Continental Air Lines, Inc. v. Keenan, 84SC460

Citation731 P.2d 708
Decision Date20 January 1987
Docket NumberNo. 84SC460,84SC460
Parties, 105 Lab.Cas. P 55,671, 1 IER Cases 1361 CONTINENTAL AIR LINES, INC., a Nevada corporation, Petitioner, v. Maynard W. KEENAN, Jr., Respondent.
CourtSupreme Court of Colorado

Holland & Hart, John M. Husband, Denver, for petitioner.

Epstein, Epstein & Lozow, P.C., Donald L. Lozow, Bradley A. Lozow, Denver, for respondent.

Sherman & Howard, Theodore A. Olsen, Denver, for amicus curiae, Mountain States Employers Council.

Feiger & Hyman, Lynn D. Feiger, Thomas A. Feldman, Denver, for amicus curiae, plaintiff Employment Lawyers Ass'n.

VOLLACK, Justice.

The petitioner, Continental Air Lines, Inc. (Continental), appeals from the court of appeals' unpublished opinion, Keenan v. Continental Air Lines, Inc., No. 83CA1104 (Oct. 18, 1984), which held that an employer's distribution to employees of handbooks or policy manuals which contain specific procedures for termination of employment, when relied upon by an employee and supported by the consideration of continued service, may result in the employer becoming contractually bound to comply with those procedures. The court of appeals concluded that there were material questions of fact; therefore, summary judgment was inappropriate. We granted certiorari review, and we reverse in part and remand with directions.

I.

The respondent, Maynard W. Keenan, Jr., was employed by Continental from May 1974 to September 1981, when he was discharged. Keenan then filed this suit alleging wrongful discharge based on the failure of Continental to follow procedures set forth in its policy manual or handbook. Keenan alleged in his complaint that he was given "certain job security assurances" contained in Continental's handbook. At his deposition, Keenan stated that he had not relied on any policies contained in the manual at the time he became employed and stated that he did not receive a copy of that manual until after his employment had started. Subsequently, however, Keenan contradicted his deposition testimony in an affidavit and stated that he was given a copy of the handbook when he was hired.

Continental published the handbook before Keenan was hired. Periodically, the handbook was subject to revision by Continental. The pertinent portion of the handbook concerns a corporate hearing procedure for management personnel who wish to challenge a discipline, discharge, or other job action taken by the company. The hearing procedure was revised by Continental on February 1, 1979, prior to the time Keenan assumed a management position. There is no evidence that Keenan participated in the revision or negotiated for the terms of the handbook either prior to accepting his initial position or prior to accepting the management position. After Keenan was discharged, he made a request for a hearing pursuant to the applicable portion of the handbook. Keenan was denied this hearing.

The trial court granted Continental's motion for summary judgment. Keenan appealed, and the court of appeals reversed and remanded the cause.

II.

We granted certiorari to determine whether an employee may sue an employer for breach of contract on the theory that an employee manual, unilaterally published by the employer, may serve as a basis for altering the terms of an employment otherwise terminable at will. Courts have taken varied and sometimes contradictory approaches to this question. Several courts have concluded that employee manuals setting forth termination procedures are not contractually binding on the employer. E.g., Beidler v. W.R. Grace, Inc., 461 F.Supp. 1013 (E.D.Pa.1978), aff'd mem., 609 F.2d 500 (3d Cir.1979); Muller v. Stromberg Carlson Corp., 427 So.2d 266 (Fla.Dist.Ct.App.1983); Shaw v. S.S. Kresge Co., 167 Ind.App. 1, 328 N.E.2d 775 (1975); Gates v. Life of Montana Insurance Co., 196 Mont. 178, 638 P.2d 1063 (1982); Edwards v. Citibank, N.A., 74 A.D.2d 553, 425 N.Y.S.2d 327 (1980); Griffin v. Housing Authority, 62 N.C.App. 556, 303 S.E.2d 200 (1983). Other courts have held that an employee manual on termination procedures is a unilateral offer of employment for which continued service by the employee may constitute consideration and acceptance. See, e.g., Carter v. Kaskasia Community Action Agency, 24 Ill.App.3d 1056, 322 N.E.2d 574 (1974); Dahl v. Brunswick Corp., 227 Md. 471, 356 A.2d 221 (1976); Toussaint v. Blue Cross & Blue Shield, 408 Mich. 579, 292 N.W.2d 880 (1980); Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn.1983); Southwest Gas Corp. v. Ahmad, 99 Nev. 594, 668 P.2d 261 (1983); Langdon v. Saga Corp., 569 P.2d 524 (Okla.Ct.App.1976); Hercules Powder Co. v. Brookfield, 189 Va. 531, 53 S.E.2d 804 (1949). Still another approach is that an employee manual may be binding on the employer not on the theory of contract but on the basis of the employee's reasonable and detrimental reliance on the terms of the manual. See, e.g., Cleary v. American Airlines, Inc., 111 Cal.App.3d 443, 168 Cal.Rptr. 722 (1980); Toussaint, 408 Mich. 579, 292 N.W.2d 880; Arie v. Intertherm, Inc., 648 S.W.2d 142 (Mo.Ct.App.1983); Thompson v. St. Regis Paper Co., 102 Wash.2d 219, 685 P.2d 1081 (1984).

