Reid v. Sears, Roebuck and Co.

• Decision Date: 28 April 1986
• Docket Number: 84-1199,83-1842 and 84-1511,No. 84-1199,Nos. 83-,Nos. 84-1189,No. 84-1189,84-1189,s. 83-,s. 84-1189
• Citation: 790 F.2d 453
• Parties: 122 L.R.R.M. (BNA) 2153, 54 USLW 2611, 104 Lab.Cas. P 55,592, 1 Indiv.Empl.Rts.Cas. 451 Mary Ann REID (), John Serra (), Mary Batchelor (1842, 84-1511), Plaintiffs-Appellants, v. SEARS, ROEBUCK AND COMPANY, a New York Corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 453

790 F.2d 453

122 L.R.R.M. (BNA) 2153, 54 USLW 2611,

104 Lab.Cas. P 55,592,

1 Indiv.Empl.Rts.Cas. 451

Mary Ann REID (No. 84-1189), John Serra (No. 84-1199), Mary

Batchelor (Nos. 83- 1842, 84-1511), Plaintiffs-Appellants, v. SEARS, ROEBUCK AND COMPANY, a New York Corporation,

Defendant-Appellee.

Nos. 84-1189, 84-1199, 83-1842 and 84-1511.

United States Court of Appeals, Sixth Circuit.

Argued Nov. 13, 1985.

Decided April 28, 1986.

L. Rodger Webb (argued), Detroit, Mich., for plaintiffs-appellants in Nos. 84-1511, 83-1842.

Dennis P. Brescoll (argued), Brescoll and Associates, Mount Clemens, Mich., for plaintiffs-appellants in Nos. 84-1189, 84-1199.

Charles C. DeWitt, Jr. and Robert L. Duty, Detroit, Mich., counsel for defendant-appellee.

Before LIVELY, Chief Judge, and MERRITT and JONES, Circuit Judges. ^*

LIVELY, Chief Judge.

These three appeals were argued separately, but have been consolidated for opinion since all require application of the same body of Michigan law. The three plaintiffs are former employees of Sears who were discharged without a showing of good cause. The plaintiffs brought separate suits in Michigan courts, claiming that their employment contracts with Sears, though for indefinite terms, required Sears to show good cause before they could be discharged. All relied on the seminal decision of the Supreme Court of Michigan in Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880 (1980). The cases were removed to the United States District Court for the Eastern District of Michigan on the basis of diversity of citizenship. Three judges of the District heard the cases, 588 F.Supp. 558, and each granted summary judgment in favor of Sears.

I.

In Toussaint the Supreme Court of Michigan recognized the general rule that "in the absence of distinguishing features or provisions or a consideration in addition to the services to be rendered, ... contracts [for permanent employment] are indefinite hirings, terminable at the will of either party." 408 Mich. at 596, 292 N.W.2d 880, quoting Lynas v. Maxwell Farms, 279 Mich. 684, 687, 273 N.W. 315 (1937). The court held, however, that the general rule does not apply when the contract of employment provides that the employee may not be discharged except for cause. Though such a contract is indefinite, the requirement of cause is enforceable. A provision requiring cause for the discharge of an indefinite term employee "may become part of the contract either by express agreement, oral or written, or as a result of an employee's legitimate expectations grounded in an employer's policy statements." Id. 408 Mich. at 598, 292 N.W.2d 880. The court further held that the jury properly could have found that Toussaint had a legitimate expectation of continued employment on the basis of his employer's written policy statement set forth in a manual of personnel policies.

Toussaint's employer, Blue Cross, and Masco Corporation, the employer of the plaintiff Ebling in a companion case, argued that the rule announced by the Michigan Supreme Court would make it impossible to have a contract of employment that was terminable at the will of either party. The court responded to this argument:

Employers are most assuredly free to enter into employment contracts terminable at will without assigning cause. We hold only that an employer's express agreement to terminate only for cause, or statements of company policy and procedure to that effect, can give rise to rights enforceable in contract.

Id. at 610, 292 N.W.2d 880. The court further amplified this condition as follows:

If Blue Cross or Masco had desired, they could have established a company policy of requiring prospective employees to acknowledge that they served at the will or the pleasure of the company and, thus, have avoided the misunderstandings that generated this litigation. ²⁴

Id. at 612, 292 N.W.2d 880. Footnote 24 states in part:

Where the employer has not agreed to job security, it can protect itself by entering into a written contract which explicitly provides that the employee serves at the pleasure or at the will of the employer or as long as his services are satisfactory to the employer.

