Johnston v. Dlorah, Inc.

529 N.W.2d 201, 1995 S.D. LEXIS 45, 1995 WL 135950

• Court: South Dakota Supreme Court
• Decided: March 29, 1995
• Docket: 18635
• Status: Published

Opinions

MILLER, Chief Justice

(on reassignment).

In this wrongful termination action, Mary Hale Johnston (Johnston) appeals the decision of the trial court granting summary judgment to her former employer, DLO-RAH, Inc. (DLORAH). We affirm.

FACTS

DLORAH, doing business as National College (College), hired Johnston as a part-time instructor at College’s Sioux Falls branch campus in January 1989. Effective June 18, 1990, DLORAH promoted Johnston to a full-time position as the director of the Sioux Falls branch. Johnston received College’s employee handbook at that time.

In July 1990, less than a month after Johnston’s promotion to branch director, DLO-RAH sold or leased all of the assets of College to another company, Learning Technologies Corporation (LTC). Although LTC replaced some personnel when it gained control of College, Johnston remained in her position. In January 1991, LTC exercised an escape provision in its purchase/lease contract with DLORAH. From January to May 31, 1991, DLORAH managed College on behalf of LTC. On May 31, 1991, DLORAH resumed full control and ownership of College.

Four months later, on September 26, 1991, DLORAH’s Vice-President of Branches unexpectedly fired Johnston. Johnston had never received any warnings or reprimands about unsatisfactory work performance. The vice president gave no specific reason for Johnston’s termination, indicating only that a “business decision” to bring in a new director had been made.

Johnston brought a wrongful termination action against DLORAH. Johnston argued that, according to the terms of the employee handbook, she could not be terminated without just cause. DLORAH contended that Johnston was an at-will employee and thus it was not obligated to give her a reason for her termination. Alternatively, DLORAH claimed that Johnston became a probationary employee when title to College’s property reverted back to DLORAH on May 31, 1991. Probationary employees, under the terms of the handbook, can be terminated with or without cause at any time during their six-month probationary period.

Both parties filed motions for summary judgment as to their claims. The trial court granted summary judgment to DLORAH. The court found the handbook did limit DLO-RAH’s right to terminate Johnston at will, but determined Johnston’s employment was probationary and therefore not subject to the “just cause” protections in the handbook. Johnston appeals.

DECISION

This Court recently addressed the issue of termination of employees under an employee handbook. In Nelson v. WEB Water Dev. Ass’n, Inc., 507 N.W.2d 691, 696 (S.D.1993), we stated:

South Dakota law provides that employment having no specified term may be terminated at the will of either party. SDCL 60-4-4. We have carved out two exceptions to this employment-at-will doctrine in cases where implied contracts arise through the use of employee handbooks. Osterkamp v. Alkota Mfg., Inc., 332 N.W.2d 275 (S.D.1983). The two exceptions have been clearly defined by this court:

First, such an agreement may be found where the handbook explicitly provides, in the same or comparable language, that discharge can occur ‘for cause only.’ Second, a ‘for cause only1 agreement may be implied where the handbook contains a detailed list of exclusive grounds of employee discipline or discharge and, a mandatory and specified procedure which the employer agrees to follow pri- or to any employee’s termination.

Butterfield v. Citibank of South Dakota, 437 N.W.2d 857, 859 (S.D.1989). In short, the handbook must contain language indicating a clear intention on the employer’s part to surrender its statutory power to terminate its employees at will[.]’ Id.

In order to determine whether DLO-RAH relinquished its authority to terminate Johnston at will, we must review the 1991 handbook, which was in effect at the time of her termination. In a chapter entitled “Termination-Separation,” this handbook states that “[a]n employee may be discharged without advance notice if the employee has been employed by the college on a full-time basis for less than six months” or “if the cause of such discharge is dishonesty, physical assault or threat of physical assault, for being under the influence of alcohol or drugs while on duty, or for gross acts unbecoming of one in his/her employment position.” This chapter continues to advise that, absent these two situations, i.e., full-time employment of less than six months or one of the enumerated causes, “an employee shall not be discharged or suspended without just cause. With respect to discharge or suspension, the employee shall be given at least one written warning notice of the complaint against such employee.”

