Toth v. Square D Co.

• Decision Date: 25 May 1989
• Docket Number: 3:87-2514-16,3:87-2515-16,and 3:87-2517-16 to 3:87-2519-16.,Civ. A. No. 3:87-1998-16 to 3:87-2000-16,3:87-2002-16 to 3:87-2007-16
• Citation: 712 F. Supp. 1231
• Parties: Frank G. TOTH, Plaintiff, v. SQUARE D COMPANY, Defendant, and 13 consolidated cases.
• Court: U.S. District Court — District of South Carolina

712 F. Supp. 1231

Frank G. TOTH, Plaintiff, v. SQUARE D COMPANY, Defendant and 13 consolidated cases.

Civ. A. Nos. 3:87-1998-16 to 3:87-2000-16, 3:87-2002-16 to 3:87-2007-16, 3:87-2514-16, 3:87-2515-16, and 3:87-2517-16 to 3:87-2519-16.

United States District Court, D. South Carolina, Columbia Division.

May 25, 1989.

Herbert W. Louthian, Jr. Columbia, S.C., for plaintiff.

G. Daniel Ellzey, Jonathan P. Pearson, Columbia, S.C., for defendant.

ORDER

HENDERSON, District Judge.

This matter is before the Court on the defendant's motions for summary judgment in these consolidated actions pursuant to Rule 56 of the Federal Rules of Civil Procedure. The plaintiffs are all former salaried employees at the defendant's Columbia, South Carolina plant who have brought these actions to recover damages for wrongful discharge. Plaintiffs Robert P. Brown, Billy Threatt, George Gallo and Alexander S. McRant were discharged in January 1986. Plaintiffs Frank G. Toth, Eugene A. Snyder, Rosea Carolyn Newton, Bobby C. Branham, Alvin D. Bean, Fred A. Hilley, Mary Eames, Margaret Wells, Vera M. Roberts and Joseph A. Meritt were discharged in January 1987. All fourteen plaintiffs have alleged causes of action for breach of employment contract and outrage, also known as intentional infliction of emotional distress. In addition, plaintiffs Toth, Threatt, Snyder, Newton, Branham, Bean, Hilley, Gallo and Eames have asserted causes of action for violation of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. §§ 621 et seq. The defendant moves for summary judgment on all of the causes of action in each complaint. For the reasons set forth below, the Court grants the defendant's motion on the causes of action for outrage and violation of the ADEA and denies the motion on the causes of action for breach of contract. In reaching this decision, the Court considers the three causes of action separately.

I.

First, the Court considers the defendant's motions insofar as they seek summary judgment on the causes of action for breach of employment contract. The plaintiffs, relying on Small v. Springs Indus., 292 S.C. 481, 357 S.E.2d 452 (1987), contend their lay-offs breached their contractual rights secured by an employment handbook distributed by the defendant to its employees. Under South Carolina law, in the absence of a contractual or statutory limitation, an employer may terminate an employee at his pleasure and without cause and such a termination will not give rise to a cause of action by the employee. Sams v. Brotherhood of Ry. & S.S. Clerks, 166 F.Supp. 49, 53-54 (D.S.C.1956); see also Todd v. South Carolina Farm Bureau Mut. Ins. Co., 276 S.C. 284, 289, 278 S.E.2d 607, 609 (1981); Ross v. Life Ins. Co. of Va., 273 S.C. 764, 765, 259 S.E.2d 814, 815 (1979). In Small, however, the South Carolina Supreme Court affirmed a jury verdict in favor of an employee who alleged he was discharged without receiving benefit of a four-step disciplinary process set out in an employment handbook and bulletin. The Small court stated: "We hold that a jury can consider an employee handbook, along with other evidence, in deciding whether the employer and employee had a limiting agreement on the employee's at-will employment status." 292 S.C. at 486, 357 S.E.2d at 455. The plaintiffs here assert that under their employment handbook the defendant was required to lay-off employees in reverse order of seniority and that the failure to do so constituted a breach of their employment agreements. The defendant has moved for summary judgment on the contract causes of action on the grounds that (1) employment handbooks cannot be used to establish breach of employment contracts occurring before the decision in Small; (2) any contractual rights the employees enjoyed under the handbook terminated when the defendant issued a revised handbook on July 1, 1986; and (3) even if there was a contract, the evidence in the record establishes that it was not breached as to certain of the plaintiffs. The Court rejects all three of the defendant's grounds and denies its motions as they relate to the contract causes of action.

A.