Id. The Supreme Court of Michigan found that neither employer in Toussaint had so protected itself and that both had created situations in which the employees had legitimate expectations of continued employment in the absence of a showing of good cause for discharge.

The Supreme Court of Michigan recently described its holding in Toussaint as follows:

In Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 292 NW2d 880 (1980), this Court held that an employment contract providing that an employee would not be terminated except for cause was enforceable although no definite term of employment was stated.

Toussaint makes employment contracts which provide that an employee will not be dismissed except for cause enforceable in the same manner as other contracts. It did not recognize employment as a fundamental right or create a new "special" right. The only right held in Toussaint to be enforceable was the right that arose out of the promise not to terminate except for cause.

Employers and employees remain free to provide, or not to provide, for job security. Absent a contractual provision for job security, either the employer or the employee may ordinarily terminate an employment contract at any time for any, or no, reason.

Valentine v. General American Credit, Inc., 420 Mich. 256, 258-59, 362 N.W.2d 628 (1984) (footnote omitted). Justice Charles L. Levin was the author of both the Toussaint and the Valentine opinions.

II.

A.

Each of the plaintiffs in the three cases before us had been employed by Sears for more than ten years. Before being hired each had signed an application for employment that provided:

In consideration of my employment, I agree to conform to the rules and regulations of Sears, Roebuck and Co., and my employment and compensation can be terminated with or without cause, and with or without notice, at any time, at the option of either the Company or myself. I understand that no store manager or representative of Sears, Roebuck and Co., other than the president or vice president of the Company, has any authority to enter into any agreement for employment for any specified period of time, or to make any agreement contrary to the foregoing.

It is clear that, though this acknowledgement was obtained long before the ruling in Toussaint, Sears attempted to protect itself from claims such as those of these plaintiffs in precisely the manner described by the court in Toussaint. However, Reid, Serra and Batchelor all contend that they produced evidence from which a jury could have found that Sears created a legitimate expectation of continued employment, and that the district court committed reversible error in granting summary judgment.

B.

The plaintiffs rely on certain promises allegedly made to them. Mrs. Reid states that when she first began working full time at Sears her store manager told her, "The job is yours as long as you want it." Ms. Batchelor claims not only that she was told in her job interview that there were "three main reasons" why Sears employees are fired but also that she was told by a former supervisor that he would intervene on her behalf to make sure she was not laid off. Mr. Serra relies on promises of job security from his supervisors. Sears replies that since none of these alleged oral promises came from a president or vice president, they cannot possibly have created a legitimate expectancy in the face of the language contained in the application for employment.

All of the plaintiffs also assert that the Sears employee handbook, "Getting Acquainted with Sears," created an implied contract to discharge only for cause. The handbook provided, at page 23:

EMPLOYE RULES

Since you are new to Sears, it is important for you to know what personal conduct is expected of you while on the job. In most instances your own good judgment will tell you what is the right thing to do. However, you should know what specific rules must be followed since violation of these rules may result in termination of your employment.

. Unsatisfactory performance of your job.

. Theft.

. Refusal to follow instructions directly related to the performance of your job (example: insubordination).

. Disorderly conduct; reporting for work under the influence of liquor, drugs or other stimulants, or consumption of such substances while on Company premises.

. Obtaining employment on the basis of false or misleading information.

. Falsifying a timecard by intentionally punching another employe's timecard or intentionally permitting anyone else to punch your timecard.

. Excessive absences or tardiness including absence from your job for two consecutive days without notifying your unit.

. Soliciting or accepting gifts (money or merchandise) in connection with a Company transaction of any kind. Also conducting other than Company business on Company premises without authority.

. Committing, or attempting to commit, deliberate damage to Company property, advocating or taking part in unlawful seizure of, or trespassing on, Company property.

The plaintiffs argue that the effect of this language was to create an implied contract to discharge only for one of the listed causes or for some other good reason.

C.

We state briefly the circumstances surrounding the three discharges:

Mary Ann Reid had been employed by Sears for 17 years. In January 1981, the battery was stolen from a car which her son had borrowed from his grandmother, plaintiff's mother. When the son called his father for advice, Mr. Reid agreed to buy a new battery to replace the stolen one, and he did so using his wife's 10% employee discount at Sears. When Mrs. Reid's mother consulted her insurance company, she was told that she could not recover without receipts for the purchase both of the stolen...