Orr v. Westminster Village North, Inc.

• Decision Date: 08 June 1995
• Docket Number: No. 49A02-9311-CV-634,49A02-9311-CV-634
• Citation: 651 N.E.2d 795
• Parties: 10 IER Cases 1237 Lee ORR, Alfred Smith, and William R. Robinson, Appellant-Plaintiffs, v. WESTMINSTER VILLAGE NORTH, INC., Appellee-Defendant.
• Court: Indiana Appellate Court

Page 795

651 N.E.2d 795

10 IER Cases 1237

Lee ORR, Alfred Smith, and William R. Robinson, Appellant-Plaintiffs, v. WESTMINSTER VILLAGE NORTH, INC., Appellee-Defendant.

No. 49A02-9311-CV-634.

Court of Appeals of Indiana.

June 8, 1995.

Rehearing Denied July 24, 1995.

Briane M. House, Kightlinger & Gray, Indianapolis, for appellant.

Patrick D. Miller, Goodin & Kraege, Indianapolis, for appellee.

OPINION

KIRSCH, Judge.

Lee Orr, Alfred Smith, and William Robinson appeal the adverse entry of summary judgment in their suit for wrongful discharge against Westminster Village North, Inc. Orr, Smith and Robinson (collectively, the Employees) raise the following consolidated and restated issues:

1. Whether Westminster's discharge of the Employees violated its employment contract with them?

2. Whether IC 22-6-3-1 creates an exception to the employment at will doctrine?

We reverse.

FACTS AND PROCEDURAL HISTORY

The evidence most favorable to the nonmovant Employees shows that they were employed as hourly maintenance workers in Westminster's Department of Buildings and Grounds. Prior to hiring the Employees, Westminster adopted an employee handbook (the Handbook) which explained its employment policies. Included in those policies, according to the Employees, were: annual performance evaluations, provisions for job security and opportunity for advancement, a progressive discipline system, and a grievance procedure to challenge disciplinary action. When they were hired, the Employees were each given a copy of the Handbook and asked to sign a statement indicating that they had read the Handbook.

The Employees were discharged by Westminster on March 22, 1990, for being in an unauthorized area and for conduct endangering safety and life. The Employees filed suit against Westminster, alleging that their discharge was a breach of their employment contract with Westminster. Specifically, the Employees contended that the Handbook was a part of their employment contract with Westminster and, in its discharge of them, Westminster: breached the terms of the contract by failing to follow the discipline and grievance procedures of the Handbook, breached an implied covenant of fair dealing with the Employees, negligently investigated the incident which resulted in the Employees' discharge, and defamed the Employees. Alleging, inter alia, that the Employees were at will employees and, as such, could be discharged at any time without cause, Westminster moved for partial summary judgment. ¹ The trial court granted Westminster's motion.

DISCUSSION AND DECISION

The purpose of summary judgment is to end litigation about which there can be no factual dispute and which may be determined as a matter of law. Liberty Mut. Ins. Co. v. Metzler (1992), Ind.App., 586 N.E.2d 897, 899, trans. denied (1993). In reviewing a grant of summary judgment, we apply the same standard as did the trial court in entering it. Id. at 900. That is, summary judgment shall be granted if the designated evidence shows that "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Ind.Trial Rule 56(C); Wickey v. Sparks (1994), Ind.App., 642 N.E.2d 262, 265, trans. denied (1995). A genuine issue of material fact exists where facts concerning an issue which would dispose of the litigation are in dispute or where the undisputed facts are capable of supporting conflicting inferences on a dispositive issue. Scott v. Bodor, Inc. (1991), Ind.App., 571 N.E.2d 313, 318. Construing all facts and reasonable inferences against the moving party, we will affirm a summary judgment on any legal theory which is consistent with the designated evidence in the record. ² Wickey, 642 N.E.2d at 265.

Issue One: Were the Employees party to an employment

contract which was breached by their discharge?

The Employees first contend that they were employees for a term and that their discharge was a breach of their contract for term employment. They fail, however, to identify any definite period or duration of employment established by their oral contract with Westminster, and nothing in the record supports their claim of term employment.

The relationship between an employer and employee is contractual and arises from an express or implied contract of employment. Miller v. State (1972), 153 Ind.App. 54, 61, 285 N.E.2d 843, 847. Like any other contract, an employment contract is the product of an agreement between the parties; this agreement may either be express, or implied by acts of the parties which unequivocally show that the parties intended to create an employment relationship. See id. It is in the public's best interest that the freedom of contract not be unnecessarily restricted. Stampco Constr. Co. v. Guffey (1991), Ind.App., 572 N.E.2d 510, 513. Consequently, persons of full age and competent understanding are generally free to include in a contract any terms they wish, so long as those terms do not offend the public policy of this state. See University Casework Systems, Inc. v. Bahre (1977), 172 Ind.App. 624, 630, 362 N.E.2d 155, 159, trans. denied.

