Pine River State Bank v. Mettille
115 L.R.R.M. (BNA) 4493, 333 N.W.2d 622, 1983 Minn. LEXIS 1135 (1983)
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Rule of Law:
Definite provisions in an employee handbook regarding job termination procedures, distributed to an employee after hiring, can become an enforceable unilateral contract that modifies a pre-existing at-will employment agreement if the employee provides acceptance and consideration by continuing to work.
Facts:
- In April 1978, Richard Mettille was hired by Pine River State Bank as a loan officer under an oral agreement for an indefinite term.
- Mettille acknowledged that his employment was at-will, meaning he was free to leave and the bank was free to terminate him at any time.
- Late in 1978, the bank distributed a printed Employee Handbook to its employees, including Mettille.
- The handbook contained a section titled "Disciplinary Policy," which outlined a multi-step procedure of reprimands and review before an employee could be discharged.
- In September 1979, an audit revealed numerous serious 'technical exceptions' in loan files for which Mettille was responsible.
- On September 28, 1979, the bank's president terminated Mettille's employment due to the loan file errors.
- The bank did not follow the multi-step disciplinary procedure outlined in its employee handbook when it fired Mettille.
Procedural Posture:
- Pine River State Bank sued Richard Mettille in a Minnesota trial court to collect on two defaulted promissory notes.
- Mettille filed a counterclaim against the bank, alleging that it had breached his employment contract by discharging him without cause and in violation of handbook procedures.
- A jury at the trial court level found in favor of Mettille on his counterclaim, awarding him $27,675 in damages for breach of contract.
- The trial court judge entered judgment for Mettille for $24,141.07, after deducting the amount he owed the bank on the notes.
- The bank (appellant) moved for a new trial, which the trial court denied.
- The bank appealed the denial of its post-trial motion to the Supreme Court of Minnesota, with Mettille as the respondent.
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Issue:
Does an employee handbook containing specific disciplinary procedures, distributed after an at-will employee is hired, become a binding unilateral contract that modifies the at-will employment relationship?
Opinions:
Majority - Simonett
Yes, an employee handbook can modify an at-will employment agreement and become an enforceable unilateral contract. To do so, the handbook's provisions must be definite enough to constitute an offer, the offer must be communicated to the employee, and the employee must accept the offer and provide consideration by continuing their employment. The court reasoned that the traditional at-will doctrine is a rule of contract construction, not a substantive limitation on the parties' freedom to contract. While general statements of policy, like the handbook's 'Job Security' section, are not definite enough to be an offer, the specific, multi-step 'Disciplinary Policy' was a definite offer. Mettille accepted this offer and provided consideration by continuing to work for the bank after receiving the handbook. Arguments against enforceability, such as a lack of mutuality of obligation or a need for additional consideration beyond continued service, were rejected as outdated or inapplicable. Therefore, the handbook's disciplinary procedures became part of Mettille's contract, and the bank breached that contract by failing to follow them.
Analysis:
This case significantly altered the employment-at-will landscape in Minnesota by establishing the 'handbook exception.' The decision holds that employers can be contractually bound by the specific promises they make in employee handbooks, even if those handbooks are distributed after employment has begun and without any new consideration other than the employee's continued service. This ruling forces employers to draft handbooks with extreme care, as specific procedural or substantive promises can transform an at-will relationship into one that requires cause or specific procedures for termination. Future litigation in this area often centers on whether handbook language is sufficiently definite to constitute a contractual offer or if it is merely a general statement of policy with appropriate disclaimers.
