Chipman v. Nw. Healthcare Corp.

• Court: United States State Supreme Court of Montana
• Citation: 317 P.3d 182,373 Mont. 360
• Decision Date: 21 January 2014
• Docket Number: No. DA 13–0329.,DA 13–0329.
• Parties: Sheila CHIPMAN, individually and on behalf of all others similarly situated, Deborah Wallen, individually and on behalf of all others similarly situated, and Ellen Hames, individually and on behalf of all others similarly situated, Plaintiffs and Appellants, v. NORTHWEST HEALTHCARE CORPORATION, APPLIED HEALTH SERVICES, INC.; Brendan House; Kalispell Regional Medical Center, Inc., The Summit and Northwest Orthopedics & Sports Medicine, L.L.C., Defendants and Appellees.

373 Mont. 360
317 P.3d 182

Sheila CHIPMAN, individually and on behalf of all others similarly situated, Deborah Wallen, individually and on behalf of all others similarly situated, and Ellen Hames, individually and on behalf of all others similarly situated, Plaintiffs and Appellants,
v.
NORTHWEST HEALTHCARE CORPORATION, APPLIED HEALTH SERVICES, INC.; Brendan House; Kalispell Regional Medical Center, Inc., The Summit and Northwest Orthopedics & Sports Medicine, L.L.C., Defendants and Appellees.

No. DA 13–0329.

Supreme Court of Montana.

Submitted on Briefs Oct. 30, 2013.
Decided Jan. 21, 2014.

[317 P.3d 183]

For Appellants: Amy Eddy, David Sandler, Eddy Sandler Trial Attorneys, PLLP; Kalispell, Montana.

For Appellees: Robert C. Lukes, Charles E. Hansberry; Garlington, Lohn & Robinson, PLLP; Missoula, Montana.

Richard M. Kobdish; Attorney at Law; Dallas, Texas.

Justice BETH BAKER delivered the Opinion of the Court.

¶ 1 Sheila Chipman, Deborah Wallen, and Ellen Hames (Plaintiffs) appeal the order of the Eleventh Judicial District Court, Flathead County, granting Defendants' (Employers) motion for summary judgment. We consider on appeal whether the District Court erred in the following determinations:

¶ 2 1. That Employers' policies did not constitute a standardized group employment contract;

¶ 3 2. That the CIB Pay–Out Benefit was not deferred compensation or wages under

[317 P.3d 184]

the Montana Wage and Wage Protection Act.

¶ 4 3. That the covenant of good faith and fair dealing does not apply to Plaintiffs' claims.

¶ 5 We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

¶ 6 The named plaintiffs are employees of Kalispell Regional Medical Center (KRMC), a subsidiary of Northwest Healthcare Corporation. Upon hire, new employees sign a probationary employment contract that reads, “Upon expiration of this Probationary Employment Contract, if the Employer and Employee elect to continue the employment relationship, the Employee shall attain regular employee status, subject to the policies and regulations of the Employer, as they may exist from time to time.” Plaintiffs did not sign any additional employment contract when they completed their probationary period.

¶ 7 In the 1990s, Employers created a sick-leave policy as part of its benefits package that allowed employees to “bank” their sick leave in what Employers termed a continued illness bank (CIB). The CIB was established to provide employees “with a source of compensation during long term illnesses and extended periods of time off from work due to personal injury, illness or an approved [family medical leave].” Only Employees who had been employed continuously for six months could begin to accrue CIB hours. Employees could accumulate up to 866 CIB hours for use at any time during their employment; upon termination of employment, employees lost any unused sick leave. Employers revised the terms of the CIB in 2002; the modified plan allowed the capped amount of unused CIB hours to be paid out to departing employees “who have completed a minimum of twenty-five years of service.” KRMC adopted the policy (hereinafter referred to as the CIB Pay–Out Benefit) on March 31, 2002, after holding meetings to explain the new policy.

¶ 8 Employers' policy and procedure manual contains an additional policy describing different categories of employment status. The policy expressly states that for those employees eligible for benefits, “[t]hese benefits may change from time to time....” The policies and procedures contained in the manual were summarized and communicated to Employees through a handbook. The Foreword to Employers' handbook also stated that “the procedures, practices, policies and benefits described here may be modified, added to, or discontinued from time to time.” Employees signed a receipt for each edition of the handbook, which stated:

I understand that this Handbook states Northwest Healthcare's policies and practices in effect on the date of publication. I understand that nothing contained in the Handbook may be construed as creating a promise of future benefits or a binding contract with Northwest Healthcare for benefits or for any other purpose. I also understand that these policies and procedures are continually evaluated and may be amended, modified or terminated at any time.

¶ 9 In 2008, KRMC met with new external auditors and determined that accounting for the possible financial liability of the CIB Pay–Out Benefit for all employees would jeopardize its ability to expand operations and possibly endanger its credit rating for tax-exempt bond issuances. Due to these concerns, Employers terminated the Pay–Out Benefit as of July 1, 2008. Only employees who already had reached twenty-five years of employment with Employers at that time are now entitled to their earned but unused CIB hours upon termination; Plaintiffs represent employees who had not reached twenty-five years of service before the benefit ended.

