Crain Industries, Inc. v. Cass

• Decision Date: 03 June 1991
• Docket Number: No. 90-233,90-233
• Citation: 305 Ark. 566,810 S.W.2d 910
• Parties: , 60 USLW 2060, 123 Lab.Cas. P 57,087, 6 IER Cases 909 CRAIN INDUSTRIES, INC. Appellant, v. Kenneth CASS, Lois Marion, Mary Sherman, Victor Knauls, William Keith, and David Haywood, Appellees.
• Court: Arkansas Supreme Court

Page 910

810 S.W.2d 910

305 Ark. 566, 60 USLW 2060, 123

Lab.Cas. P 57,087,

6 IER Cases 909

CRAIN INDUSTRIES, INC. Appellant, v. Kenneth CASS, Lois Marion, Mary Sherman, Victor Knauls William Keith, and David Haywood, Appellees.

No. 90-233.

Supreme Court of Arkansas.

June 3, 1991.

Michael R. Jones, Mountainburg, for appellant.

W. Asa Hutchinson, Fort Smith, for appellees.

NEWBERN, Justice.

This is a wrongful discharge from employment case. The appellant, Crain Industries, Inc., employed the appellees, Kenneth Cass, Lois Marion, Mary Sherman, Victor Knauls, William Keith, and David Haywood. Due to a reduction in the work force at Crain Industries, those employees were laid off, although they were senior in length of service to some others in their respective departments who were not laid off. The employees claimed breach of contract on the basis of a provision in the Crain Industries employment handbook which provided:

In the event it should become necessary to reduce the number of employees in the work force, employees will be laid off on a seniority basis by department. The last employee hired would be the first to be laid off. This policy will be adhered to with one possible exception; that is, under circumstances where the efficiency of a department would be impaired by the loss of some particular employee's skill.

It is not argued that any of these employees were laid off because of the need to retain a "particular employee's skill." Crain Industries' main argument is that the employees were "at will" employees, and the language of the handbook quoted above was "precatory" and insufficient to form the basis of a holding that Crain Industries had contracted not to lay off the employees except in accordance with the handbook. We affirm the judgment based on a jury's finding that Crain contracted to conduct the lay-off in accordance with the provisions of the handbook. Crain raises additional points in which we find no merit, and we will state additional facts as needed to dispose of them.

1. Handbook as contract

As to how the handbook came into existence, Kenneth Cass testified as follows:

A. Well, they were trying to form a union, out there at Crain, because of them recently firing a supervisor, and Mr. Crain called a meeting. I think it was the day or the day before we were to take a vote. And he said that we didn't need a union, that if we would vote no to the union, he would come out with a policy that would--guidelines for the employees and the supervisors and Crain Industry, you know.

Q. And was the union voted in or voted out?

A. They were voted out.

Q. And subsequent to that, was the policy manual adopted?

A. Yes.

Cass went on to testify that he was aware of the seniority provisions in the handbook and that the seniority concept was important to him as he remained with the company. Marion, Sherman, Knauls, Keith, and Haywood, also testified of their awareness of the provisions and their expectations that Crain Industries would follow them. The testimony was submitted to the jury which was instructed to find in favor of the employees if the jury found express provisions in the handbook constituting an express agreement. The jury found the express provision an agreement. The Trial Court entered judgment based on that finding.

Generally, the law of this State is that an employer or an employee may terminate an employment relationship at will. In Jackson v. Kinark Corp., 282 Ark. 548, 669 S.W.2d 898 (1984), we recognized that this common law rule was changing in other states which were softening it by finding express or implied agreements for a specified period of employment or by holding that an employer could not discharge an employee arbitrarily or in bad faith. The Jackson case was presented to this Court on appeal of a summary judgment in favor of the employer. We remanded so that facts could be developed with respect to the existence and meaning of an employee handbook which Jackson claimed to constitute a contract of employment. We wrote that we would "be in a position to fully consider that trend only after the facts in [the] case [had] been definitely determined." See also Gaulden v. Emerson Electric Co., 284 Ark. 149, 680 S.W.2d 92 (1984); Griffin v. Erickson, 277 Ark. 433, 642 S.W.2d 308 (1982).

