Bullock v. Auto. Club of Mich.

381 N.W.2d 793, 146 Mich. App. 711

• Court: Michigan Court of Appeals
• Decided: November 4, 1985
• Docket: Docket 71773
• Status: Published

Opinion

Per Curiam.

Defendants appeal by leave granted from an order of the Wayne County Circuit Court denying defendants’ motion for accelerated and/or summary judgment.

In May of 1968, plaintiff was hired by defendants as a commission salesperson. At that time, the sales representatives were not members of any union. On February 7, 1978, the Michigan Sales Association (union) was certified as the exclusive bargaining representative for defendants’ commission salesperson.

Starting in October, 1980, the company and the union met at least 28 times in an effort to negoti ate a collective bargaining agreement. The primary dispute throughout the negotiations centered around the implementation of mandatory production standards. Defendants insisted that the collective bargaining agreement contain scheduled minimum production standards, which the union vigorously resisted.

Defendants submitted a final offer to the union in July, 1981, which included the disputed minimum production standards. At a general membership meeting held on August 5, 1981, the union voted to reject the company’s final offer, resulting in an impasse.

On September 1, 1981, defendants implemented the production standards which were in its final offer. Under these standards, if a sales representative failed to meet a predetermined production standard during any particular month, the representative received an oral warning and, in subsequent months, a written warning, probation, and termination or demotion if the representative failed to fulfill the standards for four successive months.

On October 8, 1981, defendants and the union resumed negotiations and held ten additional negotiating sessions without reaching an agreement. Negotiations broke off on January 4, 1982, reconvened on February 24, 1982, and no further meetings were held after March 18, 1982. In October, 1982, the union was decertified.

In the meantime, on February 19, 1982, defendants notified plaintiff that his employment as a commission sales representative would be terminated as of February 28, 1982, for failure to fulfill the requisite production standard. Defendants offered and plaintiff accepted a lower paying position as a salaried member advisor.

Subsequently, on July, 1982, plaintiff filed the action at bar in Wayne County Circuit Court alleging breach of an employment contract, relying on Toussaint v Blue Cross & Blue Shield of Michigan, 408 Mich 579; 292 NW2d 880 (1980), reh den 409 Mich 1101 (1980). According to plaintiff, when he was hired in 1968, defendants made certain promises and representations to him, including: (1) that he would have a lifetime job as long as he did not steal; (2) that he would be employed as a sales representative and earn a 7% commission for his sales, a method of compensation which had been in effect for many years; and (3) if he worked hard to build up his "book of business”, which consists of accumulated policies and memberships that a commission salesperson builds up over the years, he could enjoy his later working years by realizing those commissions.

According to plaintiff, his demotion, which was allegedly predicated on his failure to meet the production standards, and the implementation of a unit compensation program in place of the commission compensation, violated this preexisting contract.

On August 10, 1982, defendants filed a petition for removal to federal court on the basis that plaintiff’s cause of action was governed exclusively by the National Labor Relations Act and depended entirely on federal law. Once in federal court, defendants filed a motion to dismiss alleging that the National Labor Relations Board (NLRB) had exclusive jurisdiction over plaintiff’s claim and that the United States District Court lacked subject matter jurisdiction. Plaintiff filed a motion to remand to the circuit court on August 30, 1982, pointing out the inconsistent positions taken by defendants in circuit court and in federal court. Federal District Court Judge Anna Diggs Taylor heard oral arguments on October 25, 1982, and remanded the case to Wayne County Circuit Court on November 1, 1982.

In Wayne County Circuit Court, on November 16, 1982, defendants filed a motion for accelerated or, in the alternative, summary judgment. On February 16, 1983, before the hearing on this motion, plaintiff filed a first amended complaint which added counts for age discrimination, unjust enrichment, conversion and negligent evaluation. Two days later, the trial court heard the parties’ arguments concerning accelerated and summary judgment and denied defendants’ motion, from which defendants appeal.

Defendants first argue that the trial court erred in refusing to dismiss plaintiff’s action because Toussaint expressly permits an employer to unilaterally change its employment policies so long as the employees are notified of the changes and the new policies are applied fairly, consistently and uniformly. We disagree that this is the holding of Toussaint.

