Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-86-01263/USCOURTS-ca10-86-01263-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

KENNETH 

Vo 

MAREMONT 

PUBLISH 

IN THE UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

E. WILLIAMS, ) 

) 

Plaintiff/Appellee, ) 

) 

FILED 

United States Court of Appeals •re.nth Circuit -

MAY 2 31989 

ROBERT L. HOECKER 

Clerk 

) No. 86-1263 

) 

CORPORATION, ) 

) 

Defendant/Appellant. ) 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF OKLAHOMA 

(D.Cc No. CIV-84-1337W) 

Margaret Stockwell (Benjamin E. Stockwell with her on the brief), 

Stockwell Law Offices, Norman, Oklahoma, Attorneys for PlaintiffAppellee. 

Gerald D. Skoning (Thomas J. Piskorski with him on the briefs), 

Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Illinois, 

Attorneys for Defendant-Appellant. 

Before HOLLOWAY, Chief Judge, ANDERSON, Circuit Judge, and 

SAFFELS,* District Judge. 

ANDERSON, Circuit Judge. 

Kenneth E. Williams was fired from his job as a general 

foreman at the Chickasha Plant of Maremont Corporation following a 

sexual harassment charge against him. Specifically, one. male and 

three female employees signed statements asserting that while on 

* Honorable Dale E. Saffels, United States District CourL, 

District of Kansas, sitting by designation. 

Appellate Case: 86-1263 Document: 01019963450 Date Filed: 05/23/1989 Page: 1 
company time and property, and in view and hearing of those 

employees, Williams pulled down the zipper of his pants. Def. 

Exs. E, F, G, and H. One statement further asserted that at that 

time Williams said "if you want it here it is." Id., Def. Ex. F. 

That statement was confirmed at trial by others. R. Vol. III at 

118. Another statement referred to an occasion around the same 

week when Williams allegedly said 11 he would f __ right out here at 

Maremont for $50.00 cause nothing would embarrass him. 11 Def. Ex. 

E. At trial Williams denied pulling his zipper down but admitted 

that "I reached down towards my belt buckle and fly, or whatever, 

you know, that area," R. Vol. II at I-22, and "said something to 

the effect, here it is, or try it, or something." Id. at I-53. 

He partially excused his action by explaining that the incident 

occurred while he was joking with a female employee, Tina Park, 

whom he used to date, and who had teased him about being too old 

to "get it up. 11 Id. at I-22. The employees who signed the 

statements were close by Williams but not part of the immediate 

conversation between Williams and Park. R. Vol. II at I-137, I157, I-159; R. Vol. III at 63, 75. Williams did not regard his 

conduct as sexual harassment, R. Vol. II at I-48-49, but, as 

indicated by the following exchange during his direct examination 

at trial, he knew it was wrong: 

"Q. What do you feel was the most that should have 

happened to you for whatever it was you did? 

A. I felt like I ought to have been disciplined, 

because I, you know, I knew it was wrong, and I knew it 

was a dumb stupid thing to do after I done it. At the 

time, you know, under the circumstances, you know, it 

was a joking thing, deal, and then after I done it, I 

knew, you know, I had done wrong, and I felt like I 

ought to be disciplined. 11 

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R. Vol. II at I-49. 

Following his termination Williams sued Maremont for ''wrongful discharge." R. Vol. I, Tab 30, para. 2. He contended, among 

other things, that the Maremont employee handbook distributed to 

hourly personnel at the Chickasha Plant constituted a contract in 

which, in effect, Maremont promised not to discharge any employee, 

management or hourly, for a single instance in one year of any one 

of twenty-three work rule violations, set forth in the handbook. 

Violation 21 was: "Threatening, intimidating, coercing, using 

abusive language, or harassing any employee on company premises." 

Pl. Ex. 3 at 37. Williams argued that sexual harassment fell 

within that rule. The.handbook provided that an infraction under 

rule 21 resulted in a maximum of six disciplinary points. 

Termination was based on an accumulation of eight points. 1 

The district court ruled that Williams' "cause of action 

sounds in tort and thus the typical types of damages recoverable 

in tort actions are potentially recoverable in this action." R. 

Vol. I, Tab 17 at 11 (Order of December 10, 1984). Consequently, 

in addition to back pay and insurance benefits, and front pay and 

insurance and retirement benefits, the court allowed Williams to 

seek recovery for alleged damage to his reputation, and punitive 

damages. Following a two-day trial a jury awarded Williams 

$750,000 in "actual damages'' and $250,000 in punitive damages. 

1 Since the Maremont Employee Handbook forms the basis of this 

case, the section in question is set forth in its entirety as an 

appendix to this opinion. 

