Marles Flowers v. Memphis Housing Authority

IN THE COURT OF APPEALS OF TENNESSEE

WESTERN SECTION AT JACKSON

FILED

MARLES FLOWERS, ) June 17, 1997

)

Plaintiff/Appellee, ) Shelby Circuit No. 51934 T.D. Cecil Crowson, Jr.

) Appellate C ourt Clerk

VS. ) Appeal No. 02A01-9610-CV-00240

)

MEMPHIS HOUSING AUTHORITY, )

)

Defendant/Appellant. )

APPEAL FROM THE CIRCUIT COURT OF SHELBY COUNTY

AT MEMPHIS, TENNESSEE

THE HONORABLE WYETH CHANDLER, JUDGE

GREGORY L. PERRY

Memphis, Tennessee

Attorney for Appellant

ALAN BRYANT CHAMBERS

JEFF A. CROW, JR.

CHAMBERS, CROW, DURHAM & HOLTON

Memphis, Tennessee

Attorneys for Appellee

REVERSED AND REMANDED

ALAN E. HIGHERS, J.

CONCUR:

DAVID R. FARMER, J.

HOLLY KIRBY LILLARD, J.

In this action for breach of employment contract, Defendant Memphis Housing

Authority (MHA) appeals two orders of the trial court entered in favor of MHA’s former

employee, Plaintiff/Appellee Marles Flowers. In its first order, the trial court granted

Flowers’ motion for summary judgment based on the court’s conclusion that MHA’s Manual

of Operations constituted part of the employment contract between the parties and, further,

that MHA breached this contract by terminating Flowers without just cause. After amending

the pleadings to conform to the proof in the record, the trial court’s initial order also granted

summary judgment to Flowers on his claim that, in terminating Flowers, MHA deprived him

of a protectible property interest in violation of his constitutional right to due process. The

trial court later entered a final order granting Flowers the remedies of back pay for a period

of three years, as well as reinstatement to his former position with MHA. For the reasons

hereinafter stated, we reverse the trial court’s orders and remand for further proceedings.

For purposes of Flowers’ motion for summary judgment, the parties stipulated to the

following facts. MHA hired Flowers for a management position in September 1990. MHA’s

operation is partially governed by federal law and by federal rules and regulations

implemented by the United States Department of Housing and Urban Development (HUD).

Between November 1991 and February 1992, HUD’s district area office in Nashville

conducted a Comprehensive Coordinated Management Review of MHA. As a result of this

review, HUD issued a report in March 1992 which concluded that Flowers had been

improperly hired. Based on this finding, HUD instructed MHA to terminate Flowers’

employment. As instructed, MHA terminated Flowers in April 1992.

During Flowers’ employment with MHA, MHA had in effect an employee handbook

known as its “Manual of Operations.” As pertinent to this appeal, the Manual’s forward

states:

This is the official Manual of Operations for the Memphis

Housing Authority. Its purpose is to arrange for ready

reference a review of the policies, relationships, and

procedures of [MHA]. It is intended primarily as a guide for

employees in the discharge of their duties.

Article IV of the Manual, entitled AMENDMENTS, provides that:

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The Manual of Operations and the By-Laws of [MHA] may be

amended by any special or regular meeting of the Board of

Commissioners by a simple majority of said Commissioners,

there being a quorum present.

Section 208 of the Manual, entitled EMPLOYMENT AND PERSONNEL REGULATIONS,

provides that:

All employment and personnel procedures shall be regulated

by the provisions hereinafter provided in this section and

elsewhere in this Manual.

In this section, the Manual lists four reasons for termination of services: resignation,

dismissal for just cause, retirement, and reduction in force. The Manual also lists causes

for which an employee may be suspended, demoted, or terminated, and it divides the

causes into two categories, major infractions and other infractions. After listing examples

of infractions, the Manual states:

None of the aforementioned Major or Other Infractions will be

deemed to prevent the dismissal, demotion, suspension, or

disciplinary action of an employee for just cause. JUST

CAUSE shall exist when [MHA] has a reasonable basis for the

action taken even though such cause is not contained in those

mentioned above.

Section 304 of the Manual, entitled THE PERSONNEL GRIEVANCE PROCEDURE, sets

forth a procedure whereby employees may file “grievances concerned with the

interpretation and/or application of [the Manual], its directives, procedures, working

conditions and discipline.” Finally, Section 401 of the Manual, entitled PURPOSE, provides

that:

This Manual of Operations contemplates that every [function]

of [MHA] shall be carried out by its members and employees

strictly in accordance with policies and procedures adopted by

[MHA], and incorporated in the Manual.