For their argument, defendants rely on the following language in Toussaint:

"While an employer need not establish personnel policies or practices, where an employer chooses to establish such policies and practices and makes them known to its employees, the employment relationship is presumably enhanced. The employer secures an orderly, cooperative and loyal work force, and the employee the peace of mind associated with job security and the conviction that he will be treated fairly. No pre-employment negotiations need take place and the parties’ minds need not meet on the subject; nor does it matter that the employee knows nothing of the particulars of the employer’s policies and practices or that the employer may change them unilaterally. It is enough that the employer chooses, presumably in its own interest, to create an environment in which the employee believes that, whatever the personnel policies and practices, they are established and official at any given time, purport to be fair, and are applied consistently and uniformly to each employee. The employer has then created a situation 'instinct with an obligation’.

"We hold that employer statements of policy, such as the Blue Cross Supervisory Manual and Guidelines, can give rise to contractual rights in employees without evidence that the parties mutually agreed that the policy statements would create contractual rights in the employee, and, hence, although the statement of policy is signed by neither party, can be unilaterally amended by the employer without notice to the employee, and contains no reference to a specific employee, his job description or compensation, and although no reference was made to the policy statement in pre-employment interviews and the employee does not learn of its existence until after his hiring.” Id., pp 613-615. (Emphasis added, footnotes omitted.)

This holding must be construed in light of the factual context of Toussaint in order to be fairly understood.

Charles Toussaint was employed in a middle management position with Blue Cross. After he was employed for five years and discharged, he commenced an action against his former employer claiming that the discharge violated his employment agreement which permitted discharge only for cause. This action resulted in a jury verdict rendered for Toussaint in the amount of $72,835.52.

On appeal this Court reversed the jury verdict for Toussaint holding that "a contract for permanent employment or employment for life is a contract for an indefinite period and terminable at the will of either party” and "cannot be made other than terminable at will by a provision that states that an employee will not be discharged except for cause”. (Emphasis supplied.) Toussaint v Blue Cross & Blue Shield of Michigan, 79 Mich App 429, 434-435; 262 NW2d 848 (1977).

The questions thus presented to the Supreme Court were whether this Court had correctly stated the law and, if not, whether there was sufficient evidence presented to make submissible to the jury the question of whether there was an agreement for a contract of employment terminable only for cause. The Supreme Court resolved the first question and reversed the decision of this Court, holding that:

"1) a provision of an employment contract providing that an employee shall not be discharged except for cause is legally enforceable although the contract is not for a definite term — the term is 'indefinite,’ and

"2) such a provision 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 statement”. 408 Mich 598.

As to the second question, the Supreme Court held that in Toussaint’s case there was sufficient evidence of an express agreement to justify submission to the jury and that "[a] jury could also find for Toussaint based on legitimate expectations grounded in his employer’s written policy statements set in the manual of personnel policies”. Id., p 599. It is to this latter conclusion of the Supreme Court that the two passages cited by defendant speak.

In reaching its conclusion, the Court focused on whether the evidence could support a finding that Toussaint gave consideration for his employer’s promise in the employee manual to terminate its employees only for just cause. It recognized that in setting forth personnel policies and procedures the employer contemplated mutual adherence to the policy, thereby deriving benefits from a cooperative and loyal work force. Id., pp 613-615. These benefits were deemed sufficient consideration to make the just cause policy in the manual binding on the employer. Id, In the passages cited by defendants, Justice Levin and the majority were concerned that employers could implement such company policies but then apply them arbitrarily. To avoid sanctioning such capricious action, the Supreme Court held, and rightfully so, that once an employer chooses "to create an environment in which the employee believes that, whatever the personnel policies and practices, they are established and official at any given time, purport to be fair, and are applied consistently and uniformly to each employee” the employer has created a "situation 'instinct with an obligation’ ”. Id., p 613. This is so even where there are no preemployment negotiations, no meeting of the minds on the subject, and no knowlege on the part of the employee as to the particularities of the policies or that the employer is free to unilaterally change them. These conditions are not prerequisites to the formation of an employee’s right to have stated personnel policies and practices of the employer applied to his own employment. Compare, Rasch v East Jordan, 141 Mich App 336, 344-345; 367 NW2d 856 (1985).

This is the narrow holding of Toussaint. Toussaint did not abrogate the traditional notions of contract law in general nor did it directly address the issue presented in the instant case.

