Keenan v. Continental Airlines: Employee Handbooks and Employment at Will in Colorado
| Publication year | 1987 |
| Pages | 969 |
1987, June, Pg. 969. Keenan v. Continental Airlines: Employee Handbooks and Employment at Will in Colorado
John M. Husband, Denver, is a partner, and Allen P. Taggart, Denver, is an associate of the firm of Holland & Hart.
The doctrine of employment at will simply stated is that in the absence of statute or an expressly written contract for a definite term, an employee can be discharged for good cause, no cause or any cause. This doctrine has stood as a cornerstone of American employment law for over a century.(fn1)
The doctrine has recently been the subject of various judicial interpretations in numerous courts throughout the country. Some courts, such as those in Michigan and California, have been critical of the at-will doctrine and have created gaping exceptions that have eroded the effect of the doctrine.(fn2) Other courts, such as those in Pennsylvania and Kansas, have adhered to the traditional doctrine.(fn3) As a result of these differing interpretations, both employers and employees have been subjected to grossly disparate results.(fn4)
Out of these cases, three recent judicially carved exceptions to the traditional doctrine of employment at will have emerged: (1) the public policy exception where the employee is discharged for refusing to violate a law or act against the public interest at his employer's demand; (2) the implied covenant of good faith and fair dealing exception wherein an obliga-tion of good faith and fair dealing is implied in each employment contract; and (3) the employment contract exception in which courts have applied unilateral contract principles.(fn5) Courts have found a contract on terms contained in hiring letters, oral assertions, written policy statements and employment manuals.(fn6) Colorado courts have not definitively determined the public policy exception and have rejected the good faith and fair dealing exception.(fn7) The Colorado Supreme Court, until recently, had not addressed the contract exception.
Against this national backdrop, in January 1987, the Colorado Supreme Court had the opportunity to deal with the contract exception in the context of employment manuals. In Keenan v. Continental Airlines,(fn8) the court examined whether an employee may sue an employer for breach of contract on the theory that a unilaterally promulgated employee manual may serve as a basis for altering the terms of an employment otherwise terminable at will.9
This article focuses on the Keenan decision and is intended to inform practitioners of the current status of the employment handbook exception to employment at will in Colorado.(fn10)
Employee documents have traditionally been viewed by management as unilateral statements of benefits and procedures subject to change at any time and fully at the discretion of the employer. Historically, employers did not view employment documents as creating contractual rights. In the absence of consideration other than performance of the job by the employee or mutual bargaining between the employer and employee, many courts found handbooks to be unilateral statements by the employer and therefore unenforceable.(fn11) Something more than the performance of duties of the employee and the payment of wages was needed for a handbook to be contractually binding. In one case for example, no "meeting of the minds" or mutual understanding was present sufficient for the court to conclude that a contract had been formed.(fn12)
In addition, handbooks had not been considered contractually binding because there was no "mutuality of obligation" between the parties. Mutuality of obligation requires that unless both parties to a contract are bound, neither is bound. Therefore,
Many recent decisions have utilized implied contract principles to bind contractually an employer to the policies or procedures contained in employee handbooks, personnel manuals or written policy statements. For example, in Toussaint v. Blue Cross and Blue Shield,(fn14) the Michigan Supreme Court held that the plaintiff employee, in accepting employment, had been explicitly assured both orally and in his employer's policy manual, that termination would require "good cause." There was no written employment contract, the employment was for an indefinite term and there had been no clear meeting of the minds between the employer and employee on whether the manual constituted a contract. Despite this, the court held that the employer was bound by the policy statements contained in the manual. The court concluded that employers could modify their heretofore unquestioned right to discharge employees by use of either "express agreement[s], oral or written, or as a result of an employee's legitimate expectations grounded in an employer's policy statements."(fn15)
One court has been particularly critical of such judicial interpretations that erode the at-will doctrine. It stated:
Taking a nationwide view of the law in this area, it is apparent that what once was the corpus juris of employment relationships has lately become an amorphous mass of confusion replete with holdings that defy reconciliation from one jurisdiction to the next. The at-will presumption, the citadel that once governed the field with such predictability, has been eroded of late by piecemeal attacks on both the contract and tort fronts and the entire field seems precariously perched on the brink of change. . . .
... if termination at will contracts are to be forbidden, the judicial process may be an inappropriate forum for such sweeping policy change.(fn16)
Not all jurisdictions have taken an approach that erodes the traditional doctrine. Where an employee handbook has been or could be, according to its terms, unilaterally revised during the course of an employee's employment, some courts have concluded that the handbook was not intended by the parties to be contractually binding.(fn17) Such courts have been reluctant to construe the provisions of employee handbooks or personnel manuals as con-tractually binding on the employer. Moreover, several courts have found that where manual terms were not bargained for by the parties, any benefits conferred by it are mere gratuities. These courts have found that no meeting of the minds is evidenced by the defendant's unilateral act of publishing company policy.(fn18)
However, more than half of the state court jurisdictions have adopted the handbook exception to employment at will in some form. The basic elements necessary for any contract should be present before a contract will be implied: an offer, acceptance of the offer, consideration and mutuality of obligation.(fn19)
In recent years Colorado court decisions dealing with the effect of employee handbooks on the at-will employment relationship have defied reconciliation from one case to the next.(fn20) Before Keenan, it was uncertain whether the Colorado Supreme Court would support the at-will doctrine or allow certain exceptions. In addition, the lower court opinions before Keenan provided little guidance regarding the scope of the handbook exception to employment at will.
The first Colorado case to address the question of whether contractual rights are created by the terms of a personnel manual was Brooks v. Trans World Airlines, a U.S. District Court decision.(fn21) In this case, Judge Kane held that the employer's personnel manual created enforceable contract rights that required the company to permit Brooks to exercise whatever displacement rights he had when furloughed. However, the court explicitly stated that the issue of whether the handbook created a right not to be discharged without cause was not before the court.(fn22)
In Salimi v. Farmers Insurance Group, the Colorado Court of Appeals, in a decision of only two pages, overturned the long-established principle of at-will employment and embraced the notion that a personnel policy manual could have contractual effect.(fn23) Salimi involved an action by an employee who complained that his employer conducted an unfair and incomplete investigation into his alleged misconduct and that his subsequent demotion was a violation of the published policies of the employer. The court stated:
[A]n employer's distribution to employees of handbooks or policy manuals which contain specific procedures for termination of employment, when relied upon by an employee and supported by the consideration of continued service, may result in an employer becoming contractually bound to comply with those procedures.(fn24)
On the same day that the Salimi decision was handed down, the Court of Appeals decided Corbin v. Sinclair Marketing, Inc.(fn25) In Corbin, the plaintiff argued that he was wrongfully discharged for failure to obey an order from his employer that allegedly violated federal and state safety laws and the company's own safety policies contained in a safety regulation manual. The court found that federal and state law did not prohibit the employer from ordering Corbin to check certain sensors in the back of a gasoline truck, an act which allegedly violated the employer's own safety policy. The court held that a safety policy was not the same as a termination policy and that the employer was not obliged to follow the safety regulations in its own manual.(fn26) Reading Corbin and Salimi together...
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