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Maremont appeals the jury verdict and judgment entered on 

that verdict, and the district court's denial of Maremont's timely 

motion for a judgment notwithstanding the verdict or, in the 

alternative, for a new trial. It contends here, as it did in the 

district court: (a) that the employee handbook in question, 

specifica1ly the disciplinary point system, did not apply to 

salaried, supervisory employees such as Williams; (b) that the 

jury's verdict was unsupported by the evidence because Maremont 

had an explicit sexual harassment policy, the violation of which 

was grounds for discharge, and that Williams violated that policy; 

(c) that the district court erred in excluding evidence of other 

instances of sexual misconduct on the job by Williams, and erred 

in its instructions as to the burden of proof; and (d) that 

numerous errors were committed with respect to the damages. Upon 

consideration of the record in the light of new guidance from the 

Oklahoma Supreme Court, we reverse. 

I• 

During the pendency of this case on appeal the Oklahoma 

Supreme Court decided two important cases which bear on the issues 

under consideration: Hinson v. Cameron, 742 P.2d 549 (Okla. 1987), 

and Burk v. K-Mart Corp., No. 67,785, (Okla. Feb. 7, 1989) (1989 

Lexis 17). 2 

2 We postponed the disposition of this case until after the 

Oklahoma Supreme Court decided Burk, which was under advisement by 

the court at the time this case was argued before us. We are 

bound to apply the most recent statement of state law when 

deciding cases filed under diversity jurisdiction. See Southwest 

Forest Industries, Inc. v. Sutton, 868 F.2d 352, 354 (10th Cir. 

1989). 

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Hinson, a nurse's assistant at the Comanche County Hospital, 

was terminated for not following orders. She sued the hospital on 

both tort and contract grounds, asserting that. the order in 

question was never given and that the employee manual, which 

"constitutes a part of her employment contract with the hospital 

protects her from discharge absent good cause." Hinson v. 

Cameron~ 742 P.2d at 551. The Oklahoma Supreme Court framed the 

questions on appeal, and their disposition as follows: 

Id. 

Two questions are presented on certiorari: [l] Did 

an at-will employee, dismissed for her failure to 

perform an assigned duty, state a cause of action in 

tort for wrongful discharge from employment? and [2] Did 

the employee manual alter an at-will relationship 

between the plaintiff and her employer? We answer both 

questions in the negative and reinstate the trial 

court's summary judgment for the defendants. 

The court, in Hinson, observed that the general rule 

permitting termination of "at-will" employment without liability 

has been modified in various states by three exceptions: "(a) 

public policy tort, (b) tortious breach of an implied covenant of 

good faith and fair dealing and (c) implied contract that 

restricts the employer's power to discharge." Id. at 552. It 

then noted that. no public policy consideration was involved in 

Hinson's case; and, with respect to the tort action based on the 

implied covenant of good faith theory it said: 

Assuming there may be an implied covenant of good faith 

and fair dealing in every at-will employment relation, 

that covenant does not operate to forbid employment 

severance except for good cause. The court's adoption 

of a contrary view would "subject each discharge to 

judicial incursions into the amorphous concept of bad 

faith." 

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Id. at 554. 

The court then turned to the issue of an implied contract 

arising from -an employee ·manual, and found that Hinson had not 

made out a claim sufficient to survive summary judgment under an 

implied contract theory. 

In Burk the Oklahoma Supreme Court directly addressed the 

question left open in Hinson: whether in Oklahoma, there is an 

implied obligation of good faith and fair dealing in reference to 

termination in every employment-at-will contract. It concluded 

that in Oklahoma, with the exception of a very narrow class of 

cases where discharge is contrary to a clear mandate of public 

policy, "there is no implied obligation of good faith and fair 

dealing in reference to termination in any employment-at-will 

contract." Burk v. K-Mart Corp., slip op. at 9. 

The court recognized the public policy exception as an action 

in tort, noting that in Oklahoma torts may arise in the course of 

performance of a contract. However, the court appeared to take a 

narrow view with regard to circumstances under which a tort cause 

of action could arise in an employee discharge context. It 

construed Hall v. Farmers Insurance Exchange, 713 P.2d 1027 (Okla. 

1985), a widely quoted decision of that court, as a case falling 

within the public policy exception because the employer in that 

case, an insurance company, was seeking to avoid the payment of 

benefits already earned (renewal premiums). The Burk court also 

observed that in Hinson no tort cause of action existed "because 

the plaintiff was suing her employer for damages other than earned 

income and the legal relationship dealt with that of master and 

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servant, not principal and agent as in Hall." Burk v. K-Mart 

Corp., slip op. at 5 (emphasis added). 

There are differences between the case before us and the 

cases of Hinson and Burk. Williams' employment at Maremont was 

"at-will" in the sense that it was of indefinite duration. See 

Id.·· at 3; Hinson v. Cameron, 742 P.2d at 554. However, Williams' 

contention is that the employee handbook contractually altered 

that relationship. He asserts, in effect, that by the handbook 

Maremont contracted with all Maremont employees not to discharge 

them except for cause, and expressly contracted with them not to 

terminate, among other things, for a single instance of sexual 

harassment (assuming no other disciplinary points on the record of 

the offending employee). Thus, Williams might argue, for example, 

that an implied covenant of good faith and fair dealing might 

still arise in the context of an express contract, or that some 

facts might be alleged which would support a tort action arising 

out of a contractual relationship. See Burk v. K-Mart Corp., slip 

op. at 7-8. 

