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Alaska Supreme Court Decision Could Affect Employee Discipline

Posted Tuesday, October 21, 2014.

Alaska Sup. Ct.: Detailed policy manual outlining employee discipline could be contract

A policy manual outlining how employees at a retail chain were to be punished for infractions could represent a binding employment contract, even though it contained some language indicating that the retail chain could bypass provisions if it wanted, the Supreme Court of Alaska held. Reversing summary judgment for the employer, the court reasoned that a reasonable jury could find the policy manual altered the employee’s at-will status (Becker v Fred Meyer Stores, Inc, October 16, 2014, Bolger, J).

Foot chase after thief. A loss prevention manager for a retail chain observed a suspicious customer on a security monitor, who took a stereo system off a shelf, removed the security wrapping, and walked toward the exit. After the customer passed through the store’s electronic security devices, the employee confronted him. The customer dropped the stereo and ran into the store’s parking lot, dropping his cell phone on the way. Thinking he could use the phone to help identify the customer, the employee picked it up. When the customer demanded the phone be returned, the employee threw it onto the store’s roof. As the customer ran to his car, the employee stepped off the sidewalk and followed him, noting his license plate number as he drove away. The customer was later charged with theft.

Termination. When the employee met with his supervisor, he was told he had violated company policy by using a security camera to observe the customer, running on the sales floor, and stepping off the sidewalk to pursue him. Because of these and other violations the employee had committed in the past, he was terminated on the spot, without any prior verbal or written warning. The employee sued for wrongful discharge, but the superior court granted summary judgment for the retail chain. He appealed.

Breach of contract. When granting summary judgment, the superior court held that there was no contract between the employee and the retail chain and that the employee could be terminated at will. Alaska’s Supreme Court disagreed, holding that a reasonable person could find that the retail chain’s loss prevention policy manual represented a binding employment contract. That policy manual listed several circumstances under which workers could be fired without warning. It also differentiated between various kinds of mistakes loss prevention officers could make when stopping a customer suspected of stealing merchandise and provided disciplinary guidelines for each one. All of this detail created the impression that employees were to be provided with certain job protections.

“Hedging” language. The retail chain argued that, despite all the procedures set out in its policy manual, no workers could believe that it altered their status as at-will employees, thanks to the presence of “hedging language.” For example, the manual provided that termination was always an option when an employee made an error in judgment so severe that it exposed the retail chain to civil liability. However, when read within the context of the manual’s many disciplinary procedures, this created an exception to the general rule that those procedures would be followed. The manual contained no language indicating that it could decline to follow its procedures as it pleased, and reasonable minds could differ as to whether the retail chain was bound to follow them in the case of the employee.

Actual violations. The retail chain also argued that, even if the policy manual represented an employment contract, its decision to fire the employee without notice was justified under the terms of that contract. But the superior court never actually reached that question when it granted summary judgment to the retail chain, which was something for it to consider on remand.

Implied covenant of good faith and fair dealing. In addition, the employee presented a material question of fact as to whether the retail chain breached the implied covenant of good faith and fair dealing by firing him, even though it did not fire other employees who had been in similar situations. The employee identified 29 of his coworkers who had not been fired for committing similar or more serious violations. Although the employee described at least a couple of those coworkers’ situations in detail, it was enough that he alleged they were treated differently to raise an issue of fact as to whether he had been treated fairly. Despite the retail chain’s argument to the contrary, the employee did not have to point to coworkers who shared his exact job description and committed the exact same violations as he had to show disparate treatment. His allegations were sufficient, and the court reversed summary judgment to the retail chain and remanded.

The case number is S-15314.