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Perspectives: Obscure deaths, but high profile handbook cases.

Byline: Marshall H. Tanick

"A single death is a tragedy; a million deaths is a statistic."

Soviet Premier Joseph Stalin

The death of a prominent person usually evokes extended eulogies, obituaries and other public acclaim for their feature or, in some cases, lamentations for their failures and follies.

Conversely, the passing of less notables generally attract scant attention, largely from family members, friends and colleagues.

But the demise of low-visibility individuals often obscures their importance in the law. One such example is the death early last month of Patricia J. Feges. The 87-year-old Blaine woman died on March 7, 2019, of injuries sustained in a car accident in Athen Township in Isanti County, a week earlier.

Few may have known her, but her name looms large in Minnesota jurisprudence. She was the plaintiff in a major lawsuit more than three decades ago that helped shape the development of Minnesota law concerning employment handbooks or manuals.

Here's a look at what she did and what her case and other similar ones have meant in the evolution of this genre of law in this state.

Restaurant ruling

The decedent was at the center of a case that reflected the ever-changing tides of workplace handbook or manual law in this state.

Initially hired in 1975 as a cook at one of the many Perkins restaurants outlets in the Twin Cities, she had a roller-coaster career at several of the company's facilities in the northeastern suburbs of the Twin Cities, leaving for a year, returning, being promoted a couple of times, demoted, again serving as a general manager at the Mounds View site, and then, at age 56, terminated and replaced by a man nearly three decades younger.

An employment handbook given to her and other supervisory personnel during her career at Perkins articulated the company's policy of giving "documented, progressive warnings," except for serious transgressions, including a multi-step disciplinary procedure starting with a verbal warning and proceeding to two written warnings before termination. She later received a second handbook, containing an express disclaimer declaring that it was not to be "construed to form a contract." But it contained a similar tiered progressive discipline arrangement as the other one, which apparently remained in effect. She was subsequently discharged because management believed that the restaurant she oversaw was not making sufficient improvements, deeming her performance insufficient and blaming her for inadequate oversight. She had received a written first warning and a second one in her regular performance appraisal before she was terminated and replaced by the younger man.

She sued in Ramsey County District Court, claiming wrongful termination for failure to follow the disciplinary procedures in the manual, as well as age discrimination under the state Human Rights Act. The court dismissed her age discrimination claim. But her handbook claim, based upon breach of contract, made it to the jury, which awarded her nearly $50,000 along with court-awarded attorney's fees. The Court of Appeals reversed, holding that the progressive discipline policy was not binding because it was in a handbook that was disseminated only to supervisors and not to all employees, while affirming dismissal of the age discrimination claim.

The Supreme Court took up three issues: the breach of contract claim; the measure of damages; and age discrimination, ultimately ruling in favor of her on the handbook claim in Feges v. Perkins Restaurants, Inc., 483 N.W.2d 701 (Minn. 1992).

In doing so, it rejected multiple defenses raised by the employer, including that the handbook was not distributed widely enough to be binding. Noting inconsistent rulings by the appellate court in cases of limited distribution manuals, it held that the "decisive question is whether the manual is communicated to the employee," rather than the general scope of its distribution. Because this is a question of fact for a jury to decide, the justices upheld the trial court's determination that the progressive discipline policy was an offer communicated to Feges; became a term of her employment contract; and that the restaurant breached.

The restaurant's claim that it reserved the right to unilaterally change the policy also was rejected because the company's "[r]etention of that power does not preclude the existence of a contact once accepted by the [employee]." The disclaimer contained in one of the handbooks did not override the earlier binding manual that was given to her and remained in effect.

Challenges by both sides for damages were rejected, and the jury's determination that limited damages to the date of trial with no future damages was upheld. Dismissal of the age discrimination claim was affirmed on grounds that there was sufficient evidence of "erratic performance over a period of time" by Feges, warranting her termination.

The critical concern in the Feges case, the scope of distribution of the manual, or the effect of limited distribution of it, was put to rest later that year in a decision by the Court of Appeals in Campbell v. Leaseway Customized Transport, 484 N.W.2d 481 (Minn. App. 1992). A disabled employee sued because he did not receive any warnings or a hearing, as promised in his employment manual. The trial court directed a verdict for the employer on grounds that the handbook had not been distributed to all employees, but the appellate court reversed, based upon Feges. It reasoned that, following Feges, whether the manuals had been sufficiently distributed was a fact issue for the jury. Additionally, the court held that the provisions in the handbook, coupled with the company's prior practice, may have been sufficiently precise to create an enforceable contract under evolving Minnesota workplace handbook law.

Seminal suit

That evolution was launched by a Supreme Court ruling nearly a decade earlier in the seminal suit of Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983), the initial case recognizing that statements in employee handbooks may form the basis for contractual claims by employees who are discharged or otherwise disciplined by their employers, without compliance with the terms of those documents. Pine River unleashed a torrent of litigation relating to the rights of employees and obligations of employers regarding handbooks and similar workplace related materials.

