Skeets v. Johnson

805 F.2d 767, 55 U.S.L.W. 2308

• Court: Court of Appeals for the Eighth Circuit
• Decided: November 12, 1986
• Docket: No. 85-1761
• Status: Published

Opinions

HANSON, Senior District Judge.

Before the court is an appeal from the decision of the district court granting Skeets’ summary judgment motion, holding that his termination from employment with the Arkansas State Highway and Transportation Department deprived him of due process in violation of 42 U.S.C. § 1983 and reinstating him with full backpay. We affirm the decision of the district court.¹

I. BACKGROUND

Skeets had been an at will employee of the Arkansas State Highway Commission for ten years. On April 10, 1979 he was summarily discharged from his job by appellant Johnson for “dereliction on duty.” Although Skeets ceased all official duties on that day, he continued to draw vacation pay until May 18, 1979.

At the time of Skeets’ discharge, the Department’s employee handbook provided for grievance procedures including an impartial hearing, a thorough investigation, and a final decision in writing from the director. The procedures also provided that the failure of the Department to grant an aggrieved employee the specified rights would advance the grievance to the next step in the process.

Based on stipulated facts, the district court found that Skeets had sufficiently invoked his rights under the procedures when he requested permission from Johnson “to tell his side of the story.” The Court also found that Skeets had not been given an impartial hearing or a thorough investigation prior to notification of his termination, nor did Johnson advise Skeets to submit his complaint in writing or offer to assist him in preparing the complaint. The court also found that Johnson’s refusal to provide Skeets with an impartial hearing and thorough investigation, as provided in Step 1 of the grievance procedure, automatically advanced the grievance to the next step. As a result, the court concluded that Skeets had a protectable property interest in his continued employment. The court therefore held that, because Skeets sought the equitable remedy of reinstatement with backpay, it was not necessary to inquire into the merits of the underlying dispute, and ordered that Skeets be reinstated with full backpay. 609 F.Supp. 793, 795-98 (E.D.Ark.1985).

II.DISCUSSION

A. Property Interest

Whether Skeets has a protectable property right in his continued employment is initially a matter of state law. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). The Arkansas Highway Commission is authorized “[t]o establish a merit system under the merit council * * Ark.Stat. § 76— 201.5(i) (1981). The Commission is also empowered “[t]o investigate * * * official conduct of department personnel.” Ark.Stat. § 76-201.5(g). In 1981 the Arkansas Legislature established a Merit Board to hear appeals from state agencies with regard to state employee matters. Ark.Stat. §§ 12-3901 et seq.; but see Patton v. Ragland, 282 Ark. 231, 668 S.W.2d 3 (1984) (§ 12-3905(2) an unconstitutional delegation). Specifically excluded from Merit Board review are matters before the Arkansas State Highway Commission and the Arkansas State Highway and Transportation Department. Ark.Stat. § 12-3907. Although Skeets is excluded from Merit Board review, it nonetheless appears that the Legislature intended there to be a mechanism to review Highway Department employee disputes such as his.

Under Arkansas law, in the absence of some alteration of the basic employment relationship, an employee for an indefinite term is subject to dismissal at any time without cause. Griffin v. Erickson, 277 Ark. 433, 642 S.W.2d 308, 310 (1982); see also Scholtes v. Signal Delivery Service, Inc., 548 F.Supp. 487, 491-94 (W.D.Ark.1982). The Arkansas Supreme Court recently declared that “[w]e have clearly stated that we will reexamine our [employment at will] doctrine when we are presented with a case in which the contract of employment provides for discharge only for cause and the employee is discharged arbitrarily or in bad faith.” Gaulden v. Emerson Electric Co., 284 Ark. 149, 680 S.W.2d 92, 94 (1984). Earlier in Jackson v. Kinark Corp., 282 Ark. 548, 669 S.W.2d 898 (1984), the Arkansas Court had considered, but decided the case on other grounds, whether an employee handbook created a contract of employ-giving rise to a cause of action for wrongful discharge. Id. at 899.

An employee handbook can create a property interest if it reflects a de facto policy of established guidelines to be followed prior to dismissal. See Gerrin v. Hickey, 464 F.Supp. 276, 280 (E.D.Ark.1979); see also Perry v. Sindermann, 408 U.S. 593, 602-03, 92 S.Ct. 2694, 2700, 33 L.Ed.2d 570 (1972).