Historically, Indiana has recognized two forms of employment: 1) employment for a definite term; and, 2) employment at will. See Atkins v. Board of Sch. Comm'rs of Indianapolis (S.D.Ind.1993), 830 F.Supp. 1169, 1181. A contract for term employment is created when the parties agree that employment shall continue for a fixed or ascertainable period. If no definite or ascertainable period of employment is agreed upon, the employment is at will, Rice v. Grant County Bd. of Comm'rs (1984), Ind.App., 472 N.E.2d 213, 214, trans. denied (1985), and is presumptively terminable at any time, without liability, at the election of either party. See McClanahan v. Remington Freight Lines (1988), Ind., 517 N.E.2d 390, 392. Because the Employees' contract with Westminster was for an indefinite period, they were not term employees. See Rice, 472 N.E.2d at 214.

The Employees next argue that the Handbook, as part of their employment contract, modified their employment at will status by limiting Westminster's ability to discharge them. They claim that they could be discharged only for the offenses specified in the Handbook and, then, only pursuant to the grievance procedures delineated therein. Westminster replies that it is not bound by the policies contained in the Handbook and that the Employees remained at will employees, dischargeable without cause.

We begin with our supreme court's observation that the employment at will doctrine does not prevent the parties to an employment contract from including job security provisions in the contract. In Streckfus v. Gardenside Terrace Co-op, Inc. (1987), Ind., 504 N.E.2d 273, the court noted that:

"[T]he employment at will doctrine is a rule of contract construction [and] not a rule imposing substantive limitations on the formation of a contract[,] [t]herefore, should parties to an employment contract choose to include a job security provision in the contract, enforcement of such a provision would not necessarily conflict with the employment at will doctrine."

Id., 504 N.E.2d at 275 (citations omitted). As a rule of contract construction, therefore, the employment at will doctrine does not prevent job security provisions in handbooks or other employer policy statements from becoming part of at-will employment contracts, so long as the parties intended them to be part of the employment contract and so long as the contract is otherwise enforceable.

We have often discussed the requirement of consideration to support an employment contract in terms of reciprocal promises by the employer and the employee to be bound to the same term of employment. For example, in Shaw v. S.S. Kresge Co. (1975), 167 Ind.App. 1, 328 N.E.2d 775, we held:

"Even assuming, arguendo, that the handbook relied upon by [the employee] constituted a part of the contract, in the absence of a promise on the part of the employer that the employment should continue for a period of time that is either definite or capable of determination, the employment relationship is terminable at the will of the employer. There being no binding promise on the part of the employee that he would continue the employment, it must also be regarded as terminable at his discretion as well. For want of mutuality of obligation or consideration, such a contract would be unenforcible [sic] in respect of that which remains executory. See: 1A Corbin, Contracts, § 152 (1963). See also: 1 Corbin, Contracts, § 96 (1963); 3A Corbin, Contracts, § 683 (1960)."

Id., 167 Ind.App. at 7, 328 N.E.2d at 779 (citation omitted). See also Campbell v. Eli Lilly and Co. (1980), Ind.App., 413 N.E.2d 1054, 1062, trans. denied 421 N.E.2d 1099 (1981).

As our supreme court explained long ago, however, it is consideration, and not mutuality binding the parties to reciprocal performance, which is the true requirement for contract formation. In Jordan v. Indianapolis Water Co. (1902), 159 Ind. 337, 346, 64 N.E. 680, 683, the court held that: "It is enough to give mutuality to a contract that is entire in its character, if there is a consideration, on both sides for its performance." See also 3 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts, § 7:14, at 290 (4th ed. 1992) ("It is ... better ... to take the position, as the Restatement [of Contracts] (Second) does, that no requirement of mutuality of obligation exists so long as the requirement of consideration is met."). We conclude, therefore, that it is consideration, and not a mutual agreement to a definite term of employment, that determines whether job security provisions agreed upon by the parties are enforceable. Thus, an employment contract granting job security to an employee is not unenforceable merely because the employee has a nonreciprocal right to resign at will. See Kostanzer v. State ex rel. Ramsey (1933), 205 Ind. 536, 548-49, 187 N.E....