Until then, nearly all Minnesota employees who worked in the private sector and were not members of labor unions were at-will employees, other than those very few who had employment contracts. As such, they could be discharged or otherwise disciplined at the whim or discretion of their employers. Under this age old doctrine, general affirmations of workplace conditions or job security were insufficient to convert at-will relationship into a contractual one. The at will mantra was that employers have the right to take any action that they deem fit at any time and without cause, sometimes characterized as "for any reason or no reason at all." Cederstrand v. Lutheran Brotherhood, 117 N.W2.d 213, 221 (Minn. 1962).

The reluctance of courts to intervene in the process was premised on the oft-repeated judicial hesitancy, in the words of the Eighth Circuit Court of Appeals, to become a "super personnel department." Dorsey v. Pinnacle Automation Co., 278 F.3d 830, 837 (8th Cir. 2002); Wilkening v. County of Ramsey, 153 F.3d 869, 873 (8th Cir. 1998).

That reluctance changed as a result of the Pine River ruling. The suit was brought by a bank loan officer, Richard Mettille, Sr., in a small central Minnesota town outside of Brainerd. After he was discharged due to poor performance, he sued, claiming that the facility failed to comply with the terms of a handbook that had been given to him and other employees. That included disciplinary and job security provisions requiring two reprimands before suspension or dismissal and allowing termination only if, following a factual review, according to the bank's standard procedures, the employee's post-reprimand work performance did not improve. The bank, however, dismissed him without complying with those provisions, including not following its own office procedures of conducting a post-termination review.

His claim was not surprisingly rejected by the Cass County District Court, which ruled that the employment manual did not dictate a deviation from the prevailing at will employment standard. But the Supreme Court, prior to establishment of the Court of Appeals, reversed, holding that the employment manual constituted a binding agreement and that the Bank's noncompliance with its disciplinary provisions entitled the employee to sue for breach of contract. The handbook constituted an offer of employment with job security provisions the employee's continued work represented acceptance, and thus, the employer was contractually required to follow the specified procedures regarding reprimands and dismissals. As it concluded, disciplinary and job security provisions in a job manual are enforceable, whether they are proffered at the time of the original hiring or later, when the parties have agreed to be bound thereby.

Right retrenched

As some hoped for and others feared, Pine River opened the floodgates of employment handbook litigation. It also led to subsequent enlargement and then retrenchment of the contractual right recognized in that case and later asserted, usually unsuccessfully, in other contexts as well, such as education law disputes.

Crafty employers and their counsel found ways to maneuver around the handbook ruling. Rather than backing off from the use of employment manuals, as a few employers did, the bulk of employers found the handbooks helpful in establishing parameters of workplace expectations. Accordingly, rather than dispensing with them altogether in light of Pine River, they managed to restrict their legal impact.

The courts abetted this practice by imposing three major restrictions on the Pine River doctrine: limiting language; tepid terminology; and constrictive circulation of the handbooks.

Use of disclaimers was the principle way that circumvented the Pine River doctrine. Stating that an employment manual is "not contractual," not "binding" on the employer, "subject to change," and should "not be relied upon by employees," or similar phraseology effectively barred the recognition of legally-enforceable contractual rights by employees. For example, the Court of Appeals rejected an unlawful discharge Pine River claim based upon disclaimer language that the policies described in the manual "are not conditions of employment, and the language is not intended to create a contract [with] the employees." Audette v. Northeast State Bank of Minneapolis, 436 N.W.2d 125, 126 (Minn. Ct. App. 1996).

Another Pine River case sank due to multiple handbook provisions that retained management's discretion to "make any change at any time by adding to, deleting or changing any policy," a declaration that the handbook is "not necessarily all inclusive," and any clause intended to reserve the right of management to "vary from the policies [in the handbook] if, in its opinion, the circumstances require." Simonson v. Meader Distrib. Co., 413 N.W.2d 146, 147 (Minn. Ct. App. 1987).

Another conventional employment manual claim was served up with a new, but unsuccessful twist in Erickson v. Cannon Valley Cooperative, 1999 WL 262124 (Minn. Ct. App. May 4, 1999) (unpublished). A terminated employee claimed that his employer failed to follow progressive disciplinary procedures set forth in its handbook. The employee, however, was unable to overcome the disclaimer stating that the employment was "at will"; that the manual was not a contract; that management reserved discretion in administering discipline; and that employees are not "guaranteed the right to progressive discipline." The employee's claim that the company was estopped from denying the manual constituted a unilateral contract was rejected on grounds that the disclaimer terms were so explicit to start, that employees could not reasonably rely on progressive discipline terms set forth in the handbook. The employee's claimed promissory estoppel was rejected because the employee had not turned down any job offers. His mere continued employment did not constitute the type of reliance upon which estoppel may be predicated.

