Witkowski v. Thomas J. Lipton, Inc.

• Decision Date: 30 June 1994
• Citation: 136 N.J. 385,643 A.2d 546
• Parties: , 130 Lab.Cas. P 57,871, 9 IER Cases 1332 Edward B. WITKOWSKI, Plaintiff-Respondent, and Janice M. Witkowski, Plaintiff, v. THOMAS J. LIPTON, INC., Defendant-Appellant, and Joseph Diraddo and Edward Kearns, Defendants.
• Court: New Jersey Supreme Court

Page 385

136 N.J. 385

643 A.2d 546, 130 Lab.Cas. P 57,871,

9 IER Cases 1332

Edward B. WITKOWSKI, Plaintiff-Respondent, and Janice M. Witkowski, Plaintiff, v. THOMAS J. LIPTON, INC., Defendant-Appellant, and Joseph Diraddo and Edward Kearns, Defendants.

Supreme Court of New Jersey.

Argued Jan. 3, 1994.

Decided June 30, 1994.

Francis X. Dee, Newark, for appellant (Carpenter, Bennett & Morrissey, attorneys; Francis X. Dee and David J. Reilly, on the briefs).

Paul L. Kleinbaum, Newark, for respondent (Zazzali, Zazzali, Fagella & Nowak, attorneys).

The opinion of the Court was delivered by

HANDLER, J.

In this case, an employee who worked as a maintenance mechanic for a manufacturing company with a large workforce was fired by his employer. The employee claims that his discharge was wrongful because the employment manual, which provides grounds and procedures for termination, constitutes an employment contract that was not followed in the employee's discharge. The employer claims that the employee's discharge was not wrongful. It contends that the employee was hired as an "at-will" employee who could be fired without cause.

This case, as does the companion case of Nicosia v. Wakefern Food Corp., 136 N.J. 401, 643 A.2d 554 (1994), also decided today, requires the Court again to consider, in light of Woolley v. Hoffman LaRoche, 99 N.J. 284, 491 A.2d 1257, modified, 101 N.J. 10, 499 A.2d 515 (1985), the circumstances under which an employment manual may create an enforceable contract requiring the employer to discharge an employee only for cause in accordance with the manual's provisions.

I

Plaintiff Edward Witkowski ("Witkowski") was fired by defendant Thomas J. Lipton, Inc. ("Lipton") for theft when a can of oil was discovered in his locker. Witkowski denied that he had stolen the oil and asserted that under Lipton's employment manual he could not be fired without cause.

Witkowski and his wife filed a complaint against Lipton alleging, among other claims, wrongful discharge due to breach of contract based on Lipton's employment manual. Defendant moved for summary judgment, seeking dismissal of the complaint in its entirety. Defendant argued that Witkowski was an "at will" employee who could be fired without cause and that its manual did not express a comprehensive termination policy but merely provided some examples of terminable offenses and thus did not create an implied employment contract. Plaintiff Edward Witkowski opposed the motion, attacking solely the defense to the wrongful-discharge allegation of the complaint. The trial court found "as a matter of law that the [Lipton] manual ... was not intended to be a comprehensive treatment of the subject of employment termination and therefore there was no contract between plaintiff and defendant." Accordingly, it granted Lipton's motion for summary judgment.

Plaintiff appealed the decision to the Appellate Division, arguing that genuine issues of material fact existed regarding the existence of an employment contract based on the employment manual. That court, in an unreported per curiam opinion, reversed the judgment of the trial court and remanded, finding that the manual "created a factual question of an employment contract."

Defendant filed a petition for certification, which we granted. 134 N.J. 480, 634 A.2d 527 (1993). We affirm the judgment of the Appellate Division.

II

Lipton hired Witkowski in June 1980 as a Class B Maintenance Mechanic. In October 1989, a routine United States Department of Agriculture inspection of employee lockers revealed that plaintiff's locker contained a can of CRC industrial 3.36 lubricating oil, a type of oil used on the "demand conveyor car clutches" at the Lipton plant. Lipton fired Witkowski on the grounds that he had stolen the lubricating oil. Witkowski denied that he had stolen the oil, claiming that he had permission from his supervisor to keep the oil in his locker. Despite his denial, Lipton discharged Witkowski based on the alleged theft.

