Pelizza v. Reader's Digest Sales and Services

• Decision Date: 27 November 1985
• Docket Number: No. 85 C 5569.,85 C 5569.
• Citation: 624 F. Supp. 806
• Parties: Robert J. PELIZZA, Plaintiff, v. READER'S DIGEST SALES AND SERVICES INC., a Delaware corporation, a subsidiary of Readers Digest Association Inc., Defendant.
• Court: U.S. District Court — Northern District of Illinois

624 F. Supp. 806

Robert J. PELIZZA, Plaintiff, v. READER'S DIGEST SALES AND SERVICES INC., a Delaware corporation, a subsidiary of Readers Digest Association Inc., Defendant.

No. 85 C 5569.

United States District Court, N.D. Illinois, E.D.

November 27, 1985.

Robert E. Arroyo, Paul K. Whitsitt, Keck Mahin & Cate, Chicago, Ill., for plaintiff.

Leigh R. Gignilliat, III, Roger Zamparo, Jr., Salinger Gignilliat Hymen & Zamparo, P.C., Chicago, Ill., for defendant.

MEMORANDUM OPINION

WILL, District Judge.

Robert J. Pelizza filed this action against Reader's Digest Sales & Services Inc. (Reader's Digest) seeking damages for lost wages and other benefits due to the termination of his employment. The three count complaint alleges breach of contract in Count I, breach of the duty to deal fairly and in good faith in Count II, and intentional infliction of emotional distress in Count III. Defendant moved to dismiss the complaint for failure to state a claim upon which relief can be granted. Plaintiff withdrew Count II. For the reasons stated below, we deny defendant's motion to dismiss Count I, and grant its motion to dismiss Count III.

We must decide whether employer policies and procedures or an employee manual unilaterally adopted by an employer prior to the date an employee is hired can modify an employment at-will relationship in Illinois. In deciding whether to dismiss a claim for failure to state a claim, we must regard the well pled facts of the complaint as true and construe the allegations of the complaint in the light most favorable to the plaintiff.

Count I: Breach of Contract

Pelizza alleges in Count I of his complaint that he entered into an employment agreement as an Advertising Sales Representative with defendant on August 17, 1981. He asserts that the oral portions of the contract included his agreement to become an employee of the defendant and the defendant's agreement to pay him for his services. The written portion of the contract, plaintiff alleges, is an Employee Manual which sets out the defendant's established company policies regarding the obligations of both parties. Plaintiff asserts that relevant terms of the manual are that Readers Digest would not terminate an employee unless (1) the employee's work did not meet performance standards established by each department or, (2) the employee was found to be in violation of the company's written rules and regulations. Plaintiff attached sections 3 and 5 of the manual to his complaint. Section 3 states: "It is the policy of the Reader's Digest to take immediate action when an employee violates any of the following rules and regulations." After enumerating the rules, the manual sets out procedures to be followed if an employee violates the rules. The procedures include an immediate suspension for one to three days with the approval of the Department Head and the Personnel Department, during which time the violation will be thoroughly investigated by three members of management. Depending on the results of the investigation, the employee will be either reinstated with back pay, with or without a warning, or terminated. "The Personnel Department will monitor these procedures to be sure they are applied consistently to all employees."

Section 5 sets forth the company's policy regarding involuntary termination of employees.

INVOLUNTARY TERMINATION POLICY

It is the policy of the Reader's Digest to retain employees whose work meets the performance standards established by each department as necessary for meeting corporate growth and profit objectives. Individuals who are found to be in violation of company rules and regulations, are subject to termination.

The procedure for terminating an employee includes, among other things, requirements that the decision to terminate be discussed with the Personnel Department prior to termination, that there be a termination interview with the employee in which specific work performance deficiencies are cited as documentation, and that an exit interview be conducted with the employee to settle all accounts between the company and the employee.

Pelizza alleges that there was an implied portion of the contract which included an agreement that defendant would conform its conduct in the employer-employee relationship to the guidelines which it prepared and developed, or, in the alternative, that defendant's policy statement implied an agreement to terminate only for cause. Pelizza claims that the defendant breached the terms of the employment contract when he was involuntarily discharged by Reader's Digest on January 2, 1985.