In Gladden v. Arkansas Children's Hospital, 292 Ark. 130, 728 S.W.2d 501 (1987), we dealt with the cases of two employees, each of whom contended she could not be fired by her employer without cause. Each claim was based on statements of the employer made in employment regulations or an employee handbook. We reviewed our cases to date and stated the extent to which we meant to revise the employment at will doctrine. We held the statements in the handbook and regulations were not sufficiently specific to be binding, and thus we sustained the judgments in favor of the two employers. In discussing our willingness to reconsider the employment at will doctrine, we wrote:

We do ... believe that a modification of the at will rule is appropriate in two respects; where an employee relies upon a personnel manual that contains an express provision against termination except for cause he may not be arbitrarily discharged in violation of such a provision. Moreover, we reject as outmoded and untenable the premise announced in St. Louis Iron Mt. Ry. Co. v. Matthews, 64 Ark. 398, 42 S.W. 902 (1897), that the at will rule applies even where the employment agreement contains a provision that the employee will not be discharged except for cause, unless it is for a definite term. With those two modifications we reaffirm the at will doctrine. [292 Ark. at 136, 728 S.W.2d at 505]

We thus reaffirmed the employment at will doctrine except where there is an agreement that the employment is for a specified time, in which case firing may be only for cause, or where an employer's employment manual contains an express provision stating that the employee will only be dismissed for cause and that provision is relied on by the employee.

In Smith v. American Greetings Corp., 304 Ark. 596, 804 S.W.2d 683 (1991), we were asked, and we declined, to hold this language in an employer's handbook created an enforceable promise to discharge only for cause: "We believe in working and thinking and planning to provide a stable and growing business, to give such service to our customers that we may provide maximum job security for our employees." We held that it did not rise to the level of an "express provision" as the Gladden case ruling required.

In the case now before us, there is no contention that the employees were hired for a specified time. The question is thus whether the exception to the employment at will doctrine for a contract arising from a promise made in the handbook, applied. Crain Industries argues that there was no express provision. By comparison with the one we reviewed in the Smith case, the provision here is a model of clarity and definiteness. There is no doubt as to its meaning, but the question remains whether it is to be enforced.

Although the handbook in this case did not contain the provision on firing only for cause, the employees contend with respect to the Gladden case, "it is clear that the court envisioned a modification of the at-will doctrine in any case in which there was an express provision in the employee handbook governing the procedure at the time of termination."

The trial court did not err in presenting the matter to the jury. In the Gladden appeal, where we held for the employers because we could find no specific provision in the employment regulations or manual requiring dismissal to be for cause only, one of the appellants cited Wagner v. Sperry Univac, 458 F.Supp. 505 (E.D.Pa.1978). We distinguished the case and stated, "In Wagner, a reduction in force was to be governed by seniority in determining who would be laid-off and Wagner's discharge violated that provision." While the holding in the Gladden case is hardly a direct adoption of the Wagner decision, we did imply that if there were such a provision in an employment manual it would be enforceable, and that is entirely consistent with our explanation that an exception to the employment at will doctrine may arise from reliance on a promise made in an employment handbook.

The Trial Court was correct in assuming, after studying the Gladden decision, that this Court would not hold that clear language constituting a promise not to dismiss other than for cause would be upheld but clear language constituting a promise not to dismiss in a lay-off except by departmental seniority would not be upheld.

Cases dealing specifically with handbook provisions are collected in Comment, Unilateral Modification of Employment Handbooks: Further Encroachments on the Employment-at-Will Doctrine, 139 Penn.L.Rev. 197 (1990). The author points out that unilateral contract analysis is common in handbook cases and quotes the following, omitting citations, from Small v. Springs Indus., Inc., 292 S.C. 481, 357 S.E.2d 452, 454 (1987).

[There are] "strong equitable and social policy reasons militating against allowing employers to promulgate for their employees potentially misleading personnel manuals while reserving the right to deviate from them at their own caprice." ... It is patently unjust to allow an employer to couch a handbook, bulletin, or other similar material in mandatory terms and then allow him to ignore these very policies as "a gratuitous, non-binding statement of general policy" whenever it works to his disadvantage. Assuredly, the employer would view these policies differently if it were the employee who failed to follow them.... If company policies are not worth the paper on which they are printed, then it would be better not to mislead employees by distributing them.

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