Hall v. City of Plainview, A19-0606

• Decision Date: 03 February 2021
• Docket Number: A19-0606
• Citation: 954 N.W.2d 254
• Parties: Donald HALL, Appellant, v. CITY OF PLAINVIEW, Respondent.
• Court: Minnesota Supreme Court

954 N.W.2d 254

Donald HALL, Appellant,

v.CITY OF PLAINVIEW, Respondent.

A19-0606

Supreme Court of Minnesota.

Filed: February 3, 2021

OPINION

THISSEN, Justice.

This case raises two related questions arising from an employer's refusal to pay accrued paid time off (PTO) when an employee's employment ended. First, do disclaimer provisions in an employee handbook stating that the handbook's policies should not be construed as a contract unambiguously allow an employer to refuse to pay accrued PTO in accordance with an employer policy set forth in the handbook? Second, does Minn. Stat. § 181.13(a) (2020) create an independent substantive right to payment of accrued PTO in the absence of a contract between the employer and employee or another source identified in the statute that establishes an obligation by the employer to pay PTO?

We conclude that the answer to both questions is no. Therefore, we affirm in part, reverse in part, and remand to the district court for further proceedings.

FACTS

In 2017, respondent City of Plainview (the City) terminated appellant Donald Hall from his position as manager of its municipal liquor store. Hall had worked in that capacity for nearly 30 years. At the time of his termination, Hall had accumulated 1,778.73 hours of unused PTO, which was reflected in his payroll documents including his final paystub from the City. Following Hall's termination, the City refused to pay Hall the accrued PTO, citing Hall's failure to provide sufficient notice per the requirements of the City's Personnel Policies and Procedures Manual (the Handbook).

The City adopted the current version of the Handbook in April 2009. As to PTO, it states, in relevant part:

The Paid Time Off (PTO) program combines the traditional vacation and sick leave into one plan and fills the needs that are not normally accommodated through traditional programs. PTO is an alternative way of providing employees with paid time away from work for such things as vacation, personal business, or short term illness. The City offers employees PTO in order to allow employees to take time off to attend to their personal affairs. In addition, PTO is seen as a benefit, and it is used to help recruit and retain a qualified workforce.

....

When an employee ends their employment with the City, for any reason, 100% of the accrued unused personal leave time will be paid up to 500 hours, unless the employee did not give sufficient notice as required by the policy.

"Sufficient notice" appears to refer to a provision in the Handbook that states: "Employees wishing to leave the City in good standing shall file" a written resignation at least 14 days before their departure and that "[f]ailure to comply with this procedure may be considered cause for ... denying leave benefits."

The introduction to the Handbook contains a disclaimer stating that "[t]he purpose of these policies is to establish a uniform and equitable system of personnel administration for employees of the City of Plainview. They should not be construed as contract terms." The Handbook introduction later states:

The Personnel Policies and Procedures Manual is not intended to create an express or implied contract of employment between the City of Plainview and an employee. The Personnel Policies and Procedures Manual does contain language dealing with the grievance procedure, employee discipline or termination, which the City may cho[o]se to follow in a particular instance. These provisions however, are not intended to alter the relationship between the City as an employer, and an individual employee, as being one which is "at will", terminable by either at any time for any reason.

Prior to Hall's termination, the City's interim administrator sent a letter which offered Hall the opportunity to "voluntarily resign from employment" in lieu of termination. The letter stated that if Hall did so "with sufficient notice," the City would pay 100 percent of his "accrued unused personal leave time" up to 500 hours. Hall declined the offer and the city council voted to terminate his employment.

After the vote, the City's interim administrator notified Hall of his termination in a letter which stated: "You will receive all compensation owing to you related to your employment with the City on the appropriate payday." Hall then demanded payment of the entirety of his 1,778.73 accrued PTO hours. The City responded to Hall's demand by refusing to pay the PTO hours due to Hall's failure to provide sufficient notice as set forth in the Handbook.

Hall filed a complaint in district court laying out three claims: breach of contract, violation of Minn. Stat. § 181.13, and unjust enrichment. First, Hall asserted that a binding contract existed between him and the City. Hall claimed that, by refusing to pay his accrued PTO, the City breached the contract. Second, Hall argued that his accrued PTO constituted "wages" under Minn. Stat. § 181.13(a) and that because the City discharged him without paying these "earned and unpaid" wages, it violated the statute. Finally, Hall pleaded a claim of unjust enrichment in the alternative to his contract and statutory claims, asserting that the City had been unjustly enriched by retaining his earned wages.

