Petition for Writ of Certiorari — Automobile Club of Michigan v. Bullock

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No. oa ;

In the Supreme Couwt of the United States

OCTOBER TERM, 1989

AUTOMOBILE CLUB OF MICHIGAN, a/k/a AAA, and

AUTO CLUB INSURANCE ASSOCIATION,

PETITIONERS

WILLIAM J. BULLOCK,

RESPONDENT

PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF MICHIGAN

JOHN CORBETT O’MEARA

Counsel of Record

THEODORE R. OPPERWALI

Dickinson, Wright, Moon,

Van Dusen & Freeman

800 First National Building

Detroit, Michigan 48226

(313) 223-3500

BOWNE OF DETROIT

610 W. CONGRESS - DETROIT, MICHIGAN 48226 - (313) 964-1330

QUESTIONS PRESENTED

Respondent Bullock claims that when he was hired by

petitioner AAA in 1968, he was orally promised that he would be

paid sales commissions and would be discharged only if caught

stealing. In 1978 a union was certified by the NLRB as the

exclusive bargaining representative of AAA’s sales employees,

including Bullock. AAA and the union collectively bargained to a

bona fide impasse, whereupon AAA lawfully unilaterally imple-

mented its final offer including a unit compensation system and

minimum production standards. Bullock was later discharged

under these minimum production standards. He sued in Michigan

state court claiming breach of the alleged oral contract made

when he was hired. The Michigan Supreme Court held that his

state-law contract claims were not preempted by the National

Labor Relations Act (“NLRA”).

The questions presented are:

1. Whether the NLRA preempts, under the Garmon doc-

trine, an employee’s state-law employment contract claims that

are directly contrary to terms and conditions of employment

lawfully implemented by the employer following an impasse in

collective bargaining with the employee’s exclusive bargaining

representative, for the reason that the state-law claims concern

conduct arguably subject to the Act.

2. Whether the NLRA preempts, under the Machinists

doctrine, these state-law employment contract claims because

they undermine an economic self-help remedy that Congress

intended to be unregulated and controlled only by the free play of

economic forces.

PARTIES TO THE PROCEEDING

AND RULE 28.1 STATEMENT

All parties to the proceedings below subject to this petition

are set forth in the caption.

The only parent company, subsidiary (other than wholly

owned subsidiaries), or affiliate of the petitioners is Auto Club

Leasing Company.

TABLE OF CONTENTS

Page

| V

ES os cava y vies es sieve wesseees

ONE 2

CONSTITUTIONAL AND STATUTORY PROVI-

a 2

sya cne seve vcevecscceces 2

a 3

2. Beoen © Leweutt in State Court.................. 6

3. The Michigan Court of Appeals’ Opinion .......... 8

4. The Michigan Supreme Court’s Opinion ........... )

REASONS FOR GRANTING THE PETITION ..... 11

I. The Michigan Supreme Court Has Decided An Impor-

tant Federal Question In A Way That Cannot Be

Reconciled With This Court’s Decisions And Threat-

ens To Disrupt Federal Labor Policy .............. 14

A. Bullock’s state-law claims are preempted under

Garmon because they concern activity arguably

I Gh vaca vcvccveccccwsecs 14

B. Bullock’s state-law claims are preempted under

Machinists because they undermine an economic

self-help remedy that Congress intended to be un-

regulated and controlled only by the free play of

ne 22

II. The Michigan Supreme Court’s Decision Conflicts

With Decisions Of Several Federal Courts Of Appeals. 26

EEE 30

APPENDICES

A. Michigan.Supreme Court Opinion................. la

B. Order Denying Rehearing.................-....-. 56a

ccc nce c cece esse eee eees 57a

D. Michigan Court of Appeals Opinion............... 58a

E. Wayne County Circuit Court Order ............... Tla

F. Constitutional and Statutory Provisions Involved..... 73a

TABLE OF CONTENTS — (Continued)

Page

Complaint and Demand for Trial fo eee bh Rradtey 75a

First Amended Complaint and Demand for Trial

. by Jury ro CU Ssevesewtnweset oe teetmamstdakd clted | Un

Second Amended Complaint and Demand for Trial

by Jury

TABLE OF AUTHORITIES

CASES: Page

American Ship Building Co. v. NLRB, 380 U.S. 300

A ee ae enna 6 Obes os 4 RR 8S 19, 23

Automobile Club of Michigan, 237 NLRB 379 (1978),

enforced, 631 F.2d 82 (6th Cir. 1980) ............ 4

Automobile Club of Michigan, 267 NLRB 1206

ae 6, 19

Automobile Club of Michigan, Case Nos. 7-CA-15209,

ee ein ceccervervece ces e's 5

Bankey y. Storer Broadcasting Co., 432 Mich. 438, 433

en 12

Belknap, Inc. v. Hale, 463 U.S. 491

eee ek adn use te ees 04 2,10, 20, 24, 27, 29

Bi-Rite Foods, Inc., 147 NLRB 59 (1964)........... 19

Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) .... 13, 19

Construction Laborers v. Curry, 371 U.S. 542

Cais ae eek ava wiaseeebaenesss 2

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469

red a cabee ee aavetev dase nss 2

Derrico v. Sheehan Emergency Hospital, 844 F.2d 22

eal came s ae Saw Cee ke wwe ve 28

Emhart Industries, 297 NLRB No. 29 (1989) ....... 19

Emporium Capwell Co. v. Community Org., 420 U.S.

i eel ee neat ceneeececdeeesss 18, 20, 27

Farmer v. Carpenters, 430 U.S. 290 (1977).......... 21

Farrell vy. Automobile Club of Michigan, 155 Mich.

App. 378, 399 N.W.2d 531 (1986) ............... 13

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) 22

Garner v. Teamsters, 346 U.S. 485 (1953) .......... 15

Golden State Transit Corp. v. Los Angeles, 475 U.S.

Rec ace ecescvcccecccececs 20, 23, 24, 25

TABLE OF AUTHORITIES — (Continued)

Page

Guerincy v. Automobile Club of Michigan, Wayne

County Circuit Court No. 84-402714-CZ.......... 13

H.K. Porter Co. v. NLRB, 397 U.S. 99 (1970) ....... 18

J.I. Case Co. v. NLRB, 321 U.S. 332

CIQGED ok ccncuidanes ves bsaeekeeeeeee 10, 25, 26

Kortas and Keener v. Automobile Club of Michigan,

Wayne County Circuit Court No. 83-334618-CZ ... 13

Laborers Health & Welfare Trust Fund v. Advanced

Lightweight Concrete Co., US. , 108 S.

Ce. GOP CIS xk cncdsscnnccnceeerete«nes 18

LaPorte Transit Co., 286 NLRB No. 10 (1987),

enforced, F.2d (7th Cir. Nov. 1, 1989) .. 19

Longshoremen v. Davis, 476 U.S. 380 (1985) ........ 14

Machinists v. Wisconsin Employment Relations Com-

nelaaion, 437 U.S. C05 TEP Oe «kas be Maw cerca dacee passim

Maushund v. Earl C. Smith, Inc., 795 F.2d 589 (6th

Ci. S9GD oon cess vv tesccteeneeeeeeee 27

Medo Photo Supply Corp. v. NLRB, 321 U.S. 678

(1966) ....n sc ecccccdavesseveneeeeeeen 20

Metropolitan Life Insurance Co. v. Massachusetts, 471

oe ee ere 22, 23, 25

Motor Coach Employees v. Lockridge, 403 U.S. 274

i) re ee ee ae 16, 20, 21, 29

National Metalcrafters, Division of Keystone Consoli-

dated Industries v. McNeil, 784 F.2d 817 (7th Cir.

IDOE) . en cvcaeekvews es suena ee rRIEEeG es 9, 26

NLRB v. Allis-Chalmers Mfg. Co., 388 U.S. 175

(1967)... ccsvccccsessccedesebneteneeeeeen 17, 27

NLRB v. Insurance Agents’ International Union, 361

US. 477 (1960)... cc0c0'svevcesen ts cane eeeenre 22

vii

TABLE OF AUTHORITIES — (Continued)

Page

NLRB v. Katz, 369 U.S. 736 (1962)................ 19, 24

Operating Engineers v. Jones, 460 U.S. 669

OSE NIG CER ee os 16, 17, 19, 21, 29

Pacific Intercom Co., 255 NLRB 28 (1981) ......... 20

Parker v. Connors Steel Co., 855 F.2d 1510 (11th Cir.

1988), cert. denied, 109 S.Ct. 2066 (1989) ........ 29

Powell vy. National Football League, F.2d ;

132 LRRM 2866 (8th Cir. Nov. 1, 1989) ......... 19

Roberts v. Automobile Club of Michigan, 138 Mich.

App. 488, 360 N.W.2d 224 (1984), leave to appeal

denied, 424 Mich. 867 (1986), cert. denied, 479

i riers way cue e ei sais. x

San Diego Building Trades Council vy. Garmon, 359 U.S.

ee eee ind ee hee ar passim

Sears, Roebuck & Co. v. Carpenters, 436 U.S. 180

SECU N EM UoaGe usu a dea seed sandcscss sees 10, 17

Serrano v. Jones & Laughlin Steel Co., 790 F.2d 1279

ee i i woop vd 0s 9, 28

Skladzien vy. Automobile Club of Michigan, Wayne

County Circuit Court No. 84-420005-CK ......... 13

Teamsters Union v. Morton, 377 U.S. 252 (1964) .... 22

Toussaint v. Blue Cross & Blue Shield of Michigan, 408

Mich. 579, 292 N.W.2d 880

eae. cn unos 0 p¥ 0 ane ye bes 9, 13, 27

Wells v. General Motors Corp., 881 F.2d 166 (Sth Cir.

Eee Na cae Nensbowcesvascdsesees 29

Western Newspaper Publishing Co., 269 NLRB 355

ER ers se iispessserecccsceces 19

Wolff v. Automobile Club of Michigan, Wayne County

Circuit Court No. 83-308498-CK ................

Vili

TABLE OF AUTHORITIES — (Continued)

Page

MISCELLANEOUS:

National Labor Relations Act, 29 U.S.C. §151

POE Eee Pe er ee TTT Sere eee e Ty passim

Shepard, Heylman & Duston, Without Just Cause

GE SUE ecdckeuccaccamebeeicte neice 13

Iu the Supreme Court of the United States

OCTOBER TERM, 1989

No.

AUTOMOBILE CLUB OF MICHIGAN, a/k/a AAA, and

AUTO CLUB INSURANCE ASSOCIATION,

PETITIONERS

Vv.

WILLIAM J. BULLOCK,

RESPONDENT

PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF MICHIGAN

Automobile Club of Michigan, a/k/a AAA, and Auto Club

Insurance Association petition for a writ of certiorari to review the

judgment of the Supreme Court of Michigan.

OPINIONS BELOW

The opinion of the Michigan Supreme Court (App. A, infra,

la-55a) is reported at 432 Mich. 472, 444 N.W.2d 114. The

Michigan Supreme Court’s order denying AAA’s motion for

rehearing (App. B, infra, 56a) is unreported. The Michigan

Supreme Court’s “Editor's Note” amending a portion of its

opinion (App. C, infra, 57a) is unreported. The opinion of the

Michigan Court of Appeals (App. D, infra, 58a-70a) is reported

at 146 Mich. App. 711, 381 N.W.2d 793. The order of the Wayne

County Circuit Court (App. E, infra, 71a-72a) is unreported.

JURISDICTION

The judgment of the Michigan Supreme Court was entered

on June 6, 1989, and AAA’s petition for rehearing was denied on

September 8, 1989 (App. B, infra, 56a). The jurisdiction of this

Court is invoked under 28 U.S.C. §1257.!

CONSTITUTIONAL AND

STATUTORY PROVISIONS INVOLVED

The constitutional and statutory provisions involved, set forth

at App. F, infra, 73a-74a, are: Supremacy Clause, United States

Constitution, Article VI, Clause 2; Nationa! Labor Relations Act,

Sections 7, 8(a), 8(d), 9(a), and 10(a), 29 U.S.C. §§157,

158(a), 158(d), 159(a), 160(a).

STATEMENT

Respondent William J. Bullock is a former sales representa-

tive of petitioner Automobile Club of Michigan (“AAA”) who

was discharged from his job because he failed to satisfy minimum

production standards AAA had lawfully implemented following a

bona fide impasse in collective bargaining with Bullock’s union. It

is not disputed by Bullock that he failed to satisfy these produc-

tion standards, or that they were imposed following a bargaining

impasse. Instead, Bullock claims in this state court action that his

employment with AAA was governed by an individual oral

employment contract made when he was hired by AAA ten years

before his union was certified. According to Bullock, his individ-

1 The judgment of the Michigan Supreme Court is “final” for purposes of

28 U.S.C. §1257, even though the Michigan Supreme Court remanded the case

for trial, because it finally disposed of the federal preemption issue, reversal here

would terminate the state claim, and to permit the state claim to go forward in

state court without resolving the preemption issue “would involve a serious risk

of eroding the federal statutory policy” of “ ‘requiring the subject matter of

respondents’ cause to be heard by the . . . Board, not by the state courts.’”

Belknap, Inc. v. Hale, 463 U.S. 491, 497-98 n. 5 (1983), quoting Cox

Broadcasting Corp. v. Cohn, 420 U.S. 469, 483 (1975); Construction Laborers v.

Curry, 371 U.S. 542, 550 (1963).

Sy a le i lg SS i tae RS at

ual contract provided that he would be discharged only if caught

stealing. Bullock contends that this alleged oral contract is en-

forceable by a state court jury despite the National Labor Rela-

tions Board’s intervening certification of Bullock’s union and

despite AAA’s lawful implementation of minimum production

standards and disciplinary procedures following an impasse in

collective bargaining with Bullock’s union. Bullock also contends

that his individual contract provided for radically different com-

pensation terms than those implemented by AAA following the

impasse in bargaining. Bullock thus seeks to have a state court

jury enforce an alleged individual oral employment contract that

is directly at odds with terms and conditions of employment

produced by the collective bargaining process.

Because Bullock’s state-law claims concern conduct that is

arguably protected or prohibited by the National Labor Relations

Act (“NLRA” or “Act”), and because his claims concern

conduct that Congress intended be left unregulated for the com-

batants in labor disputes, it must be held preempted by the

NLRA. Permitting Bullock’s state-law claims to proceed would

both intrude upon the jurisdiction of the National Labor Rela-

tions Board (“NLRB” or “Board’’) and contravene established

federal labor policies governing economic self-help remedies.

Indeed, Bullock’s state-law claims — and similar claims being

asserted in state courts by countless union-represented employees

— would nullify crucial elements of the federal scheme of labor-

management relations, creating uncertainty and unpredictability

in this important field.

1. Factual Background. Respondent Bullock was hired by

AAA in 1968, at a time when AAA’s sales representatives were

not represented by a union (App., infra, 20a). In his state court

complaint filed after he was discharged in 1982, Bullock asserted

(3) that the following “promises” were made when he “entered

the employ” of AAA 14 years earlier (App., infra, 4a-Sa):

(a) That he would have a lifetime job as long as he did

not steal;

(b) That he would work as a commission salesman for

Defendant and enjoy the benefits of a seven (7%) percent

commission for sales which had been in effect for many

years;

business,” he would be able to earn large sums of money;

(d) That if he worked hard and built up his “book of

business,” he would enjoy his later working years with

Defendant by realizing commissions from the “book of

business,” which “book of business” is the accumulated

memberships and policies which a commission salesman

builds up over the years.

Bullock further alleged in his complaint (4) that he there-

after “worked very hard and built up his ‘book of business’ in

reliance upon the promises of Defendant and in order to enable

him to enjoy the benefits of a large salary due to his individual

efforts in developing his business” (App., infra, Sa).

On February 7, 1978, following an election conducted pursu-

ant to §9 of the NLRA, the NLRB certified the Michigan AAA

Sales Association as the exclusive collective bargaining represen-

tative for AAA’s sales representatives in a Detroit-area bargaining

unit (App., infra, 20a). AAA thereafter challenged the propriety

of the NLRB’s certification, contending that only a state-wide

bargaining unit was appropriate. This challenge was ultimately

rejected. See Automobile Club of Michigan, 237 NLRB 379

(1978), enforced, 631 F.2d 82 (6th Cir. 1980).

In the meantime, on July 1, 1978, after the union’s certifica-

tion but before the bargaining unit question was resolved, AAA

eliminated commissions as the basis for compensating sales repre-

sentatives, including Bullock, and instead established a “unit

compensation” system. The union filed an unfair labor practice

charge with the NLRB, asserting that this change in the compen-

sation system constituted failure to bargain in good faith violative

of §8(a)(1) and §8(a)(5) of the NLRA. After a hearing, an

administrative law judge of the NLRB found that the company’s

unilateral change in the compensation system did not “constitute

the initiating of a new plan without consultation or discussion

with the Union.” Automobile Club of Michigan, Case Nos. 7-

CA-15209, 7-CA-15400, ALJ Decision at 12 (1979).2 The judge

accordingly recommended “that the allegations of the complaint

with regard thereto be dismissed.” Jd. The Board affirmed.

After the bargaining unit question was resolved in 1980,

collective bargaining commenced between AAA and the union

toward a first labor contract. However, despite numerous bargain-

ing sessions, AAA and the union failed to reach agreement

because the union firmly resisted a fundamental bargaining de-

mand of the company: that the contract contain minimum pro-

duction standards for sales representatives (App., infra; 20a). In

1981, after an extended period of bargaining, AAA presented to

the union a final “last best” offer containing both its longstanding

proposal for minimum production standards (id.) and a continua-

tion of the unit compensation system that had been in effect since

1978. The minimum production standards included a disciplinary

procedure whereby sales representatives who failed to meet pre-

scribed production standards would receive, in progressive se-

quence, an oral warning, a written warning, probation, and

ultimately discharge (App., infra, 21a).