Nevertheless, there is nothing about this case which suggests 

that the Oklahoma Supreme Court would recognize a tort cause of 

action in lieu of or in addition to a cause of action for breach 

of contract. We believe the tenor of the Hinson and Burk 

decisions supports the conclusion that Williams' cause of action, 

if any, sounds in contract, for breach, and not in tort. 

Therefore, the proceedings below were in error to the extent that 

they were grounded upon tort principles. In particular, it was 

error to award punitive damages and damages for injury to 

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reputation. As the district court implicitly recognized, those 

are typical types of damages recoverable in tort actions. 3 R. 

Vol. I, Tab 17 at 11 (Order- of December 10~ 1984). Williams 

concedes in his brief on appeal that they are tort damages. Brief 

of Plaintiff-Appellee at 15-16. We proceed, then, to analyze the 

remai~ing issues on appeal under contract principles. 

II. 

In Hinson the Oklahoma Supreme Court observed that it has not 

as yet directly addressed whether a personnel manual can 

constitute a contract enforceable by an employee against the 

issuing employer. Hinson v. Cameron, 742 P.2d at 555. However, 

citing Oklahoma decisions in Langdon v. Saga Corp., 569 P.2d 524 

(Okla. Ct. App. 1976), Miller v. Indep. School Dist. No. 56 of 

Garfield County, 609 P.2d 756 (Okla. 1980), and this court's 

decision in Vinyard v. King, 728 F.2d 428, 432 (10th Cir. 1984) 

(construing Oklahoma law), the court indicated that certain 

instances may exist where express or implied contracts might arise 

from an employer's personnel manual or policy statements. Hinson 

v. Cameron, 742 P.2d at 554-57. For purposes of this opinion we 

assume that the Oklahoma Supreme Court would treat employers' 

personnel manuals, handbooks, or other statements of policy as 

unilateral contracts binding on the employer, under proper 

3 See,~, Okla. Stat. Ann. tit. 23, § 9 (West 1987); Fox 

----v. 

Overton, 534 P.2d 679, 681 (Okla. 1975). 

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circumstances. Many states considering the question have done 

so. 4 

As the Hinson court noted, provisions in such materials can 

constitute evidence of the employer's intent to create a contract. 

Hinson v. Cameron, 742 P.2d at 554-55. As a result the provisions 

can become enforceable promises. The inquiry is essentially one 

of fact to be resolved by a jury. However, identifying the legal 

elements which must guide the jury in finding and applying the 

facts has presented a difficult task. There is general agreement 

that all the facts and circumstances must be taken into account, 

and that the promises must be definite, not just vague assurances. 

Also, traditional notions of mutuality and separate consideration 

have been altered and are ceasing to be the focal point of 

inquiry. But the courts are widely divergent in their views on 

4 According to one writer, as of 1986 twenty-nine jurisdictions 

(state and federal) supported enforcement of policy manual 

prov1s1ons. Note, Limiting the Employment-at-Will Rule: Enforcing 

Policy Manual Promises Through Unilateral Contract Analysis, 16 

Seton Hall L. Rev. 465, 477 n.98 (1986). A contrary conclusion, 

unsupported by a listing of cases addressing the question, is 

stated by another writer. Note, Protecting Employees-at-Will 

Against Wrongful Discharge: The Public Policy Exception, 96 Harv. 

L. Rev. 1931, 1935 (,1983). For comprehensive discussions of the 

various rationales employed in finding the existence of a contract 

in such situations see Note, Limiting the Employment-at-Will Rule: 

Enforcing Policy Manual Promises Through Unilateral Contract 

Analysis, 16 Seton Hall L. Rev. 465 (1986}; Tepker, Oklahoma's AtWill Rule: Heeding the Warnings of America's Evolving Employment 

Law?, 39 Okla. L. Rev. 373, 387-92, 408-24 (1986); Note, Employers 

And Employees: Hinson v. Cameron: Dimming the "Hall Light" on 

Oklahoma's "Revised" Employment-at-Will Doctrine?, 41 Okla. L. 

Rev. 314, 323-26, 336-37; Note, Employee Handbooks and Employmentat-Will Contracts, 1985 Duke L.J. 196. See generally Note, 

"Protecting at Will Employees Against Wrongful Discharge: The Duty 

to Terminate Only in Good Faith," 93 Harv. L. Rev. 1816, 1820-21 

(1980); Dertouzos, Holland & Ebner, The Legal and Economic 

Consequences of Wrongful Termination, 3602 RAND Inst. for Civ. 

Just. 1, 6-7 (1988). Representative cases are digested at 12 

A.L.R. 4th 544, 567-73. 