First, the defendant asserts that because the decision in Small created a new contractual right for employees, its holding cannot be applied retroactively to permit employees discharged before the Small decision was issued to rely on handbooks as evidence of employment rights. Since the defendant filed these motions, the South Carolina Supreme Court, upon certification from this Court, resolved the issue of retrospective application in Toth v. Square D, ___ S.C. ___, 377 S.E.2d 584 (1989). The Supreme Court stated in Toth: "We explicitly hold that Small is to be retroactively applied to causes of action arising prior to the date it was filed." Id. at ___, 377 S.E.2d at 586. In light of this holding, the Court rejects the defendant's first ground for summary judgment on the contract causes of action.

B.

As a second ground, the defendant argues it is entitled to summary judgment on the breach of contract causes of action asserted by those plaintiffs discharged after July 1, 1986,¹ when the defendant issued a revised handbook. The defendant also seeks partial summary judgment on the contract causes of action asserted by those plaintiffs laid off before that date,² asserting that those plaintiffs are not entitled to recover for any damages incurred after the handbook was revised. The revised handbook on which the defendant relies contains no lay-off provisions and, in addition, sets out the following disclaimer: "This booklet is not intended to create any contractual rights in favor of the employee or Company. The Company reserves the right to change the terms of this booklet at any time." Salaried Employee Handbook at 2 (Revised July 1986). All ten of the plaintiffs laid off after July 1, 1986, admit that they received the revised handbook and signed the following acknowledgement: "This will acknowledge receipt of Square D's Employee Handbook as revised on July 1, 1986. I recognize it is my responsibility to read the handbook and understand the policies and procedures set forth in it."³ Id. at 16; Deposition of Frank G. Toth at 42 (September 15, 1987); Deposition of Eugene Snyder at 149 (September 14, 1987); Deposition of Rosea Carolyn Newton at 35 (September 25, 1987); Deposition of Bobby Branham at 34-35 (September 17, 1987); Deposition of Alvin Douglas Bean at 32 (September 17, 1987); Deposition of Fred A. Hilley at 53-54 (September 18, 1987); Deposition of Mary Eames at 31-32 (October 13, 1987); Deposition of Margaret Wells at 36 (October 7, 1987); Deposition of Vera Roberts at 40 (October 20, 1987); Deposition of Joseph Andrew Meritt at 32-33 (October 20, 1987). The defendant asserts that any contract which may have existed under the earlier handbook limiting the defendant's right to lay off employees at will terminated when the revised handbook was issued. Thus, the defendant argues, those employees laid off after July 1, 1986, have no cause of action for breach of contract and those laid off before that date may recover only those damages suffered before the revised handbook was issued. The Court rejects the defendant's argument as to both classes of employees.

The South Carolina Supreme Court based its decision in Small on principles of equity and fairness:

Once the defendant employer voluntarily chose to publish the handbook and bulletin and orally assure the employees that the provisions of those publications would be followed, there were "strong equitable and social policy reasons militating against allowing the employers to promulgate for their employees potentially misleading personnel manuals while reserving the right to deviate from them at their own caprice." Walker v. Westinghouse Electric Corporation, 77 N.C. App. 253, 259, 335 S.E.2d 79, 83 (1985). "Having announced the policy, presumably with a view to obtaining the benefit of improved quality of the work force, the employer may not treat its promise as illusory." Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 619, 292 N.W.2d 880, 895 (1980). * * * It is patently unjust to allow an employer to couch a handbook, bulletin, or other similar material in mandatory terms and then allow him to ignore these very policies as "a gratuitous nonbinding statement of general policy" whenever it works to his disadvantage. * * * If company policies are not worth the paper on which they are printed, then it would be better not to mislead employees by distributing them. Due to the potential for gross inequality in a situation such as the one in the case at bar, a majority of states has determined that a handbook can alter the employment status. See Annot., 33 A.L.R. 4th 120 (1984). South Carolina, as a progressive state which wishes to see that both employer and employee are treated fairly, now joins those states.

Id. 292 S.C. at 485-86, 357 S.E.2d at 454-55. The principles set forth in Small require that the Court reject the ground raised here by the defendant. If an employer were permitted to extinguish an employee's rights under an existing handbook through the simple expedient of a revised handbook, employees could suffer the very inequities the Small court sought to prevent. An employer could ignore his own mandatory policies and his handbook, as the Small Court observed, would not be worth the paper on which it is printed.

Permitting unilateral modification of an employment contract through handbook revision would also run contrary to established principles of contract formation. The essential elements of any contract are mutual assent to be bound, usually demonstrated by offer and acceptance, and exchange of valuable consideration. See Pierce v. Northwestern Mut. Life Ins. Co., 444 F.Supp. 1098, 1106 (D.S.C.1978); Baylor v. Bath, 189 S.C. 269, 270, 1 S.E.2d 139, 140 (1939); McPeters v. Yeargin Constr. Co., 290 S.C. 327, 331, 350 S.E.2d 208, 210-11 (Ct.App.1...