Schoff v. Combined Ins. Co. of America, 98-14.

• Decision Date: 22 December 1999
• Docket Number: No. 98-14.,98-14.
• Citation: 604 N.W.2d 43
• Parties: Ronald Dean SCHOFF, Appellant, v. COMBINED INSURANCE COMPANY OF AMERICA, Appellee.
• Court: Iowa Supreme Court

604 N.W.2d 43

Ronald Dean SCHOFF, Appellant, v. COMBINED INSURANCE COMPANY OF AMERICA, Appellee.

No. 98-14.

Supreme Court of Iowa.

December 22, 1999.

Iris E. Muchmore and Leonard T. Strand of Simmons, Perrine, Albright & Ellwood, P.L.C., Cedar Rapids, for appellant.

Connie Alt and Nancy J. Penner of Shuttleworth & Ingersoll, P.C., Cedar Rapids, for appellee.

Considered by McGIVERIN, C.J., and LARSON, NEUMAN, SNELL, and TERNUS, JJ.

TERNUS, Justice.

Plaintiff, Ronald Dean Schoff, appeals an adverse summary judgment ruling on his claim for damages filed against his former employer, defendant, Combined Insurance Company of America. He asserts the district court erroneously held that he could not base his claim on a theory of promissory estoppel because he was an at-will employee. He also alleges error in the district court's rejection of his theory of negligent training and supervision. We affirm.

I. Scope of Review.

Summary judgment under Iowa Rule of Civil Procedure 237(c) is appropriate only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See Phipps v. IASD Health Servs. Corp., 558 N.W.2d 198, 201 (Iowa 1997)

. Accordingly, we examine the record before the district court to determine whether any genuine issue of material fact exists and whether the court correctly applied the law. See id. The facts are viewed "in the light most favorable to the party opposing the motion for summary judgment." Id.

II. Background Facts and Proceedings.

Viewed in a light most favorable to the plaintiff, the record shows the following facts. Prior to his employment by the defendant, Schoff was a sixteen-year employee of MidAmerican Energy Corporation. On February 28, 1996, Schoff interviewed with Michael Hageman, a district manager for Combined. At the time of his interview, Schoff completed a written application for employment. The application stated that bonding by Combined's bonding company was a condition of employment. It also asked about Schoff's criminal history. In response to the question, "Have you ever been convicted of a felony?" Schoff answered, "No." Schoff had, however, been convicted of two serious misdemeanors, and he voluntarily disclosed this fact to Hageman during the interview. Hageman understood that Schoff revealed this information to be sure that Schoff's criminal record would not cause a problem with his potential employment by Combined.

Hageman questioned Schoff about the incident resulting in the convictions, and Schoff answered all of Hageman's questions. Hageman never asked, however, whether Schoff had ever been charged with a felony, and Schoff did not volunteer the fact that the original charges resulting in his misdemeanor convictions were felony charges. At the time Hageman interviewed Schoff, Hageman understood that only felony convictions, as opposed to charges, were pertinent to bonding. Therefore, he believed that Schoff's criminal record, which he understood involved only misdemeanor convictions, would not adversely affect Schoff's employment with Combined. When Schoff asked Hageman whether this incident would cause any problem with Schoff's potential employment by Combined, Hageman assured Schoff that "as long as [you] have no felony convictions, [your] criminal record [will] be no problem."

Hageman subsequently offered Schoff a position as a sales representative for Combined. Prior to accepting this offer, Schoff specifically asked Hageman whether his criminal record would have any impact on his employment with Combined. Hageman again assured Schoff that it would not. Hageman also stated that only felony convictions were relevant to employment and bonding decisions. Schoff accepted the position offered by Hageman and terminated his employment with MidAmerican.

Upon acceptance of the job offered by Combined, Schoff was required to apply for fidelity bond coverage. Hageman completed an enrollment form for Schoff, in Schoff's presence, asking Schoff specific questions when the need arose. Hageman did not answer the question, "Have you ever been convicted, sentenced or imprisoned?" He told Schoff that only felony convictions were relevant and, therefore, Hageman simply wrote "N/A" after the question. Schoff signed the form and it was forwarded to the bonding company.

Schoff then entered a training period of several weeks. At the end of this period, he signed an employment contract with Combined. This agreement was on a standard form and explicitly stated that the employment contract was "terminable at will by either party."