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more detailed matters. Variously using both unilateral contract 

and promissory estoppel principles, the courts have taken 

different approaches to such things as how the promise must be 

communicated (in a meeting with the employee? a general 

distribution? merely by adopting and "publishing" the policy or 

manual? etc.): the requirement, if any, of the individual 

employee's actual knowledge of the promise; whether the promise 

was intended as an inducement; whether it actually operated as an 

inducement and, if so, whether as to employees generally or each 

employee in particular; whether specific reliance on the promise 

by way of continuing to work and foregoing other job 

opportunities, is a requirement; and so on. 5 

There is no clear guidance on these points in the Oklahoma 

decisions. In Hinson the Oklahoma Supreme Court found that the 

hospital's employee manual did not contain an implied promise that 

Hinson could only be dismissed for certain listed reasons. It 

pointed out that the employee manual only listed examples of some, 

although not all, grounds for termination. Emphasizing inducement 

it also said: 

"For contractual protection from an at-will discharge 

Hinson relied below solely on the legal effect of the 

printed text in the employee manual. Neither of 

Hinson's two responses to the summary judgment motion 

identifies some promissory inducement dehors the manual 

as an issue of fact to be tried. Moreover, the 

evidentiary materials before us give no indication that 

the Hospital induced Hinson to accept or to continue her 

5 For a discussion and review of various authorities analyzing 

the nature and sufficiency of communication, reliance and similar 

matters, see Note, Limiting the Employment-at-Will Rule: Enforcing 

Policy Manual Promises Through Unilateral Contract Analysis, 16 

Seton Hall L. Rev. at 485-86. 

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employment by a promised tenure that would shield her 

from termination except for stipulated causes.'' 

Id. at 556, n. 28 (some emphasis added). 

In Langdon v. Saga Corp., 569 P.2d 524 (Okla. Ct. App. 1976), 

the court of appeals determined that certain benefit provisions 

contained in a personnel manual issued by the employer did 

constitute a binding contract enforceable by an at-will employee. 

In reaching that conclusion the court emphasized consent, 

communication, inducement and reliance as, apparently, necessary 

prerequisites to the formation of a contract binding on the 

employer: 

"Under Oklahoma law the existence of a contract 

depends on four elements: (1) competent parties, (2} 

consent, (3) a legal object, and (4) consideration. 15 

O.S. 1971, § 2. The parties consent must be (1) 

voluntary, (2) mutual, and (3) communicated. 15 o.s. 

1971, § 51. 

Turning to our facts, and construing them favorably 

to the Plaintiff, we find that the Plaintiff was 

employed at will by Defendant's predecessor and the 

Defendant. When Defendant issued its Personnel Manual 

it offered benefits calculated to induce employees to 

increase production and remain with the company. The 

Personnel Manual defines the Defendant's 'corporate 

creed' and includes as objectives (1) the development of 

a superior management team, and (2) to assure fair and 

equitable compensation and personal growth for , employees. 

Construing Plaintiff's continued employment with 

Defendant as employment at will whereby either party 

could terminate the relationship it is still evidence 

that until termination the parties had a contractual 

relationship. It is possible to construe the Personnel 

Manual as an offer for a unilateral contract accepted by 

the Plaintiff's continuing to work for the Defendant and 

forgoing his option of termination. Consideration 

sufficient to support a contract is defined as 'any 

benefit conferred ... to which the promiser is not 

lawfully entitled [i.e., forgoing termination].' Where 

an employee at will forgoes options to refuse future 

performance in reliance or in partial reliance on 

articulated personnel policies of the employer, the 

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employer is bound by those policies insofar as they have 

accrued to an employee for performance rendered while 

they were in effect and have not been excluded or 

modified by another valid contractual arrangement." 

Langdon v. Saga Corp., 569 P.2d at 527 (emphasis added). 6 

Yet, in Miller v. Independent School Dist. No. 56 of Garfield 

County, 609 P.2d 756 (Okla. 1980), the Oklahoma Supreme Court 

seemingly held that the mer~ adoption and general publication of a 

policy was enough to, incorporate that policy into teachers' 

contracts. Construing Miller in Hinson the court stated: 

"In Miller we held that, in disputes involving 

nonrenewal of a school teacher's contract, a policy 

statement adopted by the board of education providing 

for written notification of reasons for nonrenewal was 

incorporated by implication in the teacher's contract of 

employment." 

Hinson v. Cameron, 742 P.2d at 555 (emphasis added). 

However, we do not consider it necessary in this case to 

predict which elements the Oklahoma Supreme Court will ultimately 

require for the formation of a contract in a written company 

policy situation. It is unnecessary because Williams' claim 

cannot be supported on any acceptable ground. 

Certain facts are important to an analysis of Williams' 

breach of contract claim. First, his status as an employee at 

Maremont was changed shortly before the incident in question. He 

was promoted to the supervisory position of general foreman in 

January, 1984, R. Vol. II at I-16, and held that position at times 

relevant to this case. The position is salaried. The female 

6 In Vinyard v. King, 728 F.2d at 431, n.7, this court took 

particular notice of the fact that the employee "was required, 

after reading and understanding its contents, to sign, along with 

the personnel assistant, the back page of the handbook." 