In this case the Personnel Manual (hereinafter “Manual”) was submitted as Exhibit B to the district court with defendants’ motion for partial summary judgment, which had asserted Skeets had no property right to continued employment. The district court denied defendants’ motion. Skeets now asserts that, although not referred to in the district court’s ruling on plaintiff’s summary judgment motion, the Manual is part of the record on appeal. We would agree. Because the summary judgment motions of each party deal with the identical issue, whether Skeets had a property interest in continued employment, we can see no prejudice to either party in considering the Manual on appeal. See F.R.App.P. 10(a). The dissent characterizes our consideration of the Manual as raising a new issue on appeal. Although it is certainly true that Skeets only argued below the grievance procedures created his property right, we believe it would be a strained reading to divorce the grievance procedures from the rest of the Manual of which they are a part. On the contrary, we believe the grievance procedures can only be understood in pari materia with the other provisions in the Manual.

On July 20, 1972, the Director of Highways for the Arkansas Highway Commission provided Highway Department employees with the Manual, and enclosed a letter stating:

This manual has been prepared to provide information for supervisors and other employees. It * * * contains information on all personnel policies, procedures, and employment practices. * * *

To the supervisor, it serves as a guide to the proper administration of personnel. To the employee, it is a source of information on employee services and conduct. By reading and referring to this manual, all employees may fully inform themselves on matters affecting them personally.

Id. (emphasis added). Section 106(C) of the Manual goes on to state, with regard to employee conduct, that [i]t has long been the practice of the Highway Department to counsel with and help any employee whose performance is not satisfactory.” Manual at 4. Section 106(C) also lists the grounds for immediate termination of employees whose work is “unsatisfactory.” One of the grounds listed is for “[d]ereliction of duty.” Id.

The Manual in § 205(10) explains that in filling out Form AH125, the personnel action form, “[a]ll AH125’s must have in the ‘Remarks’ section, a thorough, yet concise, explanation as to the justification for the proposed action.” Manual at 33. Section 206(4) explains that in completing Form AH125 for terminating an employee “the reason for separation and the quality of the employee’s service, whether satisfactory or unsatisfactory, should be entered in ‘Remarks.’ ” Manual at 38. Upon Skeets’ termination, the AH125 “Remarks” portion states as the reason for discharge merely “[djereliction of duty.”

We believe that it is apparent, by virtue of the statute providing for a merit review mechanism and by the Manual stating reasons for termination and the specific manner in which employees can be terminated, that Skeets was more than an at will employee when he was summarily fired.

Against this background, we must consider Skeets’ contention that the grievance procedures provide him with a property right to continued employment. The procedures appear at § 133 of the Manual, as amended by Minute Order on June 25, 1975, and provide a method for employees to grieve working conditions. Step 1 states: “It is the duty of the supervisor to give an impartial hearing [and] make a thorough investigation * * The procedures also provide for an impartial hearing and thorough investigation when the employee “take[s] this matter up first with his/her supervisor.” The procedures do not specify whether the request for the hearing should be in writing or whether it can be made orally. As a result, it appears to have been reasonable for the district court to conclude that Skeets’ oral request had sufficiently invoked the grievance procedures so as to trigger his right to continued employment until he received his pre-termination investigation and hearing.²

The grievance procedures further provide that “[i]f the Department fails to meet and/or provide for any grievance hearing within the time limits, the grievance will automatically be advanced to the next step.” In addition, the procedures state that the final decision will be made by the Director and that after a subordinate provides him with a written report concerning the grievance, the Director’s “final decision will be sent in writing to the employee.”

We recently held in Hogue v. Clinton, 791 F.2d 1318 (8th Cir.1986), that grievance procedures similar to those at issue in this case do no more than create a unilateral expectation of continued employment insufficient to entitle a discharged Arkansas state employee to a pretermination hearing. Central to the panel’s holding was that grievance procedures which “do not restrict or even guide [the] agency’s decision making by allowing for termination only under certain circumstances or for specific reasons” do not create a property interest in continued employment. Id. at 1324. We believe that Hogue is distinguishable from this case.

The central difference between Skeets and Hogue is in the quantum of due process each employee was afforded. In Ho-gue, the record reveals that at the time he was terminated he was presented with a list of allegations, at which point he pursued an appeal. During the appeal process he was accorded “some kind of a hearing” at which the allegations against him were discussed. Roth, 408 U.S. at 569-70, 92 S.Ct. at 2705. He filed his lawsuit only-after his appeal to the Merit Council dissolved, apparently in light of the Arkansas Supreme Court decision in Patton v. Ragland, 282 Ark. 398, 668 S.W.2d 3 (1984), that the statute providing for the Council was unconstitutionally vague. Upon this record the majority of the panel concluded that Hogue had no property right to a due process pretermination hearing. Hogue, 791 F.2d at 1325.