On August 5, 1981, the company’s final offer was rejected at

a general meeting of the union’s membership. It is undisputed

that, at this juncture, AAA and the union were at a bona fide

impasse in their collective bargaining (App., infra, 20a). Accord-

ingly, AAA was free to unilaterally implement its final offer

including the minimum production standards, disciplinary proce-

dure, and unit compensation system. Effective September 1,

1981, AAA did so (id.). Though the union and its members could

have gone on strike, they chose not to, and instead continued to

work — but now under the terms of the company’s final offer

which had been implemented.

* A copy of the unpublished ALJ Decision has been lodged with the Clerk

of the Court.

Though negotiations continued, the union filed another un-

fair labor practice charge with the NLRB, asserting that AAA

had unilaterally implemented new working conditions in reprisal

for the sales representatives’ support for the union in violation of

§8(a)(1); the union did not assert a violation of the duty to

bargain in good faith under §8(a) (5) and §8(d). After a hearing

before an administrative law judge, this charge too was dismissed,

and the Board affirmed. See Automobile Club of Michigan, 267

NLRB 1206 (1983).

Because Bullock failed to meet the minimum production

standards contained in the implemented final offer under which

he continued to work, he was progressively disciplined in accor-

dance with the disciplinary procedure and was ultimately dis-

charged in February 1982. There is no dispute that Bullock did

fail to satisfy the standards and that the company did comply with

its disciplinary procedure. Bullock was one of 75 sales representa-

tives (out of a total of 570) discharged from their jobs over

several months in accordance with the procedure because they

failed to meet the production standards (App., infra, 18a n.7).

In October 1982, having failed to achieve a collective bar-

gaining agreement with AAA, the union was decertified through

another NLRB election (App., infra, 20a). It is undisputed that

Bullock and his co-workers were discharged while the union was

still certified as their exclusive bargaining representative.

2. Bullock's Lawsuit in State Court. In July 1982 Bullock

filed a one-count complaint, with jury demand, in the Circuit

Court for Wayne County, Michigan, asserting (5) that AAA

had breached an express or implied contract with him by “chang-

ing its policies as follows” (App. G, infra, 76a-77a):

(a) Eliminating commissions as a basis of compensa-

tion for sales persons;

(b) Establishing a “unit compensation” program

whereby the commission salesmen would only get a certain

amount of money per membership or policy rather than a

percentage commission as had been promised to the com-

mission salesmen when they entered the employ of

Defendant;

(d) Imposing unreasonable quotas upon the commis-

sion salesmen which, taken together with the non-competi-

tive rates for Defendant’s policies, made it impossible for the

commission salesmen to achieve their quotas; and,

(e) Coercing Plaintiff and other persons similarly situ-

ated out of their employment thereby breaching the implied

contract between Plaintiff and Defendant.

Bullock’s state-law action thus asserted that his personal terms of

employment were directly contrary to those implemented by

AAA following the impasse in bargaining with Bullock’s union.3

AAA moved in state court to dismiss Bullock’s claims on

NLRA preemption grounds.‘ After extensive briefing and argu-

ment, the trial court denied AAA’s motion but certified the

question for immediate appeal because it involved “controlling

questions of law as to which there is substantial ground for

3 Most of the 75 sales representatives who had been discharged with

Bullock for failing to meet the production standards filed virtually identical

lawsuits in the Michigan Circuit Courts. Many of these suits were stayed

pending a ruling on the NLRA preemption issue.

* AAA had removed Bullock’s suit to U.S. District Court on NLRA

preemption grounds. See San Diego Building Trades Council v. Garmon, 359

U.S. 236 (1959); Machinists v. Wisconsin Employment Relations Commission,

427 U.S. 132 (1976). Anticipating this Court’s later decision in Caterpillar Inc.

v. Williams, 482 U.S. 386, 397-398 (1987), the U.S. District Court granted

Bullock’s motion to remand.

After his suit was remanded, Bullock filed a first amended complaint (App.

H, infra, 79a-83a) in which he deleted his allegation in §5(d) that AAA had

changed its — by imposing quotas, though he left intact his discharge claim

challenging the standard for termination; he also added claims for unjust

enrichment, conversion, age discrimination, and negligent evaluation (App.,

infra, 18a-19a n.7, 24a nIN)-A second amendment to the complaint (App. I,

infra, 84a-90a) later reinstated an allegation in 97(c) regarding the imposition

of quotas, added a claim for promissory estoppel, and dropped the claim for

negligent evaluation.

difference of opinion” and immediate appeal “may materially

advance the ultimate termination of the litigation” (App. E, infra,

7la-72a).

3. The Michigan Court of Appeals’ Opinion. The intermedi-

ate appeals court summarily rejected the company’s NLRA

preemption arguments (App., infra, 69a-70a). In that court’s

view, the Garmon and Machinists preemption doctrines could not

apply simply because no collective bargaining agreement had ever

been consummated between AAA and the union. It was of no

import that the terms of employment at issue had been unilater-

ally implemented following an impasse in collective bargaining

with a union — an economic self-help weapon expressly sanc-

tioned by federal law. As the court saw it, the parties had merely

negotiated for a time and gone their separate ways (id. at 69a):

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, [Bullock’s] preexisting contract rights are still in

effect. Redress for any alleged breach of those rights is

properly brought in state courts.5

5 The appeals court also noted (id. at 70a) its agreement with the NLRA

preemption analysis in that court’s earlier decision in Roberts v. Automobile

Club of Michigan, 138 Mich. App. 488, 360 N.W.2d 224 (1984), leave to appeal

denied, 424 Mich. 867 (1986), cert. denied, 479 U.S. 889 (1986) (Justices

Brennan and Marshall dissenting from the denial). The Roberts case was

decided only by Michigan’s intermediate appellate court, and predated all of the

federal decisions, discussed infra, demonstrating a conflict between the Michi-

gan court and numerous federal courts of appeals. The grounds justifying a grant

of certiorari in Bullock have substantially changed since the denial of certiorari

in Roberts.

4. The Michigan Supreme Court's Opinion. Michigan's

highest court rejected the company’s NLRA preemption argu-

ments for essentially the same reason — the absence of a

consummated contract between AAA and the union.® In the

court’s view, Bullock’s state-law claims, which were predicated on

alleged oral promises that pre-dated the company’s unilateral

implementation of unit compensation and minimum production

standards, were “essentially an ordinary contract action, routinely

heard in state court” because no collective agreement had ever

been reached (App., infra, 27a-28a). The court noted that its far-

reaching employment contract decision in Toussaint v. Blue Cross

& Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880

(1980), “made no exception for unionized employees” (App.,

infra, 28a n.22).7 The court rejected AAA’s argument that its

decision conflicted with National Metalcrafters, Division of Key-

stone Consolidated Industries v. McNeil, 784 F.2d 817 (7th Cir.

1986); and Serrano v. Jones & Laughlin Steel Co., 790 F.2d 1279

(6th Cir. 1986), erroneously concluding that these cases involved

only §301 preemption (App., infra, 21a-22a n.9).

With regard to Garmon preemption, the Michigan court

concluded that “the substance of Bullock’s state law claims

significantly differ[s] from any claims he could have presented to

the NLRB” because the NLRB is only “concerned with the

process of bargaining” and would only “decide whether an im-

passe in bargaining had occurred”; accordingly, the court rea-

® Justice Levin’s separate opinion was the opinion of the court on the

NLRA preemption question (App., infra, 14a-28a) and was joined by each of

the other Michigan Supreme Court Justices (App., infra, 7a-8a, 39a).

7 In finding Bullock’s lawsuit “essentially an ordinary contract action,” the

Michigan Supreme Court’s original opinion posited that Bullock’s union “was

decertified before Bullock was discharged” (App., infra, 28a). This was of

course not true and may have influenced the court’s reasoning. The court issued

an “Editor’s Note” amending this portion of the opinion (App., infra, 57a) at

the time it denied AAA’s motion for rehearing. No question is presented here

whether the NLRA would preempt an employee’s state-law contract claim

based on pre-certification promises, where he is discharged after decertification.

Bullock was unquestionably in the bargaining unit and exclusively represented

by the union when he was discharged.

soned, “Bullock’s state law claims could not have been presented

to the NLRB” nor could the NLRB “have provided a remedy for

his state law claims” (App., infra, 25a-26a). In the Michigan

court’s view, because Bullock could not have obtained relief from

the NLRB on his state-law claim (i.e., the NLRB would have

rejected it), to allow that claim to proceed in state court would

“pose[] no risk of interference with the jurisdiction of the

NLRB?” (id.), citing Belknap, Inc. v. Hale, 463 U.S. 491 (1983),

and Sears, Roebuck & Co. v. Carpenters, 436 U.S. 180 (1978).

The court thus focused not on whether the state-law claim

concerned conduct governed by the NLRA, but on whether the

NLRB would itself adjudicate and remediate the state-law claim.

The Michigan court also rejected the company’s Machinists

preemption argument that an employer’s right to impose a final

“last best” offer following an impasse in bargaining is an eco-

nomic self-help remedy for labor disputants that is controlled only

by the free play of economic forces and must remain free of state

regulation (App., infra, 26a). The court disposed of Machinists

preemption by citing a portion of Belknap v. Hale, supra, that

addressed only Garmon preemption. The court then stated (App.,

infra, 27a):

The selection of a union representative did not instantly

extinguish Bullock’s state law claims or contract rights.

Employees would hesitate to cast their lot with a union if

they were deemed to have forgiven their common-law con-

tract and other claims when a collective bargaining agent was

certified without regard to whether a collective bargaining

agreement is entered into.

Relying on dictum in this Court’s opinion in J.J. Case Co. v.

NLRB, 321 U.S. 332, 336-337 (1944), the Michigan court

reasoned that because negotiations between AAA and the union

had become deadlocked and no labor agreement had been con-

summated, enforcement of pre-existing state-law contract rights

would not “frustrate any policy of the federal labor laws” (App.,

infra, 28a).

The Michigan Supreme Court accordingly rejected both

Garmon and Machinists preemption and determined that the

Michigan courts had jurisdiction of the subject matter of Bul-

lock’s state-law contract claims predicated on individual terms of

employment directly contrary to the unilaterally implemented

unit compensation system and production standards.

AAA moved for rehearing on the NLRA preemption ques-

tion, pointing out that the court’s decision clashed with numerous

federal court of appeals decisions, misconstrued the role and

jurisdiction of the NLRB, overlooked important decisions of this

Court, and applied incorrect standards for both Garmon and

Machinists preemption. The Michigan Supreme Court denied the

motion without comment (App., infra, 57a).

REASONS FOR GRANTING THE PETITION

Since 1935 when the NLRA was enacted, this Court has

repeatedly grappled with preemption issues relating to state-law

actions that might intrude on the federal scheme of labor-

management relations created and governed by the Act. In recent

decades there have evolved in this Court’s decisions two distinct

doctrines of NLRA preemption. First, Garmon preemption pre-

cludes state-law claims that regulate conduct that is actually or

arguably subject to §7 or §8 of the NLRA. San Diego Building

Trades Council v. Garmon, 357 U.S. 236, 245 (1959). Second,

Machinists preemption precludes state-law claims or regulation

affecting the self-help remedies of labor disputants that Congress

intended to be left unregulated and controlled only by the free

play of economic forces. Machinists v. Wisconsin Employment

Relations Commission, 427 U.S. 132, 147 (1976).

Bullock’s state-law claims directly implicate both of these

NLRA preemption doctrines. AAA’s actions in unilaterally im-

plementing new terms of employment following an impasse in

bargaining fell squarely within the purview of the NLRA, and

Bullock’s claims could have been (and in some respects were)

presented as unfair labor practice charges to the NLRB. To

permit Bullock to prosecute his state-law claims seeking to

enforce terms of employment radically different than those collec-

tively bargained with his union, would force AAA to commit an

unfair labor practice by granting more favorable terms to individ-

ual employees and bypassing the collective bargaining process.

Garmon preemption therefore applies. In addition, Bullock’s

state-law claims, if allowed to proceed, would effectively deprive

his employer of its right under the NLRA to implement a final

offer following an impasse in bargaining — a crucial self-help

weapon — thereby altering the balance of economic forces.

Machinists preemption also applies.

The Michigan Supreme Court’s decision permits countless

unionized employees to shield themselves from /awfu/ unilateral

changes in employment terms following an impasse by spurning

the NLRA’s structure for collective bargaining and the NLRB’s

jurisdiction over this field. AAA fully complied with the collective

bargaining process established by the NLRB. But by allowing

state courts to enforce terms of employment wholly inconsistent

with those mandated by federal law, the Michigan court has

effectively rewritten and nullified the federal scheme.’ Any cir-

cumstance involving a hiatus in a collective bargaining agreement

is vulnerable to such state-law challenges. Nor can an employer

know what contrary terms will be asserted by employees for

adjudication by a local jury. Congress did not intend that state

court juries would, in such situations, determine the terms and

conditions of employment for union-represented employees. Pre-

dictability and uniformity in labor relations — the cornerstones of

federal labor law and policy — are thus eroded and employers

8 In Bankey v. Storer Broadcasting Co., 432 Mich. 438, 433 N.W.2d 112

(1989), a companion case to Bullock, the Michigan Supreme Court addressed

an employer’s ability (through reasonable notice uniformly given to affected

employees) to unilaterally alter contractual terms of employment for non-union

employees. The court in Bullock extended these state-law principles to union-

ized employees, as the court expressly acknowledged (App., infra, 28a n.22). By

thus applying state-law contract principles to unionized employees governed by

federal law, the Michigan court nullified the federal scheme for unilaterally

altering terms of employment following an impasse in collective bargaining with

an employee’s union.

(allegedly subject to both federal and state employment laws) are

left in a conundrum of irreconcilable obligations.®

The NLRA preemption issues presented in this case are

recurring ones. They were identified, but not decided, by this

Court in Caterpillar Inc. v. Williams, 482 U.S. 386, 397-398

(1987). The Court there noted that, while Garmon and Machin-

ists preemption defenses under the NLRA would not create

removal jurisdiction, individual employment contract claims

brought by union-represented employees in state court “might be

pre-empted by the NLRA.” /d. at 398 n.12. As state-law individ-

ual contract suits by union-represented employees like Bullock

proliferate, guidance is needed from this Court for employers and

employees to determine the extent to which such claims are

precluded by the NLRA, and to resolve the recurring and

concrete dilemma created by the decision below.!°

Finally, the decision below is not only out of step with this

Court’s Garmon and Machinists decisions and their progeny, but

it is in direct conflict with decisions by the Second, Sixth,

Seventh, and Eleventh Circuits. The Fifth Circuit has deepened

the conflict by rejecting NLRA preemption in a related circum-

stance. These conflicts have created uncertainty in a field that

* Of the scores of virtually identical lawsuits brought by Bullock and his co-

workers in Michigan state courts, five have been tried. In Guerincy v. Automo-

bile Club of Michigan, Wayne County Circuit Court No. 84-402714-CZ, the

employee's claim was tried to the court rather than a jury, and the judge entered

a “no cause” judgment in AAA's favor. Four cases tried to state court juries

have produced verdicts: Skladzien v. Automobile Club of Michigan, Wayne

County Circuit Court No. 84-420005-CK ($1,100,587); Wolff v. Automobile

Club of Michigan, Wayne County Circuit Court No. 83-308498-CK ($300,000,

remitted to $220,000); Kortas and Keener v. Automobile Club of Michigan,

Wayne County Circuit Court No. 83-334618-CZ ($622,254 and $592,302

respectively); Farrell v. Automobile Club of Michigan, 155 Mich. App. 378, 399

N.W.2d 531 ($150,000).

10 While the Michigan Supreme Court's 1980 decision in Toussaint v. Blue

Cross & Blue Shield of Michigan, supra, was one of the earliest and most

sweeping, court decisions in at least 36 States have now recognized express and

implied contract exceptions to the employment-at-will doctrine. Shepard,

Heylman & Duston, Without Just Cause 8-9 (BNA 1989).

should bear predictability and national uniformity. Review by this

Court is plainly warranted. Inasmuch as the claims at issue

clearly implicate federal labor policy under the NLRA and the

jurisdiction of the NLRB, were there to be any doubt the Court

may wish to request the views of the Solicitor General.

I. The Michigan Supreme Court Has Decided An Impor-

tant Federal Question In A Way That Cannot Be Recon-

ciled With This Court’s Decisions And Threatens To

Disrupt Federal Labor Policy.

A. Bullock’s state-law claims are preempted under Gar-

mon because they concern activity arguably subject to

the NLRA.

There is no dispute in this case that (1) AAA bargained to

impasse with Bullock’s union and thereafter lawfully imple-

mented its final offer including the minimum production stan-

dards and unit compensation system; (2) Bullock (and his co-

workers) thereafter continued to work under the new terms and

was disciplined and discharged in accordance with the production

standards and disciplinary procedure; (3) Bullock’s union filed

charges with the NLRB challenging certain of AAA’s actions,

and the NLRB dismissed each of the union’s charges; and (4)

Bullock’s state court lawsuit seeks to have a jury adjudicate terms

of an alleged individual oral employment contract that are directly

contrary to those implemented following the impasse in

bargaining.