(Emphasis added). 

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employees who witnessed the zipper incident, although not under 

Williams' direct supervision at the time, were hourly employees, 

ranking lower than Williams in the employment hierarchy. 

Second, the disciplinary point system upon which Williams 

relies as a contract, was introduced into the plant on March 5, 

1984, as part of a revised employee handbook, less than a month 

prior to Williams' termination. R. Vol. III at 4-6, 111. The 

handbook states on the front cover, "Revised 1984." Testimony at 

trial revealed that the revised handbook was distributed to hourly 

employees only, at meetings called for the purpose, although 

copies were generally available in the personnel office. Id. at 

5-6; R. Vol. II at I-59-60. Williams' testimony is devoid of any 

assertion that he received a copy of the revised handbook, or that 

he ever actually saw the new disciplinary point provisions in the 

revised handbook prior to his termination, or that he had read any 

part of or even had a copy of the 1984 handbook in his possession. 

His testimony and all other evidence at trial is equally devoid of 

any suggestion of "some promissory inducement dehors the manual,'' 

or that Maremont "induced [Williams] ... to accept or to 

continue [his] employment by a promised tenure that would shield 

[him] from termination" for sexual harassment, except upon the 

accumulation of eight disciplinary points. See Hinson v. Cameron, 

742 P.2d at 556, n.28. Williams admitted that no one ever told 

him that the manual applied to him as a general foreman, R. Vol. 

II at I-59, and no superior of his gave him a copy of the revised 

handbook. Id. at I-60. In short, there is no specific evidence 

which would support a finding of knowledge, inducement or 

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reliance. The record also shows that Williams did not even 

mention the point system to any company official during the events 

relating to his termination, and evidenced no knowledge of or 

reliance on that system. R. Vol. II at I-56, I-57. Further, the 

record shows that no supervisory personnel at the plant had been 

disciplined under the point system in the handbook. 

Third, Maremont had in existence at the time a written policy 

specifically relating to sexual harassment in the workplace. 7 

7 The company's sexual harassment policy, dated June 

was set out on one page, and provided as follows: 

4, 1981, 

SEXUAL HARASSMENT POLICY 

I. It is the policy of Maremont Corporation that 

sexual harassment of employees in the workplace is 

unacceptable and will not be tolerated. The law 

provides: 

Harassment on the basis of sex is a violation of Sec. 703 of Title VII. 

Unwelcome sexual advances, requests for 

sexual favors, and other verbal or physical conduct of a sexual nature constitute 

sexual harassment when (1) submission to 

such conduct is made either explicitly or 

implicitly a term or condition of an 

individual's employment; (2) submission 

to or rejection of such conduct by an 

individual is used as the basis for 

employment decisions affecting such individual, or (3) such conduct has the purpose or effect of substantially interfering with an individual's work performance 

or creating an intimidating, hostile, or 

offensive working environment. 

Common sources of charges include offensive or 

abusive physical contact, joking, lewd language, 

suggesting sexual favors, displaying sexually 

suggestive objects, pictures, magazines, etc. 

II. All employees of Maremont Corporation are expected 

to avoid any behavior or conduct toward any other 

employee which could be interpreted as sexual 

(footnote continued on next page) 

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That policy permitted termination of an offender. The policy was 

not in the handbook, and had not physically been distributed to 

employees, but the uncontradicted testimony was that the policy 

had been posted on the three main bulletin boards at the Chickasha 

plant prior to any of the events in question. R. Vol. III at 10. 

Williams denies having seen the policy on any bulletin board, but 

neither he nor anyone else testified that it had not in fact been 

posted. 

Fourth, the handbook states at page 39 that its contents 

summarize "in a general way the basic policies and personnel 

practices of Maremont Corporation that affect you and is not all 

inclusive." Pl. Ex. 3 at 39 (emphasis added). Immediately 

following the enumerated work rules it states further that 

"[v]iolations not specifically described in these rules will be 

handled as warranted by the circumstances of the case." Id. at 38 

(emphasis added). The handbook also advises employees to read the 

(footnote continued from previous page) 

harassment. 

III. Appropriate management and supervisory personnel 

shall take prompt, corrective action when they become aware of sexual harassment. Such action may 

include discipline up to and including termination 

of the offending employee or employees. 

IV. Any employee who feels that he or she has been the 

victim of sexual harassment should notify his or 

her supervisor, department head, Personnel Representative, or the Corporate Director of Compliance 

at the Corporate Headquarters in Chicago. 

Chairman, President and Chief Executive Officer 

Def. Ex. A (~exual Harassment Policy). 

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bulletin boards: 

BULLETIN BOARDS 

It is important for you to be well-informed and 

knowledgable. The Company bulletin boards are an 

excellent source of information. You should make it a 

daily routine to read the bulletin boards to be sure you 

are aware of events and important announcements. 

Id. at 4. 

