In the state of Michigan, employment-at-will is nearly dead as a legal doctrine. The Michigan judiciary has systematically attacked the foundations of the doctrine, supplanting private contract and freedom of choice with the erratic imposition of judicial will. As a result, Michigan has become a rather dubious leader in the field of employment law. Everyone from liberal academics seeking publicly imposed "justice" in the workplace, to public policy makers searching for ways to give more economic leverage to employees, to plaintiffs attorneys seeking the quick and easy big financial score, Michigan is the legal beacon. The seminal case producing such reactions is Toussaint v. Blue Cross & Blue Shield of Michigan. [28]
Plaintiff Toussaint was a middle management employee with five years service when he was terminated. During the course of his preemployment interviews, Toussaint asked about job security and was told that he would be with the company "as long as I did my job". He was also handed a personnel policy manual which stated in part, "it is the policy of the company to treat employees leaving Blue Cross in a fair and consistent manner and to release employees for just cause only." The policy manual also provided for complaint procedures and disciplinary procedures. In handing Toussaint the manual, an officer at Blue Cross reassured the plaintiff that if he came to Blue Gross, he "wouldn't have to look for another job because he knew of no one ever being discharged".
The Michigan Supreme Court responded to this lawsuit by establishing a new implied contract cause of action. In a 4-3 decision, the Court held that "employers may have an implied contractual obligation not to discharge employees without just cause, based on expressed terms of an employment agreement or an employee's legitimate expectations derived from the employer's policy statement." Going further, the Court found that "oral statements made during a hiring interview to the effect that an employee would remain at work as long as he did his job" was sufficient to create a binding contract. Going still further, the court focused on the "environment" of the workplace:
It is enough that the employer chooses, presumably in his own interest, to create an environment which the employee believes, whatever the personnel policies and practices, they are established 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 obligation." [29]
Traditional contract law was thrown out the window. The Court went so far as to point out that "(n)o pre-employment negotiations need take place and the parties' minds need not meet on the subject". The Court can simply invent the contract from any events, statements, and "environment":
We hold that employer statements of policy ... can give rise to contractual rights in employees without evidence that the parties mutually agreed that the policy statements would create contractual rights in the employee, and, hence, although the statement of policy is signed by neither party, can be unilaterally amended by the employer without notice to the employee, and contains no reference to a specific employee, 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.
It does not take much imagination to grasp what this revolutionary, radical decision unleashed. In a torrent of subsequent cases, the entire employment-at-will foundation upon which Michigan employment law was based was thrown into disarray. Suddenly, every discharged employee could sustain a full trial claiming unjust discharge. Any reference point, whether it was a statement made by someone somewhere at some time, or a slip of paper, or a pattern of behavior, was enough to require a jury trial.
Rather perversely, the Court insisted that Michigan was still an employment-at-will state. Employers would simply have to inform their employees that they were employed at will. Yet Michigan courts have held that whether disclaimers are enforceable can be a question of fact where factors reflecting a contrary intention exist. In Dalton v. Herbruck Egg Sales, Co., [30] plaintiff admitted reading and understanding a disclaimer in his handbook that he could be terminated "at any time ... without specific cause or reason." Yet the handbook also contained a progressive discipline policy. The Court of Appeals found that the tenor of the entire handbook was that all employees would be treated fairly and justly in accordance with the procedures set forth therein, and thus a jurycould decide to disregard the disclaimer. In Schipani v. Ford Motor Co. [31] the Court of Appeals held that an employer's oral representations regarding duration of employment could override an express disclaimer in written materials.
Recent doubt has also been cast on the ability of the employer to change previously established Implied contract rights. In Bankey v. Storer Broadcasting Co., [32] the Michigan Supreme Court reaffirmed that a written "discharge for cause" provision could be revised by a later writing, provided the employee was given "reasonable notice". But in a companion case, Bullock v. Automobile Club Insurance Association of Michigan [33] the Court indicated that implied contracts, once created, may create a legitimate expectation which subsequent employer policy changes cannot simply reverse. In Bullock, the plaintiff claimed an oral promise of discharge for cause only. The defendant subsequently issued a policy manual indicating employment-at-will. The Court indicated that in the right factual circumstances of "reasonable expectation", the subsequent change could be considered only an offer of a contract change, permitting a jury to conclude that the previous implied contract was still enforceable.