"Under Illinois law, an employment relationship implies the existence of an employment contract." Rynar v. Ciba-Geigy Corp., 560 F.Supp. 619, 624 (N.D.Ill.1983); see also Sargent v. Illinois Institute of Technology, 78 Ill.App.3d 117, 33 Ill.Dec. 937, 397 N.E.2d 443 (1 Dist.1979). A written or oral employment contract which does not specify the term of employment creates an employment relationship which endures at the will of the parties, and which is terminable by the employer or the employee at any time, for or without cause, subject only to independent contractual or statutory provisions. Rynar, 560 F.Supp. at 624; see also Pudil v. Smart Buy, Inc., 607 F.Supp. 440 (N.D.Ill.1985); Enis v. Continental Illinois National Bank & Trust Co. of Chicago, 582 F.Supp. 876, 879 (N.D.Ill.1984); Sargent, 78 Ill.App.3d at 121, 33 Ill.Dec. at 939-40, 397 N.E.2d at 445-46. The Illinois Supreme Court has not addressed the question of whether personnel policies and procedures developed and unilaterally adopted by an employer become a part of the employment contract which is implied by the employment relationship and, thus, modify the at-will nature of the employment relationship. However, several Illinois appellate courts and United States district courts in the Northern District of Illinois have addressed the question.

Defendant argues that the terms of an employment contract and the at-will nature of the employment relationship are not altered by the terms of a personnel policies and procedures manual unless the manual was bargained for or assented to by the employee during his employment. See Sargent, 78 Ill.App.3d at 121-22, 33 Ill.Dec. at 940, 397 N.E.2d at 446. A personnel policy is bargained for, and thus modifies the at-will nature of the employment relationship "where the terms of the policy itself suggest that a mutuality of obligation was intended by employer and employees when the policy was written, and the facts surrounding implementation of the policy establish that the policy modified the pre-existing employment contract which is implied in the employer-employee relationship." Rynar, 560 F.Supp. at 624 (citations omitted).

In Carter v. Kaskaskia Community Action Agency, 24 Ill.App.3d 1056, 322 N.E.2d 574 (5 Dist.1974), a personnel policy manual was adopted after employees had been hired. It gave employees the right to a grievance hearing before discharge in exchange for forfeiture of vacation pay if an employee failed to give thirty days notice prior to resigning. The employer reviewed the manual with employees who then accepted it. Thus, the court concluded that the manual was a proposed (and accepted) modification of an existing at-will employment contract, which imposed obligations on both parties. The court found that the employees both assented to the modification and provided consideration for the modification by continuing to work after the modification was implemented, thus creating mutuality of obligation and an enforceable contract. Id. at 1058-59, 322 N.E.2d at 576.

In Sargent, however, the Appellate Court of Illinois for the First District found that a personnel manual adopted and issued by the employer to its employees did not become part of an employment contract. 78 Ill.App.3d at 122, 33 Ill.Dec. at 940, 397 N.E.2d at 446. The court found that, unlike Carter, the manual was given to the plaintiff when he began his employment. Id. Furthermore, since the manual only defined the duties and responsibilities of the job, by agreeing to be bound by it the plaintiff merely agreed to properly perform his job and nothing more. Since the plaintiff did not provide any additional consideration (other than his services) to support the pre-discharge hearing requirement in the personnel manual, it did not become part of an enforceable contract.

The rationale of Sargent has guided United States district courts applying Illinois law. See Rynar, 560 F.Supp. 619; Enis, 582 F.Supp. 876. In Rynar we granted defendant's motion for summary judgment because, even though the terms of the employer's policy suggested a mutuality of obligation from which a mutuality of consideration might be inferred, the undisputed facts did not suggest that either the plaintiff individually, or the employees collectively accepted the personnel policy as a contract.

In Enis, Judge Bua found that discharge procedures contained in an employee handbook did not rise to the level of a mutually enforceable agreement because the handbook was given to the plaintiff when she was hired, so there was no modification of a pre-existing employment agreement. Moreover, the guidelines in the handbook were not bargained for, but merely defined the duties of the job. Thus, by accepting the handbook, the plaintiff merely agreed to properly perform her job duties and nothing more. Since the plaintiff did not provide any additional consideration (other than her services) to support the discharge procedures set out in the handbook, those procedures did not become part of the employment contract. Enis, 582 F.Supp. at 879.

The mode of inquiry adopted by the Illinois Appellate Courts in these earlier decisions focused on the adequacy of consideration. The courts tended to treat the "rule" that an employment relationship of undefined duration is terminable at the will of either party, as a substantive rule of law, rather than as a...