In response to Hall's complaint, the City moved to dismiss all three claims. The district court granted the City's motion as to Hall's contract and statutory claims but denied the motion as to Hall's unjust enrichment claim. The parties ultimately settled the unjust enrichment claim out of court and it is not before us on appeal.

Hall appealed the district court's dismissal of his contract and statutory claims. The court of appeals affirmed. Specifically, it held that the disclaimer language in the Handbook was "substantially similar to disclaimer language in other cases ... in which [the court of appeals] has concluded that an enforceable contract did not arise." Hall v. City of Plainview , No. A19-0606, 2019 WL 6695142, at *2 (Minn. App. Dec. 9, 2019). With regard to Hall's statutory claim, the court noted that an employment contract must exist to recover under section 181.13(a) for an employer's failure to pay accrued PTO. Id. at *3–4. We granted Hall's petition for review.¹

ANALYSIS

This case arises from an appeal taken from the district court's order granting the City's motion to dismiss. See Minn. R. Civ. P. 12.02(e). Our review of whether Hall "has stated a claim sufficiently to survive a motion to dismiss is de novo." Hansen v. U.S. Bank Nat'l Ass'n , 934 N.W.2d 319, 325 (Minn. 2019). To determine whether a plaintiff's claim survives a motion to dismiss, we look to "the facts alleged in the complaint, accepting those facts as true," and construing all reasonable factual inferences in favor of the plaintiff. Id.

This case involves issues of contract and statutory interpretation. We review both de novo. Lee v. Fresenius Med. Care, Inc. , 741 N.W.2d 117, 122–23 (Minn. 2007) (reviewing a prior version of Minn. Stat. § 181.13 de novo); Martens v. Minn. Mining & Mfg. Co. , 616 N.W.2d 732, 740 (Minn. 2000) (stating that de novo review is appropriate when we consider whether a party's alleged statements constitute a unilateral offer to contract).

I.

The central question here is whether the City has a contractual obligation to pay accrued PTO to Hall. In his complaint, Hall alleged that the City "offered Plaintiff and other employees a number of employee benefits," including payment of accrued PTO in accordance with the Handbook. He also stated that at the time of his termination, he had accrued 1,778.73 hours of PTO, "which was reflected in his payroll documents including his final paystub from the City." He then claimed that the Handbook is a binding contract and that by refusing to pay his accrued PTO, the City violated the terms of the contract.

Our assessment of whether the City has a contractual obligation to Hall to pay him accrued PTO requires us to consider two questions. First, whether the Handbook meets the requirements for formation of a unilateral contract. Second, whether the general disclaimer language in the Handbook means that the City is not obligated to pay Hall accrued PTO in accordance with the PTO payment provision set forth in the Handbook.

A.

We first consider the nature of the employment contract that Hall alleges exists between him and the City. It is not an employment contract formed by the employer and employee sitting down, mutually negotiating the terms of the employment relationship, and signing a written agreement that sets forth those agreed upon terms. Indeed, it is nearly unimaginable that the issue presented in this case—a dispute over a contract that both sets forth the terms of the compensation in the form of accrued PTO that an employee will receive upon performing work for the City and also provides that those terms do not create contractual rights—would ever arise in the context of a negotiated written employment contract. That scenario makes no sense.

Instead, the employment contract alleged in this case is a unilateral contract. As we explained in Pine River State Bank v. Mettille , "[g]enerally speaking, a promise of employment on particular terms of unspecified duration, if in the form of an offer, and if accepted by the employee, may create a binding unilateral contract." 333 N.W.2d 622, 626 (Minn. 1983). Such an offer "must be definite in form and must be communicated to the offeree." Id. An employee may accept a unilateral offer of employment by performing the work for the employer. See id. at 627. By performing the job, "although free to leave, the employee supplies the necessary consideration for the offer." Id. Stated more simply, a unilateral employment contract is formed when an employer tells a potential employee, "If you come work for me, this is what you will get in return," and the potential employee performs the work. And once the work is performed, the employee earns the promised compensation and—at least for that period of...