In this factual setting the district court instructed the 

jury on the law as follows: 

"In order to prevail on his claim that he was 

wrongfully discharged, plaintiff must prove the 

following elements by a preponderance of the evidence: 

(1) that the provisions of the employee handbook 

upon which plaintiff relies apply to plaintiff; 

(2) that defendant failed to comply with these 

provisions when it discharged the plaintiff; and 

(3) that plaintiff suffered damages and such 

damages were directly caused by defendant's actions. 

You are instructed with regard to the first 

element, that application of the handbook provisions may 

be found either by express language in the handbook or 

by defendant's conduct in creating a situation whereby 

plaintiff reasonably believed that these provisions 

applied to him and justifiably relied on this belief." 

R. Vol. I, Tab 59, Instruction No. 10 (emphasis added). 

By that instruction the jury could only find that the 

handbook "provisions" applied to Williams. No specific mention is 

made of the work rule in question, or the disciplinary point 

system. Beyond that the first option open to the jury in 

instruction no. 10 -- application of the handbook provisions by 

the "express language in the handbook'' -- does not satisfy the 

requirements of communication, inducement, and reliance suggested 

by Hinson and Langdon to be necessary to form a unilateral 

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contract. If, on the other hand, mere ''express language" is 

enough, then certainly the express language of the sexual 

harassment policy applies and modifies ·the handbook. 8 

The second option -- application of the handbook provisions 

by "defendant's conduct in creating a situation whereby plaintiff 

reasonably believed that these provisions applied to him and 

justifiably relied on this relief" -- comes closer, but still 

fails adequately to tie inducement and reliance to the 

continuation of employment in any capacity, and especially to 

Williams' job as general foreman. More damaging, however, is the 

complete lack of specific and direct evidence necessary to support 

any jury finding on that alternative ground. Williams stated that 

sometime after he hired on with Maremont in 1972 as an hourly 

8 We also conclude. that instruction number 

That instruction provided: 

11 was in error. 

"You are further instructed that defendant has 

alleged that regardless of the applicability of the 

handbook provisions, which defendant denies, that there 

was in existence at the time plaintiff was discharged a 

specific policy covering sexual harassment which 

subjects violators to discipline up to and including 

discharge. 

If you find by a preponderance of the evidence that 

such a policy existed and that plaintiff was made aware 

of its application to him and that the acts of plaintiff 

constitute sexual harassment as prohibited by such 

policy, then you must find for the defendant and against 

the plaintiff." 

R. Vol. I, Tab 59, Instruction No. 11 (emphasis added). The 

pivotal element of that instruction was Williams' awareness of the 

sexual harassment policy. That condition is inconsistent with the 

first option in instruction no. 10, which would permit application 

of the handbook provisions based only on the express language of 

the handbook, without regard to Williams' awareness of the 

language. The instruction also ignores the sufficiency of 

communication by virtue of a general publication and posting on 

the plant bulletin boards. 

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employee, he was provided the employee handbook (as then 

constituted, without the point system upon which he relies). R. 

Vol. II at I-28. 

effect that he 

And he made numerous general statements 

thought "the handbook'' applied to him. 

to the 

He also 

referred to the point system in a general way, but did not connect 

his knowledge of the point system to any period prior to his 

discharge. As noted above, there is no direct evidence that 

Williams was given, had possession of, or had read the 1984 

revised handbook and, in particular, the new point system in 

question prior to his termination. Nor is there any evidence from 

Williams connecting that handbook and the point system to Williams 

in his new management job. In fact, the uncontradicted evidence 

was that no management personnel had been disciplined under that 

system, even though Williams himself knew of supervisors who had 

been discharged. R. Vol. II at I-57, I-104-05; R. Vol. III at 8-

9, 111. Thus, any finding based on the "reliance" portion of the 

jury instruction is unsupported by the evidence. 

In the absence of proof of the elements necessary to form a 

contract, no contract has been formed and the relationship is 

merely one of employment-at-will. See generally the discussion in 

Doe v. First National Bank of Chicago, 865 F.2d 864, 871-73 (7th 

Cir. 1989). Under such circumstances Hinson and Burk would deny 

recovery. 

Even if one assumes the existence of a unilateral contract 

with respect to the disciplinary point system, the jury 

instructions do not charge meaningful consideration of whether the 

word ''harassment" in rule 21 includes the special category of 

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sexual harassment. Maremont issued a separate, specific policy 

with regard to sexual harassment in 1981, which permitted the 

immediate discharge of offenders. That policy was posted in the 

Chickasha plant when the 1984 revised handbook was issued. It is 

obvious that Maremont did not intend rule 21 to supersede that 

policy. 9 

Furthermore, it is illogical on the face of it that employees 

should interpret rule 21 as including the special category of 

sexual harassment. Such an interpretation would prevent Maremont 

from firing even management personnel (under Williams' theory of 

coverage) for the grossest kind of sexual offense or conduct 

directed toward a female employee. It would group such patently 

illegal behavior with six point violations such as sleeping on 

company time (rule 23), and classify them as less serious than 

such violations as the failure to follow instructions (rule 29), 

for which eight points can be given and the employee fired. A 

simple comparison of the various work rules and the points 

assigned for the violations thereof, signifying severity of the 

offense, makes it clear that sexual harassment is not intended to 

be uniformly classified as a six point violation. ''Harassment" is 

a general term. The handbook advises at the end of the listed 

work rules that "violations not specifically described" will be 

handled as warranted, by the circumstances of the case. The 

handbook also advises that it only summarizes policies in a 

9 Maremont's plant personnel manager testified that the sexual 

harassment policy is independent of the handbook. R. Vol. III at 

12. 

