Jones v. Central Peninsula General Hosp., S-2587

• Decision Date: 25 August 1989
• Docket Number: No. S-2587,S-2587
• Citation: 779 P.2d 783
• Parties: 116 Lab.Cas. P 56,416, 4 IER Cases 1204 Marge JONES, Appellant, v. CENTRAL PENINSULA GENERAL HOSPITAL, Lutheran Hospitals and Homes Society of America, Nancy McIlwaine, Chriss Huss, Simon Hancock, and Glen Benson, Appellees.
• Court: Alaska Supreme Court

Page 783

779 P.2d 783

116 Lab.Cas. P 56,416, 4 IER Cases 1204

Marge JONES, Appellant, v. CENTRAL PENINSULA GENERAL HOSPITAL, Lutheran Hospitals and Homes Society of America, Nancy McIlwaine, Chriss Huss, Simon Hancock, and Glen Benson, Appellees.

No. S-2587.

Supreme Court of Alaska.

Aug. 25, 1989.

Paul S. Wilcox, Hughes, Thorsness, Gantz, Powell, and Brundin, Anchorage, for appellant.

Howard A. Lazar, Delaney, Wiles, Hayes, Reitman, and Brubaker, Inc., Anchorage, for appellees.

Before MATTHEWS, C.J., and RABINOWITZ, BURKE, COMPTON and MOORE, JJ.

RABINOWITZ, Justice.

I. INTRODUCTION.

This appeal arises from Marge Jones' termination from employment as a nurse at Central Peninsula General Hospital (CPGH) in Soldotna. CPGH was and is operated by the Lutheran Hospitals and Homes Society (LHHS).

In her complaint Marge Jones alleged that LHHS, CPGH, and Chriss Huss and Simon Hancock, employees of CPGH, recklessly and wrongfully terminated her in violation of her contract of employment, and in violation of express and implied covenants of good faith and fair dealing. Jones also alleged that the defendants breached her contract of employment by failing to accord her access to the grievance procedures which were provided other employees. In a separate count Jones further alleged that defendant Glen Benson, acting regional director of LHHS, illegally ratified her wrongful discharge. Jones' complaint also contained two separate counts against Nancy McIlwaine in which it was asserted that McIlwaine defamed Jones and thus recklessly interfered with Jones' contract of employment with CPGH, as well as her prospective contractual relations. Additional claims alleged by Jones in her complaint have since been dismissed with prejudice by stipulation. By way of relief Jones sought both compensatory and punitive damages.

The superior court entered summary judgment in favor of CPGH and LHHS on Jones' wrongful termination and breach of contract claims. Summary judgment was also entered in McIlwaine's favor on the defamation and wrongful interference with contract claims. Jones' claims against Huss, Hancock, and Benson were dismissed. The superior court awarded $18,000 in attorney's fees and $3,248 in costs to the prevailing defendants.

II. STATEMENT OF THE CASE. ¹

Marge Jones was employed by CPGH as a registered nurse from October 1, 1971, until her termination on October 5, 1978. Jones had no contract for a specific length of employment. Rather, her employment was terminable at will. On July 1, 1974, LHHS issued a personnel policy manual which, among other things, provided for termination for cause and a grievance procedure for all employees.

In 1975 Jones became a "nurse supervisor" on the night shift. As a "nurse supervisor" Jones was the senior nurse on duty during her shift. She did not exercise such supervisory powers as scheduling, or hiring and firing her assistants.

In 1978 LHHS issued a second personnel policy manual. The 1978 manual exempted supervisory employees from the grievance procedures, but provided that all non-probationary employees would be terminable only for good cause.

Jones was terminated on October 5, 1978, for incidents that allegedly occurred during the evening of September 30th. LHHS denied Jones the opportunity to file a grievance on the ground that she was a supervisor, and therefore terminable at will.

The superior court granted summary judgment to CPGH and LHHS on the grounds that the 1978 policy manual was not part of Jones' employment contract, and that, as a supervisor, Jones was not protected by the grievance procedures set forth in the 1978 policy manual. The superior court also granted summary judgment to McIlwaine, former Director of Nurses at CPGH, on the ground that her allegedly defamatory statements were conditionally privileged. The court dismissed the claims against Huss, Hancock and Benson on the basis that, since CPGH and LHHS were entitled to summary judgment on the wrongful discharge and breach of contract claims, it followed that the individual defendants were entitled to have Jones' claims against them dismissed.

This appeal followed.

III. WAS SUMMARY JUDGMENT PROPERLY GRANTED TO CPGH AND LHHS?

Jones argues that by issuing the 1974 personnel policy manual, LHHS modified the terms of her at-will employment, and bound itself to the policies and procedures in the manual. Alternatively, she argues that the 1978 manual provided her with the right to be terminated only for cause. LHHS responds that these personnel manuals did not form part of the employment agreement it had with Jones.

