Anderson v. Douglas & Lomason Co.

• Decision Date: 22 November 1995
• Docket Number: No. 94-615,94-615
• Citation: 540 N.W.2d 277
• Parties: 131 Lab.Cas. P 58,035, 11 IER Cases 263 Terry ANDERSON, Appellant, v. DOUGLAS & LOMASON COMPANY, Appellee.
• Court: Iowa Supreme Court

Page 277

540 N.W.2d 277

131 Lab.Cas. P 58,035, 11 IER Cases 263

Terry ANDERSON, Appellant, v. DOUGLAS & LOMASON COMPANY, Appellee.

No. 94-615.

Supreme Court of Iowa.

Nov. 22, 1995.

Richard B. Maher of Marks & Clare, Omaha, Nebraska, for appellant.

Helen C. Adams, Russell L. Samson, and David S. Steward of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for appellee.

Considered by McGIVERIN, C.J., and LAVORATO, NEUMAN, ANDREASEN, and TERNUS, JJ.

TERNUS, Justice.

Defendant, Douglas & Lomason Company (DLC), discharged plaintiff, Terry Anderson, for taking a box of pencils. Anderson responded with a breach-of-contract action claiming DLC failed to follow progressive discipline policies contained in the employee handbook. The district court granted DLC's motion for summary judgment, which argued, in part, that the handbook did not constitute a contract. Anderson appealed.

Although we conclude progressive discipline policies meeting the requirements for a unilateral contract are enforceable, a disclaimer in the handbook given to Anderson prevented the policies from constituting a contract. Therefore, we affirm the district court's grant of summary judgment.

I. Background Facts and Proceedings.

On Anderson's first day of work at DLC he attended a six hour orientation session for new employees. He was informed that DLC had a progressive discipline policy and he was given a fifty-three page employee handbook which included these policies. Anderson read only the first few pages of the handbook; he admits he never read the provisions on progressive discipline.

DLC fired Anderson after three years of employment. His termination was based on an incident which occurred as he was leaving the plant one day. Company personnel stopped his pickup and asked to search it. Anderson gave permission and the workers found a box of company pencils. As a result, they also asked to search his home and garage. Anderson consented and a subsequent search revealed no company property. However, that same day, DLC asked Anderson to resign. He refused and was immediately fired.

Anderson responded by filing this breach-of-contract action against DLC. He claims DLC did not follow the progressive discipline policies outlined in its handbook for unauthorized possession of company property. ¹ These progressive discipline policies require a written warning for the first offense, a three-day suspension without pay for the second offense, and discharge for the third offense. Because this was not Anderson's third offense, he claims DLC could not fire him.

DLC filed a motion for summary judgment claiming the handbook did not constitute a contract and therefore Anderson was employed at-will. First, DLC contended the handbook was never communicated to or accepted by Anderson because he did not read it. Second, DLC argued the handbook was not definite enough to constitute an offer. DLC cited two reasons for its vagueness claim: the handbook contains no written guarantees that discharge will occur only for cause or under certain conditions--the rules are mere guidance; and the manual contains a written disclaimer. The district court granted the employer's summary judgment motion without explanation in a calendar entry.

II. Scope of Review.

We uphold summary judgment when the moving party shows no genuine issue of material fact exists and it is entitled to judgment as a matter of law. Iowa R.Civ.P. 237(c); C-Thru Container Corp. v. Midland Mfg. Co., 533 N.W.2d 542, 544 (Iowa 1995). To decide if the moving party has met this burden, we review the record in the light most favorable to the party opposing summary judgment. Hoffnagle v. McDonald's Corp., 522 N.W.2d 808, 811 (Iowa 1994).

III. Indefinite Employment Contracts.

The central issue presented by this dispute is whether DLC's issuance of a handbook created an employment contract. ² This question arises because Iowa employment relationships are presumed to be at-will: In the absence of a valid employment contract either party may terminate the relationship without consequence. See Hunter v. Board of Trustees, 481 N.W.2d 510, 513 (Iowa 1992). Indeed, the doctrine of employment at-will is merely a gap-filler, a judicially created presumption utilized when parties to an employment contract are silent as to duration. Butler v. Walker Power, Inc., 137 N.H. 432, 629 A.2d 91, 93 (1993); see also Sorenson v. Kennecott-Utah Copper Corp., 873 P.2d 1141, 1145 (Utah App.1994) (at-will rule is mere rule of contract construction); Richard A. Epstein, In Defense of the Contract at Will, U.Chi.L.Rev. 947, 951 (1984) ("[at-will] rule of construction [is] in response to the perennial question of gaps"). To understand our interpretation of employment contracts, particularly the nexus between the at-will doctrine and employee handbooks, we provide a brief overview.