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Appellate Case: 86-1263 Document: 01019963450 Date Filed: 05/23/1989 Page: 19 
general way, and therefore is not all-inclusive. Pl. Ex. 3 at 38, 

39. See Appendix. 

There is a further consideration. Williams was in a 

supervisory position. That fact alone must serve to put him and 

any similarly situated employee on notice that higher standards 

are required of them, and punishment .obviously operates on a 

different level than that applied to hourly employees. 

Public policy also affects our construction of this contract 

claim. Here, public policy operates to require a construction of 

contract terms in favor of giving the employer broad discretion in 

its efforts to eliminate sexual harassment from the workplace. In 

this area of judicially created contracts and contract rights, it 

is perfectly consistent to impose a rule of contract construction 

which favors the enforcement of a workplace free from offensive 

sexual conduct. Furthermore, such latitude in favor of the 

employer includes· the right, within reason, to determine what 

types of speech and conduct fall within the prohibited category. 

Maremont's sexual harassment policy included discipline for 

offensive conduct, including conduct "which could be interpreted 

as sexual harassment." Pl. Ex. A. See also n.7 above. The 

company did not exceed permissible limits by its evaluation here. 

Thus, it is of no consequence that Williams himself did not regard 

his acts as sexual harassment. 

Finally, the contract theory must fail even if one assumes 

that simply by issuing a handbook and periodic revisions Maremont 

contractually bound itself to every employee who kept on working 

in reliance thereon. As we noted above, under such an assumption 

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other policies unilaterally adopted and published by Maremont 

should apply as well. Thus, the company's sexual harassment 

policy would be included in the disciplinary portion of the 

handbook by implication. That reasoning is consistent with Miller 

v. Indep. School Dist. No. 56 of Garfield County, 609 P.2d 756 

(Okla. 1980). 

In summary, we hold that the jury instructions permitting 

tort damages, and those establishing the requirements for 

determining whether Maremont contractually bound itself not to 

fire Williams for conduct which could be interpreted as sexual 

harassment, were in error. More fundamentally, however, and 

construing the evidence most favorably to Williams, 10 we hold that 

Williams did not make out a case sufficient to present to a jury 

on his breach of contract cause of action. The verdict in this 

case is not supported by either the law or the evidence, and 

Maremont's post trial motion for judgment notwithstanding the 

verdict should have been granted. In reaching this conclusion we 

have considered all the issues raised by the parties, addressing 

only those deemed by us to be necessary. 

10 With respect to this settled standard of review, we stated in 

Hurd v. American Hoist and Derrick Co., 734 F.2d 495, 498-99 (10th 

Cir. 1984): 

"Motions for a directed verdict and for judgment n.o.v. 

are considered under the same standard. Although we 

have often used differing phraseology to express this 

standard, we believe that they all have essentially 

equivalent meaning, which is best summarized by Wright & 

Miller: 'The question is not whether there is literally 

no evidence supporting the party against whom the motion 

is directed but whether there is evidence upon which the 

jury could properly find a verdict for the party.'" 

(Citations and footnote omitted). 

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III. 

It is clear by the size of the award, and punitive damages, 

that the jury in this case thought that Maremont acted too 

severely by terminating Williams for what it must have regarded as 

a comparatively small event after --twelve years of blemish-free 

service. Unquestionably, Maremont could have disciplined Williams 

in ways short of discharge, and in doing so made it clear to all 

concerned that his conduct was absolutely unacceptable, and any 

other improper speech or conduct would result in immediate 

dischargeo In retrospect, that, perhaps, would have been wisest. 

But the question is not whether Maremont was unduly harsh in this 

instance, the question is whether it had the legal right to 

terminate Williams under the circumstances. We conclude that it 

did. The judgment entered by the district court is REVERSED. 

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APPENDIX 

WORK RULES 

Maremont, like other employers, has established work rules. 

These rules are specifically designed to aid Maremont and our 

employees in achieving a safe working environment and operational 

goals to better enhance our competitiveness in the market place, 

while also creating a consistent and fair method in dealing with 

violations. 

Each work rule is assigned a point value based on the 

severity of the rule violation. The accumulation of points will 

result in corrective action according to the guidelines listed: 

A. 

B. 

c. 

D. 

Two (2) points 

Four (4) points 

Six (6) points 

Eight (8) points 

Verbal 

Written 

Final 

Termination 

In the event formal corrective action becomes necessary, the 

supervisor will meet with the employee to discuss the infraction. 