In these circumstances, the Garmon preemption doctrine

mandates that federal labor law and policy supersede Bullock’s

state cause of action. The decision below cannot be reconciled

with the rulings of this Court or the principles of federal labor

policy reflected in those rulings.

As this Court most recently stated in Longshoremen v.

Davis, 476 U.S. 380 (1985):

Subject to exception only in limited circumstances, “[w]hen

an activity is arguably subject to §7 or §8 of the Act * * *,

a aS Rani A am

the States as well as the federal courts must defer to the

exclusive competence of the National Labor Relations Board

if the danger of state interference with national policy is to be

averted.”

Id. at 381, quoting Garmon, supra, 359 U.S. at 245. Citing its

early opinion in Garner v. Teamsters, 346 U.S. 485, 490-491

(1953), the Court in Longshoremen repeated “what has come to

be the accepted basis for the broadly pre-emptive scope of the

NLRA” (476 US. at 389):

“Congress did not merely lay down a substantive rule of law

to be enforced by any tribunal competent to apply law

generally to the parties. It went on to confine primary

interpretation and application of its rules to a specific and

specially constituted tribunal and prescribed a particular

procedure for investigation, complaint and notice, and hear-

ing and decision, including judicial relief pending a final

administrative order. Congress evidently considered that cen-

tralized administration of specially designed procedures was

necessary to obtain uniform application of its substantive

rules and to avoid these diversities and conflicts likely to

result from a variety of local procedures and attitudes toward

labor controversies... . A multiplicity of tribunals and a

diversity of procedures are quite as apt to produce incompati-

ble or conflicting adjudications as are different rules of

substantive law.” (Emphasis added.)

The Court in Longshoremen went on to emphasize the “now

well-established scope of [Garmon] pre-emption” (id.): that in

light of the statute’s “complex and interrelated federal scheme of

law, remedy, and administration,” Garmon, 359 U.S. at 243, “due

regard for the federal enactment requires that state jurisdiction

must yield” (id. at 244) in circumstances where “the activities

sought to be regulated by a State are clearly or may fairly be

assumed to be within the purview of §7 or §8.” Even in ambigu-

ous situations, this Court admonished, “courts are not primary

tribunals to adjudicate such issues. It is essential to the adminis-

tration of the Act that these determinations be left in the first

instance to the National Labor Relations Board.” 476 U.S. at

389-390, quoting Garmon, 359 U.S. at 244-245. The force of

NLRA preemption is so powerful that, “[i]f there is pre-emption

under Garmon, then state jurisdiction is extinguished.” 476 U.S.

at 391 (footnote omitted).

The Garmon preemption doctrine has frequently been in-

voked to bar common law claims, however styled, brought by

employees in state courts. For example, in Motor Coach Employ-

ees v. Lockridge, 403 U.S. 274 (1971), a union member brought a

state court contract action against his union after being dis-

charged pursuant to a union security clause in a labor contract.

This Court held that Lockridge’s state-law claim involved con-

duct within the purview of §7 and §8 of the Act, and explicitly

rejected the reasoning of the Idaho Supreme Court — identical to

the Michigan Supreme Court’s reasoning here — that the theory

or label of the state lawsuit made a difference:

Assuredly the proposition that Lockridge’s complaint was

not subject to the exclusive jurisdiction of the NLRB be-

cause it charged a breach of contract rather than an unfair

labor practice is not tenable. Pre-emption * * * is designed to

shield the system from conflicting regulation of conduct. /t is

the conduct being regulated, not the formal description of

governing legal standards, that is the proper focus of concern.

Id. at 292 (emphasis added).

More recently the Court held in Operating Engineers v.

Jones, 460 U.S. 669 (1983), that a state-law claim of interference

with an employment contract brought by an employee/union

member was preempted under Garmon because, once again, it

involved conduct arguably protected or prohibited by the Act.

This was so even though the state-law claim was not identical to

that which could have been presented to the NLRB. The Court

rejected Jones’ “identicality of controversies” argument — which

was fully relied on by the court below — for two reasons that

apply here. First, adjudicating the employee’s state-law claim

would require the state court to decide federal labor law issues in

the first instance, issues which “should be resolved by the Board”;

second, the claims overlapped on a “crucial element” of federal

law rendering “the federal and state claims * * * the same in a

fundamental respect.” 460 U.S. at 682. As a result, “[t]}he risk of

interference with the Board’s jurisdiction [was] obvious and

substantial.” Jd. at 683.1!

Contrary to these decisions of this Court, the Michigan

Supreme Court characterized Bullock’s lawsuit as “essentially an

ordinary contract action, routinely heard in state court” (App.,

infra, 27a). The Michigan court not only applied the notion of

“identicality” in an improper and mechanistic way, see Operating

Engineers v. Jones, supra; it disregarded the “arguably protected”

branch of Garmon preemption; and it wholly failed to understand

the scope of §7 and §8 of the NLRA and the role and jurisdiction

of the NLRB. Most fundamentally, the court ignored the fact

that, under §9(a) of the Act, once Bullock and his co-workers

voted for union representation, the union became “the exclusive

representative[ } of all the employees in such unit for the purposes

of Collective bargaining in respect to rates of pay, wages, hours of

employment, or other conditions of employment * * *.” As this

Court stated in NLRB v. Allis-Chalmers Mfg. Co., 388 U.S. 175,

180 (1967):

National labor policy has been built on the premise that by

pooling their economic strength and acting through a labor

11 Compare Sears, Roebuck & Co. v. Carpenters, 436 U.S. 180, 197

(1978), upon which the Michigan Supreme Court rested its decision. Sears

involved an employer’s trespass action against union picketing where the union

declined to file an unfair labor practice charge with the NLRB, and the

employer was unable to do so. The Court stated that the “critical inquiry” for

the “arguably prohibited” branch of Garmon preemption is whether “the

controversy presented to the state court is identical to*** or different

from * * * that which could have been, but was not, presented to the Labor

Board.” 436 U.S. at 197. The state court issue in Sears was the location of the

picketing whereas the NLRA issues were “completely unrelated to the simple

question whether a trespass had occurred.” /d. at 198. The Court in Operating

Engineers v. Jones, supra, appears to have eased the “identicality of controver-

sies” standard in the context of an employee claim more closely resembling that

here. In any event, this “identicality” standard is not applicable to the “arguably

protected” branch of Garmon preemption, upon which AAA also relies.

organization freely chosen by the majority, the employees of

an appropriate unit have the most effective means of bar-

gaining for improvements in wages, hours, and working

conditions. The policy therefore extinguishes the individual

employee's power to order his own relations with his em-

ployer and creates a power vested in the chosen representa-

tive to act in the interests of all employees. * * * Thus only

the union may contract the employee's terms and conditions

of employment * * *. The employee may disagree with many

of the union decisions but is bound by them. (Emphasis

added. )

See also Emporium Capwell Co. v. Community Org., 420 U.S.

50, 62-64 (1975) (separate bargaining by individual employees is

antithetical to the Act’s principle of exclusive representation and

is therefore unprotected).

The core of Bullock’s state-law claims (and those of his 75

discharged co-workers) is that AAA wrongfully applied to him

the unit compensation system and minimum production standards

implemented following the impasse in collective bargaining with

Bullock’s union — inasmuch as he had allegedly been orally

promised 14 years earlier that he would be paid on a commission

basis and discharged only if caught stealing. Bullock thus con-

tends that he had an individual oral employment contract provid-

ing totally different terms than those flowing from the collective

bargaining process. Bullock’s state-law claims could surely have

been presented to the NLRB as an unlawful unilateral change by

AAA that was “arguably prohibited” by §8(a)(5) and §8(d) of

the NLRA, though the NLRB would likely have rejected his

claims (as the Michigan court surmised) on the ground that

AAA’s action was in fact sanctioned or “protected” by the Act.

This is so because the right of an employer to implement a final

offer following an impasse in collective bargaining with a union,

and thereby lawfully alter prior terms of employment for unit

employees, is established beyond any question. See, e.g., Laborers

Health & Welfare Trust Fund v. Advanced Lightweight Concrete

Co, _US.__, 108 S. Ct. 830, 833 n.5 (1988); HK. Porter

Co. v. NLRB, 397 U.S. 99, 108-109 (1970); American Ship

Building Co. v. NLRB, 380 U.S. 300, 316 (1965); NLRB v. Katz,

369 U.S. 736, 745 (1962); Powell v. National Football League,

___F.2d__, 132 LRRM 2866, 2872 (8th Cir. Nov. 1, 1989);

Western Newspaper Publishing Co., 269 NLRB 335 (1984); Bi-

Rite Foods, Inc., 147 NLRB 59 (1964). Having exercised that

right, it would be plainly violative of §8(a)(5) and §8(d) for an

employer to apply to Bullock any terms other than those con-

tained in the unilaterally implemented final offer. See Emhart

Industries, 297 NLRB No. 29 (1989). If AAA could not have

voluntarily acceded to Bullock’s claim under federal law, a

fortiori AAA cannot be compelled to do so by Bullock’s state

court action.

Bullock and his union were free to file an unfair labor

practice charge with the NLRB contesting AAA’s unilateral

implementation of the terms of its final offer; if a violation were

found, the NLRB would be empowered to order re-establishment

of the prior terms (the very relief Bullock seeks in his suit).

LaPorte Transit Co., 286 NLRB No. 10 (19 __ ), enforced, ___

F.2d __ (7th Cir. Nov. 1, 1989). Indeed, the union did file an

NLRB charge here, though it charged AAA only with reprisals

under §8(a)(1) and not a failure to bargain in good faith under

§8(a) (5) or §8(d). The NLRB dismissed the charge for lack of

merit. See Automobile Club of Michigan, 267 NLRB 1206

(1983). AAA’s action was thus presumptively “protected” by the

NLRA. But, even if it were not, it would have been “arguably

prohibited” and still subject to Garmon preemption. See Operat-

ing Engineers v. Jones, supra, 460 U.S. at 681-684.

The Board’s jurisdiction is implicated on a second ground.

Bullock’s state-law claim posits that his employer had individually

contracted with him for terms of employment directly contrary to

those produced by collective bargaining with Bullock’s exclusive

representative under §9(a) of the Act. As the Court noted in

Caterpillar Inc. v. Williams, 482 U.S. 386, 398 n.12 (1987), “it is

an unfair labor practice ‘for the employer to disregard the bar-

gaining representative by negotiating with individual employees,

whether a majority or a minority, with respect to wages, hours,

and working conditions,’”’ quoting Medo Photo Supply Corp. v.

NLRB, 321 U.S. 678, 684 (1944). The Medo decision affirmed

“the essential principle” under the Act that “[b]argaining carried

on by the employer directly with the employees * * * who have

not revoked their designation of a bargaining agent, would be

subversive of the mode of collective bargaining which the statute

has ordained * * *.” Jd. See also Emporium Capwell Co., supra;

Pacific Intercom Co., 255 NLRB 28 (1981) (individual agree-

ments with employees establishing wage rate different than col-

lectively bargained rate “bypassed” union and violated

§8(a) (5)).

In short, Bullock’s state-law claims ineluctably concern con-

duct arguably protected or prohibited by the Act. Indeed, his

claims seek to achieve a result that would be violative of the Act.

He was at all relevant times exclusively represented by the union

which bargained on his behalf. He had access to the Board’s

remedies.!2 AAA’s unilateral implementation of new employment

terms was protected, or it could have been challenged as prohib-

ited. While the Michigan court was likely correct that the NLRB

would have rejected Bullock’s claims as meritless, and therefore

“would not have provided a remedy for his state-law claims”

(App., infra, 25a-26a), this Court has consistently rejected such

a test for Garmon preemption. See, e.g., Motor Coach Employees

v. Lockridge, supra, 403 U.S. at 292. Indeed, the test for Garmon

preemption utilized by the Michigan court — whether an NLRB

charge is “identical” and would “provide[ ] a remedy for his state-

law claims” — would render Garmon preemption inapplicable in

virtually every case, despite this Court’s repeated pronouncements

to the contrary. The proper test is whether the state-law claim

12 Bullock was clearly not an “innocent third party” outside the bargaining

relationship and without a Board remedy, as were the non-union strike replace-

ments in Belknap, Inc. v. Hale, 463 U.S. 491, 510-511 (1983) — a case

inappropriately relied upon by the Michigan court below. See also Golden State

Transit Corp. v. Los Angeles, 475 U.S. 608, 617 n.7 (1986).

seeks to regulate conduct within the purview of the Act. That test

is plainly satisfied.

The decision below foments all of the evils Garmon preemp-

tion was designed to avoid. It not only causes a “potential conflict

of rules of law, of remedy, and of administration,” 359 U.S. at

242, but it produces a direct confrontation between the federal

scheme of labor relations and collective bargaining (which per-

mits AAA’s labor practices here) and a state-law contract theory

(which purports to condemn those practices as violative of alleged

oral “promises”). It is the Board’s function to review the propri-

ety of collective bargaining practices. “To leave the States free to

regulate conduct so plainly within the central aim of federal

regulation involves too great a danger of conflict between power

asserted by Congress and requirements imposed by state law.” /d.

at 244. As the Court stated in Farmer v. Carpenters, 430 US.

290, 300 n.9 (1977), “Board approval of various * * * practices

would be meaningless if state courts could declare those proce-

dures violative of [a plaintiff's] contractual rights * * *.” For the

Act’s objectives of uniformity and predictability in labor-manage-

ment relations to be achieved, administration of matters governed

by the Act must be left to the Board because to do otherwise

“would create potential frustration of national purposes.” Gar-

mon, 359 U.S. at 244-245. This is especially so where state-law

claims like Bullock’s are triable to local juries which have no

competence in the “complex and interrelated federal scheme of

law, remedy, and administration” under the NLRA. /d. at 243.

Bullock’s state-law contract claims should accordingly be

held preempted under the Garmon doctrine.!*

13 The Court recognized in Garmon, 359 U.S. at 243-244, that states retain

the power to regulate “where the activity regulated was a merely peripheral

concern” of the Act or “where the regulated conduct touched interests so deeply

rooted in local feeling and responsibility that, in the absence of compelling

congressional direction; we could not infer that Congress had deprived the States

of the power to act” (footnote omitted). The Michigan Supreme Court did not

rest its holding of non-preemption on either of these exceptions, nor would either

apply. Compare Motor Coach Employees v. Lockridge, supra; Operating Engi-

B. Bullock’s state-law claims are preempted under Ma-

chinists because they undermine an economic self-help

remedy that Congress intended to be unregulated and

controlled only by the free play of economic forces.

A second branch of NLRA preemption, often called Ma-

chinists preemption, was developed in Teamsters Union v. Mor-

ton, 377 U.S. 252 (1964), and Machinists v. Wisconsin

Employment Relations Commission, 427 U.S. 132 (1976). This

branch precludes state efforts to regulate conduct that, while

neither arguably protected nor prohibited by the Act, nevertheless

implicates the federal scheme of labor relations embodied in the

Act. It “protects against state interference with policies impli-

cated by the structure of the Act, by pre-empting state law and

state causes of action concerning conduct that Congress intended

to be unregulated.” Metropolitan Life Insurance Co. v. Massachu-

setts, 471 U.S. 724, 749 (1985). See also Fort Halifax Packing

Co. v. Coyne, 482 U.S. 1, 19-20 (1987). In essence, Machinists

preemption inquires whether ““Congress occupied this field and

closed it to state regulation.” Machinists, 427 U.S. at 146,

quoting Morton, 377 US. at 258.

Central to Machinists preemption is the principle that “[i]n

selecting which forms of economic pressure should be prohib-

ited... , Congress struck the ‘balance... between the uncon-

trolled power of management and labor to further their respective

interests.’ ” Jd. In establishing this balance of conflicting interests,

Congress left unregulated certain self-help weapons that were to

be controlled solely by “the free play of economic forces.”

Machinists, 427 U.S. at 146-147. Moreover, for a state to regulate

self-help weapons intended to be left for the “ ‘free play of

contending economic forces, . . . is not merely [to fill] a gap [by]

outlaw[ing] what federal law fails to outlaw; it is denying one

party to an economic contest a weapon that Congress meant him

to have available.’ Jd. at 150 (citation omitted). In NLRB v.

neers v. Jones, supra. Indeed, the statutory interests involved in this case go

straight to the heart of the Act.

Insurance Agents’ International Union, 361 U.S. 477, 489 (1960),

the Court stated:

The presence of economic weapons in reserve, and their

actual exercise on occasion by the parties, is part and parcel

of the system that the Wagner and Taft-Hartley Acts have

recognized. * * * [T]he two factors — necessity for good-

faith bargaining between parties, and the availability of

economic pressure devices to each to make the other incline

to agree on one’s terms — exist side by side.

In defining federal labor policy under the NLRA, “Congress

determined both how much the conduct of unions and employers

should be regulated, and how much it should be left unregulated.”

Metropolitan Life Insurance Co., supra, 471 U.S. at 751. The

balance thus struck prohibits a state from depriving a party to a

labor dispute of an economic self-help weapon Congress granted

to it.

Recently, in Golden State Transit Corp. v. Los Angeles, 475

U.S. 608 (1986) — a critical case not addressed by the court

below — this Court applied Machinists preemption principles in

holding that the City of Los Angeles had impermissibly

“thwarted” the collective bargaining process by imposing a condi-

tion (that the employer resolve a labor dispute by a specified

date) on the granting of a taxi franchise renewal. /d. at 615. By

imposing this condition, the City had improperly denied the

employer “the exercise of economic self-help” which the em-

ployer was “entirely justified in using * * * to withstand the strike

in an attempt to obtain bargaining concessions from the union.”

Id.