After being terminated by MHA, Flowers did not pursue the personnel grievance

procedure outlined in MHA’s Manual of Operations; however, the parties stipulated that

Flowers would have been terminated even if he had completed the grievance process and

that it would have been futile for him to do so.

Flowers subsequently filed a complaint against MHA for breach of employment

contract. In his complaint, Flowers alleged that MHA’s Manual of Operations constituted

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an employment contract between the parties and that MHA had breached this employment

contract by terminating Flowers without just cause. Flowers later sought to amend his

complaint to state a cause of action for substantive and procedural due process violations.1

Both parties filed motions for summary judgment. The trial court granted Flowers’ motion

as to both claims, and this appeal followed.

On appeal, MHA contends that the trial court erred in (1) granting Flowers’ motion

to amend his complaint; (2) granting Flowers’ motion for summary judgment; (3) awarding

Flowers back pay and reinstatement; and (4) denying MHA’s motion for leave to renew its

motion for summary judgment. We conclude that the outcome of this appeal is controlled

by this court’s recent decision in Williams v. Memphis Housing Authority, No.

02A01-9608-CV-00190, slip op. at 2-6 (Tenn. App. June 2, 1997), and, thus, we reverse

the trial court’s judgment based on the reasoning set forth in that case.

In Williams v. MHA, two MHA employees were terminated under substantially similar

circumstances under which Flowers was terminated. As in this appeal, in Williams v. MHA,

the dispositive question was whether MHA’s Manual of Operations constituted an

employment agreement which contractually limited MHA’s right to terminate the

employees. Answering this question in the negative, we reasoned:

Because Tennessee adheres to the “employee-at-will”

rule, a presumption arises in this state that an employee is an

employee at will. Davis v. Connecticut Gen. Life Ins. Co., 743

F. Supp. 1273, 1280 (M.D. Tenn. 1990). Under this well-

established rule, a contract for employment for an indefinite

term is considered a contract at will which can be terminated

by an employer (or an employee) at any time without cause.

Bringle v. Methodist Hosp., 701 S.W.2d 622, 625 (Tenn. App.

1985); accord Graves v. Anchor Wire Corp., 692 S.W.2d 420,

422 (Tenn. App. 1985); Whittaker v.Care-More, Inc., 621

S.W.2d 395, 396 (Tenn. App. 1981).

In recent years, the courts of this state have recognized,

at least in theory, that an exception to the at-will rule may arise

where an employer promulgates an employee handbook which

confers certain benefits on employees or which limits the

employer’s right to terminate employees. In order to be

considered part of the employment contract, however, the

handbook must contain specific language showing the

employer’s intent to be bound by the handbook’s provisions.

1

See U.S . Const. am end s. V, X IV; 42 U.S .C. § 1 983 (198 8); see also Tenn. Const. art. I, § 8.

4

Smith v. Morris, 778 S.W.2d 857, 858 (Tenn. App. 1988).

Unless the employee handbook contains specific guarantees

or binding commitments, the handbook will not constitute a

contract. Whittaker v. Care-More, 621 S.W.2d at 397. As

stated by one court, “the language used must be phrased in

binding terms, interpreted in the context of the entire

handbook, and read in conjunction with any other relevant

material, such as an employment application.” Claiborne v.

Frito-Lay, Inc., 718 F. Supp. 1319, 1321 (E.D. Tenn. 1989).

Our research has revealed few instances in which appellate

courts of this state have concluded that the language of an

employee handbook was binding on an employer. See

Williams v. Maremont Corp., 776 S.W.2d 78 (Tenn. App. 1988)

(holding that terms of employee handbook were binding on

employer where handbook provided that employees would be

recalled in order of seniority); Hamby v. Genesco, Inc., 627

S.W.2d 373 (Tenn. App. 1981) (holding that employee

handbook’s “rollback” provision was binding on employer

where handbook provided that, for so long as employment

relationship continued, handbook contained guaranteed

policies, practices, and procedures of employer); see also

Hooks v. Gibson, 842 S.W.2d 625 (Tenn. App. 1992)

(concluding that employee handbook became part of

employment contract where handbook was promulgated

pursuant to agreement between employer and state and

employees were third-party beneficiaries of such agreement).

....