At the conclusion of the meeting, if the employee disagrees with 

the corrective action, then the supervisor will arrange a meeting 

between a personnel representative, employee, and supervisor. If 

the corrective action is upheld at the conclusion of the meeting, 

then the employee may pursue the Internal Justice Policy (Page 15 

Employee Handbook). 

All levels of corrective action must be documented, approved 

by a Personnel Representative, and filed in the individual's 

personnel file. 

Employees who have work rule violations are provided with an 

opportunity to remove points from their record. This can be 

accomplished through good performance for specified periods of 

time. Good performance is defined as no work rules violation 

according to the table listed below: 

Good Performance For: 

3 Consecutive Months 

6 Consecutive Months 

9 Consecutive Months 

Point Reduction 

1 Point 

Total Pts. 

1 

2 Points 

2 Points 

12 Consecutive Months All Points Removed 

1. 

2. 

3. 

APPENDIX 

WORK RULES 

Failure to wear required safety equipment 

Failure to report injuries occurring on the 

job by end of shift 

Horseplay, roaming, loafing, or leaving work 

station without proper notification while on 

3 

5 

All 

PTS 

2 

2 

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Appellate Case: 86-1263 Document: 01019963450 Date Filed: 05/23/1989 Page: 23 
company time 2 

4. Visiting or interfering with others while at 

work 2 

5. Excessive tardiness or absenteeism 2 

6. Littering on company premises 2 

7. Failure or inability to produce quality, 

quantity work desired 2 

8. Failure to observe parking and traffic regulations on company premises 2 

9. False or malicious statements concerning any 

employee, the company, or its products 2 

10. Entering or leaving through unauthorized doors 

except in case of fires, fire drills, or 

emergencies without authorization 2 

11. Consuming food or drinks in unauthorized areas 2 

12. For each wage garnishment over one in a 12 

month period 2 

13. Causing damage to plant, equipment, or person 

while operating a hyster/forklift 3 

14. Abuse, misuse, unauthorized use, or destruction 

of Maremont property, tools, equipment or the 

property of others 4 

15. Gambling on company premises at any time 4 

16. Solicitation (See Solicitation Policy) 4 

17. Operating machinery in an unsafe manner or 

without safety guards, equipment being utilized 

properly without authorization 4 

18. Smoking while operating lifts, trollies, or 

Hysters 4 

19. Unauthorized use of cameras inside the plant 4 

20. Smoking in an unauthorized area 6 

21. Threatening, intimidating, coercing, using 

abusive language, or harassing any employee 

on company premises 6 

22. Clocking attendance transactions for anyone 

other than yourself 6 

23. Sleeping while on company time 6 

24. Theft, or willful destruction of property 

belonging to Maremont or other individuals 8 

25. Fighting on company premises 8 

26. Possession and/or consumption of alcohol or 

illegal drugs on company premises 8 

27. Deliberately falsifying any records or 

deliberately giving false information for 

company records 8 

28. Possession of firearms, weapons or explosives 

on company premises 8 

29. Insubordination and/or refusal or failure to 

follow instructions of supervisor 8 

30. Job abandonment 8 

31. Failure to submit upon request to a medical 8 

examination 

32. Absence of three days with no call in 8 

APPENDIX Page 2 

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Violations not specifically described in these rules will be 

handled as warranted by the circumstances of the case. 

NOTE: ·This point-system is designed for permanent employees. New 

hires and temporaries will be unQer more stringent guidelines 

during their evaluation period. 

SOLICITATION 

Distribution rules for which an employee not complying will 

be disciplined or discharged: 

A. Solicitation and distribution of literature by nonemployees on Company property is prohibited. 

B. Solicitation of any type by employees on Company 

property during working time is prohibited. 

C. Distribution of literature by employees on Company 

property in nonworking areas during working time is 

prohibited. 

D. Distribution of literature by employees on Company 

property in working areas is prohibited. 

E. Threatening, intimidating, coercing or interferring 

(sic) with employees or supervision at any time is 

prohibited. 

Definition of terms: 

A. Non working time - defined as the employee's free 

time when he or she is not required to be working, 

such as break periods, lunch periods, before and 

after working hours, etc. 

B. Non working areas defined such as cafeteria, 

parking lot, Company grounds, etc. 

C. Solicitation as used in this policy is defined as 

appealing to an employee a) to buy, sell, or trade 

any items; b) contribute money or services or 

anything of value for a nonwork related purpose; c) 

to sign a document in support of a cause. 

Violation of this no solicitation, distribution of literature 

rule is very serious, and any violation of this rule will result 

in disciplinary action up to and including discharge. 

COMPLETE DETAILS 

This handbook summarizes in a general way the basic policies 

and personnel practices of Maremont Corporation that affect you 

and is not all inclusive. Any inquiries you may have concerning 

any policy should be directed to your foreman or the Personnel 

Department. 

Maremont Corporation Employee Handbook (Revised 1984) (Pl. Ex. 3 

at 35-40). 

APPENDIX Page 3 

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