Even the Michigan courts have set limits on their new doctrine. In Schwartz v. Michigan Sugar Co., [34] and subsequent cases, the courts have insisted that "a more subjective expectancy on the part of employee" is insufficient to create the "legitimate expectation" necessary to form an enforceable contract. Actual conduct by the parties, oral statements, or written materials are at least necessary to form an implied contract. In addition, the more conservative federal courts (especially the Sixth Circuit) have engaged in guerilla warfare against the Toussaint doctrine, taking every opportunity within the guidelines established by the Michigan Supreme Court to limit the impact of the implied contract approach to the employment relationship. [35]
Yet despite the efforts of the federal courts and certain Michigan judges to establish boundaries within which the implied contract doctrine can operate, the doors to moment-by-moment courtroom invention of contracts have been inalterably opened. The particular facts in a case can always be construed to help the sympathetic plaintiff or punish the less than likeable defendant. An employer can take all the care in the world to issue the correct employment-at-will language, conduct the most precise job evaluations, and adhere to all the proper hiring procedures, and still have an implied contract imposed, merely because a jury somewhere thought that a discharge was not fair under the circumstances.
Needless to say, the Michigan courts have not just limited themselves to the invention of contracts. They have also resorted to the "public policy" theories to enhance their ability to interfere with the employment relationship. When even implied contract law fails to provide relief to a discharged employee, the court can always turn to the new "fairness" world of "public policy" in order to punish and manipulate the employer.
In Renny v. Port Huron Hospital, [36] the employer did everything right from the standpoint of implied contract. The plaintiff had signed an Acknowledgement and Agreement stating that she had received a copy of the hospital handbook, had read and fully understood the contents, and agreed to abide by the rules and regulations contained therein. Employees were expected to read the handbook carefully and become familiar with its contents. The handbook stated explicitly that management had "the sole right to manage and operate the hospital." Among the provisions in the handbook was an optional grievance procedure. Plaintiff Renny, a registered nurse, agreed to use that procedure to appeal her discharge for operating room irregularities. A peer review committee consisting of three supervisory and three non-supervisory employees which she had selected from a group of qualified volunteers ruled against her.
Renny nevertheless challenged her termination in court. In a bizarre twist of logic, the Michigan Supreme Court ruled in her favor, first by finding that the existence of the grievance procedure created a good cause employment contract, and then by holding that the grievance procedure provided by the hospital was simply not fair enough. The Court hold that a good cause employment contract requires certain procedural rights and protections which the hospital had failed to provide. It didn't matter that the hospital was under no obligation to establish a grievance procedure. It didn't matter that Renny voluntarily chose to use the grievance procedure. The Court simply took it upon itself to pass judgment on the procedure on the basis of its own arbitrary sense of fairness.
Not only did this decision severely limit the ability of Michigan employers to resolve workplace disputes outside of the courtroom setting by requiring complex, high cost procedures which make implementation of a grievance procedure prohibitive, but it also imposed a significant limitation on the ability of the employer to set even the most basic conditions of employment. For every rule and procedure established by the employer to run the workplace, the Court simply takes it upon itself to impose its own arbitrary standard of "fairness", accepting or rejecting each rule or procedure regardless of the actual contractual choices of the parties. The will of the parties is dismissed and replaced with the personal will of the judge. At this point one must ask, who is the real employer? Has the Court decided to substitute its standards of management for those of the employer?.
The "public policy" exception also reared its intrusive head in Coins v. Ford Motor Co., [37] where the Michigan Court of Appeals decided that a discharged employee could bring a tort action claiming unjust discharge for exercising "rights" outside of the immediate employment setting. Goins was discharged, according to the employer, for falsifying his medical history form. The plaintiff had failed to state on the form that he had sustained a work-related knee injury while previously employed with another company. In filing a wrongful discharge suit against Ford, Goins argued that the company had in fact not discharged him for filing a false form, but instead for filing the workers' compensation claim with the previous company. The court accepted Goins' argument, arguing that the exercise of a public policy "right" prohibited Goins' discharge, even though the right was exercised in a setting totally unrelated to the employment at hand.
The practical effect of this two-pronged judicial attack on the freedom of the employment contract is that employment-at-will is virtually dead in Michigan. Each judge or juror need only turn to his/her own sense of what is fair, and then manipulate the facts in the case to suit his/her needs. If the facts permit the invention of an implied contract, this technique will be used. If the facts are too flimsy to support a contract, then "public policy" will do. The actual intent of the parties becomes irrelevant.
Judges and juries have become managers in Michigan's workplace, second-guessing the decisions of both employers and employees. No private contract between an employer and his/her employee is ever completely safe from after-the-fact alteration. Every workplace decision is subject to an appeal to the "instincts" of courtroom participants. To liberal academics, public activists, and income-hungry lawyers, such a system of governmental intervention may indeed offer an ideal model for the future of employment law, but it has little to do with the American tradition of contract and freedom of choice.