Schoff began selling insurance for Combined and proved to be an excellent employee. After only three months on the job, however, he was taken out of the field because his application for a fidelity bond had been denied. Schoff was told that the bonding company refused to issue a bond for him due to his criminal record. Combined asserted that the bonding company denied coverage because Schoff had been charged with two felonies and had failed to disclose the information about his conviction history on the enrollment form. Schoff was subsequently officially terminated from his employment with Combined. Schoff commenced this suit against Combined, relying on two theories for the recovery of damages. First, he claimed that Combined was "estopped from terminating [him] as a result of the criminal charges which [he] had disclosed during his initial interview with [Combined's representative], and which [the representative] had assured [him] would not adversely affect his employment [with Combined]." In an amended petition, Schoff added a negligence claim, asserting that Combined "was negligent in the training and supervision of its District Manager ... in the performance of his duties to interview and hire employees" and because of this negligence, the plaintiff suffered injury.

The district court granted Combined's motion for summary judgment, concluding that, as a matter of law, the plaintiff was an at-will employee and could be terminated for any lawful reason. Furthermore, the court rejected the plaintiff's negligent training and supervision claim, holding as a matter of law that an employer owes no duty to a prospective employee to appropriately train and supervise its employees responsible for hiring. The plaintiff appeals.

III. Is the Theory of Promissory Estoppel Available in an At-Will Employment Context?

A. Parties' positions. The parties appear to agree that Schoff was an at-will employee of Combined. See generally Foote v. Simmonds Precision Prods. Co., 158 Vt. 566, 613 A.2d 1277, 1280 (1992)

(holding that even where employment contract has been modified by the law of promissory estoppel, "employees for an indefinite term are still considered at-will employees, who may be discharged for any number of reasons not prohibited by the modifications"). They disagree on whether this at-will relationship could be modified by alleged oral promises made by Combined to Schoff.

The plaintiff contends that the district court erred in holding that the doctrine of promissory estoppel cannot apply in the context of an employment-at-will relationship. He maintains that this theory is just another method of establishing contract rights and, therefore, is not necessarily inconsistent with Iowa's employment-at-will doctrine. In response, Combined argues that the promissory estoppel theory upon which the plaintiff relies should be rejected for the same reasons that our court has previously refused to allow a claim for negligent misrepresentation in the employment-at-will context.

B. Iowa's employment-at-will doctrine. Our court has not previously considered the viability of a claim of promissory estoppel arising out of an employment relationship. Therefore, we begin our discussion with a brief review of the status of employment at will in Iowa.

In Iowa, employment relationships are presumed to be at will. See Phipps, 558 N.W.2d at 202

. The modern formulation of employment at will "permits termination at any time for any lawful reason, that is, a reason that is not contrary to public policy." Lockhart v. Cedar Rapids Community Sch. Dist., 577 N.W.2d 845, 846 (Iowa 1998). We have recognized, however, that the employer and employee can contractually alter the at-will employment relationship. When an employer's handbook or policy manual guarantees "that discharge will occur `only for cause or under certain conditions,'" the employer is bound by this guarantee. Anderson v. Douglas & Lomason Co., 540 N.W.2d 277, 283 (Iowa 1995) (quoting French v. Foods, Inc., 495 N.W.2d 768, 770 (Iowa 1993)). Because the plaintiff analogizes his promissory estoppel claim to the contractual alteration of the employment-at-will relationship permitted by our cases, we discuss this contract theory in more detail.

Liability of the employer based on promises made in an employee handbook is based on the legal theory of unilateral contract. See id. at 282 (noting that "employee handbooks that meet the requirements for a unilateral contract" are an exception to the rule that employment relationships are presumed to be at will). "A unilateral contract consists of an offeror making a promise and an offeree rendering some performance as acceptance." Id. at 283. Accordingly, an employee who seeks to recover under this theory must show three elements: "(1) the handbook is sufficiently definite in its terms to create an offer; (2) the handbook is communicated to and accepted by the employee so as to constitute acceptance; and (3) the employee provides consideration." Id. With this background, we now turn to the plaintiff's claim.

B. Theory of promissory estoppel. The theory of promissory estoppel allows individuals to be held liable for their promises despite an absence of the consideration typically found in a contract. 4 Samuel Williston, Williston on Contracts § 8.4, at 41 (1992). "[C]ourts have applied the principle of estoppel...