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O'Brien v. New England Telephone & Telegraph Co.

Massachusetts Supreme Judicial Court
422 Mass. 686 (1996)
ELI5:

Rule of Law:

An employee personnel manual can create an implied, enforceable contract altering an at-will employment relationship, but the employee must exhaust any grievance procedures contained within that manual before suing for wrongful termination. A supervisor may be held personally liable for intentional interference with an employee's contractual relations if their actions are motivated by actual malice and are not related to the employer's legitimate business interests.


Facts:

  • Mary C. O'Brien began working for New England Telephone & Telegraph Company (NET) in 1956 and had a good work record for over two decades.
  • In 1984, her supervisor, Edwin H. Hurley, Jr., attempted to transfer her, but O'Brien successfully grieved the transfer based on NET's personnel manual.
  • Following the successful grievance, Hurley began a multi-year campaign of harassment against O'Brien, which included screaming at her, calling her derogatory names, and withholding work from her.
  • In 1985, Hurley suspended O'Brien for three days, but she successfully grieved the suspension, which was reduced to one day off without pay.
  • In 1989, O'Brien suspected Hurley was giving her work to a salesperson with whom he was friendly.
  • To confirm her suspicions, O'Brien made a series of silent, "hang-up" telephone calls to Hurley and the salesperson.
  • NET traced the calls to O'Brien, and she admitted to making them.
  • NET terminated O'Brien's employment, stating the calls were a violation of its Code of Business Conduct, and O'Brien did not file a grievance concerning her termination.

Procedural Posture:

  • Mary C. O'Brien sued Edwin H. Hurley, Jr. for intentional interference with contractual relations and New England Telephone & Telegraph Company (NET) for wrongful termination in a Massachusetts state trial court.
  • A jury returned a verdict in favor of O'Brien on both claims.
  • The trial court entered judgment for O'Brien against both Hurley and NET.
  • The defendants, Hurley and NET, jointly filed an application for direct appellate review to the Supreme Judicial Court of Massachusetts, the state's highest court.

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Issue:

Does an employee personnel manual create an enforceable employment contract, and if so, must an employee exhaust the manual's grievance procedures before suing for wrongful termination?


Opinions:

Majority - Wilkins, J.

Yes, an employee personnel manual can create enforceable contractual rights, but an employee must exhaust the grievance procedures contained within that manual before bringing a lawsuit for wrongful termination. The court upheld the verdict against the supervisor, Hurley, finding the jury was warranted in concluding his conduct was motivated by "actual malice" unrelated to NET's legitimate interests and that this harassment caused O'Brien to commit the act for which she was discharged. Regarding the employer, NET, the court clarified that a personnel manual can form an implied contract if an employee reasonably believes the employer is offering continued employment on the terms stated in the manual, thereby moving away from a rigid checklist of factors. In this case, NET's manual created such contractual rights. However, the manual also established a mandatory grievance procedure. By failing to file a grievance for her termination, O'Brien did not exhaust her administrative remedies and thus forfeited her right to sue NET for breach of the employment contract.



Analysis:

This decision significantly clarifies Massachusetts law on employee handbooks, establishing that they can create binding contractual rights based on the reasonable expectations of employees, rather than a rigid set of formation criteria. It moves the state's jurisprudence in line with the majority of jurisdictions. However, the ruling also creates a crucial procedural requirement: employees who wish to enforce rights found in a manual must first exhaust any internal grievance procedures provided within it. This creates a powerful defense for employers, potentially resolving disputes internally and shielding them from immediate litigation.

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