Certified Question, In re

• Decision Date: 06 June 1989
• Docket Number: WJBK-TV2,No. 78200,D,78200
• Parties: , 112 Lab.Cas. P 56,091, 4 Indiv.Empl.Rts.Cas. (BNA) 673 . Kenneth BANKEY, Plaintiff-Appellee, v. STORER BROADCASTING COMPANY, an Ohio corporation,efendant-Appellant. Supreme Court of Michigan
• Court: Michigan Supreme Court

Page 112

443 N.W.2d 112

432 Mich. 438, 112 Lab.Cas. P 56,091,

4 Indiv.Empl.Rts.Cas. (BNA) 673

In re CERTIFIED QUESTION from the United States Court of

Appeals for the Sixth Circuit.

Kenneth BANKEY, Plaintiff-Appellee, v. STORER BROADCASTING COMPANY, an Ohio corporation, WJBK-TV2,

Defendant-Appellant.

No. 78200.

Supreme Court of Michigan.

Argued March 5, 1987.

Decided June 6, 1989.

Sommers, Schwartz, Silver & Schwartz, P.C. by Donald J. Gasiorek, Patrick Burkett, Southfield, for plaintiff-appellee, Kenneth Bankey.

Dickinson, Wright, Moon, Van Dusen & Freeman, John Corbett O'Meara, Theodore R. Opperwall, Detroit, for defendant-appellant Storer Broadcasting Co.

GRIFFIN, Justice.

Pursuant to MCR 7.305(B), the United States Court of Appeals for the Sixth Circuit has certified, and we have agreed to answer, ¹ the following question:

"Once a provision that an employee shall not be discharged except for cause becomes legally enforceable under Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 578 ; (1980), as a result of an employee's legitimate expectations grounded in the employer's written policy statements, may the employer thereafter unilaterally change those written policy statements by adopting a generally applicable policy and alter the employment relationship of existing employees to one at the will of the employer in the absence of an express notification to the employees from the outset that the employer reserves the right to make such a change?"

We answer in the affirmative. An employer may, without an express reservation of the right to do so, unilaterally change its written policy from one of discharge for cause to one of termination at will, provided that the employer gives affected employees reasonable notice of the policy change.

I

In its order certifying the question, ² the Court of Appeals for the Sixth Circuit set forth the following facts:

"Kenneth Bankey was employed as a salesman for Storer Broadcasting Company for thirteen years until he was discharged on March 23, 1981. The reason given by Storer Broadcasting was poor job performance. On July 15, 1982, Mr. Bankey filed a complaint in the Michigan Circuit Court for the County of Oakland alleging that throughout his employment with Storer, there existed a policy that Storer would not terminate its employees without just cause, and that in reliance upon that policy he remained in Storer's employ for more than twelve years. On August 24, 1982, Storer Broadcasting removed the case from the Circuit Court for Oakland County to the United States District Court for the Eastern District of Michigan on the basis of diversity jurisdiction pursuant to 28 USC 1332. This case is controlled by the substantive law of the State of Michigan.

"Mr. Bankey successfully argued in the district court that his employment relationship with Storer was controlled by [a] 1980 Personnel Policy Digest [issued by Storer] which expressly states that 'an employee may be ... discharged for cause.' In January, 1981, Storer revised its Digest to eliminate any 'for cause' requirement for discharge of its employees. The January 1981 Digest states that '[e]mployment is at the will of the company.' The district court found as a matter of law that the 1980 Digest created a 'for cause' employment contract and that once such a contract is established under Toussaint, the employer cannot unilaterally alter the employment relationship as to existing employees to permit discharge at will. The court's ruling on this issue was made following the defendant's motion for directed verdict at the close of plaintiff's case."

A jury awarded Mr. Bankey $55,000 in damages on his claim that Storer had breached its obligation not to discharge without cause. Storer's appeal in the United States Court of Appeals for the Sixth Circuit precipitated the certified question.