The economic right of an employer under the NLRA unilat-

erally to implement a final offer following an impasse in collec-

tive bargaining with a union has long been recognized by this

Court and the NLRB. See pages 18-19, supra. The ability to

“institute unilaterally [new] working conditions” is an important

employer “economic weapon” necessary “to counterbalance the

employees’ power of strike.” American Ship Building Co. v.

NLRB, 380 U.S. 300, 316 (1965). It is undisputed that AAA

exercised this federally protected weapon when, following an

impasse in bargaining with Bullock’s union, it implemented the

terms of its final offer. Once implemented, these terms became

the established and binding terms for bargaining unit employees,

including Bullock, until altered through further bargaining or

following another impasse. NLRB v. Katz, supra.

By permitting bargaining unit employees to maintain state

court actions grounded on individual employment contracts con-

taining contrary terms, the Michigan court has emasculated an

employer’s ability to utilize this weapon in the first instance. As in

Golden State Transit, 475 U.S. at 615, allowing such claims

“thwart[s] * * * the exercise of economic self-help.” The mere

threat of expensive and time-consuming state lawsuits challenging

the terms under which each individual employee works following

unilateral implementation of a final offer would so chill an

employer’s ability to utilize this weapon that it would exercise it

only at its peril. The present situation aptly illustrates this peril:

Eight years after unilaterally altering terms following the impasse

in bargaining, AAA continues to defend scores of state court

lawsuits in which local juries will, under the decision below,

determine for each individual plaintiff whether AAA effectively

implemented new terms of employment on September 1, 1981.

Under the Michigan court’s holding, state court juries will be the

after-the-fact regulators of an employer’s exercise of a federally

sanctioned economic self-help right. That is the Board’s responsi-

bility. Juries will have the power to nullify that right altogether by

imposing contrary terms of employment allegedly arising from

ora! promises. That flies in the face of the Machinists doctrine.

The Michigan court simplistically reasoned that “Bul-

lock’s action is essentially an ordinary contract action, routinely

heard in state court” (App., infra, 27a). The court added that its

holding in “Toussaint made no exception for unionized employ-

ees” (App., infra, 28a n.22). The court then purported to balance

federal and state interests, improperly utilizing a portion of this

Court’s Belknap opinion that addressed only Garmon preemption.

Machinists preemption entails no such balancing of state and

federal interests. Metropolitan Life Insurance Co., supra, 471

U.S. at 749 n.27; see also Golden State Transit, supra, 475 U.S. at

618 n.8. The Michigan court’s holding was not just mistaken. It

threatens to disrupt federal labor law and policy governing eco-

nomic self-help weapons.

In concluding that Bullock’s (and his co-workers’) individual

state-law contract claims would not be extinguished until a

collective bargaining agreement was actually consummated

(which never occurred as the union was later decertified), the

Michigan court relied on dictum contained in this Court’s opinion

in J.J. Case Co. v. NLRB, 321 U.S. 332, 336-337 (1944) (App.,

infra, 27a-28).14 The actual holding in J.J. Case concerned an

14 This Court stated in dictum in J./. Case:

Care has been taken in the opinions of the Court to reserve a field for the

individual contract, even in industries covered by the National Labor

Relations Act, not merely as an act or evidence of hiring, but also in the

sense of a completely individually bargained contract setting out the terms

of employment, because there are circumstances in which it may legally be

used, in fact, in which there is no alternative. Without limiting the

possibilities, instances such as the following will occur: Men may continue

work after a collective agreement expires and, despite negotiation in good

faith, the negotiation may be deadlocked or delayed; in the interim express

or implied individual agreements may be held to govern. 321 U.S. at 336-

337 (emphasis added).

The Michigan court failed to note, however, that this dictum concluded

with the following statement by this Court:

As the employer in these circumstances may be under no legal obligation to

bargain collectively, he may be free to enter into individual contracts. /d. at

337 (footnote omitted) (emphasis added).

While it may have been less clear in 1944 under the original version of the

NLRA (which did not include §8(d)’s definition of the duty to bargain in in

good faith) whscher an employer would legally “be free to enter into individua!

contracts” in those circumstances, it certainly has been clear since the Taft-

Hartley Act’s addition of §8(d) in 1947 that an employer would violate

§8(a)(5) by bargaining individually with employees in such circumstances. See

cases cited at pages 19-20, supra. As the reference to “a completely individually

bargained contract setting out the terms of employment” also suggests, the

Court in J.J. Case did not have in mind the type of contractual oral “promises”

alleged here which have been made enforceable by state courts only in the last

decade. See note 10, supra.

entirely different issue than the enforceability of individual con-

tracts by union-represented employees:

Individual contracts, no matter what the circumstances that

justify their execution or what their terms, may not be

availed of to defeat or delay the procedures prescribed by the

National Labor Relations Act looking to collective bargain-

ing, nor to exclude the contracting employee from a duly

ascertained bargaining unit; nor may they be used to forestall

bargaining or to limit or condition the terms of the collective

agreement. 321 U.S. at 337.

Thus, J.J Case’s holding actually supports an opposite proposition

than that for which the court below cited it.

In relying on dictum, the Michigan court not only discarded

the holding of that case, but contravened fundamental federal

labor principles by generating wholesale state regulation of the

collective bargaining process. Under the Michigan court’s deci-

sion, most employers’ pre-agreement bargaining options would be

foreclosed because exercising them could produce a multiplicity

of state-law claims by individual employees. This certainly was

not the result contemplated by Congress nor intended by J.J.

Case.

II. The Michigan Supreme Court’s Decision Conflicts With

Decisions Of Several Federal Courts Of Appeals.

A conflict exists on the NLRA preemption issue between the

Michigan Supreme Court’s decision below and decisions of the

Second, Sixth, Seventh, and Eleventh Circuits. The Michigan

court either disregarded these decisions, or mischaracterized

“AAA’s reliance” on them as “misplaced” because they only

“involve §301 preemption” (App., infra, 21a-22a n.9). Each of

the following decisions holds that state-law claims arising in

comparable factual contexts are preempted under Garmon or

Machinists.

In a case virtually identical to the instant case, National

Metalcrafters, Division of Keystone Consolidated Industries v.

McNeil, 784 F.2d 817 (7th Cir. 1986), an employee and a state

official clainied that the company had violated an Illinois wage

payment statute by making vacation payments under a formula

unilaterally implemented following an impasse in bargaining with

the union — rather than under the pre-impasse formula. /d. at

823. In a carefully reasoned opinion by Judge Posner, the Seventh

Circuit held the plaintiffs’ state-law claims preempted under

Garmon. Id. at 826-828. After thoroughly analyzing §8 of the

NLRA, the court concluded that the company’s right unilaterally

to implement its final offer following impasse was “protected” by

the Act, and that if the company had failed to bargain in good

faith to impasse, its conduct would have been “prohibited” by the

NLRA. In either event the plaintiffs’ state-law claim was pre-

empted. /d. at 827. In essence, the state-law claim simply created

a new and conflicting layer of remedies for matters governed by

the NLRA. /d. at 828. Thus, National Metalcrafters is directly

inconsistent with the Michigan court’s holding here.

In Maushund v. Earl C. Smith, Inc., 795 F.2d 589 (6th Cir.

1986), a bargaining unit employee who had not yet achieved

seniority coverage under the collective bargaining agreement (by

virtue of his “casual” status) alleged a “cause for discharge”

individual employment contract under Toussaint v. Blue Cross &

Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880 (1980)

— precisely the same theory Bullock advances here. The Sixth

Circuit held Maushund’s state law claim preempted by the

NLRA:

[I]t is beyond question that Maushund must look to federal

labor law for any relief and that his sole remedy, if any, lies

not in state law but in the terms of the collective bargaining

agreement. NLRB vy. Allis-Chalmers Mfg. * * *. The collec-

tive bargaining process prohibits Maushund from engaging in

separate negotiations with the company and precludes any

actions to enforce such an agreement. See Emporium Cap-

well v. Western Add. Comm. Org. * * *. Maushund’s reliance

upon Belknap v. Hale * * * is misplaced. While Belknap held

that an employer’s obligations under a collective bargaining

agreement did not insulate it from a state’s “normal rules of

law” governing its relationships with third parties, Maushund

here clearly was not such a third party. 795 F.2d at 590-591.

This holding too is in direct conflict with that of the Michigan

court.

The Second Circuit’s decision in Derrico v. Sheehan Emer-

gency Hospital, 844 F.2d 22 (2d Cir. 1988), is also in direct

conflict. A bargaining unit employee was discharged during the

hiatus between an expired collective bargaining agreement and a

newly bargained one. He predicated a state-law wrongful dis-

charge claim on an alleged implied “cause for discharge” contract

— the same type of claim asserted by Bullock here. The Second

Circuit found this claim “inconsistent with the NLRA’s struc-

ture” and therefore preempted under Machinists. Id. at 29. First,

the court concluded that permitting the claim would artificially

limit the bargaining parties’ “economic weapons” which are “an

integral part of the balance the NLRA strikes between labor and

management.” /d. The court held:

Exposure to liability at state law for breach of contract under

the circumstances of this case would significantly alter the

labor-management relationship * * *. Jd.

Second, the employee’s state-law theory “would significantly

affect the collective bargaining process that lies at the heart of the

NLRA.” Jd. “The potential for disrupting collective bargaining,”

the court reasoned, “is thus especially serious in this case and

compels the conclusion that the state-law claim is preempted by

the NLRA.” Jd.

The approach to this NLRA preemption issue in Serrano v.

Jones & Laughlin Steel Co., 790 F.2d 1279 (6th Cir. 1986), is

also in conflict with that of the Michigan court below. A group of

unionized employees alleged that their employer had committed

state-law fraud, misrepresentation, and breach of contractual

duties by making express or implied promises to employees

regarding its decision to keep a plant open. The employees’ union

had collectively bargained a concession agreement in anticipation

of the plant staying open. The court held that the employees’

state-law claims arising from their termination were preempted by

the NLRA under Garmon, Motor Coach Employees v. Lockridge,

and Operating Engineers v. Jones. The gravamen of their state-

law theories “implicated” the duty to bargain under §8(a) (5) and

§8(d) of the NLRA, and the alleged conduct would arguably

have involved a violation of §8. Moreover, “[f]ailure of an

employer to bargain in good faith about terms and conditions of

employment is not peripheral to the concerns of federal labor law;

rather, it strikes at the heart of one of the basic concerns of that

law.” Id. at 1287. The Sixth Circuit also distinguished Belknap v.

Hale as involving two separate groups of employees who had

entirely different controversies with their employer: (1) union-

represented strikers who were engaged in collective bargaining

governed strictly by the NLRA; and (2) non-union replacements

“innocent third parties” — who were not involved in the

collective bargaining process and whose remedies rested solely on

state law. Jd. at 1287-1288.

Finally, in Parker v. Connors Steel Co., 855 F.2d 1510, 1515S-

1518 (11th Cir. 1988), cert. denied, 109 S.Ct. 2066 (1989), the

Eleventh Circuit adopted the Sixth Circuit’s reasoning in Serrano

in holding that virtually identical state-law claims were pre-

empted by the NLRA.!5

These conflicts in the application of the NLRA preemption

doctrines create uncertainty in a field that, by virtue of the

preemptive force of the NLRA, should bear predictability and

national uniformity. AAA urges the Court to resolve the conflict,

clarify whether the NLRA preempts union-represented employ-

ees’ state-law individual contract claims in the circumstances

presented here, and bring certainty to this important area affect-

ing labor-management relations.

18 The Fifth Circuit in Wells v. General Motors Corp., 881 F.2d 166, 169-

172 (Sth Cir. 1989), rejected the company’s argument that employees’ state-law

claims, arising in circumstances not unlike those in Serrano and Parker, were

preempted by the NLRA. Wells thus demonstrates conflict within the Circuits

on this NLRA preemption issue.

CONCLUSION

For the reasons stated, the petition for a writ of certiorari

should be granted.

December 1989

Respectfully submitted,

JOHN CORBETT O’MEARA

Counsel of Record

THEODORE R. OPPERWALL

Dickinson, Wright, Moon,

Van Dusen & Freeman

800 First National Building

Detroit, Michigan 48226

(313) 223-3500

APPENDICES

Appendix A

MICHIGAN SUPREME COURT

472 432 Micu 472 [June

BULLOCK v AUTOMOBILE CLUB OF MICHIGAN

Docket No. 78027. Argued March 5, 1987 (Calendar No. 19). Decided

June 6, 1969.

William J. Bullock brought an action in the Wayne Circuit Court

against the Automobile Club of Michigan, challenging his

termination as a commission sales representative after fourteen

years with aaa and changes in his compensation. The plaintiff

asserted an oral contract of employment on the basis of state-

ments made to him when he entered aaa’s employ, and

claimed that the contract was breached by aaa when it

changed its method of compensating commission sales represen-

tatives, adopted new production standards and disciplinary

procedures, and subsequently terminated him as a sales repre

sentative for failing to meet the new standards. The court,

Michael_L. Stacey, J. denied aaa’s motion for accelerated or

summary judgment, finding that the plaintiff had stated claims

on which relief could be granted and that his claims were not

preémpted by federal law. The Court of Appeals, Hoop, PJ.,

and Bronson and R. L. Tanvonen, JJ., affirmed in an opinion

per curiam (Docket No. 71773). Aaa appeals.

In an opinion by Justice Boyuz, joined by Justices Bricxiey,

CavANAGH, and Agcugr, the Supreme Court held:

The plaintiff's claim is not preémpted by the National Labor

Relations Act. On the basis of the record, the defendant is not

entitled to judgment as a matter of law.

The plaintiff pled an action for breach of a verbal contract of

employment alleged to have arisen at the commencement of his

employment. To the extent that plaintiff relies on policy manu-

als as the basis for his claim, In re Certified Question, 432 Mich

438 (1989), provides the guidelines for resolution on remand as

to whether unilateral change in the policy manuals would be

effective. However, defendant’s assertion of a change in policy

manuals does not, on this record, establish that there is no

genuine issue of material fact as to whether the plaintiff had

an enforceable contract containing a limitation on discharge.

Justice Levin, writing separately, stated:

The plaintiffs state law claims are not preémpted by the

National Labor Relations Act. The denial of the defendant’s

Appendix A

1989] BuLiock v AAA 473

production

ment contract is one of fact; it cannot be decided on a i

for summary disposition, but must be decided by the trier of

meee end om

are provided by In re Certified Question, 432 Mich 438 (1989).

The defendant’s motion for summary judgment should have

been granted, however. It is not reasonable to construe the

alleged oral assurances by the employer as an enforceable

agreement to discharge only for cause. Subjective expectancies

of continued employment do not constitute a termination-for-

cause contract, and the plaintiff's claim should fail as a matter

of law.

Caution should be exercised in judging the viability of a

breach of contract action based solely on alleged ora! represen-

tations recalled years after hiring. What is needed is a modi-

cum of realism and common sense. “Lifetime” employment

contracts are extraordinary and must be expressed in clear and

unequivocal terms. In this case, the allegations are insufficient

as a matter of law to provide a basis for a contract of employ-

ment that was not terminable at will.

146 Mich App 711; 381 NW2d 793 (1985) affirmed.

John W. Mason, Mary Taylor Zick, and Theo-

dore S. Andris, P.C. (by Thomas H. Bannigan), for

the plaintiff.

Fox & Grove (by Kalvin M. Grove, Steven L.

Gillman, and Allison C. Blakley) and Finkel,

Whitefield & Selik (by Robert J. Finkel) for the

defendants.

The Fishman Group (by Steven J. Fishman and

Appendix A

474 482 Micn 472 [June

OPINION OF THE CouRT

Malcolm D. Brown) for Michigan State Chamber of

Commerce.

Butzel, Long, Gust, Klein & Van Zile, P.C. (by

William M. Saxton and David B. Calzone), for

Greater Detroit Chamber of Commerce.

BoyYLe, J.

This is an interlocutory appeal by the defendant

from the trial court’s denial of its motion for

summary judgment pursuant to GCR 1963,

117.2(3),' alleging that there is no genuine issue of

material fact and that aaa is therefore entitled to

judgment as a matter of law.’ The motion was filed

before defendant’s answer and before any mean-

ingful discovery.

A motion for summary judgment filed before

interrogatories and depositions are taken tests

whether a cause of action has been stated, but a

motion, filed after depositions and interrogatories,

generally tests whether the opposing party’s ap-

propriate data raises a genuine issue as to any

material fact. The function of a court in disposing

of a motion for summary judgment is not to decide

issues of fact, but to ascertain whether or not

there is an issue of fact to be tried, resolving all

1 Now MCR 2.116(CX10).

2 While aaa’s trial court motion was brought on alternate ground of

GCR 1963, 117.2(1), failure to state a claim upon which relief may be

granted and GCR 1963, 117.2(3), it does not now that Bullock’s

amended complaint is technically deficient, Le. that it fails on its face

to state a claim for a breach of contract. The defendant's brief does

touch upon an issue of indefiniteness which be characterized as

an attack upon the sufficiency of the but this issue was

raised in neither the trial court nor in Court of a

resolution of this matter is therefore limited to the GCR 117

question.

Appendix A

1989] BuLLock v AAA 475

OF THE

doubts as to the existence of a genuine issue of

fact against a moving party. The fact allegations

vits of

must be considered to be true. Inferences must be

viewed in the light most favorable to the

opposing the motion. [7 Callaghan’s Michigan

Pleading & Practice (2d ed), § 43.12, p 30.]

