the Statement on May 15, 1989 after reading the 1988 version of the Handbook. Smith signed the Statement on April 25, 1988 after reviewing an earlier and substantially similar version of the Handbook. He also received and reviewed the 1988 version. Orr, who resigned from Westminster and was later re-hired prior to this incident, did not dispute that he read the 1988 version of the Handbook, or that he signed the Statement at the time Westminster re-hired him.
[3] Robinson testified that he was not aware of the grievance procedures. Smith testified that he did not understand the details of the grievance procedures. Orr testified that he did not personally utilize the grievance procedure, but that his attorney may have attempted to comply with the procedure by writing a letter. His attorney, however, had maintained only that it would have been futile to utilize the grievance procedure in light of the fact that Westminster had already terminated Orr.
[4] Seco Chemicals, Inc. v. Stewart,
[5] Citing Ohio Table Pad Co. v. Hogan,
[6] Holloway v. Giganti, Inc.,
[7] See First Nat'l Bank of Logansport v. Logan Mfg. Co.,
[8] Section 90(1) of the Restatement (Second) of Contracts (1981) provides: "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee and a third person and which does induce such action or forbearance is binding if injustice can be avoided only by the enforcement of the promise. The remedy for breach may be limited as justice requires." Id. at 242.
[9] Although the Court of Appeals expressly concluded that a genuine issue of material fact is in dispute because "evidence supports the Employees' contention that they either began work at Westminster or continued working there in reliance upon possible job security provisions found in the Handbook,"
[10] Immediately prior to beginning work at Westminster, Orr and Robinson were unemployed. Smith had just moved to Indiana from Tennessee and was doing odd jobs for a man who allowed him to stay on his premises and ultimately helped him get a job at Westminster.
[11] Ordinarily, in a unilateral contract, there is no bargaining process or exchange of promises by the parties as in a bilateral contract. Only one party makes an offer (or promise) which invites performance by another, and the performancе constitutes both the acceptance of that offer and consideration. See Richard J. Pratt, Unilateral Modification of Employment Handbooks: Further Encroachments on the Employment-at-will Doctrine, 139 U. Pa. L.Rev. 197, 210 & nn. 83-84 (1990). See also 1A Arthur Corbin, Corbin on Contracts § 152, at 13-17(1963); Arthur Corbin, Corbin on Contracts One Volume Edition § 21, at 31-36, § 63, at 102-03 (1952); John Calamari & Joseph Perillo, The Law of Contracts § 2-10 (3d ed.1987).
[12] See generally 1 Barbara Lindemann & Paul Grossman, Employment Discrimination Law 1004-11 (Paul W. Crane, Jr. et al. eds.1996); Michael A. Chagares, Utilization of the Disclaimer as an Effective Means to Define the Employment Relationship, 17 Hoffstra L.Rev. 365 (1989); Michael J. Phillips, Disclaimers of Wrongful Discharge Liability: Time for a Crackdown? 70 Wash. U.L.Q. 1131 (1992); Deborah A. Schmedemann & Judi McLean Parks, Contract Formation and Employee Handbooks: Legal, Psychological, and Empirical Analyses, 29 Wake Forest L.Rev. 647 (1994); David J. Walsh & Joshua L. Schwartz, State Common Law Wrongful Discharge Doctrines: Up-Date, Refinement, and Rationales, 33 Am. Bus. L.J. 645 (1996); Kathleen A. Kynberg, Must Employment Manuals Contain Disciplinary Procedures to Form Binding Contracts? Resolving the Confusion in the Illinois Appellate Courts, 21 S. Ill. U.L.J. 297 (1997); Pratt, supra note 11; Protecting At Will Employees Against Wrongful Discharge: The Duty to Terminate Only in Good Faith, 93 Harv. L.Rev. 1816 (1980); Gabriel S. Rosenthal, Crafting a New Means of Analysis for Wrongful Discharge Claims Based on Promises in Employee Handbooks, 71 Wash. L.Rev. 1157 (1996); George L. Blum, Annotation, Effectiveness of Employer's Disclaimer or Representations in Personnel Manual or Employee Handbook Altering At-Will Employment Relationship (1994 & Supp.1997); Theresa Ludwig Kruk, Annotation, Right to Discharge Allegedly "At-Will" Employee as Affected by Employer's Promulgation of Employment Policies as to Discharge (1984 & Supp.1997).
[13] The Court of Appeals decisions on this point are not entirely clear and consistent. Compare Tuthill Corp. v. Wolfe,
[14] A number of Court of Appeals decisions have held, without discussing the adequate independent consideration requirement, that the terms of an employee handbook are irrelevant unless the employment contract is one for a definite term. See, e.g., Tri-City Comprehensive Community Mental Health Centеr, Inc. v. Franklin,
[15] Courts holding that an employеe handbook constitutes a contract have done so utilizing various theories and tests. See generally Chagares, supra note 12, at 372-75; Phillips, supra note 12, at 1138-40; Walsh & Schwarz, supra note 12, at 665-69 (briefly summarizing a number of approaches and providing a survey chart of the status of the issue throughout the United States). Compare Pine River v. Mettille,
[16] In Indiana, as in Illinois, the existence of a contract when the facts are undisputed is generally a question of law for the court. See Keating v. Burton,
[17] See, e.g., Fregara v. Jet Aviation Business Jets,