There is similar uncertainty in Colorado concerning the formulation of the appropriate standard in such cases. See Garcia v. Aetna Finance Co., 752 F.2d 488 (10th Cir.1984) (termination policy set forth in manual was a unilateral expression of policy by the employer, not an employment contract between employee and employer for a definite term); Salimi v. Farmers Insurance Group, 684 P.2d 264 (Colo.App.1984) (employer may become contractually bound to comply with termination procedures in handbook when procedures are relied on by employee and supported by the consideration of continued service); cf. Ritter v. Colorado Interstate Gas Co., 593 F.Supp. 1279 (D.Colo.1984) (declining to hear state law breach of employment contract claims because of uncertainty regarding Colorado's readiness to modify the "at will" employment doctrine so as to afford discharged employees greater rights).

The parties and the amici curiae to this proceeding have recognized that resolution of the question of the propriety of the trial court's decision requires the articulation of some definitive standards to guide trial courts in resolving an employee's legal or equitable claims based on an employer's failure to follow the termination procedures set out in an employee manual unilaterally published by the employer and not expressly made a part of the original employment agreement.

III.

An employee who is hired in Colorado for an indefinite period of time is an "at will employee," whose employment may be terminated by either party without cause and without notice, and whose termination does not give rise to a cause of action. See, e.g., Garcia v. Aetna Finance Co., 752 F.2d 488 (10th Cir.1984); Smith v. Montgomery Ward & Co., Inc., 567 F.Supp. 1331 (D.Colo.1983); Johnson v. Jefferson County Board of Health, 662 P.2d 463 (Colo.1983); Hughes v. Mountain States Telephone and Telegraph Co., 686 P.2d 814 (Colo.App.1984); Justice v. Stanley Aviation Corp., 35 Colo.App. 1, 530 P.2d 984 (1974); Lampe v. Presbyterian Medical Center, 41 Colo.App. 465, 590 P.2d 513 (1978). This presumption of "at will" employment, however, should not be considered absolute but rather should be rebuttable under certain circumstances. We adopt neither the categorical rule that an employee manual automatically becomes part of the employment contract and that an employee can be terminated only in accordance with its terms, nor do we adopt the contrary rule that such manuals are no more than unilateral expressions of general company policies which have no bearing on the employee's contractual rights.

An employee originally hired under a contract terminable at will may be able to enforce the termination procedures in an employee manual under one of the following alternative theories. The employee may be entitled to relief under ordinary contract principles if he can demonstrate, first, that in promulgating the termination procedures the employer was making an offer to the employee--that is, the employer manifested his willingness to enter into a bargain in such a way as to justify the employee in understanding that his assent to the bargain was invited by the employer and that the employee's assent would conclude the bargain, Restatement (Second) of Contracts § 24 (1981)--and second, that his initial or continued employment constituted acceptance of and consideration for those procedures. 1 See, e.g., Dahl, 227 Md. 471, 356 A.2d 221; Pine River State Bank, 333 N.W.2d 622; Southwest Gas Corp., 99 Nev. 594, 668 P.2d 261; Langdon, 569 P.2d 524; Hercules Powder Co., 189 Va. 531, 53 S.E.2d 804.

Alternatively, even if the requisites for formation of a contract are not found, the employee would be entitled to enforce the termination procedures under a theory of promissory estoppel if he can demonstrate that the employer should reasonably have expected the employee to consider the employee manual as a commitment from the employer to follow the termination procedures, that the employee reasonably relied on the termination procedures to his detriment, and that injustice can be avoided only by enforcement of the termination procedures. See, e.g., Cleary, 111 Cal.App.3d 443, 168 Cal.Rptr. 722; Toussaint, 408 Mich. 579, 292 N.W.2d 880; Arie, 648 S.W.2d 142; Thompson, 102 Wash.2d 219, 685 P.2d 1081; see also Kiely v. St. Germain, 670 P.2d 764 (Colo.1983); Vigoda v. Denver Urban Renewal Authority, 646 P.2d 900 (Colo.1982); Restatement (Second) of Contracts §§ 2 and 90 (1981). Unless this preliminary factual showing is sufficient to overcome the presumption of an employment terminable at the will of either party, the employee's cause of action should fail.

IV.

Under C.R.C.P. 56(c), summary judgment is proper only when the pleadings, affidavits, depositions, or admissions establish that there is no...

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