By contrast, Skeets was called into his supervisor’s office and terminated, the only reason stated being “dereliction of duty.” Skeets requested a hearing in order to tell his side of the story. The district court found that this request was denied and that he was at no point presented with a list of the charges against him, nor was he able to confront those who provided evidence against him. In addition, the investigation which formed the basis of his dismissal was not completed and submitted to the Director until two months after Skeets had been terminated. He did not obtain a copy of this report until in discovery in preparation for trial. These irregularities come in the face of grievance procedures which provide in Step 1 for a thorough investigation and impartial hearing, and that the grievance will automatically advance to the next step if the grievance procedure is not provided by the Department.

The factual postures of these cases demonstrate the differences between them. In Hogue, the claimant asserted a property right to a due process pretermination hearing in spite of the fact that he had been presented with a list of the charges against him and had been able to appeal the termination as provided in the grievance procedures. It would therefore appear that what Hogue claimed was a due process right to the “specific decision” that he be reinstated with backpay. This conclusion follows from the Hogue reference to Goodisman v. Lytle, 724 F.2d 818, 820 (9th Cir.1984), that “the expectation of a specific decision is not enhanced enough to establish a constitutionally protected interest in the procedures.” Hogue, 791 F.2d at 1324.

Skeets, on the other hand, appears to be asking for an opportunity to have any kind of a hearing, rather than a hearing at which a specific decision would result. On this basis, we would hold that the grievance procedures in this case presented Skeets with a property interest in a thorough investigation and hearing. That is, the grievance procedures, by virtue of the fact that a grievance advances to the next step if the Department fails to provide the required process, amount to a restriction on agency discretion which the Hogue court found to be necessary to trigger a sufficient property interest.

We are well aware that our holding seems to narrow some of the language in Hogue, but we cannot believe that Hogue is a signal for us to countenance the complete deprivation of even the rudiments of due process as occurred in this case. The grievance procedures in this case create a reasonable expectation that a grievance will be handled fairly. They by no means suggest that a particular decision will result, but they do create a mutually explicit understanding that had Skeets been allowed to proceed with his grievance he would have received the quantum of process that he was due.

The district court relied on Wilson v. Robinson, 668 F.2d 380 (8th Cir.1981), to establish that grievance procedures may provide an aggrieved employee with a due process right to a pretermination hearing. Appellants assert that in Wilson the procedures dealt specifically with the process to be followed prior to job terminations while the instant procedures apparently do not. We agree with the district court that this distinction is not “fatal.” As the Supreme Court stated in Perry v. Sindermann:

We have made clear in Roth that “property” interests subject to procedural due process protection are not limited by a few rigid, technical forms. Rather, “property” denotes a broad range of interests that are secured by “existing rules or understandings.” A person’s interest in a benefit is a “property” interest for due process purposes if there are such rules or mutually explicit understandings that support his claim of entitlement to the benefit and that he may invoke at a hearing.

408 U.S. at 601, 92 S.Ct. at 2699 (citations omitted). Although there may be no explicit provision for a hearing at the instance of an employment termination, that right is not expressly denied and may be inferred from the grievance procedures. We believe that the grievance procedures can be construed as being applicable to employment terminations such as at issue.

We conclude that it would have been reasonable for Skeets to believe that he would only be terminated for one of the grounds listed in the Manual and only after he had been given a thorough, concise explanation, in effect what appears to be termination only for cause. Taken with the grievance procedures providing a mechanism to appeal employee matters, we conclude Skeets had a right to a hearing and investigation before he was terminated.³ Today’s holding is consistent with those of other courts which have considered whether grievance procedures can create an expectation of continued employment. See Beckham v. Harris, 756 F.2d 1032, 1037 (4th Cir.1985) (discharge is in violation of procedural rules adopted by employer specifically designed to protect employees from immediate discharge); Zeigler v. Jackson, 716 F.2d 847, 849 (11th Cir.1983) (finding no property right because no ground stated upon which dismissal must be based); Gleason v. Board of City Commissioners, 620 F.Supp. 632, 634-35 (D.Colo.1985) (property interest created because employee could only be terminated for cause and decision to terminate reviewable); Jaffe v. Federal Reserve Bank of Chicago, 586 F.Supp. 106, 107 (N.D.Ill. 1984) (dicta) (grievance procedure may constitute rules or understandings constituting claim of entitlement to benefit).

