Toussaint v. Blue Cross & Blue Shield
1980 Mich. LEXIS 227, 292 N.W.2d 880, 408 Mich. 579 (1980)
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Rule of Law:
An employer's express agreement or statements of company policy can create contractual rights for employees, making a promise to terminate only for just cause legally enforceable even in an employment contract for an indefinite term.
Facts:
- Charles Toussaint interviewed for a middle management position at Blue Cross.
- During hiring discussions, Toussaint was told he would be with the company 'as long as I did my job.'
- Upon being hired, Toussaint was given a company personnel manual which stated it was policy to release employees 'for just cause only.'
- Walter Ebling interviewed for a middle management position at Masco Corporation and expressed concerns about job security.
- A Masco executive assured Ebling that if he was 'doing the job,' he would not be discharged.
- Ebling's compensation included a stock option that would vest after three years of continuous employment.
- Blue Cross discharged Toussaint after five years of employment.
- Masco discharged Ebling after two years of employment, before his stock option could vest.
Procedural Posture:
- Charles Toussaint sued Blue Cross in a Michigan trial court for wrongful discharge, and a jury returned a verdict in his favor.
- Blue Cross, as appellant, appealed to the Michigan Court of Appeals, which reversed the trial court's judgment.
- Walter Ebling sued Masco Corp. in a Michigan trial court for wrongful discharge, and a jury returned a verdict in his favor.
- Masco Corp., as appellant, appealed to the Michigan Court of Appeals, which affirmed the trial court's judgment.
- The Michigan Supreme Court granted leave to appeal in both cases and consolidated them for its decision.
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Issue:
Does a provision in an employment contract, whether express or implied from an employer's policy statements, that an employee will only be discharged for cause become a legally enforceable part of the contract, even if the employment is for an indefinite term?
Opinions:
Majority - Levin, J.
Yes. A provision of an employment contract providing that an employee shall not be discharged except for cause is legally enforceable even if the contract is for an indefinite term. The traditional employment-at-will doctrine is a rule of construction, not a substantive rule of law, and employers are free to bind themselves to a higher standard of job security. Such a binding provision can be established in two ways: 1) by express agreement, either oral or written, or 2) as a result of an employee's legitimate expectations grounded in the employer's policy statements, such as those in a personnel manual. When an employer creates policies promising fair treatment and just-cause termination, it benefits from a more loyal and cooperative workforce and creates a situation 'instinct with an obligation.' The employee does not need to have specifically negotiated for these policies or even known of them prior to employment for them to become part of the enforceable contract. The question of whether an employer had 'just cause' to terminate an employee is a question of fact for the jury to decide.
Concurring in part and dissenting in part - Ryan, J.
Yes, in Ebling's case; No, in Toussaint's case. While a 'just cause' provision can be enforceable, it must be a bargained-for term of the contract. In Ebling's case, the specific oral assurances he received during negotiations were 'distinguishing features' that removed his employment from the at-will rule, creating a jury question. However, in Toussaint's case, there is no evidence that the Blue Cross policy manual was intended by both parties to be part of his employment contract. The manual was a unilateral statement of company policy given to him after he was hired, not a mutually agreed-upon contractual term. Cases enforcing employer policy statements typically involve deferred compensation like pensions, which is distinct from the fundamental term of employment duration. Without evidence of mutual assent to make the manual a binding contract, Toussaint's employment remained terminable at will.
Analysis:
This decision significantly altered the employment law landscape in Michigan by creating major exceptions to the employment-at-will doctrine. It established that employers' policy manuals, handbooks, and even oral assurances could create legally enforceable contracts for job security. This ruling forced employers to be far more cautious in their communications and written policies to avoid inadvertently creating 'just cause' employment relationships. The 'legitimate expectations' theory, in particular, broadened the scope for wrongful discharge claims, allowing juries to find contractual obligations based on the overall environment created by the employer, not just on explicitly negotiated terms.