The timing of the defendant’s motion, coupled

with the failure of the defendants to specifically

identify the issue as to which it believes there is

no genuine issue of material fact,’ places this case

in an awkward posture for appellate review. Also,

the trial court’s analysis and that of the Court of

Appeals focused on the employment-manual excep-

tion to employment at will and the question as to

whether and under what circumstances an em-

ployer may alter policy manuals. However, turn-

ing first to the pleadings,‘ I find the following,

common allegations:

3. That when Plaintiff entered the employ of

Defendant he entered the employ of Defendant

based upon [sic] the following promises:

a) That he would have a lifetime job as long as

he did not steal;

b) that he would work as a commission sales-

man for Defendant and enjoy the benefits of a

seven (7%) percent commission for sales which had

been in effect for many years;

c) that if he worked hard and built up his “book

of business,” he would be able to earn large sums

of money;

d) that if he worked hard and built up his “book

of business,” he could enjoy his later working

years with Defendant by realizing commissions

3 MCR 2.116(GX4) now requires a specific identification of the alleg-

edly undisputed issue.

Appendix A

476 432 Micu 472 [June

Ornaon oF THE Court

from the “book of business,” which “book of busi-

ness” is the accumulated memberships and policies

which a commission salesman builds up over the

years.

4. That for many years, Defendant worked very

hard and built up his “book of business” in reli-

ance upon the promises of Defendant and in order

to enable him to enjoy the benefits of a large

salary due to his individual efforts in developing

his business.

In addition to these common allegations, count 1 of

the first amended complaint asserts a breach of

contract upon the basis of the following actions of

AAA:

a) Eliminating commissions as a basis of com-

pensation for sales persons;

b) establishing a “unit compensation” program

whereby the commission salesmen would only get

a certain amount of money per membership or

policy rather than a percentage commission as had

been promised to the commission salesmen when

they entered the employ of Defendant;

c) establishing non-competitive rates for its

product;

d) coercing Plaintiff and other similarly situated

out of their employment thereby breaching the

express and implied contract between Plaintiff and

Defendant.

Finally, paragraph 7 of the first amended com-

plaint alleges that these actions violated plaintiff's

Appendix A

1989} BuLLock v AAA 477

Opinion or THe Court

job in which he was told he would be able to earn

large commissions.”

In support of its motion, AAA submitted two

affidavits. The affidavit of Gerald Trocchio asserts

facts relevant only to the issue of NLRA preémp-

tion. On the other hand, the affidavit of Frederick

A. Cruise, Vice President for Corporate Opera-

tions, states a number of facts relevant to the state

law issues of this appeal. This affidavit essentially

admits that plaintiff was discharged for failure to

meet minimum production quotas imposed by AAA

after reaching impasse in its negotiations with

plaintiffs union. Of greatest significance, however,

are paragraphs 6 and 7 of the affidavit of Mr.

6. The Company has continuously reviewed and

revised its employment policies. For example, ex-

amination of the Company’s Sales Rules Manual

reveals that the entire manual was revised on July

1, 1972, and that particular sections were again

revised on November 1, 1973 and July 1, 1975.

Def. Exh. a. Similarly, memorandum issued by the

Company in 1971 and 1978 pertaining to minimum

production requirements reveals that in 1971 sales

personnel were required to sell a minimum of

thirty memberships per month and in 1978 sales

personnel were required to sell a minimum of

twenty memberships. Def. Exh. s. Likewise, exami-

nation of the Company’s “Employee Complaint

Review Policy” reveals that it was revised in

November, 1979, and again in April, 1981. Def.

7. Defendant’s Exhibits a, B, and c to Defen-

5 We are in this instance ing a ion of dis-

gains peccureneeeas tints «Sats

Appendix A

478 432 Micu 472 [June

OPINION oF THE CouRT

dants’ Memorandum of Law in Support of Defen-

dants’ Motion to Dismiss are true and correct

copies of documents maintained by Defendants in

the ordinary course of its business.

After reviewing the pleadings and affidavits, the

trial court denied defendant’s motion for summary

judgment. Bullock submitted his own affidavit in

the Court of Appeals, stating in part:

7. The Company never reserved the right to

unilaterally change Company rules regarding

grounds for demotion and/or discharge. I was

clearly told by the Company at the time I was

hired and many times thereafter that nobody gets

fired unless they steal.

8. The Sales Rules Manual distributed to com-

mission sales representatives, to the extent they

contained any language regarding termination of

direct promise and custom and practice that no

one would get fired unless they stole.

The defendant’s motion to strike this affidavit was

denied by the Court of Appeals on February 2,

1985. The defendant has not renewed its motion in

this Court. -

The Court of Appeals affirmed the trial court’s

denial of the defendant’s motion for summary

judgment.®

We agree with part u of Justice Levin’s opinion,

$ Bullock vy Automobile Club of Michigan, 146 Mich App 711; 381

NW2d 793 (1985).

Appendix A

1989} BuLLock v AAA 479

OPINION oF THE CouRT

concluding that plaintiffs claim is not’ preémpted

by the National Labor Relations Act, 29 USC 151

et seq. Proper resolution of the state law issues

raised by the defendant requires further analysis.

Ill

Without identifying the nature or elements of

Bullock’s claim, AAA argues in support of its gen-

eral assertion that no genuine issue of material

fact precluded the trial court from granting its

summary judgment motion. What at first blush

might be oversight is undoubtedly due to a desire

to preserve a position when an answer is filed,

both as to the formation of the contract pled by

Bullock and the existence of such a contract at the

time of Bullock’s discharge. The defendant’s efforts

to preserve these questions are sound strategy, but

the pleadings and affidavits currently before us

present undisputed oral promises made to Bullock

at the time he entered defendant’s employ. These

must be deemed true.’

The defendant argues that a right to amend

employment policies is fully consistent with the

presumption of employment at will. We agree.

This observation, however, is most pertinent to the

plaintiff having pled in part that defendant’s ac-

tions violated his reasonable expectations based on

“policy statements” of the defendant, the origin

and precise nature of which have not yet been

identified. Bullock has also pled that the defen-

dant’s actions breached an express oral promise.

melding of contract theory and

mate , the prior opinions of this have

done to clarify the relationship between these two theories.

Appendix A

480 432 Micu 472 [June

Opinion oF THE Court

While the policy manual legitimate expectations

analysis of Toussaint v Blue Cross & Blue Shield

of Michigan, 408 Mich 579; 292 NW2d 880 (1980),

may have in practice obecured that portion of the

opinion dealing with a contract arising from an

express agreement, oral or written, it is clear that

the Toussaint majority held both that a provision

of an employment contract providing that an em-

ployee shall not be discharged except for cause is

legally enforceable and that the contract may be

established in alternative ways. According to Tous-

saint, formation may be “either by express agree-

ment, oral or written, or as a result of an employ-

ee’s legitimate expectations grounded in an em-

ployer’s policy statements.” Id, p 598 (emphasis

added).

The majority in Toussaint carefully pointed out

that the enforceability of personnel policies did not

turn on whether negotiations had taken place, the

parties’ minds had not met on the subject, the

employee knew nothing of the particulars, or that

the employer could change the policies unilater-

ally. Policy manuals in this situation were enforce-

able not as express promises, in quasi contract, or

because of promissory estoppel, but because the

Court under its common-law authority recognized

the enforceability of “‘a situation ‘instinct with an

obligation,’ ” id., p 613, an obligation distinct from

and independent of contract analysis.

In Toussaint and Ebling, the Court held that

there was sufficient evidence of an express agree-

ment to justify submission to a jury. Toussaint,

supra, p 598. While the Court in Toussaint also

held that there was sufficient evidence of Tous-

saint’s legitimate expectations grounded in the

policy manual to submit to the jury, id, p 599,

apart from the employment manual upon which

Toussaint’s legitimate expectations were based,

10a

Appendix A

1989] BuLiock v AAA 481

Opnnion or THE Court

four members of the Court found that testimony as

to the promises of Allen R. Schaedel, the defen-

dant’s treasurer, created a jury-submissible issue

as to whether there was a discharge-for-cause

contract.

In Ebling, the corporate vice president, Richard

Manoogian, promised that, if anything detrimental

came up between Ebling and his immediate super-

visor regarding Ebling’s performance, Manoogian

would personally review Ebling’s performance and

give him a chance to “correct things.” The plaintiff

testified that Manoogian further promised Ebling

that, if he was doing the job, he would not be

discharged. Id., p 626 (separate opinion of Ryan,

J.). All members of the Court, Chief Justice Coxr-

MAN, and Justices KAVANAUGH, WILLIAMS, Moopy,

Levin, Ryan, and FirzGgRa.p, agreed that this

testimony created a jury- submissible issue as to

whether plaintiffs employment was not termina-

ble at will but only for cause. Id., pp 633-644.

To paraphrase the language in Toussaint, id., p

611, and illustrate the distinction between the

alternative theories of “enforceability” there rec-

ognized, suppose that a policy manual providing

for employment at will was extant at the time an

employee was hired. Could it be said that such a

manual, as a matter of law, precluded the enforce-

ability of a later written contract providing “in so

many words” that the employee could not be

discharged except for cause? We think not. Like

wise, it cannot be said that where an express

agreement is alleged preceding an employment

manual, the alleged promise is, as a matter of law,

unenforceable.*

*I note, but decline to address, the defendant’s argument that an

oral contract of Pon Gee ee

182; MSA t to

lla

Appendix A

482 . 432 Micu 472 [June

OPINION OF THE CoURT

In In re Certified Question we have today said

that the obligation recognized by the policy man-

ual leg of Toussaint does not preclude employers

from amending employment manuals. In re Certi-

fied Question does not, however, do more than

establish that discharge-for-cause policy provisions

may be modified on the basis of “reasonable notice

of the change... uniformly given to affected

employees,” issues which the defendant’s affidavit

understandably does not address. It does not estab-

lish that amendments to employment manuals

must be construed to be modifications of a distinct,

express, or implied-in-fact contract. As the plead-

ings and affidavits stand, Bullock alleges an oral

contract for hire in which the employer limited his

right to terminate, not employment at will.

~ Jt is true, as the defendant contends, that indefi-

nite hirings have been considered to be terminable

at will. 9 Williston, Contracts, § 1017, p 131. How-

ever, as recognized by both the Toussaint majority

and dissent, this rule, properly conceived, has

never been more than one of construction.’ Tous-

saint, supra, pp 597, 650. Bullock has alleged an

oral contract of employment containing a dis-

charge-for-cause provision and the defendant’s aff-

davits do not rebut that allegation. This allegation

sets forth a claim under the holding in Toussaint

that the express promise of the employer apart

from the employment manual may create a jury-

submissible issue.

The extent of plaintiffs reliance on policy manu-

als and the effect of the manuals submitted by the

proper! before this Court. Whether the should reconsider

ulate the statute of frauds is a matter not properly

before the Court.

®In this both Toussaint and Lynas v Maxwell Farms, 279

Mich 684, 687; 273 NW 315 (1987), depart from the rule under which

employment at will is treated as a substantive limitation on the

enforcement of contracts (post, pp 517-518, Gamrrm, J.).

12a

Appendix A

1989] BuLLock v AAA 483

Orinton oF THs Court

defendant cannot be resolved on this record. These

matters may be raised on remand in light of In re

Certified Question. However, as to plaintiff's alle

gation of an oral promise, plaintiff's pleadings,

which must be deemed true, allege a breach of

discharge-for-cause employment under Toussaint.

The — manuals submitted by the defen-

dant, to extent that they do not constitute

unilateral modification of the policy basis of plain-

tiffs claim, must be seen on this record as an offer

to modify the discharge-for-cause provision of Bul-

lock’s alleged express contract and do not-entitle

the defendant to summary disposition.

The determination of the effect of these manuals

on Bullock’s allegations must await further discov-

ery and perhaps trial. We do not, at this point,

It also should be noted there are factors in the complaint which

may bring it within the distinguishing features hoiding of ing v

Facts similar to these fueled body of case law

extending the duty of good faith to discharges em t- at-

will contracts. See, e.g., Fortune v Nat’] Cash Co, 373 Mess

96; 364 NE2d 1261 (1 Maddaloni v Western Bus Lines, Inc,

386 Mass 877; 488 NE2d 361 (1962); Cook v Alexander & Alexander,

4 Conn 246; 488 A2d 1296 (1965); K mart Corp v Ponsock, 732

P2d 1365 , 1987), v Interactive Data Corp, 47 Cal 3d 654;

264 Cal Rptr 211; 765 P2d 373 (1968).

l3a

Appendix A

484 432 Micu 472 [June

Court

iN OF THE

do not know at this point whether the alleged

promise of “a lifetime job as long as he did not

steal” was either intended by the defendant or

understood by Bullock in the literal sense which

disturbs the dissent."

In sum, to the extent that plaintiff relies on

policy manuals as the basis for his claim, In re

Certified Question provides the guidelines for reso-

lution on remand as to whether unilateral change

in the policy manuals ‘vould be effective. However,

defendant’s assertion of a change in policy manu-

als does not, on this record, establish that there is

no genuine issue of material fact as to whether the

plaintiff had an enforceable contract containing a

limitation on discharge. The defendant is not enti-

tled to judgment as a matter of law.

Although not all courts have recognized exceptions or limita-

doctrine. [Summers, Labor law as the century turns: a changing

l4a

Appendix A

1989] Bu.iock v AAA 485

Ornnon sy Lavin, J.

CONCLUSION

Bullock has pled an action for a breach of an

oral contract of employment alleged to have arisen

at the commencement of his employment. The

defendant’s affidavits in regard to its policy manu-

als do not entitle the defendant to judgment under

GCR 1963, 117.23).

We affirm the decisions of the trial court and

the Court of Appeals denying the defendant’s mo-

tion for summary judgment and remand the case

to the trial court for further proceedings consis-

tent with this opinion and In re Certified Ques-

tion." We do not retain jurisdiction.

BRICKLEY, CAVANAGH, and ARCHER, JJ., con-

curred with Boy.e, J.

Levin, J. William J. Bullock claims that the

Automobile Club of Michigan breached an oral

contract of employment when it discharged him

for failing to achieve production standards set

forth in a revision of its sales rules manual. AAA

asserts that it had the right to revise minimum

production standards, although the right to do so

was not expressly reserved in the manual, and

that, in all events, Bullock’s claim is preémpted by

the National Labor Relations Act.

The instent case was argued together with In re

Certified Question, 432 Mich 438; NW2d —

(1989), also decided today. In In re Certified Ques-

tion, this Court holds that an employer may, with-

out an express reservation of the right to do so,

18 We recognize the limited nature of this response to an invitation

bo ake Se Dare Sees erpeeny matmestion of the oval

promise recognised in Toussaint. If we are to exercise that authority

15a

Appendix A

486 432 Micu 472 [June

Ornaion sy Levin, J.

unilaterally change a discharge-for-cause written

policy statement to a terminable-at-will policy.

In In re Certified Question, there was no dispute

concerning the terms of the employment contract.

The stated question posited that the terms of the

employee manual had become terms of the em-

ployment contract. The dispute was whether the

employer could unilaterally change a policy stated

in the employee’s manual that had become a term

of the employment contract. Here, the central

question is what were the terms of the employ-

ment contract, specifically, whether the provisions

of the sales rules manual concerning minimum

production standards were terms of the employ-

ment contract, as claimed by Aaa, or whether, as

claimed by Bullock, the provisions of the sales

rules manual were inconsistent with an orally

agreed upon employment contract and not terms

of the contract.

A majority of the Court agrees with the circuit

judge and the Court of Appeals' that the question

what were the terms of the employment contract

should not have been decided on the motion for

summary disposition. The question should be de-

cided by the trier of fact following a trial at which

employer and employee witnesses testify.

We all agree with the circuit judge and the

Court of Appeals that Bullock’s claim is not

preémpted by the National Labor Relations Act.

The National Labor Relations Act does not address

the state law claims set forth in Bullock’s com-

plaint. Bullock’s claims do not concern conduct

Congress intended to leave unregulated by state

law. Although a union was certified, no collection

bargaining agreement was entered into between

1 Bullock v Auto Club of Michigan, 146 Mich App 711; 381 NW2d

793 (1985).

l6a

Appendix A

1989} BuLLock v AAA 487

Opinion sy Levin, J.

AAA and the union. The state law claims of the

members of the union were not instantly extin-

guished when the union was certified, before nego-

tiations for a collective bargaining agreement be-

gan and without regard to whether a collective

agreement was entered into.

Aaa terminated Bullock’s employment as a com-

mission sales representative after employing him

in that capacity for nearly fourteen years. Bullock

remained at aaa working as a salaried sales em-

ployee, a member advisor. Bullock commenced this

action alleging that the termination of his employ-

ment a8 a commission sales representative and

changes in his compensation breached his oral

contract of employment. Bullock based his claim of

an oral employment contract on statements assert-

edly made to him when he was employed as a

sales representative with aaa in May, 1968. Ac-

cording ts Bullock, he was told that (1) he. would

have a lifetime job with aaa as long as he did not

steal; (2) he could work as a commission sales

representative for AAA and continue to receive a

seven percent commission for insurance sales; and

(3) if he worked hard and built up his “book of

business,” he would enjoy his later working years

by realizing substantial commissions from that

“book of business.”

In 1978, aaa changed its method of compensa-

tion for commission sales representatives, substi-

tuting a “unit compensation plan” for the straight

seven percent commission system. In September,

1981, AAa adopted production standards and a

disciplinary procedure to be followed when sales

representatives failed to meet the new standards.

In February, 1982, Bullock was terminated as a

17a

Appendix A

488 432 Micu 472 [June

Opmni0n By Levin, J.

commission sales representative after failing to

meet AAA production standards.’