This court has never directly addressed the question of whether such a manual may become part of a contract between an employer and an employee. However, this question has been addressed in numerous other jurisdictions. Among the jurisdictions that have recognized that a policy manual may be incorporated into an employment agreement are: Alabama, Hoffmann-La Roche, Inc. v. Campbell, 512 So.2d 725, 733 (Ala.1987); Arizona, Leikvold v. Valley View Community Hosp., 141 Ariz. 544, 688 P.2d 170, 172 (1984); California, Foley v. Interactive Data Corp., 47 Cal.3d 654, 254 Cal.Rptr. 211, 765 P.2d 373, 384-88 (1988); Connecticut, Finley v. Aetna Life & Casualty Co., 202 Conn. 190, 520 A.2d 208, 213 (1987); Illinois, Duldulao v. Saint Mary of Nazareth Hosp., 115 Ill.2d 482, 106 Ill.Dec. 8, 12, 505 N.E.2d 314, 318 (1987); Maryland, Staggs v. Blue Cross of Maryland, 61 Md.App. 381, 486 A.2d 798, 803 (1985); Michigan, Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880, 885 (1980); Minnesota, Pine River State Bank v. Mettille, 333 N.W.2d 622, 626 (Minn.1983); New Jersey, Woolley v. Hoffmann-LaRoche, Inc., 99 N.J. 284, 491 A.2d 1257, 1264 (1985); New Mexico, Vigil v. Arzola, 101 N.M. 687, 687 P.2d 1038, 1039 (1984); New York, Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 457 N.Y.S.2d 193, 199, 443 N.E.2d 441, 447 (1983); Ohio, Hedrick v. Center for Comprehensive Alcoholism Treatment, 7 Ohio App.3d 211, 454 N.E.2d 1343, 1346 (1982); Oregon, Yartzoff v. Democrat-Herald Pub. Co., 281 Or. 651, 576 P.2d 356, 359 (1978); Pennsylvania, Scott v. Extracorporeal, Inc., 376 Pa.Super. 90, 545 A.2d 334 337 (1988) (but see Richardson v. Charles Cole Memorial Hosp., 320 Pa.Super. 106, 466 A.2d 1084, 1085 (1983)); South Dakota, Osterkamp v. Alkota Mfg., 332 N.W.2d 275, 277 (S.D.1983); Tennessee, Hamby v. Genesco, Inc., 627 S.W.2d 373, 376 (Tenn.App.1981); Washington, Thompson v. St. Regis Paper Co., 102 Wash.2d 219, 685 P.2d 1081, 1087 (1984); and Wisconsin, Ferraro v. Koelsch, 124 Wis.2d 154, 368 N.W.2d 666, 671 (1985).

These courts have stated that whether an employee handbook was incorporated into an agreement between an employer and an employee is a question of fact to be determined in each case. See e.g., Leikvold, 688 P.2d at 174. In particular, the facts must show that the employer has somehow indicated to the employee, at least in general, that employment policies favorable to the latter have been established. In a leading case on the enforceability of provisions contained in employee manuals, the Supreme Court of Michigan explained in relevant part:

While an employer need not establish personnel policies or practices, where an employer chooses to establish such policies and practices and makes them known to its employees, the employment relationship is presumably enhanced. The employer secures an orderly, cooperative and loyal work force, and the employee the peace of mind associated with job security and the conviction that he will be treated fairly. No pre-employment negotiations need take place and the parties' minds need not meet on the subject; nor does it matter that the employee knows nothing of the particulars of the employer's policies and practices or that the employer may change them unilaterally. It is enough that the employer chooses, presumably in its own interest, to create an environment in which the employee believes that, whatever the personnel policies and practices, they are established and official at any given time, purport to be fair, and are applied consistently and uniformly to each employee. The employer has then created a situation "instinct with an obligation."

Toussaint, 292 N.W.2d at 892. The Toussaint court also noted that "[t]he 'rule' [that employment contracts for an indefinite term are terminable at will] is ... a rule of construction.... To the extent that courts have seen the rule as one of substantive law rather than construction, they have misapplied language and principles." Id. 292 N.W.2d at 885.

A review of cases such as Toussaint evidences "a strong trend in favor of recognizing implied contract terms that modify the power of an employer to discharge an employee [without cause]." Foley, 765 P.2d at 384. By incorporating the terms of the manual into the employment contract, these courts have allowed employees a measure of job security. See Thompson, 685 P.2d at 1087-88. Some of these courts have characterized the provisions of these manuals as unilateral contracts. "The employee's retention of employment constitutes acceptance of the offer of a unilateral contract; by continuing to stay on the job, although free to leave, the employee supplies the necessary consideration for the offer." Mettille, 333 N.W.2d at 627; see also, e.g., Woolley, 491 A.2d at 1267. See also Petit, Modern Unilateral Contracts, 63 B.U.L.Rev. 551, 561, 577 (1983); Note, Protecting At Will Employees Against Wrongful Discharge: The Duty to Terminate Only in Good Faith, 93 Harv.L.Rev. 1816, 1818 (1980).

Courts in other jurisdictions have declined to incorporate policy manuals into employment agreements. These jurisdictions include: Delaware, Heideck v. Kent General Hosp., 446 A.2d 1095, 1096 (Del.1982); Kansas, Johnson v. National Beef Packing Co., 220 Kan. 52, 551 P.2d 779, 781-82 (1979); Missouri, Johnson v. McDonnell Douglas Corp., 745 S.W.2d 661, 662 (Mo....