After carefully reviewing the specific language contained

in MHA’s Manual of Operations, we conclude that the Manual’s

provisions are insufficient to overcome the presumption that

[the Employees] were at-will employees. The Employees

contend that the Manual contains sufficient guarantees to be

binding upon MHA because the Manual specifically

contemplates that all MHA functions “shall be carried out by its

members and employees strictly in accordance with” the

Manual’s policies and procedures and, further, because the

Manual states that “[a]ll employment and personnel

procedures shall be regulated by” the Manual’s provisions. If

this language evidences an intent on the part of MHA to be

bound by the Manual’s provisions, however, such intent is

contradicted by the existence of a provision in the Manual

giving MHA’s Board of Commissioners the authority to amend

the Manual at any special or regular Board meeting. “Any

language that preserves a unilateral right on the part of the

employer to alter or modify the contents of [a] handbook”

generally precludes the handbook from being considered part

of the employment contract. Claiborne v. Frito-Lay, Inc., 718

F. Supp. 1319, 1321 (E.D. Tenn. 1989); see, e.g., Smith v.

Morris, 778 S.W.2d 857, 858 (Tenn. App. 1988) (handbook’s

language clearly showed “that modifications were anticipated”);

Bringle v. Methodist Hosp., 701 S.W.2d 622, 624 (Tenn. App.

1985) (handbook reserved to employer “right to change and

abolish policies, procedures, rules and regulations”);

Gregory v. Hunt, 24 F.3d 781, 786 (6th Cir. 1994) (handbook

provided that policies were “subject to change by

management, unilaterally and without notice”); Davis v.

Connecticut Gen. Life Ins. Co., 743 F. Supp. 1273, 1279 (M.D.

Tenn. 1990) (handbook reserved to employer “right to change

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any or all such policies, practices and procedures in whole or

in part at any time, with or without notice”). Such language

instead indicates “that the handbook simply constitute[s] a set

of guidelines or a source of information for an employee.”

Claiborne v. Frito-Lay, 718 F. Supp. at 1321. In the case of

MHA’s Manual of Operations, this conclusion is further

supported by language indicating that the Manual’s purpose “is

intended primarily as a guide for employees in the discharge

of their duties.”

Even if the Manual of Operations’ language

demonstrates an intent on the part of MHA to be bound by the

Manual, we find nothing in the Manual’s provisions which

would alter the Employees’ status as at-will employees. First,

we note that the Manual did not entitle the Employees to a

specific term of employment because the Manual’s provisions

gave the Employees no assurances of employment for any

definite time. See Graves v. Anchor Wire Corp., 692 S.W.2d

420, 421 (Tenn. App. 1985); Whittaker v. Care-More, Inc., 621

S.W.2d 395, 397 (Tenn. App. 1981); accord Davis v.

Connecticut Gen. Life Ins. Co., 743 F. Supp. 1273, 1280 (M.D.

Tenn. 1990) (concluding that, because Tennessee still clings

to “employee-at-will” rule, presumption that employee is at will

must be overcome by specific language guaranteeing definite

term of employment). Moreover, contrary to the Employees’

argument, the terms of the Manual did not limit MHA’s right to

terminate the Employees by requiring that any termination of

services be for one of the enumerated reasons, such as just

cause. Although the Manual listed only four reasons for

termination, including resignation, dismissal for just cause,

retirement, and reduction in force, this list did not purport to be

exclusive. Indeed, the Manual’s inclusion of reduction in force

to this list contemplates that certain business exigencies may

arise which necessitate dismissing employees for reasons

other than just cause. In this case, therefore, we can find no

language that unequivocally overcomes the presumption that

[the Employees] were at-will employees. See Gregory v. Hunt,

24 F.3d at 787; Davis v. Connecticut Gen. Life Ins. Co., 743 F.

Supp. at 1280.

Williams v. MHA, slip op. at 2-6 (footnotes omitted).

In accordance with Williams v. MHA, we conclude that the trial court erred in ruling

(1) that MHA’s Manual of Operations constituted an employment contract which limited

MHA’s right to terminate Flowers and (2) that Flowers was unlawfully deprived of his

property rights in violation of his constitutional right to due process. 2 As a result of this

holding, we reverse the trial court’s order granting Flowers’ motion for summary judgment,

as well as the trial court’s final order granting Flowers the remedies of back pay and

reinstatement.

2

See W illiam s v. M HA , slip op. at 7 (citing Gregory v. Hunt, 24 F.3d 781, 787 (6th Cir. 1994)).

6

The trial court’s judgment is hereby reversed, and this cause is remanded for further

proceedings consistent with this opinion. Costs on appeal are taxed to Flowers, for which

execution may issue if necessary.

HIGHERS, J.

CONCUR:

FARMER, J.

LILLARD, J.

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