The contract of employment still remains the result of a voluntary act, conveying the mutual intent of the parties to be bound by its terms and provisions. See McDonald v Boeing, 43 Mich 394; 5 NW 439 (1880). Further, where there is no written evidence of mutual intention, whether the contract was formed, what its terms are, and whether the terms have been validly modified continue to be questions for the trier of fact.

In rejecting defendants’ construction of Toussaint the trial court held "while it is true that an employer is not bound by stated policies of performance, he must make known to the employees that these policies may change in the future. It is not enough that the employer makes the actual change of policy known to those working pursuant to it; it must also make sure that they knew these policies can be changed. This results in an issue of fact whether there was expectation of a continued policy in practice or knowledge that such policies could and would be changed.” (Emphasis added.)

We have already explained why the trial court was correct in rejecting defendants’ construction of Toussaint However, we do not find the trial court’s reasoning to be based on a correct reading of Toussaint The Toussaint Court wrote:

"Employers can make known to their employees that personnel policies are subject to unilateral changes by the employer. Employees would then have no legitimate expectation that any particular policy will continue to remain in force.” 408 Mich 619 (Emphasis added.)

There is a fundamental difference between the words "must” and "can”. In using the word "can” the Toussaint Court was advising the employer that it "can” protect itself against a reasonable expectation arising in an employee that a policy or practice is part of the employment contract by informing the employee that its policy can be changed at any time. The Supreme Court does not state, as did the trial court, that an employer must give such notice or otherwise be barred from unilaterally effecting policy changes in the future. To the contrary, such notice or knowledge can be construed from the circumstances surrounding the employment. For instance, this Court has held that where an employer has unilaterally changed its personnel policy plans regularly, the plans cannot give rise to rights enforceable in contract because the expectations of the employee cannot be considered reasonable or legitimate. Engquist v Livingston County, 139 Mich App 280, 283-284; 361 NW2d 794 (1984).

However, we agree that the question of whether there was a legitimate and reasonable expectation in the employee that an employer’s policy or practice is a term of the employment contract which bears directly upon the question of whether the employer is free to unilaterally change the policy or practice is for the trier of fact. Therefore, we will not disturb the decision of the trial court although it was reached through incorrect reasoning. DeWitt Twp v Clinton County, 113 Mich App 709, 713; 319 NW2d 2 (1982).

Accordingly, we hold that whether the terms of plaintiffs employment contract included provisions (1) that he would have a lifetime job as long as he did not steal, (2) that he would be employed as a sales representative and compensated by commissions on his sales throughout his employment, and (3) that he could enjoy his later working years by realizing those commissions are questions of fact which must be decided by the trier of fact. Once the terms of plaintiffs employment contract are determined, then the ultimate issue of whether defendants breached the employment contract with plaintiff by implementing the new production standards and demoting plaintiff pursuant to those standards can be determined by the trier of fact.

Defendants next argue that plaintiffs complaint should be dismissed because an employer’s unilat eral implementation of its final offer after reaching a bona fide impasse in the negotiation of an initial collective bargaining agreement has the same effect as reaching a collective bargaining agreement and supersedes all prior individual employment contracts. According to defendants, this occurred in the case at bar and requires that federal law must govern plaintiff’s case. Therefore, plaintiff’s Toussaint claims must be dismissed as Toussaint was never intended to apply in the context of union negotiations.

Reduced to its basic meaning, collective bargaining is no more than negotiating. It only brings about contract rights, it does not consist of them. As in a one-on-one agreement where there is no meeting of the minds, collective bargaining which does not bear an agreement is no more than a process without a result. As such, bargaining to impasse on the formation of a new agreement creates nothing that could supersede preexisting contract rights.

Since no collective bargaining agreement was ever reached in this case, plaintiff’s preexisting contract rights are still in effect. Redress for any alleged breach of those rights is properly brought in state courts. The trial court, therefore, properly denied summary judgment on this ground.

Defendants further argue that even if plaintiff’s individual contract survived the selection of the union, the terms of the contract were superseded by the terms validly implemented after an impasse was reached in collective bargaining. Defendants claim, therefore, that state jurisdiction is preempted, and that the National Labor Relations Board has exclusive jurisdiction. This argument was rejected by this Court in a companion case against defendants with which we agree. Roberts v Automobile Club of Michigan, 138 Mich App 488; 360 NW2d 224 (1984).

Affirmed.