¶ 10 Following termination of the policy allowing a contingent CIB Pay–Out Benefit, Plaintiffs brought a class action complaint against Employers. They alleged breach of their employment contract, breach of the covenant of good faith and fair dealing, and violation of the Montana Wages and Wage Protection Act. In an earlier appeal, we affirmed the District Court's certification of the class of employees.

[317 P.3d 185]

Chipman v. N.W. Healthcare Corp., 2012 MT 242, 366 Mont. 450, 288 P.3d 193. Plaintiffs moved for partial summary judgment on April 30, 2012. Employers responded and filed a cross-motion for summary judgment on June 13, 2012. After hearing arguments, the District Court granted Employers' motion for summary judgment on April 24, 2013. Plaintiffs now appeal that order.

STANDARD OF REVIEW

¶ 11 We review a district court's grant of summary judgment de novo, using the same criteria applied by the district court under M.R. Civ. P. 56. Draggin' Y Cattle Co. v. Addink, 2013 MT 319, ¶ 16, 372 Mont. 334, 312 P.3d 451. Summary judgment is appropriate when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” M.R. Civ. P. 56(c).

¶ 12 “The existence of a contract is a question of law.” Murphy v. Home Depot, 2012 MT 23, ¶ 6, 364 Mont. 27, 270 P.3d 72. Statutory interpretations also present questions of law. State v. Madsen, 2013 MT 281, ¶ 8, 372 Mont. 102, 317 P.3d 806. The parties agree that there are no genuine issues of material fact and that the issues before us are solely questions of law. We review a district court's conclusions on such questions for correctness. Murphy, ¶ 6.

DISCUSSION

¶ 13 1. Whether the District Court erred in its determination that Employers' policies did not constitute a standardized group employment contract.

¶ 14 Plaintiffs first contend that Employers' institution of the CIB Pay–Out Benefit created a binding agreement under which Employers promised to compensate Plaintiffs for their earned and unused CIB hours if Plaintiffs stayed with Employers for twenty-five years. Plaintiffs assert that the employer manual constituted a standardized group employment contract with employees and governed the relationship. Plaintiffs admit, however, that the only statutory authority for group employment contracts in Montana relates to collective bargaining for public employees. See§ 39–31–101, MCA, et seq. There is no statutory or case law in Montana supporting blanket group employment contracts. Thus, our analysis of whether the manual is a contract is governed by general principles of Montana contract law.

¶ 15 Plaintiffs must establish four elements to prove the existence of a contract: “(1) identifiable parties capable of contracting; (2) their consent; (3) a lawful object; and (4) a sufficient cause or consideration.” Section 28–2–102, MCA. The consent of the parties must be “communicated by each to the other.” Section 28–2–301(3), MCA. Mutual consent consists of an offer and an acceptance of that offer. Daniels v. Thomas, Dean & Hoskins, Inc., 246 Mont. 125, 133, 804 P.2d 359, 363 (1990). To be considered an offer, the offeror must manifest a willingness to enter into a bargain. Daniels, 246 Mont. at 133, 804 P.2d at 364 (citing Restatement (Second) of Contracts § 24). “We determine whether the parties have mutually consented to a contract by inquiring whether a reasonable person, based upon the objective manifestation of assent, and all the surrounding circumstances, would conclude that the parties intended to be bound by the contract.” Bitterroot Int'l Sys. v. W. Star Trucks, Inc., 2007 MT 48, ¶ 33, 336 Mont. 145, 153 P.3d 627. Consent is not determined by the parties' subjective, undisclosed intent, but by their objective manifestations of consent, and properly may be determined by summary judgment. Olsen v. Johnston, 2013 MT 25, ¶¶ 11, 16, 22, 368 Mont. 347, 301 P.3d 791.

¶ 16 Manuals and handbooks outlining an employer's policies and procedures generally are not considered part of the employment contract. Hubner v. Cutthroat Communs., Inc., 2003 MT 333, ¶ 18, 318 Mont. 421, 80 P.3d 1256. Because the handbook is a “unilateral statement of company policies and procedures, because its terms are not bargained for, and because no [mutual consent] occurred,” we generally do not classify employee handbooks as binding agreements.

[317 P.3d 186]

Kittelson v. Archie Cochrane Motors, 248 Mont. 512, 518, 813 P.2d 424, 427 (1991) (citing Gates v. Life of Mont. Ins. Co., 196 Mont. 178, 183, 638 P.2d 1063, 1066 (1982)). In Gates, we held that an employee handbook that contained a unilateral statement of company policies and procedures given to an employee two years after being hired was not a contract. Gates, 196 Mont. at 183, 638 P.2d at 1066.

¶ 17 As Plaintiffs point out, we determined in a previous case that an employer's policies and procedures did constitute terms of an employment...