When he was hired, Witkowski received an employment manual from Lipton's personnel department entitled "Your Life at Lipton--Flemington Plant" ("manual"). The Lipton manual is divided into four sections: Section I--"Introduction"; Section II--"General Information"; Section III--"Your Job & Your Earnings"; and Section IV--"Employee Rights." Section I of the Lipton manual describes the history of Lipton and contains a statement of Lipton's equal-employment-opportunity policy. Section III includes information detailing salaries, promotions and transfers, overtime, and layoffs. Section IV provides information concerning certain benefits available to Lipton employees.

Section II covers several policies, including safety and sanitation, medical services, personnel and attendance, and leaves of absence. Under the heading "Some Important Basics" and the subheading "Trial Period," Section II provides:

Time and effort are required on the part of an applicant seeking employment. Usually, considerable [sic] more of both is spent by the company. It is, therefore, in the best interests of both the applicant and the company that associations be entered into only when a mutually satisfactory and worthwhile relationship will occur.

To this end we try to learn everything about applicants which is relevant to their success on the job with Lipton. We likewise try to inform applicants about the job and company requirements and benefits in order that they may decide whether or not they wish to accept employment.

This careful manner of applicant selection before employment has proven successful over the years. The best judgement, however, does not always fully replace actual performance on the job. It is our policy, therefore, to treat the first three months of employment as a trial period during which time supervisors will be expected to decide whether or not to consider the employee qualified to become a regular employee.

The last page of Section II, under the heading "Warning Notices," provides:

In fairness to both employees and the company we have a system of warning notices for violation of company policies or rules. Employees with poor records for lateness, absence, infringement of company rules or sanitation and safety regulations will be spoken to by their supervisor. A second infraction will mean a written warning, a copy of which is filed with the Personnel Department.

If the employee's record does not improve sufficiently, he or she will receive a second written warning notice. The third written notice constitutes grounds for dismissal. In some situations, depending on the seriousness of the rules' infraction, a suspension from work may be given in addition to the first or second notice.

Some violations of company policies are grounds for immediate dismissal. Some examples of these include:

1. Being unfit for work because of excessive use of intoxicants

2. Consuming intoxicants on the premises

3. Professional gambling on company premises

4. Fighting, wrestling and "horseplay" on premises

5. Clocking the time card of another employee

6. Insubordination

7. Stealing or unauthorized possession of Company property

The alleged violation of company policy that constituted the grounds for Witkowski's immediate dismissal was that encompassed by the seventh example: "Stealing or unauthorized possession of Company property."

III

The overriding issue presented is whether the Lipton manual created an employment contract that conferred on plaintiff the right to be discharged only in accordance with the terms of the manual. The Appellate Division reviewed the Lipton manual and found that the evidence would support a determination that the manual established an implied employment contract that governed termination of employment. We agree.

An employment manual providing terms and conditions of employment that include grounds and procedures for dismissal can create an employment contract. This Court held in Woolley that "absent a clear and prominent disclaimer, an implied promise contained in an employment manual that an employee will be fired only for cause may be enforceable against an employer even when the employment is for an indefinite term and would otherwise be terminable at will." 99 N.J. at 285-86, 491 A.2d 1257. Therefore, the Court ruled that the termination clause of the company's employment handbook, including the procedure required before termination, could be contractually enforced.

The Court in Woolley explained that "[a] policy manual that provides for job security grants an important, fundamental protection for workers." Id. at 297, 491 A.2d 1257. In that case, the termination policy was "definite," id. at 305 n. 12, 491 A.2d 1257, "explicit and clear," id. at 306, 491 A.2d 1257, and provided "a fairly detailed procedure," id. at 287 n. 2, 491 A.2d 1257. Hence, the Court reasoned "job security provisions contained in a personnel policy manual widely distributed among a larger workforce are supported by consideration and may therefore be enforced as a binding commitment of the employer." Id. at 302, 491 A.2d 1257.

The key consideration in determining whether an employment manual gives rise to contractual obligations is the reasonable expectations of the employees. "When an employer of a substantial number of employees circulates a manual that, when fairly read, provides that certain benefits are an incident of the employment (including, especially, job security provisions)," courts should continue and enforce that manual "in accordance with the reasonable expectations of the employees." Id. at 297-98, 491 A.2d 1257.

No categorical test can be applied in determining whether an employment manual when fairly read gives rise to the reasonable expectations of employees that it confers enforceable obligations. Certain factors, however, will generally be relevant in determining whether such a manual creates a contract. Those ordinarily relate to both the manual's specific...