Nor do we find convincing the dissent’s assertion that we foist process into substance. Even if we were as certain as the dissent in demarcating where process ends and substance begins, we believe the procedures at issue would create the kind of mandatory limitation on the employer’s discretion which makes any such distinction not especially meaningful. See Rogers v. Masem, 788 F.2d 1288, 1294-95 (8th Cir.1985); see also Hogue, 791 F.2d at 1326 (Lay, C.J., dissenting) (grievance procedures create a contract between Hogue and employer transforming procedure into substantive expectancy).

It is apparent from this record that Skeets was not accorded adequate process. In Cleveland Board of Education v. Loudermill, 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985), the Supreme Court held that when a public employee has a property interest in his continued employment, the due process clause requires that, prior to termination, the employee must be given oral or written notice of the charges, an explanation of the employer’s evidence, and an opportunity to respond. Id. 105 S.Ct. at 1495. Skeets has never had the opportunity to challenge the report or to be confronted with the witnesses whose direct and hearsay testimony form the basis of the report. We would therefore conclude that Skeets was at no point given adequate procedural due process to challenge his termination.

Appellants assert that Skeets waived his due process rights under the grievance procedures when he failed to submit a grievance in writing to the Department.⁴ From the stipulated record it is apparent that Skeets attempted orally to invoke the grievance procedures. We would agree with the district court that once his oral request to rebut the charges against him had been denied, it was unnecessary for the plaintiff to go further. We therefore conclude that he did not abandon his rights under the grievance procedures.

B. Equitable Relief

Even though the district court found that Skeets had been deprived of his property interest in his employment without procedural due process, the appellants argue that he must demonstrate that the substantive allegations against him were untrue before he could be entitled to any relief. They argue that the district court misapplied Carey v. Piphus, 435 U.S. 247, 98 S.Ct. 1042, 55 L.Ed.2d 252 (1978), by not inquiring into whether Skeets would have been terminated even if he had been afforded adequate procedural due process.

The district court chose to follow the narrow interpretation of Carey set out by another Arkansas district court in Shaw v. Gwatney, 604 F.Supp. 880 (E.D.Ark.1985), vacated in part on other grounds and aff'd in part, 795 F.2d 1351 (8th Cir.1986). In Shaw, Chief Judge Eisele had held that the court need not reach the merits of the substantive § 1983 issues in a case in which the plaintiff seeks only equitable relief. 604 P.Supp. at 887.

The Court in Carey held that an employee alleging that a discharge resulted in a deprivation of liberty could only recover nominal damages unless it could be shown that a pretermination hearing would have changed the result or that the plaintiff could demonstrate actual damages such as emotional distress. 435 U.S. at 266-67, 98 S.Ct. at 1053-54. Carey involved the measure of damages due to two students suspended from school without the benefit of presuspension procedures. The Court concluded that if on remand the district court would find that the suspensions were justified, then the students would not be able to recover damages for the procedural deprivations. Id. at 260, 98 S.Ct. at 1050.

In reaching its conclusion, the Court acknowledged that the proper measure of damages for a constitutional injury must be evaluated against the nature of the constitutional right in question. Id. at 264-65, 98 S.Ct. at 1052-53. Therefore, an application of the Carey damage rules to the instant case must take into account the nature of the constitutional injury sustained by the students suspended in Carey. It is unclear from the Court’s opinion whether the interest at stake was a liberty or property interest. However, it is apparent that the students’ suspensions were more in the nature of deprivations of liberty than of property. Hogue, 791 F.2d at 1327 (Lay, C.J., dissenting). That is, the injury is more similar to a stigma than a deprivation of an expectation to a continuing benefit, employment with the state. The harm that ensues from a short suspension from school is in the potential adverse treatment of the students by their teachers because of the perception that the students are troublemakers. Id. (Lay, C.J., dissenting). Moreover, the kind of name-clearing hearing denied the students in Carey generally does not involve the issue of whether the termination was appropriate. Rather, the issue is whether the reasons disclosed for the discharge resulted in a stigma and were false. Hogue, 791 F.2d at 1327 (Lay, C.J., dissenting). See Pollock v. Baxter Manor Nursing Home, 706 F.2d 236, 238 (8th Cir.) (McMillian, J., dissenting), rev’d on reh’g, 716 F.2d 545 (8th Cir.1983); Bishop v. Tice, 622 F.2d 349, 357-58 n. 17 (8th Cir.1980). Therefore, if the discharged employee had no right to continued employment, the residual right to the retention of the employee’s good name is not enough in itself to trigger more than an award of nominal damages. In the liberty deprivation cases, therefore, what is compensated is the loss to the person’s reputation, not the loss of employment. Hogue, 791 F.2d at 1328 (Lay, C.J., dissenting).