The use of indefinite language became a cousin of disclaimers in eviscerating employment manual claims. In Hunt v. IBM Employee's Mid-America Federal Credit Union, 384 N.W.2d 853 (Minn. 1986), the Supreme Court held that vague disciplinary and discharge language in a company's manual fell short of the specificity necessary for contractual offer under principles enunciated in Pine River. The defense of indefinite language also prevailed in Ward v. Employee Development Corp., 516 N.W.2d 198 (Minn. Ct. App. 1994), when the appellate court held that a company's employee handbook was too indefinite to form a binding contact on the lack of definitions or detailed procedures.

Restricted distribution of handbooks also reined in the Pine River ruling, at least prior to the Feges case. That limitation was reflected in Tobias v. Montgomery Ward, 362 N.W.2d 380 (Minn. App. 1985), a case often cited here and in other jurisdictions barring handbook claims based on manuals that were distributed only to limited personnel, not the entire workforce.

The Feges case, seven years later, departed from that rationale and recognized that the scope of distribution is not central to determination of a contractual claim, which depends more on its language and expectations of the parties rather than means or manner of dissemination.

While Feges represented the high water mark of the Pine River doctrine, in subsequent cases, the claims generally were unsuccessful. In Reis v. SEI Electronics, LLC, 2000 WL 943860 (Minn. Ct. App. 2000)(unpublished), multiple reasons warranted rejecting an employee's Pine River claim, including exclusive disclaimers, as well as extremely limited distribution, notwithstanding the evisceration of that doctrine in limitation of that doctrine in the Feges case.

The vice of vagueness reared its head in Martins v. 3M, 616 N.W.2d 732 (Minn. 2000). The Supreme Court there determined that a handbook claim was too indefinite and consequently rejected the argument that it constituted a contract because it lacked the specifics of how an individual's pay, benefits, or promotions were to be determined. The lack of criteria in the handbook warranted dismissal of a claim that a company's promise to properly promote and compensate employees did not apply to administrative personnel because the handbook terms were too vague and indefinite to constitute an enforceable workplace contract.

Despite the flow of case law contrary to Pine River, some employees managed to stem the tide. In Kotera v. NatroGas, Inc., 2000 WL 1182819 (Minn. Ct. App. 2000)(unpublished), a jury verdict for wrongful discharge in favor of a Pine River claimant following termination was upheld. The employer's summary dismissal of the employee without following its progressive disciplinary procedures policies in the handbook warranted affirmance of the verdict.

The unusual route that Pine River has followed, before, during and after the Feges decision is reflected in the Federal court ruling upholding the enforceability of the handbook provision against an employee, but striking one of its clauses. In Gooden v. Village Green Management Co., 2002 WL 31557689 (D. Minn. 2002), U.S. District Court Judge John Tunheim refused to accept in evidence a handbook provision compelling arbitration and requiring that an employee pay half of the cost of the proceeding because the fee splitting imposed unfair hardship upon an employee suing for wrongful discharge and discrimination. Tunheim invalidated the clause, following a ruling shortly before by the Eighth Circuit Court of Appeals invalidating a fee splitting clause in an ERISA case, Bond v. Twin Cities Carpenters Pension Fund, 307 F.3d 704 (8th Cir. 2002). But Tunheim did not invalidate the provision allowing the employer to compel arbitration, subject to agreement to pay all of the arbitration expenses of the proceeding.

Legal legacy

The victorious loan officer in the Pine River Bank case, Mettille survived his lawsuit for more than two decades. He died of natural causes in his hometown of LaCrosse, Wisconsin, in February, 2005. His stint at the bank in Pine River was part of his 35-year career in the banking industry, along with prior service in the Korean War. His passing preceded Feges' by almost 13 years.

While low profile individuals, both Mettille and Feges became somewhat handbook heroes in Minnesota jurisprudence. The passing of both of them, will be, to paraphrase Lincoln at Gettysburg, little noted, nor long remembered, except for friends, family members and cohorts.

But their roles in landmark litigation have left a legacy in Minnesota employment law.

Marshall H. Tanick is an attorney with the Twin Cities law firm of Meyer Njus Tanick.

PERSPECTIVES POINTERS

Losing Handbook Cases in Academia

Abrariao v. Hamline University School of Law (1977): Handbook inapplicable because subject to change without notice.

Ross v. University of Minnesota (1989): Student handbook not applicable at University of Minnesota.

Rollins v. Cardinal Strich (2001): Student handbook does not require strict compliance.

Zellman v. Sch. Dist. #2758 (1998): Student handbook not enforceable in public high schools at high school level.

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Publication:Minnesota Lawyer
Geographic Code:1U4MN
Date:Apr 23, 2019
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