Plаintiffs are current and former nonunion employees of defendant Josephine County. After the county commissioners passed a resolution in 2005 eliminating or reducing certain employee benefits, plaintiffs
Plaintiffs are or were county employees in managerial, supervisory, or confidential positions who were hired by the county before August 2005. The terms of their employment are set by the county board of commissioners under authority conferred by the county charter. In particular, the charter provides:
“Section 17. ADMINISTRATIVE PERSONNEL.
“The Board of County Commissioners may appoint administrative and advisory personnel of the county to offices and positions established by the Board or pursuant to its authority.
* * * *
“Section 25. COMPENSATION
“(1) The compensation and job related expenses of personnel in the service of the county shall be fixed annually by the budget committee.”
Pursuant to this charter authority, the board first issued personnel rules in 1979. The rules have been amended by resolution of the board several times over the past three decades. At all relevant times, however, the rules contained the following two general provisions. The first, emphasized by plaintiffs and serving as one basis for their argument that the rules promised a benefit package that could not be eliminated or reduced, provides that one “purpose” of the rules is “[t]o develop a рrogram of recruitment, training, advancement, and tenure that will make a career in the County government attractive to persons who possess both ability and integrity.” Non-Union Personnel Rule (NPR) 2.1(B) (emphasis added). The second rule, emphasized by defendants and serving as one basis for their argument that the county retained the right to alter or abolish the benefit package (subject to statutory and constitutional constraints), provides thаt “the Board shall take action as they deem appropriate” on any proposed rule amendment. NPR 2.3 (emphasis added). 2
At issue in this case are four employee benefits provided under the 2002-04 personnel rules (2004 rules) and the modifications to those benefits under the board’s 2005 amendments (2005 rules). The 2004 rules provided plaintiffs with (1) an employer contribution to a deferred compensation account in an amount matching thе employee’s contribution, up to six percent of the employee’s monthly salary, redeemable whenever the employee terminates employment with the county; (2) a “time management leave” program (TML), which entitled employees to accrue unused vacation, sick, and personal leave time and redeem it for cash each month or at the end of their employment; (3) a sevеn-step automatic salary increase based on years served; and (4) a provision that required that the county show “just cause” before disciplining or terminating an employee.
In 2005, the board faced significant county-wide budget cuts and passed an ordinance amending the rules governing benefits. The
Following the board’s enactment of the 2005 rules, plaintiffs filed this action alleging that, in reducing the benefits provided by the 2004 rules, the county breached the terms of plaintiffs’ employment contract, impaired an existing obligation of contract, and should be estopped from reneging on its promises. Plaintiffs sought declaratory and injunctive relief as well as damages “in an amount equal to that of the [benefits that each plaintiff] has been improperly denied.” Defendant moved for summary judgment. The trial court initially granted defendant’s motion with respect to the impairment of contract claim and breach of contract claim, but denied the motion as to the promissory estoppel claim. The trial court ordered plaintiffs to strike the contract claims; plaintiffs complied and filed a third amended complaint. After additional discovery, defendant again moved for summary judgment. The trial court granted dеfendant’s motion on the remaining claims, and plaintiffs now appeal. 3
The recurring problem of determining whether particular benefits inhere in legislatively created (or quasi-legislatively created) employment contracts requires us to apply general principles of contract law, as those principles are inflected by principles of employment law and statutory interpretation. Gеnerally, to interpret a contract provision,
we examine its text within the context of the entire contract in light of the circumstances underlying the contract’s formation.
Batzer Construction, Inc. v. Boyer,
In the employment context, if an employer offers a benefit to an at-will employee, the employee accepts the offer, thereby creating a unilateral contract, by commencing or continuing emplоyment thereafter.
McHorse v. Portland General Electric,
Although these general principles apply to contracts created by legislation, additional rules apply as well.
In the present case, the parties agree that the county’s ordinances and charter create a contract and that the 2004 contract provided for certain benefits that were significantly reduced or eliminated by the 2005 amendments. The issue is whether the 2004 contract benefits were permanent. Under the principles of government employment contracts outlined above, the issue, more precisely stated, is: Did the 2004 contract contain an unambiguous promise that the employer pick-up, TML program, step raise schedule, and “for cause” termination provision were permanent? To answer that question, we deploy the familiar strategies of statutory constructiоn, that is, examination of text, context, legislative history, and (if necessary) maxims of construction.