A. Development of employment at will. The at-will presumption originated in English seasonal servant contract law. See Jay M. Feinman, The Development of the Employment at Will Rule, 20 Am.J.Legal Hist. 118, 118 (1976) (hereinafter "Feinman Article"). When parties remained silent as to the duration of service, the English courts filled the gap by presuming a certain duration and imposing a notice-of-termination requirement. 1 William Blackstone, Commentaries on the Laws of England 413 (U.Chi.Press 1979) ("If the hiring be general without any particular time limited, the law construes it to be a hiring for a year.... [Neither side can break the contract] without a quarter's warning.") (hereinafter "Blackstone"). The judicially created doctrine complemented statutes imposing a ban on leaving one's position or firing a worker before the end of the term and reflected the judiciary's concern for fairness between masters and seasonal servants. Feinman Article, 20 Am.J.Legal Hist. at 120; see Blackstone, at 413 (relationship continues "throughout all the revolutions of the respective seasons; as well as when there is work to be done, as when there is not").

The doctrine has never been static. As additional statutes were promulgated and the variety of employment situations far removed from the domestic environment increased, the English judiciary varied the amount of notice in accordance with the type of employment. Feinman Article, 20 Am.J.Legal Hist. at 121-22. "English law thus attempted to adapt to changing conditions and new situations...." Id. at 121.

American courts relied heavily upon English precedent until the 1870s, when changing economic and social conditions prompted a dissolution of earlier law: the presumption of yearly hiring was seen as anachronistic and the concept of reasonable notice was disavowed. Id. at 125; cf. Richard J. Pratt, Comment, Unilateral Modification of Employment Handbooks: Further Encroachments On the Employment-At-Will Doctrine, 139 U.Pa.L.Rev. 197, 198-99 (1990) (hereinafter "Pratt Article"); Marla J. Weinstein, Comment, The Limitations of Judicial Innovation: A Case Study of Wrongful Dismissal Litigation in Canada and the United States, 14 Comp.Lab.L.J. 478 (1993) (comparing Canadian and American at-will jurisprudence; Canada retains the notice requirement). At this juncture, a new approach was suggested that changed the doctrine to a presumption of at-will employment:

With us the rule is inflexible, that a general or indefinite hiring is prima facie a hiring at will, and if the servant seeks to make it out a yearly hiring, the burden is upon him to establish it by proof.... [I]t is an indefinite hiring and is determinable at the will of either party, and in this respect there is no distinction between domestic and other servants.

H.G. Wood, A Treatise on the Law of Master & Servant § 134, at 272 (1877). As the English presumption was a reflection of the economic and societal conditions in early Britain, Wood's rule was an outgrowth of prevailing American thought: ascendancy of freedom of contract, a reflection of the usual duration of employment contracts, and support for the development of advanced capitalism. Feinman Article, 20 Am.J.Legal Hist. at 130-31; see also Pratt Article, 139 U.Pa.L.Rev. at 199-201.

B. Iowa jurisprudence. Wood's version of employment at will quickly spread and was universally adopted. 1 Samuel Williston, The Law of Contracts § 39, at 61-62 (1920) (hereinafter "Williston"). Indeed, it is long established in Iowa case law. Harrod v. Wineman, 146 Iowa 718, 720, 125 N.W. 812, 813 (1910) ("it is held by an overwhelming weight of authority that a contract of indefinite employment may be abandoned at will by either party without incurring any liability"); see also Fogel v. Trustees of Iowa College, 446 N.W.2d 451, 455 (Iowa 1989); Wolfe v. Graether, 389 N.W.2d 643, 652 (Iowa 1986); Harper v. Cedar Rapids Television Co., 244 N.W.2d 782, 791 (Iowa 1976).

Despite the universal acceptance of the employment-at-will doctrine, legislatures and courts have restricted its application. For example, federal labor law gave rise to union contracts that include just cause discharge provisions. Michael J. Phillips, Disclaimers of Wrongful Discharge Liability: Time for a Crackdown, 70 Wash.U.L.Q. 1131, 1134 (1992). Similarly, public employees are protected from arbitrary dismissal under civil service statutes. E.g., City of Des Moines v. Civil Serv. Comm'n, 540 N.W.2d 52, 58 (Iowa 1995); Iowa Code § 400.18 (1995).

Reflecting the perceived need to protect employees from the harshness of the at-will doctrine, courts began to erode the doctrine with exceptions. Richard Harrison Winters, Note, Employee Handbooks & Employment-At-Will Contracts, 1985 Duke L.J. 196, 199; cf. Lawrence E. Blades, Employment at Will vs. Individual Freedom: On Limiting the Abusive Exercise of Employer Power, 67 Colum.L.Rev. 1404 (1967). These exceptions generally fell within three categories: (1) discharges in violation of public policy, (2) discharges in violation of employee handbooks constituting a unilateral...