Bullock contends that the production standards

were not imposed to increase productivity, but

were part of a scheme to “eliminate senior and

older commission sales representatives from the

staff’ because the standards did not take “into

consideration the fact that the senior commission

salesmen had to spend disproportionate amounts

of their time in servicing existing accounts, rather

than seeking out new business.” Bullock asserts

that Aaa decided to eliminate senior commission

salesmen and replace them with “younger, lower

paid salaried personnel.” In addition to pleading a

claim for breach of contract, Bullock also claimed

that Aaa is liable for unjust enrichment,’ conver-

sion,‘ age discrimination,’ and negligent evalua-

tion.*

Aaa did not answer Bullock’s complaint. AAA

2In the termination letter, aaa offered Bullock a salaried position

as a “member advisor.”

3 Bullock claims that in taking back his “book of business” when he

was terminated as a sales representative, AAA was unjustly enriched.

4 Bullock claims he had a property right in his “book of business”

and that property right was taken from him as a result of wrongful

acts of AAA.

eae ea ee by contract. See also

Lichnovaky v Ziebart Int'l, did Micke 228" 228; ou NW2d 732 (1982).

Bullock claims a property interest in the renewals arising as a result

of contract.

§ Bullock alleges that the production standards were designed to

displace senior and older commission salespersons.

mtiwtioM

18a

Appendix A

1989] BuLLock v AAA 489

Ornaion sy Levin, J.

moved for accelerated judgment, claiming that

Bullock’s cause of action was preémpted by federal

labor law and, therefore, a state court lacked

jurisdiction to hear the matter.’ Aaa alternatively

7Aaa’s motion for accelerated judgment, or in the alternative

summary judgment, sought judgment in its favor pursuant to GCR

1963, 116 and 117, on the grounds that “first, the Court lacks

jurisdiction of the subject matter; second, Plaintiff has failed to state

a claim upon which relief can be granted; and, third, there is no

genuine issue as to any material fact and that Defendants are

entitled to judgment as a matter of law... .”

The memorandum of law in support of the motion contained the

following headings:

A. The Com t Must Be Dismissed In Accordance With

Principles Of Preémption.

1. Plaintiff's Toussaint Claim Is Preém Because It Seeks

so EY Te SE SE Senane Under Federal

a. States Are Precluded From Interfering With The Policy Of

Free Collective Bargaining Established By Federal Law.

Oe eee fee se ae & end Fah

Unilateral Change Cannot Be Infringed By A State Cause Of

c. A Law Of General - Is Nonetheless Preémpted

If Tits Application Would Federal Scheme.

Seeks To Regulate Conduct Exclusively Within The Unfair

B. The Complaint Must Be Dismissed Because The Supreme

Court Of Michigan Never Intended Toussaint To Apply In A

Union Context.

C. The Complaint Must Be Dismissed Because Toussaint

Protects An Employer’s Right To Make A Unilateral

D. The Complaint Must Be Dismissed Because The Company

Never Breached Plaintiff's Alleged Rights Under Toussaint.

Sees described the process, the

ine of contained in aaa’s final

offer other, referred to the tation of the final offer,

stated that of the company’s 570 sales includ-

ing Bullock, to meet the new minimum

er ee eens ee renane an eateries

employee advisors which affidavit further

19a

Appendix A

490 432 Micu 472 [June

Opnvion sy Levin, J.

moved for summary judgment, claiming that Bul-

lock had failed to state a claim on which relief

could be granted and that Aaa was entitled to

judgment because (1) Toussaint v Blue Cross &

Blue Shield, 408 Mich 579; 292 NW2d 880 (1980),

is not applicable to unionized employees, (2) Tous-

saint provided that employers may make unilat-

eral policy changes, and (3) under the common-law

requirements of Toussaint, aaa did not breach any

of Bullock’s contract rights. The basis of decision

proposed in the dissenting opinion was not stated

in AAA’s motion or supporting brief.

The circuit judge found that Bullock’s claims

were not preémpted by federal law and denied

AAa’s motion for accelerated judgment. He also

rejected the arguments made in support of AAa’s

motion for summary judgment. The Court of Ap-

peals Affirmed.*

Aaa raises the following questions in this Court:

1. May an employer revise its personnel prac-

tices, including required standards of job perfor-

mance, notwithstanding that some employees

might not have been aware that the policies previ-

ously in effect were subject to revision?

2. Do the undisputed facts demonstrate, as a

matter of law, that Bullock knew or should have

following n 26. A copy of the sales rules manual as revised July 1,

1972, was also attached.

ately after the amended complaint filed, but the order denying

was

the motion was not entered for almost two months.

* Bullock v Automobile Club of Michigan, 146 Mich 711; 381

NW2d 793 (1985). “-

20a

Appendix A

1989] Buttock v AAA 491

Ornnion sy Levin, J.

known that Aaa’s personnel policies were subject

to revision?

3. May employees—on whose behalf a union has

negotiated wages, hours and working conditions—

invoke pre-union, individual contract rights to

supersede the lawful results of the negotiations?

A majority of the Court affirms the Court of

Appeals and the circuit court denials of Aaa’s

motion for accelerated and summary judgment.

We first address the question whether the circuit

court lacked jurisdiction of the subject matter

because Bullock’s state-law claims were preémpted

by the NLRA.

When Bullock was hired in 1968, Aaa’s sales

employees were not represented by a union. On

February 7, 1978, the Michigan AAA Sales Associ-

ation was certified as the exclusive bargaining

representative for AAaA’s commission sales repre-

sentatives. Although Aaa and the union met nu-

merous times to negotiate & collective bargaining

agreement, they failed to reach an agreement

because the union would not accede to Aaa’s de-

mand that the agreement contain minimum pro-

duction standards. Aaa’s final offer included a

proposal for minimum production standards. On

August 5, 1981, the union rejected this final offer

at a general meeting of its membership, thus

creating an impasse in the bargaining. After fur-

ther attempts to negotiate a collective bargaining

agreement failed, the union was decertified in

October, 1982.

Aaa implemented the proposed production stan-

2la

Appendix A

492 432 Micu 472 [June

OPINION BY

dards on September 1, 1981. Accompanying the

production standards was a disciplinary procedure

providing that a sales representative who did not

meet a production standard during any month

would receive an oral warning. If the representa-

tive failed to meet the standards for four succes-

sive months, he would receive a written warning,

probation, and would ultimately be subject to de-

motion or termination.

Aaa contends that Bullock’s termination was

lawful because he was discharged for failing to

meet AAA’s production standards after aaa fol-

lowed the steps outlined in its disciplinary proce-

dure. Aaa and the amicus curiae, Michigan State

Chamber of Commerce, argue that Bullock’s claim

is preémpted for two reasons: (1) aaa’s right to

impose production standards is within the exclu-

sive jurisdiction of the National Labor Relations

Board, and (2) Bullock’s state law claims disrupt

the collective bargaining process by attempting to

deprive AAA of an economic weapon of self-help,

namely, the right to implement a final offer after

an impasse.

Bullock responds that state courts retain juris-

diction of state- law claims where the parties have

not entered into a collective bargaining agreement

and where the litigation does not concern federal

interests, but rather discrete state interests.

The United States Supreme Court has developed

two doctrines for determining whether a state

claim is preémpted by the NiRA.’ One doctrine, set

* Golden State Transit Corp v Los 475 US 608, 613; 106 S

Ct 1396; 89 L Ed 2d 616 (1986); Life Ins Co v Massachu-

setts, 471 US 724; 105 S Ct 2380; 85 L Ed 2d 728 (1985).

Another line of federal preémption, preémption under § 301(a) of

22a

Appendix A

1989] BuLLock v AAA 493

Opmion sy Levin, J.

forth in San Diego Building Trades Council v

Garmon, 359 US 236, 245; 79 S Ct 773; 3 L Ed 2d

775 (1959), established that state regulations and

causes of action are preémpted when they concern

an activity that is actually or arguably protected

or prohibited by the NLRA. The state claim may

survive, however, if the conduct at issue “is of only

peripheral concern to the federal law or touches

interests so deeply rooted in local feeling and

responsibility ....”” The court balances the

state’s interest in regulating or promoting a rem-

edy for the conduct against the intrusion in the

NLRB’s jurisdiction and the risk that the state’s

determination will be inconsistent with provisions

of the NLRA.

The second preémption doctrine originated in

Machinists v Wisconsin Employment Relations

Comm, 427 US 132; 96 S Ct 2548; 49 L Ed 2d 396

(1976), and was “designed, at least initially, to

govern pre-emption questions that arose concern-

ing activity that was neither arguably protected

from employer interference by 8§7 and &aX1) of

the NLRA, nor arguably prohibited as an unfair

labor practice by § 8(b) of that Act.”" Machinists

preémption prohibits state regulation and state

law claims involving conduct that Congress in-

tended to remain unregulated, namely, the use of

the Labor Management Relations Act of 1947, 61 Stat 156, 29 USC

185(a), is not pertinent because the in tion of a collective

agreement is not involved. v Ne Div of \

Chef, 486 US —, —; 108 S Ct 1877 1880-1881; 100 L Ed 2d 410

McNeil 764 Bad 617 (CA 1, 1000) cod Ben Oe of ughlin

Steel Co, 790 F2d 1279 (CA 6, 1986), is misplaced as both cases involve

§ 301 preémption.

%” Belknap, Inc v Hale, 46{. US 491, 498; 103 S Ct 3172; 77 L Ed 2d

798 (1983); San Diego Building Trades Council v Garmon, 350 US 236,

243-244; 79 S Ct 773; 3 L Ed 2d 775 (1968).

11 Metropolitan Life Ins Co v Massachusetts, n 9 supra, p 749.

23a

Appendix A

494 432 Micu 472 [June

Ornvion sy Levin, J.

economic weapons of self-help by labor and man-

agement.”

Aaa and the amicus curiae, mscc, argue that

Bullock’s action is preémpted under both the Gar-

mon and Machinists branches of NLRA preémption

doctrine.

We first examine Bullock’s state law claims in

light of the Garmon doctrine of preémption. Gar-

mon provides:

When an activity is arguably subject to § 7 or §8

of the Act, the States as well as the federal courts

must defer to the exclusive competence of the

National Labor Relations Board if the danger of

state interference with national policy is to be

averted.)

Section 8(aX5) states that it is an unfair labor

practice for an employer “to refuse to bargain

collectively with the representatives of his

employees ... .”“ Section 8(d) defines the duty

“to bargain collectively” as the duty to

“meet ... and confer in good faith with respect

to wages, hours, and other terms and conditions of

employment ... .”” Although an employer’s uni-

lateral change in the conditions of employment

then under negotiation is a violation of § &(aX5), an

employer is generally permitted to make such

changes following an impasse in negotiations.”

Aaa and mscc assert that implementation of

13 Id.

18 Garmon, supra, p 245.

14 29 USC 158(aX5).

6 29 USC 158d).

ce an SS ee ee ee ee

24a

Appendix A

1989} Bu.iock v AAA 495

Opnvion sy Levin, J.

production standards after an impasse is at least

arguably protected by § 8. Bullock contends, how-

ever, that state law claims are not within the

scope of §7 or $8. According to Bullock, the

instant action does not require that this Court

consider AAA’s imposition of new standards of

production;” rather, the action concerns oral state-

ments made to Bullock that allegedly gave rise to

a contract of employment.

The United States Supreme Court declared in

Sears, Roebuck & Co v Carpenters, 436 US 180,

197; 98 S Ct 1745; 56 L Ed 2d 209 (1978), that

preémption analysis should focus on whether the

state court controversy is identical with or differ-

ent from that which could have been presented to

the NLRB:

The critical inquiry, therefore, is not whether

the State is enforcing a law relating specifically to

labor relations cr one of general application but

whether the controversy presented to the state

court is identical to...or _ different

from ... that which could have been, but was

not, presented to the Labor Board. For it is only in

the former situation that a state court’s exercise of

jurisdiction necessarily involves a risk of interfer-

ence with the unfair labor practice jurisdiction of

the Board which the arguably prohibited branch of

the Garmon doctrine was designed to avoid. [Em-

phasis added. }

In Belknap, Inc v Hale, 463 US 491; 103 S Ct

3172; 77 L Ed 2d 798 (1983), the United States

Supreme Court ruled that employees hired to re-

place striking workers could pursue causes of ac-

tion for misrepresentation and breach of contract

25a

Appendix A

496 432 Micu 472 [June

Ormnton sy Levin, J.

in state court.” The Court found preémption to be

inappropriate because, among other reasons, an

action before the NLRB could not address or in any

way remedy the wrongs suffered by the plaintiffs.

Following the Belknap and Sears analyses, we

conclude that the substance of Bullock’s state law

claims significantly differ from any claims he could

have presented to the NLRB. The state law claims

require a determination of what were the terms of

Bullock’s employment contract and whether cer-

tain actions by AAA” breached that contract. The

NLRB, on the other hand, is concerned with the

process of bargaining. The board would decide

whether an impasse in bargaining had occurred

before AAa’s implementation of the production

standards contained in its last offer at the bargain-

ing table. The NLRB would not look at any particu-

lar provision of an employment contract in evalu-

ating the question whether an impasse had oc-

curred.”

Bullock’s state law claims could not have been

presented to the NLR3 because the NLRB would not

and could not determine Bullock’s state law

claims. The NLRB would not have provided a rem-

18In recent years, Garmon has been applied flexibly, “ ially

eee eee adem Wien in capeeten of te

conduct at issue and the State’s interest is one that does not threaten

i with the federal regulatory scheme.” Farmer v

Carpenters, 430 US 290, 302; 97 S Ct 1056; 61 L Ed 2d 338 (1977). The

26a

Appendix A

1989] BuLLock v AAA 497

Opinion By Levin, J.

edy for his state law claims and, therefore, would

not have provided a remedy for his discharge from

AAA. Bullock’s state law claims and any claim he

could bring before the NLRB are not identical but

rather separate and discrete. Allowing Bullock to

proceed on his state law claims poses no risk of

interference with the jurisdiction of the NLRB.

Aaa and MSCC also contend that Bullock’s claims

are preémpted under the Machinists rationale

because maintenance of a state law action would

thwart the effective implementation of the NLRA.

They argue that an employer’s right to impose its

final offer when the parties fail to reach a collec-

tive bargaining agreement is one of the employer’s

most powerful economic self-help weapons. They

contend that Bullock’s action threatens to inter-

fere with the collective bargaining process in a

way Congress did not intend.

Machinists preémption becomes relevant where

the action lies outside the reach of Garmon. It

“protects against state interference with policies

implicated by the structure of the [NLRA] itself, by

pre-empting state law and state causes of action

concerning conduct that Congress intended to be

unregulated.” Metropolitan Life Ins Co v Massa-

chusetts, 471 US 724, 749; 105 S Ct 2380; 85 L Ed

2d 728 (1985). Under the Machinists doctrine,

Whether self-help economic activities are 2m-

pote by employer or union, the crucial inquiry

per 8 nen a is the same: whether “the

le: state authority to curtail or

pe prohibit scl self-help would frustrate effective

implementation of the Act’s processes.’’!)

31 Machinists, supra, pp 147-148.

27a

Appendix A

498 432 Micu 472 [June

Opinion By Levin, J.

Bullock’s action is essentially an ordinary con-

tract action, routinely heard in state court. The

United States Supreme Court observed in Belknap:

The interests of the Board and the NLRA, on the

one hand, and the interest of the State in provid-

ing a remedy to its citizens for breach of contract,

on the other, are “discrete” concerns .. . . We see

no basis for holding that permitting the contract

cause of action will conflict with the rights of

either the strikers or the employer or would frus-

Hi any policy of the federal labor laws. [Id., p

512.

The mscc maintains that once a union is certi-

fied, the terms and conditions of employment are

covered exclusively by federal labor law, not state

law. Because Bullock was discharged for failure to

meet the production standards, the Mscc reasons

that the circumstances surrounding the implemen-

tation of those standards is central to Bullock’s

state law claims and necessitates a finding of

preémption. We disagree.

The selection of a union representative did not

instantly extinguish Bullock’s state law claims or

contract rights. Employees would hesitate to cast

their lot with a union if they were deemed to have

forgiven their common-law contract and other

claims when a collective bargaining agent was

certified without regard to whether a collective

bargaining agreement is entered into. The United

States Supreme Court, in J I Case Co v NLRB, 321

US 332, 336-337; 64 S Ct 576; 88 L Ed 762 (1944),

said:

Care has been taken in the opinions of the Court

28a

Appendix A

1989] BuLLock v AAA 499

Orpaon sy Lavin, J.

to reserve a field for the individual contract, even

in industries covered by the National Labor Rela-

tions Act, not merely as an act or evidence of

viduaiy but also in the sense of a completely indi-

tg contract setting out terms of

enalageian, because there are circumstances in

pene tage, ea ly Bae in fact, in which

there is no alternative. Without limiting the possi-

bilities, instances such as the following will occur:

Men may continue work after a collective agree-

ment expires and, despite negotiation in good

faith, the negotiation may be deadlocked or de-

layed; in the interim express or implied individual

agreements may be held to govern. [Emphasis

added.]

When a collective-bargaining agreement expires

and the parties are unable to agree on the terms

of a new agreement, an employer may implement

its final offer after impasse. In the instant case,

however, no collective bargaining agreement was

ever agreed upon and the union was decertified

before Bullock was discharged.“ Where no agree-

ment is reached, enforcement pursuant to state

law of preéxisting state law contract rights and

other state law claims does not “frustrate any

policy of the federal labor laws.” Belknap, supra, p

512.