When, as in this case, the employee has established he has a property right to continued employment, the proper measure of damages is the value of the lost employment — in this case reinstatement and backpay. This is because the “cause” hearing focuses not on the stigma attached to the deprivation, but upon whether the employee can be terminated for cause.

The Court in Carey suggests at footnote 15 its disfavor with cases from the Fourth and Fifth Circuits in which the courts awarded backpay for public employees discharged with cause, but without procedural due process. Carey, 435 U.S. at 260 n. 15, 98 S.Ct. at 1050 n. 15. Even though we need not reach this issue in light of our earlier determination that Skeets was not terminated for cause, we believe the Court’s language must necessarily be circumscribed as no longer having much vitality after its decision in Loudermill, 470 U.S. 532, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985). Loudermill requires “some kind of a hearing” before the discharge of the employee. Id. 105 S.Ct. at 1493 (quoting Roth, 408 U.S. at 569-70, 92 S.Ct. at 2705). The Court in Loudermill stated that

affording the employee an opportunity to respond prior to termination would impose neither a significant administrative burden nor intolerable delays. Furthermore, the employer shares the employee’s interest in avoiding disruption and erroneous decisions; and until the matter is settled, the employer would continue to receive the benefit of the employee’s labors. It is preferable to keep a qualified employee on than to train a new one. A governmental employer also has an interest in keeping citizens usefully employed rather than taking the possibly erroneous and counter-productive step of forcing its employees onto the welfare rolls. Finally, in those situations where the employer perceives a significant hazard in keeping the employee on the job, it can avoid the problem by suspending with pay.

Id. 105 S.Ct. at 1495. We believe that applying Carey to the case at bar would effectively deny Skeets of his right to a “cause” pretermination hearing because “without the deterrent of a backpay award, no incentive remains for the employer to do anything more than provide only a post-termination hearing.” Hogue, 791 F.2d at 1328 (Lay, C.J., dissenting).

We therefore hold that because Skeets had a property right to continued employment until his “cause” hearing, the district court was correct in awarding him reinstatement and backpay until a proper hearing is held.

III. OFFICIAL AND INDIVIDUAL CAPACITY

Appellants assert that the district court’s award of backpay is barred by the Eleventh Amendment. The district court’s order awarding reinstatement with backpay does not state whether it is against the appellants in their official capacities or in their individual capacities. In its earlier April 21, 1983 order, the district court dismissed the State of Arkansas and the Arkansas State Highway Commission as immune under the Eleventh Amendment. Apparently remaining after the court’s order were the appellants, sued in their individual and official capacities. We would conclude, because the court below did not specify in what capacities its backpay and reinstatement award would run against the defendants, it would be inappropriate for this Court to make any determination. Rather, it is for Skeets to attempt to enforce his award against the defendants. We therefore do not reach the issue of whether the court’s award is violative of the Eleventh Amendment.

IV. CONCLUSION

For all of the reasons stated above, we affirm the decision of the district court.

1 . The Honorable HENRY WOODS, United States District Judge for the Eastern District of Arkansas.

2 . Appellants assert that for Skeets to have an expectation to continued employment there must have been some substantive limitation on or condition precedent to the employer’s right to discharge the employee. As authority for this proposition, appellants cite our recent decision in Payne v. Ballard, 761 F.2d 491 (8th Cir.1985). However, Payne is inapposite. In Payne the employer had complied with the grievance procedures. The language in which we stated that there must be "an undertaking * * * not to discharge the employee for a certain fixed period of time * * *” had to do with the discharged teacher’s claimed property interest in a teacher’s certificate, not in the grievance procedures. See id. at 493.

3 . The dissent’s statement that Skeets has failed to state a claim of an alleged liberty interest is patently obiter dictum. See infra at 781 n. 2.

4 . Appellants rely on Birdwell v. Hazelwood School District, 491 F.2d 490 (8th Cir.1974). In Birdwell, the discharged employee failed to appear at a scheduled hearing of which he had notice. Id. at 494-95. Such is not the case here. At no point was Skeets provided a due process hearing.