State v. Gaines,
Plaintiffs do not contend that the 2004 personnel rules describing the disputed benefits contain express textual guarantees of permanence. Further, they stipulate that the rules contain an express reservation of rights under which the Board of County Commissioners “ ‘shall take action as they deem appropriate’ оn any proposed amendments” to the personnel rules. Rather, plaintiffs focus on a provision set out in the “Purpose” section of the rules stating that one of the rules’ objectives is “[t]o develop a program of recruitment, training, advancement, and tenure that will make a career in County government attractive to persons who possess both ability and integrity.” They also emphasize certain assurаnces of permanence deriving from some of the county’s handbooks and from some oral assurances from county employees. We do not find plaintiffs’ arguments to be persuasive.
A statement that personnel rules are designed to make a particular “career” attractive bears no logical relationship to a promise that the rules create permanent benefits. If the former imрlied the latter, it would be difficult to conceive of employment benefits — which, by definition, are designed to make employment attractive — that would not implicitly bear a promise of permanence. And even if we could be convinced that, in some circumstances, offering a benefit that is intended to enhance a career is necessarily an offer that cannot be retracted, we would conclude that the circumstances here do not qualify. First, the offer occurs in the context of an express proviso that it is
not
beyond amendment; the county board retained the
Plaintiffs’ arguments that employee handbooks and оral assurances from county employees constitute extrinsic evidence of guaranteed permanence are also unavailing. It is true that such assurances can constitute part of an employment contract.
Yartzoff v. Democrat-Herald Publishing Co.,
In sum, neither the text, context, nor extrinsic material establishes unambiguously that the county’s 2004 personnel rules created benefits that could not be amended. Indeed, wе conclude that, if anything, the materials establish that the rules do not create unamendable benefits.
Plaintiffs argue that, regardless of the express right to amend the benefit resolution at will, the county was bound to refrain from doing so by the obligation, implicit in every contract, to act in good faith. In support of that argument, plaintiffs rely on
Furrer v. Southwestern Oregon Community College,
Furrer does not help plaintiffs for two reasons. First, as we also noted in that case, the discretion that the employer reserved to itself was not unlimited; it was the discretion to “determine whether an application for early retirement conferred mutual benefits on the parties.” Id. It was that discretion that the employer had the obligation to exercise in good faith:
“[B]y providing that defendant would determine whether an application for early retirement conferred mutual benefits on the parties, the pre-2002 policy conferred discretion on defendant. * * * [H]owever, that discretion, even if broad, was not unlimited. As pertinent here, the relevant inquiry necessarily included matters that reasonable persons would regard as pertinent to the parties’ respectivе institutional and personal interests. * * * Because defendant was obligated to exercise its discretion under the pre-2002 policy in good faith, the promise of an early retirement benefit in that policy was not illusory.”
Id. In the present case, the county’s discretion was not the discretion to determine whether some criterion applied; it was discretion to amend the benefit resolution “as they deem appropriate.” Second, even if the county had a general good faith obligation, plaintiffs’ brief provides us with no argument as to what the county did that amounted to bad faith.
Plaintiffs also cite several cases for the proposition that certain employee benefits become “vested” at the time of employment and cannot be taken away, even prospectively.
E.g., Strunk,
“In their reply brief, petitioners also argue that this court’s decision in Taylor [v. Mult. Dep. Sher. Ret. Bd.,265 Or 445 ,510 P2d 339 (1973)] ‘is a much more pivotal case in this court’s devеloping analysis of pension benefits than is DOregon State Police Officers’ Assn.].’ In Taylor, which involved a county retirement system, the court acknowledged that ‘contractual rights can arise prior to the completion of the service necessary to a pension.’265 Or at 451 . Of course they can. The predicate question — which we determine to be dispositive in these cases — is whether the contract offer that the particular pension plan presents contains such a promise, i.e., a promise that extends over the life of a covered member’s service.”
The same conclusion disposes of plaintiffs’ remaining arguments. Defendant did not impair the contractual obligation to maintain the benefits permanently because there was no such obligation. Nor can plaintiffs succeed on a claim for promissory estoppel; the predicate element of such a claim is, not surprisingly, a promise.
Schafer et al v. Fraser et ux,
Because we reject plaintiffs’ breach of contract, impairment of contract, and promissory estoppel claims, we need not address their claims that prevailing on one or more of those claims entitles them to statutory remedies. Nor is it necessary to address their claim for class status.
Affirmed.
Notes
Article I, section 21, of the Oregon Constitution provides, in part, “No * * * law impairing the obligation of contracts shall ever he passеd!.]”
The rale itself does not state that it applies to “any proposed rule amendment,” but the parties stipulated to that meaning.
Defendant argues that plaintiffs’ breach of contract and constitutional impairment claims are unpreserved because plaintiff did not plead them in the third amended complaint. However,
Propp v. Long,
In
Lauderdale v. Eugene Water and Electric Board,
In addition, the cases that plaintiffs cite and rely on deal with pensions or other retirement benefits. We have noted that such benefits are
sui generis. Lauderdale,