In sum, we conclude that state court jurisdiction

of Bullock’s state law claims is not preémpted

under the Garmon branch or the Machinists

branch of federal preémption doctrine. The circuit

court has jurisdiction of the subject matter.

Aaa claims that it is entitled to summary judg-

ee fee pie Oat eagles vite hove bow

quegiian te for unionized employees. ns

29a

Appendix A

500 432 Micn 472 [June

Optnton BY Levin, J.

ment because Bullock failed to state a claim on

which relief can be granted and there is no genu-

ine issue of material fact.

A motion for summary judgment for failure to

state a claim “seeks to test the genuineness of a

claim by challenging the legal adequacy of the

pleadings.”"* The standard in evaluating such a

motion “is whether plaintiffs claim, on the plead-

ings, is so clearly unenforceable as a matter of law

that no factual development can possibly justify a

right to recovery.”™ In assessing the motion, the

trial court “does not act as a factfinder, nor does

the court attempt to probe the parties’ ability to

prove their allegations.” The court thus “accepts

as true all well-pleaded facts.’”™

Toussaint held enforceabie contractual rights

grounded in an employee’s legitimate expectations

generated by an employer’s statements of policy.”

%3 Abel v Eli Lilly & Co, 418 Mich 311, 323; 343 NW2d 164 (1984),

cert den 469 US 833 (1984).

™ Id., p 323

% Id., p 324

38 Id.

"Contrary to the argument of amicus curiae, the scope of Tous

saint is not limited to or-cause contracts. While Toussaint

phrased in broad terms; the court said that “em statements of

policy, such as the Blue Cross Supervisory Man and Guidelines,

can give rise to contractual rights in ” Id, pp 614

Any policy statement, then, give rise to a contractual obliga-

tion under Toussaint. A policy statement in a manual or in a casual

conversation with a superior does not, however, automatically rise to

the level of a contract. Only those statements that create legitimate

expectations in a reasonable employee are actionable. See n 31.

30a

Appendix A

1989] Bu.iock v AAA 501

Opmion By Levin, J.

Before a court can address the question of an

employee’s legitimate expectations arising from

such statements of policy, the trier of fact must

determine which employer statements, oral and

written, were a part of the contract of employ-

ment. Because this involves a factual inquiry in

the instant case, the circuit judge properly denied

summary judgment.

We are bound to accept all well-pleaded facts as

true when reviewing the ruling on aaa’s motion

for summary judgment. The oral employment con-

tract, as described by Bullock, supports a claim for

breach of contract. Bullock alleged that his oral

contract of employment provided that Aaa would

terminate him only if he were caught stealing and

that he would be compensated on a seven percent

commission plan based on his “book of business.”

Bullock’s pleadings presented questions of fact

whether aaa breached the alleged contractual pro-

visions. Bullock has sufficiently stated a claim on

which relief could be granted.

Nor did the oral statements made to Bullock at

the time of hiring necessarily lack the definiteness

required to form a binding contract as a matter of

law. Oral statements may be as binding as written

statements.

Aaa filed an affidavit in support of its motion for

summary judgment, asserting that it had continu-

ously reviewed and revised its employment poli-

cies. The affidavit stated that the sales rules man-

ual was revised in July, 1972, November, 1973,

and July, 1975, and that memoranda issued by

AAA in 1971 and 1978 required 1971 sales person-

nel to sell a minimum of thirty memberships per

month, and 1978 sales personnel to sell a mini-

mum of twenty memberships.

Bullock relies on an oral contract of employment

allegedly entered into when he was hired in May,

3la

Appendix A

432 Micx 472 [June

Ornvton By Lavin, J.

502

1968, two or three years before the earliest memo-

randa adverted to in Aaa’s affidavit. He asserts

that AAA cannot avoid its contractual obligations

resulting from the claimed oral employment con-

tract by later promulgating inconsistent general

policies that apply to all employees. He notes that

the record is sparse because virtually no discovery

has been conducted, and that aaa has not filed an

answer and thus has not denied the oral promises

asserted by Bullock. He states that the general

provisions of the sales rules manual pertaining to

production standards and continued employment

contradict the express oral agreements i

compensation and job security that were negoti-

ated terms of the oral employment agreement and

that the arguments advanced by AAA and amicus

curiae obscure the real issue: “Did the Auto Club

agree to employ Bullock as a commission salesper-

son at a rate of seven percent commission on all

new sales and renewals and to restrict its right to

discharge Bullock for reasons other than dishon-

esty or theft?”

Preliminary and central questions are whether

the terms alleged by Bullock in his complaint were

the terms of the contract of employment, and

whether and to what extent provisions of the sales

rules manual, consistent or inconsistent with the

terms alleged, were part of the contract of employ-

ment. It is a separate question whether provisions

of the sales rules manual that were in fact part of

the contract could, consistent with legitimate ex-

pectations generated by aaa’s policy statements

set forth in the sales rules manual, be revised in

ae SN: AAS CRRA See ee

them.

Aaa asserts that, under Toussaint, it was enti-

32a

Appendix A

1989] BuLLock v AAA 503

Option BY Levin, J.

tled to make unilateral changes in policy, includ-

ing the change in the compensation structure and

the implementation of production standards. It

therefore follows, according to Aaa, that these

changes could be made and enforced regardless of

rights and duties previously established.

Aaa further reasons that just as employers have

a common-law right to terminate an employee at

will who is hired for an indefinite term, they may

similarly rescind at will a personnel policy imple

mented ‘for an unspecified period where the em-

ployer has not demonstrated an intention of main-

taining such a policy permanently. Aaa suggests

that while an employee can reasonably expect that

an employer will apply its current policies uni-

formly, an employee cannot, given the routine

changes that businesses must periodically make,

expect that policies will continue to be in force

indefinitely.

While Toussaint did state that the employer

could make unilateral policy changes,” that state-

ment should be read in light of Toussaint’s pri-

mary holding that an employee may enforce legiti-

mate expectations that have been generated by an

employer’s statements of policy.”

%* Toussaint, supra, pp 613-615.

” An em who establishes no personne! policies instills no

33a

Appendix A

504 432 MicH 472, ; [June

Opinion By Levin, J

It is not possible to answer AAA’s question—

whether it could unilaterally revise its policies set

forth in the sales rules manual, including required

standards of job performance—in the abstract.

That question can only be answered after the trier

of fact has defined the terms of Bullock’s contract

of employment, including the extent, if at all, the

provisions of the sales rules manual are terms of

the contract and, if they are, the court® has deter-

mined what legitimate expectations would be gen-

erated in a reasonable employee as a result of

those contractual terms.

There will be situations where the employer’s

unilateral changes in policy are consistent with its

employees’ legitimate expectations without regard

to whether the employer has given explicit notice

that its policies are subject to change or has

established a pattern of revising its policies period-

ically. Notice is not the critical issue, although it

may be a relevant factor.

The proper focus is the legitimate expectations

of the reasonable employee. Certain policies may

not involve subject matter of sufficient significance

to engender legitimate expectations worthy of en-

forcement. Similarly, changes, even when made

with respect to critical terms of employment, may

be so minor that there is little or negligible inter-

ference with employee legitimate expectations.

In determining what a reasonable employee in

Bullock’s position might legitimately expect, the

court might consider, among other things, such

factors as the nature of the change, whether

changes in that regard have previously been made

and implemented, length of employment and job

work force, the employer may not treat its promise as illusory.

(Toussaint, supra, p 619.]}

3 See n 34.

34a

Appendix A

1989} BuLLock v AAA 505

Optnton By Levin, J.

status before and after the policy change." Be-

cause Bullock claims that the production stan-

dards and adoption of the “unit compensation”

plan had a more severe effect on senior commis-

sion sales representatives with commitments to

large “books of business,” the extent of the com-

mitment involved in servicing Bullock’s “book of

business” should also be examined.

In joining in the affirmance of the Court of

Appeals conclusion that summary judgment was

properly denied, I do not wish to be understood as

stating that an employer may only make unilat-

eral changes where the employees have been given

specific notice that the employer has reserved the

right to do so. An employer retains the right to

unilaterally modify its policies where the change

will not defeat the legitimate expectations of its

employees.

AAA maintains that unilateral contract princi-

ples bind Bullock to AAa’s revisions regardless of

the original terms of the employment contract.

Under this analysis, when an employer unilater-

ally changes its policies, an employee’s continued

performance constitutes consideration for, and ac-

ceptance of, the new terms of employment. An

employee is then bound by the new terms and can

no longer rely on the employer’s prior policies.

In In re Certified Question, this Court considered

unilateral contract analysis in a case concerning

an employer’s unilateral change from a discharge-

for-cause policy to a termination-at-will policy, and

81 Neither Valentine v General American Credit, Inc, 420 Mich 256;

362 NW2d 628 (1964), nor any other decision of this Court su

the statement in the dissen opinion that the rationale of Tous

saint “has been confined by Court to claims of wrongful dis

charge.” p 521. See n 27.

35a

Appendix A

506 432 Mic 472, [June

Optnion By Levin, J

said that it found eitinead contract

theory ... inadequate as a basis for [its]

answer... .”™

Even if the revision in the manual in In re

Certified Question from discharge for cause to

termination at will was an offer by Storer Broad-

casting Company of a change in the employment

contract, there was no reason to suppose that the

plaintiff, Kenneth Bankey, accepted such an offer.

See Thompson v Kings Entertainment, 653 F Supp

871 (ED Va, 1987), where the court said that the

employer failed to show that the employee had

accepted the revision in policy from dismissal for

cause to termination at will. In Pine River State

Bank v Mettille, 333 NW2d 622 (Minn, 1983), and

Duldulao v St Mary of Nazareth Hosp Ctr, 115 Ill

2d 482; 505 NE2d 314 (1987), the employers dis-

tributed manuals that conferred greater rights on

the employees. In such a case, it is ordinarily

reasonable to find that the employee accepted the

beneficial terms.

Aaa is concerned that the Court of Appeals

decision in Bullock provides an employee access to

a jury if he merely claims that he interpreted his

employer’s oral statements or practices as estab-

lishing policies inducing his reliance. Amicus cu-

riae also expresses concern that submitting such

issues to a jury will inevitably strip employers of

the right to change their policies. Both Aaa and

biased toward employees and thus are incapable of

rendering a just verdict in this context. They fear

that employment discharge cases ask juries of

laymen to second-guess the complicated decision-

% In re Certified Question, 453.

36a

Appendix A

1989] BuLLock v AAA 507

Opinion By Levin, J.

making processes of corporate and small business

employers.

The preliminary and central question of what

the terms of the employment contract in fact are

is clearly a question for the trier of fact, a jury

where one has been requested. Contract interpre-

tation may present a question of law.” Once the

trier of fact has determined what are the terms of

the employment contract, the separate question of

what legitimate employee expectations were gener-

ated by employer policy statements found to be a

part of the contract is a question of law™ for the

Court.*

The dissenting opinion would dismiss the com-

plaint for failure to state a claim on a ground not

%8 See Farnsworth, Contracts, § 7.14, pp 515-517.

%In the following areas of law, judges consider facts to resolve

—— of law: public figure status in libel actions, Rosenblatt v

, 383 US 75; 86 S Ct 669; 15 L Ed 2d 597 (1966), former jeopardy,

Mitchell v Forsyth, 472 US 511, 528; 105 S Ct 2806; 86 L Ed 2d 411

(1985), immunity for members of Congress, id., probable cause in an

action for malicious prosecution, Koski v Vohs, 426 Mich 424; 395

NW2d 226 (1986), estoppel, C & K Engineering Contrac-

tors v Amber Co, Inc, 23 Cal 3d 1, 7-8; 151 Cal Rptr 323; 587

P2d 1136 (1978).

It may be the court’s duty to determine what conduct is “reason-

able” in a given context. Fourth Amendment protects against

unreasonable searches and seizures. Although there is a large factual

quotient in the resolution of what constitutes an “unreasonable”

and seizure, this voluminous body of law—LaFave, Search &

(2d which now comprises four volumes—has been devel-

oped by a without a jury who have, in the application of

tests en’ by the United States Supreme Court and other

at great length what is “reasonable” and “un-

coat Uk eal ole te tee nn te requiring jury

the court either instruct the regarding the

would arise if it for the employee

not appear feasible or

37a

Appendix A

508 432 MicH 472, [June

Ormion sy Lavin, J

urged in the trial court.” While AAA’s motion for

summary judgment asserted that Bullock had

failed to state a claim on which relief can be

granted, the bases of that assertion were grounds

other than those adopted in the dissenting opinion.

The dissenting opinion, recognizing that oral

assurances were held in Toussaint to be sufficient

to require submitting the question whether there

was a contract to a jury,” states that “not all oral

assurances merit jury consideration.”™ It is sug-

gested that the expressions relied on by Bullock

were not “clear and unequivocal.”™ It is said that

Bullock could not have reasonably relied on the

oral assurances he alleged as a means of creating

a contract of employment which was not termina-

% See n 7.

* Post, p 614; Toussaint, p 597.

%* Post, p 515.

* Id., p 7.

The dissenting opinion states:

the construction set forth in Lynas,

which is by Toussaint? provides that a lifetime

employment contract, even if agreed to, is

as an hiring, terminable at the of either party, in

the of features or special consideration

absence

in addition to the services to be rendered.

*Toussaint, supra, at 596-697, 632. (Post, pp 517-518.)

38a

Appendix A

1989] Buttock v AAA 509

Opmion By Levin, J.

ble at will unless there were distinguishing fea-

tures or provisions or special consideration.”

Putting aside that there is a suggestion in one of

the briefs that Bullock may have left the employ

of another employer to accept employment with

AAA, which, if true, might constitute a distinguish-

ing feature or provision or special consideration,

there is no rule of law requiring that a contract

that need not be in writing be more specific or

clear and less equivocal when it is oral than when

it is in writing. Also putting aside that the disposi-

tion proposed in the dissenting opinion has not

been explored at the trial level, aaa has not

answered or denied the allegations that such a

contract was entered into, there is no rule making

unenforceable as a matter of law the contract

alleged by Bullock.

While the dissenters may find it incredible that

an employer would undertake to employ a person

on the terms alleged by Bullock, issues of credibil-

ity are to be resolved by the trier of fact. In this

connection, it is significant that a number of other

former AAA employees have made similar allega-

tions.“

The law implies terms of written and oral con-

tracts. Bullock was not discharged because he was

“inefficient, absent, tardy, slovenly, reckless, non-

productive” or “violent.”@ If aaa had sought to

discharge him for one of those undesirable traits

or for criminal activity other than thievery, the

# Id., p 8.

41 See Dumas v Auto Club Ins Aas’n, 168 Mich App 619; 425 NW2d

480 (1988) (180 tiffs); Farrel] v Auto Club of Michigan, 155 Mich

378; 399 531 (1986).

@ Post, p 516. While Bullock was discharged for failing to meet

AAA's standards, that does not necessarily mean he was

“nonproductive.” It is Bullock’s claim that he

in creating a “book of business” and had a contractual right to con-

tinue to work on his “book of business.”

39a

Appendix A

510 432 Micu 472 [June

Opinion By Grirrin, J

question would then arise ion it might do so

by reason of breach of an implied term of the

contract of employment. A contract is not defec-

tive because the parties have not provided for

contingencies that another person or a lawyer

might have sought to address.

vil

In conclusion, the determinations of the circuit

court and Court of Appeals that Bullock’s state

law claims are not preémpted by federal labor law

are affirmed. Also affirmed is the denial of Aaa’s

motion for summary judgment. Bullock has suffi-

ciently stated a claim on which relief can be

granted. Aaa has failed to demonstrate that it is

entitled to judgment as a matter of law. Critical

questions of fact remain undeveloped and should

be developed at trial.

The cause is remanded to the circuit court.

GRIFFIN, J. (concurring in part and dissenting in

part). I concur that plaintiffs claim is not

preémpted by the National Labor Relations Act.

Since the majority concludes that remand is re-

quired, I join in the observation that to the extent

that plaintiff's claim is based upon “legitimate

expectations grounded in an employer’s written

policy statements,” guidelines for resolution are

provided by In re Certified Question, 432 Mich 438;

— NW2d — (1989), also decided today. However, I

disagree ~ith the majority’s conclusion that sum-

mary disposition would be premature on the basis

of this record.

Plaintiff's claim of a termination-for-cause agree-

ment hangs on his assertion that at time of hire

1 Toussaint v Blue Cross & Blue Shield of Michigan; 408 Mich 579,

698; 292 NW2d 880 (1980).

40a

Appendix A

1989} BuLLock v AAA 511

py Gairrin, J.

he was orally promised “a lifetime job as long as

he did not steal.”

I conclude that it simply is not reasonable to

construe such an assertion as an enforceable

agreement to discharge only for cause. Subjective

expectancies of continued employment do not con-

stitute a termination-for-cause contract under

Toussaint, and plaintiff's claim should fail as a

matter of law.

It is still the general rule that employment for

an indefinite term is presumed to be terminable at

the will of either party.

Contracts for permanent employment or for life

have been construed by the courts on many occa-

sions. In general it may be said that in the absence

of distinguishing features or provisions or a consid-

eration in addition to the services to be rendered,

such contracts are indefinite hirings, terminable at

the will of either party. v Maxwell Farms,

279 Mich 684, 687; 293 315 (1937).]

See also anno: Right to discharge allegedly “at-

will” employee as affected by employer's promulga-

tion of employment policies as to 33

ALR4th 120. The underlying rationale for this Tule

is that “[bjecause the parties began with complete

freedom, the court will presume that they in-

tended to obligate themselves to a relationship at

will.” Toussaint v Blue Cross & Blue Shield of

, 408 Mich 579, 600; 292 NW2d 880

(1980).* (Emphasis added.)