II

This Court granted the request to answer the certified question in order to resolve some of the uncertainty concerning the scope of what has come to be known as the Toussaint "handbook exception" ³ to the employment-at-will doctrine. ⁴ Toussaint modified the presumptive rule of employment-at-will ⁵ by finding that a written discharge-for-cause employment policy may become legally enforceable in contract. ⁶

In Toussaint, the plaintiff-employee testified that in response to his inquiry about job security at the time of hiring, he was given oral assurance that he would be with the company "as long as I did my job," and was handed a manual of the employer's policies. The manual stated that once a probationary period had been completed, it was the company's "policy" to discharge employees "for just cause only." ⁷

The Michigan Court of Appeals set aside a jury verdict for Toussaint on the ground that "a contract for permanent employment or employment for life is a contract for an indefinite period and terminable at the will of either party" and "cannot be made other than terminable at will by a provision that states that an employee will not be discharged except for cause." Toussaint v. Blue Cross & Blue Shield of Michigan, 79 Mich.App. 429, 434-435, 262 N.W.2d 848 (1977).

However, upon appeal this Court reinstated the jury verdict in Toussaint, and held:

"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.

"3) In Toussaint, as in Ebling, ⁸ there was sufficient evidence of an express agreement to justify submission to the jury.

"4) A jury could also find for Toussaint based on legitimate expectations grounded in his employer's written policy statements set forth in the manual of personnel policies." ⁹

Prior to terminating the employment relationship, the employer in Toussaint had not revoked or altered its written policy statements which indicated that employees would not be discharged except for cause. Thus the Toussaint Court was not required to consider the duration of the legitimacy of an employee's expectations: Do handbook provisions setting forth a personnel policy of termination for cause support only a limited expectation that the employer will adhere to that policy while it is in effect as official company policy? Or, may an employee legitimately expect that discharge for cause has become a permanent feature of his employment contract with the company?

III

This Court indicated in Toussaint, supra, 408 Mich. pp. 614- 615, 292 N.W.2d 880, that an employer's right to make unilateral policy changes survives Toussaint 's holding that employer statements of policy can give rise to contractual rights:

"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 pre-employment interviews and the employee does not learn of its existence until after his hiring." (Emphasis added.)

Subsequent dictum, however, can be read as requiring that employees be given advance notice, directly or indirectly, that the employer reserves the right to make changes in written policies:

"An employer who establishes no personnel policies instills no reasonable expectations of performance. Employers can make known to their employees that personnel policies are subject to unilateral changes by the employer. Employees would then have no legitimate expectation that any particular policy will continue to remain in force." Id., p. 619, 292 N.W.2d 880.

In a brief submitted in connection with our consideration of the certified question, Storer asserts that an employer may unilaterally change or adopt new personnel policies without having explicitly reserved the right to do so because only a unilateral contract is formed when an employee is hired for an indefinite period. Storer reasons that when an employee continues to work following an employer's unilateral change in policy, the employee's continued employment signifies acceptance of, and provides the necessary consideration for, a new unilateral contract.

A unilateral contract is one in which the promisor does not receive a promise in return as consideration. 1 Restatement Contracts, Secs. 12, 52, pp. 10-12, 58-59. ¹⁰ In simplest terms, a typical employment contract can be described as a unilateral contract in which the employer promises to pay an employee wages in return for the employee's work. In essence, the employer's promise constitutes the terms of the employment agreement; the employee's action or forbearance in reliance upon the employer's promise constitutes sufficient consideration to make the promise legally binding. In such circumstances, there is no contractual requirement that the promisee do more than perform the act upon which the promise is predicated in order to legally obligate the promisor. Toussaint, supra, pp. 630-631, 292 N.W.2d 880 (separate opinion of Ryan, J.), citing Adolph v. Cookware Co. of America, 283 Mich. 561, 278 N.W. 687 (1938).

In a typical situation, where employment is for an indefinite duration, the unilateral contract framework provides no answer to the question: When will the act bargained for by the employer be fully performed? The answer to that question depends on the characterization of the "act" for which the promise is exchanged. If the "act" is simply a day's work (for a day's wage), then Storer's argument makes...