Although DLORAH fired Johnston only four months after its reacquisition of College, Johnston argues she was not a probationary employee. She contends that all or part, of the eleven-month period she worked under LTC’s ownership should be applied to satisfy the six-month probationary requirement. However, it is unnecessary to determine Johnston’s status as a probationary employee to resolve this ease. Even if Johnston had satisfied the probationary period, DLORAH did not violate its employee handbook by terminating her without providing just cause; a clear and conspicuous exception in the employee handbook effectively excludes Johnston’s professional, salaried position from the “for cause only” provision.¹

We begin by noting that Johnston’s job of branch director was classified as a professional position in the June 1991 employee handbook. Documents in Johnston’s personnel file further indicate this was a salaried, i.e. exempt, position. Significantly, Chapter 12 of the June 1991 handbook, entitled “Non-contractual Basis For Exempt Personnel,” begins: “It is the policy of the college that administrative and professional exempt (salaried) staff positions are appointed on a non-contractual basis and usually for an indefinite period of time.” Because Johnston’s position was, in the plain language of the handbook, noncontractual and indefinite, she cannot now claim that she was wrongfully terminated due to noncompliance with an express or implied employment contract.²

We are unconvinced by any claim that this chapter and its first sentence were not sufficiently conspicuous. First, the chapter on the noncontractual basis of professional personnel immediately precedes the chapter on “just cause” terminations, thereby refuting the contention that the disclaimer was buried elsewhere in the handbook. Second, the chapter and its title appear in the handbook’s table of contents. By simply scanning this table, Johnston would have been warned of the noncontractual status of exempt personnel. Third, page 3i of the handbook gives a brief summary of each chapter, and states: “CHAPTER TWELVE addresses noncon-tractual basis for exempt personnel.” Fourth, this chapter not only indicates that professional exempt positions are noncon-tractual, it also states that the compensation and duties of exempt management personnel are subject to change at any time by giving two weeks’ written notice to the employee. By stressing the employer’s option to alter job duties and compensation, the handbook does not indicate an intent by the employer to bind itself to a definite contract with exempt personnel. Certainly, Johnston should reasonably be expected to have taken notice of an entire chapter dealing with the noncon-tractual and indefinite nature of exempt positions like her own. We will not penalize her employer for her failure to take notice of a clear and conspicuous exception in the employee handbook.

Affirmed.

AMUNDSON and KONENKAMP, JJ., concur. SABERS, J., and WUEST, Retired Justice, dissent.

1 . The dissent concludes that Johnston was not a probationary employee at the time of her termination by DLORAH. According to the dissent, Johnston's employment with DLORAH was uninterrupted and satisfied the probationary requirement, because "[tjhere is no evidence that Johnston consented to terminate her employment with DLORAH and become a new employee of LTC’s.”

We strongly disagree. According to Yoselowitz v. People’s Bakery, Inc., a case cited with approval by the dissent:

If the employee has notice or knowledge of the substitution of a new employer and thereafter continues in his employment, he will be deemed to have accepted the new employer and to have terminated the relation previously existing with the old one.

277 N.W. 221, 223 (Minn.1938) (citing Benson v. Lehigh Valley Coal Co., 144 N.W. 774 (Minn.1914); Murray v. Union Railway Co. of New York City, 229 N.Y. 110, 127 N.E. 907 (N.Y.1920)). LTC took possession of National College effective July 1, 1990, and Johnston states she was informed of the sale some time in July 1990. Therefore, the suggestion that Johnston worked for LTC unknowingly is not supported by the evidence. Furthermore, there is simply no evidence in the record that upon learning of the sale, she resisted employment with LTC, or that the employment was otherwise "foisted" upon her as the dissent suggests. There are no affirmative statements indicating she objected to working for her new employer, and her continued, knowing service to LTC suggests she willingly remained in her job under a new employer. Because Johnston knew of the purchase by LTC and continued in her employment, she accepted LTC as her new employer and terminated her employment with DLORAH.

2 . Inexplicably, the dissent claims that Chapter 12 only governs the elimination of exempt positions and does not apply to Johnston's termination. This conclusion, which forms the foundation of the dissent, is flawed. The plain language of Chapter 12 indicates that exempt employees are subject to termination without cause. The first sentence of Chapter 12 states, "It is the policy of the college that administrative and professional exempt (salaried) staff positions are appointed on a noncontractual basis and usually for an indefinite period of time." (Emphasis added.) The use of the word "appointed” refers to hiring an individual rather than creating a position. See Webster’s Third New International Dictionary, Unabridged 105 (1971) (defining "appoint” as to "place in an office or post") (emphasis added). Therefore, employees who are hired in exempt positions work on a noncon-tractual and indefinite basis and are excepted from the just cause protections reserved for other employees. In addition, the title of Chapter 12 is "Noncontrac-tual Basis for Exempt Personnel.” (Emphasis added.) If, as the dissent claims, the chapter addresses only the elimination of positions rather than the termination of employees, the title should refer to the noncontractual status of exempt positions rather than personnel. Finally, Chapter 12 emphasizes the precarious nature of every aspect of exempt employment. Besides designating any appointment as "noncontractu- . al" and "indefinite," the chapter also states the College can modify the salary and duties of an exempt position by simply giving two weeks’ notice.

Having fully reviewed the plain language of Chapter 12, we find ample evidence that exempt personnel are explicitly excluded from the “just cause” protections extended to other employees.