* Contracts at will are not the exception, but the ruie, perhaps for

the following reason:

The contract at will is also a sensible private adaptation to

4la

Appendix A

512 432 Micn 472 [June

Ortnton sy Gairrin, J.

In Michigan, however, this general rule has

been in danger of being swallowed up by the

“narrow exception” carved out and announced by

a Court in Toussaint. In that case the Court

ld:

(1) a provision of an employment contract pro-

viding 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 writ-

ten, or as a result of an employee’s legitimate

expectations grounded in an employer’s policy

statements. [Id. at 598.]

The Toussaint decision neither vitiated the em-

ployment-at- will presumption nor did it create

new or special rights. As explained in Valentine v

General American Credit, Inc, 420 Mich 256, 258-

259; 362 NW2d 628 (1984),

42a

Appendix A

1989} Buttock v AAA 513

Option By Grirrin, J.

be enforceable was the right that arose out of the

promise not to terminate except for cause.

Employers and employees remain free to pro-

vide, or not to provide, for job security. Absent a

contractual provision for job security, either the

employer or the employee may ordinarily termi-

nate an employment contract at any time for any,

or no, reason. The obligation that gave rise to this

action is based on the agreement of the parties; it

is not an obligation imposed on the employer by

law. [Emphasis added. ]}

At one point the Toussaint Court emphasized

the limits of its ruling:

We hold only that an employer’s express agree-

ment to terminate only for cause, or statements of

company policy and procedure to that effect, can

give rise to rights enforceable in contract. [Tous-

saint, supra, at 610. Emphasis supplied.]}

However, it cannot be denied that Toussaint

pushed heavily against and through the bounda-

ries of employment contract law with such lan-

guage as:

It is enough that the employer chooses, presum-

ably in its own interest, to create an environment

in which the employee believes that, whatever the

ser pon policies and practices, they are estab-

i 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 . . . can give rise to contractuai rights in

employees without evidence that the parties mutu-

ally agreed that the policy statements would cre

ate contractual rights in the employee, and, hence,

although the statement of policy is signed by

43a

Appendix A

514 432 Micu 472 [June

Opmvion sy Grirrin, J.

neither party, can be unilaterally amended by the

employer without notice to the employee, and

contains no reference to a specific pe his

job description or compensation, and although no

reference was made to the policy statement in

preemployment interviews and the employee does

not learn of its existence until after his hiring. [Id.,

pp 613, 614-615.]

When mutual assent is replaced by the “expecta-

tions” of one party as the measure of contract

viability, an invitation to litigate is heralded, loud

and clear. We need look only at the stampede to

the courts which has followed in the wake of

Toussaint to realize, nine years later, that some

lines of reasonable limitation must be drawn. A

reasonable limit was recognized today in In re

Certified Question with the holding that a termi-

nation-for- cause policy set forth in a manual may

be changed, even though the employer had not

expressly reserved the right to do so.

The case at hand presents a further important

opportunity to provide reasonable definition for

what has come to be known as the Toussaint

doctrine. Plaintiff claims to have an employment

contract for the rest of his life, on the basis of an

oral statement allegedly made at hiring that he

would “have a lifetime job as long as he did not

steal.” Plaintiff contends that a jury should now be

allowed to decide whether such a purported assur-

ance gave rise to an enforceable contract termina-

ble only for the single cause of thievery.

To be sure, in some situations lower courts and

federal courts have held that rather general state-

ments may go to the jury as the basis of a termi-

nation-for-cause contract. See, e.g., vAT

Transport, 141 Mich App 617; 367 2d 433

(1985) (the employee testified that he was promised

that he “would never have to worry” as long as he

44a

Appendix A

1989] BuLiock v AAA 515

Optnion sy Grirrin, J.

did his job); Hetes v Schefman & Miller Law

Office, 152 Mich App 117, 119; 393 NW2d 577

(1986) (the employee would “[have] a job as long as

[she] did a good job”); Walker v Consumers Power

Co, 824 F2d 499, 503 (CA 6, 1987) (the employer

promised that the employee would not be fired as

long as he “performed adequately” and “did a good

performance on [his] job”); and Ritchie v Michigan

Consolidated Gas Co, 163 Mich App 358; 413

NW2d 796 (1987).

However, other courts have held, sensibly, that

not all oral assurances merit jury consideration. In

Broussard v Caci, Inc, 780 F2d 162, 163 (CA 1,

1986), the court distinguished between “puffery

and promise”:

Employment negotiations resulting in employ-

ment are by definition conducted in an atmosphere

of optimism and mutual hope. The air is redolent

with expectation of duration on the part of the

employee and of satisfactory performance by the

employer. But to equate general expressions of

hope for a long relationship with an express prom-

ise to discharge only for good cause would effec-

tively eliminate ithe. rule] . . . that contracts for

indefinite employment are, without more, termina-

ble at will.

Yet another court has made this distinction:

Since Toussaint, the Court has been faced with a

number of cases where the plaintiff has claimed a

Toussaint contractual obligation arising out of the

employer's hiring agent telling plaintiff at the

time of employment that plaintiff could be em-

ployed “as boom as he the job” or similar

ete as “as long as there is work to

as long as

your ak is satisfactory,” “as

pon etc. When you examine ea

statements, each, standing alone, simply does not

45a

Appendix A

516 432 Micu 472 (June

Opinion By Grirrin, J.

constitute a contract or agreement with any spe-

cific duration. Each was clearly within the policy

of the Lynas case where an employment agree-

ment for an indefinite term such as each of these

was held to be an employment at will. After all

Lynas as well as reality compels recognition of the

fact that neither party to the beginning of an

employment relationship expects it to be unsatis-

factory, and both hope it will have a significant

duration. This hope and noncontractual wish is

expressed in terms of language such as “as long as

you do the job.” Hence, the Toussaint exception to

Lynas must mean more than merely this lan-

guage. While it is true that as the economy and

society change, we can expect employment dura-

tional rules will be altered. That was probably the

basis for the specific recognition in Toussaint that

the employer will be held accountable for allowing

a hiree to reasonably believe that there was a

specific durational term to the employment; but it

must be based on more than the expression of an

optimistic hope of a long relationship. (Carpenter v

American Excelsior Co, 650 F Supp 933, 936, n 6

(ED Mich, 1987).]

Such an admonition is warranted. Caution

should be exercised in judging the viability of a

breach of contract action based solely on an al-

leged oral representation recalled with remarkable

specificity long years after the time of hiring.

The present case presents an intriguing exam-

ple. Plaintiff claims a “lifetime job . . . as long as

he did not steal.” If we take the employer at his

word, this precatory phrase sets forth an inher-

ently indefinite term of employment (a lifetime);

yet it simultaneously provides for discharge only

for a single cause (thievery). As plaintiff would

have it, he could be inefficient, absent, tardy,

slovenly, reckless, nonproductive and even violent

—to mention only a few undesirable traits; how-

ever, he could not be terminated unless he com-

46a

Appendix A

1989] Buttock v AAA 517

Opinion By Gairrin, J.

mitted the one cognizable cause for ending the

relatiocnship—stealing.

Surely, a modicum of realism and common sense

is needed. An assurance such as that alleged in

the instant case simply cannot be separated from

the realities of the working world. It should be

recognized that “lifetime” employment contracts

are extraordinary and, being so, “must be ex-

pressed in clear and unequivocal terms before a

court will conclude that an employer intended to

enter into such a weighty obligation.” Chastain v

Kelly-Springfield Tire Co, 733 F2d 1479, 1484 (CA

11, 1984). See also Naz Agency, Inc v US Fidelity

& Guaranty Co, 277 F2d 640, 641 (CA 6, 1960).

Otherwise stated, “A casual remark made at a

meeting, a phrase plucked out of context, is too

fragile a base on which to rest such a heavy

obligation inherent in such a contract.” Brown v

Safeway Stores, Inc, 190 F Supp 295, 299-300 (ED

NY, 1960).

Whether or not Bullock carried a subjective

expectancy that he would work for this employer

for the rest of his life, it is difficult to believe that

any reasonable person would rely on such an oral

assurance as the basis of an interminable employ-

ment contract “as long as he did not steal.” I

would hold that the allegations put forth in the

instant case are insufficient as a matter of law to

provide the basis for an employment contract that

is not terminable at will.

Furthermore, the rule of construction set forth

in Lynas, which is preserved by Toussaint,’ pro-

vides that a lifetime employment contract, even if

agreed to, is generally construed as an indefinite

, terminable at the will of either party, in

the absence of distinguishing features or special

3 Toussaint, supra at 596-507, 632.

47a

Appendix A

518 3 432 Micn 472 [June

Ornnon sy Gairrin, J.

consideration in addition to the services to be

rendered. I am compelled to disagree with a sug-

gestion in the majority opinion that special consid-

eration sufficient to satisfy Lynas might exist in

the instant case. Ante, p 482, n 9. As I read

the pleadings, plaintiff does not aver that any

particular benefit inured to the defendant, or that

any particular hardship was incurred by plaintiff,

distinguishable from that expected from the nor-

mal performance of all commissioned salespersons.

Accordingly, in conformity with Lynas, the mo-

tion for summary disposition should have been

granted.

Although the majority opinion appropriately fo-

cuses only upon plaintiff's claim of wrongful dis-

charge, Ante, p 477, n 5, plaintiffs complaint

includes claims that reach into other areas of the

employment relationship. For example, he con-

tends that he was orally assured at hiring that he

“would work as a commission salesman for Defen-

dant and enjoy the benefits of a seven (7%) percent

commission for sales... ,” and that “if he

worked hard and built up his ‘book of business,’ he

would be able to earn large sums of

money ... and could enjoy his later working

years....”

I addreas these ancillary claims for the purpose

of explaining why they also fail as a matter of law,

and to emphasize that the Toussaint rationale has

been confined by this Court to claims of wrongful

48a

Appendix A

1989] BuLiock v AAA 519

Orrmion By Grirrin, J.

commission with a “unit compensation plan,”

whereby sales representatives were paid commis-

sions calculated as a specified dollar amount,

rather than as a percentage of the insurance

premiums. This change in the method of compen-

sation applied across the board to all of Aaa’s

commission sales representatives, and not just to

plaintiff. Plaintiff continued to work for nearly

four years thereafter, and was compensated under

the new plan until he was terminated as a sales

representative in 1982.

Plaintiff now complains that by modifying its

method of compensation in 1978, and by institut-

ing production standards in 1981, defendant

breached an oral contract purportedly entered into

when he was hired. Specifically, plaintiff alleges

that defendant “breached said promises and

changed its policies without advising Plaintiff

when Plaintiff came into the employ of Defendant

that Defendant was reserving the right to do

ike

Of course, a promise to pay commissions on sales

actually made is enforceable, even when the un-

derlying agreement is for an indefinite duration.

Reed v Kurdziel, 352 Mich 287, 295; 89 NW2d 479

(1958). Depending on the terms agreed upon, com-

missions on sales originally procured could con-

tinue to accrue even after an employee is termi-

nated. Accordingly, plaintiff might have a valid

claim concerning defendant’s obligation to pay

commissions accruing from the book of business

established by the plaintiff prior to defendant’s

change in the method of compensating its sale

staff. However, the assertions in plaintiff's com-

plaint do not support a claim that defendant abro-

gated its managerial prerogatives to modify the

method of compensating its sales personnel.

An employer’s intentio' | give up permanently

49a

Appendix A

520 432 Mich 472 | [June

IN BY Gauirrin, J

a right so fundamental as the ability to make

changes in its method of compensation is not to be

lightly inferred. In his complaint, plaintiff reveals

that the assurances on which he relies were ex-

pressed in terms of a company policy “which had

been in effect for many years.” There was no

express statement that the policy would continue

for a fixed period of time or that the policy could

not be changed in the future.

Furthermore, there is no basis for an inference

that the compensation method in effect at hire

would forever remain unchanged. On the contrary,

the fact that policies set out in distributed manu-

als were later modified rebuts such an inference.

Since I would conclude under part 1 that plain-

tiff was an employee at will, it logically follows

that the right of an employer to terminate the

relationship “necessarily includes the right to in-

sist upon changes in the compensation arrange-

ments as a condition of continued employment.”

Green v Edward J Bettinger Co, 608 F Supp 35, 42

(ED Pa, 1984), affd 791 F2d 917 (1986), cert den

479 US 1069 (1987). Thus, an employee in a termi-

nation-at-will relationship, once informed of a

change in compensation rates, can either accept

the new rates or exercise his own right to termi-

nate the relationship. Hathaway v General Mills,

Inc, 711 SW2d 227 (Tex, 1986); Facelli v Southeast

Marketing Co, 327 SE2d 338 (SC, 1985). If an

employee continues to work with knowledge of the

changes, he impliedly accepts the modification.

Hathaway, supra; Albrant v Sterling Furniture Co,

85 Or App 272; 736 P2d 201 (1987).

Surely, where an employee continues to work

under a revised compensation system for nearly

50a

Appendix A

1989] Bu.iock v AAA 521

Optnion By GrirrFin, J.

four years, as in the case at bar, acceptance by the

employee should be implied as a matter of law.‘

Furthermore, In re Certified Question, supra,

decided today, supports the proposition that an

employer may unilaterally make such a policy

change although the right to do so has not been

expressly reserved. If even a just-cause termina-

tion policy can be modified or revoked, surely

policies of lesser import may also be changed.

It is noteworthy that during a period of more

than nine years since Toussaint, its rationale has

been confined by this Court to claims of wrongful

discharge. The point was reiterated in Valentine,

supra, p 258, where this Court stated: “[tJhe only

right held in Toussaint to be enforceable was the

right that arose out of the promise not to termi-

nate except for cause.”

Our lower courts, whose experience with Tous-

saint-based claims is extensive, have shown under-

standable reluctance to extend Toussaint beyond

wrongful discharge disputes. For example, see

Dyer v Dep’t of State Police, 119 Mich App 121;

326 NW2d 447 (1982) (rejecting the plaintiffs’

claim that department policy and practice had

given rise to a contractual right to nonduty use of

state vehicles, on the basis that rights and duties

of the parties relative to vehicle use were not

regulated by implications), and Engquist v Living-

ston Co, 139 Mich App 280; 361 NW2d 794 (1984)

(rejecting the plaintiff's claim that a fourteen-year

history of step increases had given rise to a Tous-

saint-based entitlement to step increases).

Even if it can be said that policy considerations

were sufficient to justify the Toussaint interven-

tion to protect job security, it is difficult to imagine

the scope of difficulties and mischief that would be

4 Plaintiff does not contend that he was not fully compensated for

services rendered.

Sla

Appendix A

522 432 Micu 472 [June

Orrion sy Garr, J.

_ encountered if Toussaint were to be extended be-

yond wrongful discharge into every facet of the

employment relationship. Particularly in light of

the enormous potential cost to the system that

such an extension would entail, including damage

to the delicate balance of the employee-employer

relationship, I take this occasion to express the

view that it would be prudent and wise to leave to

the Legislature the public policy decision whether,

or to what extent, Toussaint should be extended

beyond wrongful discharge.

Ill

Defendant has argued in this Court that plain-

tiffs claim of lifetime employment based on an

oral promise should be barred as in violation of

the Michigan statute of frauds.' Because Bullock’s

assertion of a “lifetime contract” is exactly the

sort of promise that courts should generally de-

cline to enforce unless it is in writing, I feel

compelled to make the following observations.

It is one of the curiosities of the common law

that contracts for permanent or lifetime employ-

ment have been held to fall outside the scope of

the statute of frauds. On its face the statute ap-

pears to require that promises contemplating long-

term commitments, such as that alleged in the

instant case, be validated by written evidence in

order to be enforceable:

In the following cases an agreement, contract or

promise shall be void, unless that agreement, con-

tract, or promise, or a note or m

thereof is in writing and signed by the party to be

aa therewith, or by a person authorized by

5 MCL 566.132; MSA 26.922. The majority declines to address this

issue since it was not raised at the trial level. Ante, p 481, n 8.

52a

Appendix A

1989] Bu.Liock v AAA 523

Ormion sy Garrrin, J.

(a) An agreement that, by its terms, is not to be

performed within 1 year from the making thereof.

Ue} 566.132(a); MSA 26.922(a). Emphasis sup-

plied.

Since enactment of the original English statute

in 1676,* however, courts have chafed under its

restrictions.’ The undisputed trend of authority

has been to interpret the “one year” provision as

applying only to contracts that have no possibility

of being completed within a year, even if the

parties to the contract in fact contemplated a

longer period.’ Michigan’s case law has followed

that trend by applying the nonstatutory “capable

of performance” exception to the one-year provi-

sion of the statute of frauds.’

Significantly, the primary reason used to explain

the result. in the case of an oral contract for

permanent or lifetime employment is that such

contracts are terminable at will. See, for example,

Sax v Detroit, GH & MR Co, 125 Mich 252, 255-

256; 84 NW 314 (1900). This rationale was typified

in Adolph v Cookware Co of America, 283 Mich

561, 568; 278 NW 687 (1938):

Plaintiffs proofs, taken as true, showed a con-

tract for permanent employment. Such a contract

is for an indefinite period and, unless for a consid-

*29 Car Il, c 3. Comparisons between t time and the late

seventeenth cen should be made cau y, if at all. Neverthe

lou earaueiete about the conditions which gave rise to

the statute is so strikingly familiar that it demands reflection: “Liti

gation indeed came close to a form of ion, and it

was an aggressive age.” Simpson, A History of

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