### No. 80-478 IN THE SUPREfiE COURT OF THE STATE OF MONTANA 1981

MARGARET NYE

## , Petitioner and Appellant,

VS. 

### THE DEPARTMENT OF LIVESTOCK,et al., Defendants and Respondents.

Appeal from: District Court of the Fifth Judicial District, In and for the County of Jefferson Honorable Frank Blair, Judgepresiding. Counsel of Record: For Appellant: Patrick Flaherty argued,Great Falls,Montana For Respondent: John Bobinski argued,Helena, Montana



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## rJ

## 1,"

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### Filed: Submitted: September 26, 1981 Decided: January 14, 1982Mr. JusticeFred J. Weber delivered the Opinion of the Court

# .

Margaret Nye brought an action inthe DistrictCourt of the FifthJudicial District, Jefferson County, Montana, seeking judicial review of the termination of her employment and damages for slander and wrongful discharge. The District Court denied the petition for judicial review and dismissed the action on 

### itsmerits. Nye appealed. We reverse the portion of the order dismissing the wrongful discharge claim and remand to the DistrictCourt for further proceedings. Margaret Nye was hired by the Department of Livestock of the Stateof Montana ("Department") inOctober 1977. She initiallyworked asa permit clerk for the Department. The record does not disclose the grade atwhich the permit clerk position was classified under the 

### state employee classification plan. InMay 1979, Nye was promoted to the position of general officeclerk V ata position classification of grade 8. Nye stated atthe 

### timeof her promotion that she understood thatpursuant toDepartment policy she would be put ina probationary status for sixmonths. InAugust 1979, Nye's supervisors in the Department determined that shewas not performing adequately inher new position. 

### On August 20, Nye was told of the deficiencies inher work and was given a ten day warning noticewhich informed her that the deficiencies must be corrected. Nye's work was spotchecked during the ensuing ten day period and her supervisors determined that she had not corrected certaindeficiencies. Nye was terminated on August 31, 1979. Nye invoked the Department's grievanceprocedures in order to challenge her termination. A three-person hearingcommittee was formed and a hearing was had on December 18, 1979. Both Nye and the Department 

### were represented by counsel. The parties brought witnesses, presented exhibits, and submitted briefs and proposed decisions to the committee. The hearing committee then gave itsopinion and recommendation to the head of the Department of Livestock. The committee concluded thatdepartments of stategovernment may require employees to enter into a probationary period when they are promoted to a new position and that the Department of Livestock's personnel policies properly included a probationary period for any promotion to a new position. Nye's rights

were viewed as the rights of a probationary employee. The hearing committee found thatNye knew and understood that she had made mistakes inher new position. The committee also found thatNye misunderstood the totality of the mistakes made by her, and found that she was under the impression that the problems had been resolved. The committee determined that the Department had notproperly trained and supervised Nye. The hearing committee decided that termination was an unduly harsh method of dealing with Nye's deficiencies, especiallywhen her excellentprior work record with the Department 

### was considered. The committee determined that because the Department's grievance procedure applied to all employees, even probationary employees must be dealtwith fairly. The committee concluded that there was a "lack of total fairness" inthe termination of Nye. The hearing committee recommended thatNye not be reinstated to her previous position and not be awarded back pay. (Itis unclear whether "previous position" refers to the permit clerk job or the general office clerk V job.) The committee further recommended thatNye be awarded $1,495.36 as compensationfor the unfair treatment given her by the Department. Finally, the committee recommended thatNye be granted an entitlement to any grade 7 or 8 position inthe Department forwhich she was qualified. The entitlementwas to apply to any such positionwhich became vacant ina two-year period. The report and recommendations of the hearing committee

were submitted to the director of the Department of Livestock inaccordance with Department grievance procedures. The director refused to follow the committee's recommendations and affirmedNye's termination. Nye filed suitinDistrict Court seeking judicial review of the agency action, damages for slander, and, by way of an amended complaint, damages forwrongful discharge. The districtjudge denied the petition forjudicial review and dismissed the cause on 

### its 

### meritsbecause he determined thatNye had only a contract at will. Nye appealed, and raised the following issues: 

### (1) Did the DistrictCourt errby denying judicial review of the Department director's decision? (2) Did the DistrictCourt 

### err by dismissing the slander complaint? and (3) Did the DistrictCourt 

### err by denying Nye's motion to amend the complaint for the purpose of seeking damages in wrongful discharge? Judicial Review Nye based her petition for review in the DistrictCourt upon the language of the Department's grievance policy and upon the Montana Administrative Procedure Act (MAPA). The Department of Livestock has adopted personnel policies developed by the Department of Administration. Policy 3-0130, Discipline Handling; Policy 3-0125, Grievances;Vol. I11 Montana Operations Manual. Policy 3-0125, Grievances, provides that: "If the employee isnot satisfied with the outcome of the Director's decision, the grievancemay be brought before the applicable statutorily authorized review body: the Board of Personnel Appeals, the Merit System Council, the Human Rights Commission, or any appropriate federal enforcement agency, while those grievances 

## - not allowed redress with 

### -- the aforementioned

### may

### - be pursued at the district court level.

### " (Emphasis supplied.) We agree with the Department that the concluding language of the above excerpt cannot, of itself, create a right of judicial review. Policy 3-0125 is an administrative regulation. InMontana, only the legislaturemay validly provide for judicial review of agency decisions. "The legislaturemay provide for directreview by the districtcourt of decisions of administrative agencies." Mont. Const. art. VII, § 4, cl. 2. A rightof judicial review cannot be created by agency fiat. In order forNye to have a right of judicial 

### review under MAPA, hers must be a "contested case." Section 2-4- 702 (1) (a)

## ,MCA, provides that I'[a] person who has exhausted alladministrative remedies available within the agency and who is aggrieved by a finaldecision ina contested case is entitled tojudicial review under this chapter." Asdefined atsection 2-4-102 (4), MCA, 

### "

## ' [c] ontested case' means any proceeding before an agency inwhich a determination of legal rights, duties, or privileges of a party isrequired by law tobe made after an opportunity for hearing." "The definitionrefers todeterminations which are 'required by law' tobe made after an opportunity for hearing. This has broader meaning than merely a statutory requirement for an opportunity for hearing. It includes situations where 

### a hearing 

### isrequired 

### as a matter of constitutional right.

### " Administrative Procedures Subcommittee Comments, Title 2, Chapter 

### 4, Part 1, MCA (Annotations)

# .Appellant Nye has cited no authority, either statutory

Orconstitutional, which indicates that a person inNye's position is "required by law" tobe given an opportunity for hearing prior to a determination of her or his rights or privileges. The research conducted by this Court has not revealed any such legal requirement. Weconclude that this

case does not qualify 

### as a contested case under MAPA. The DistrictCourt did not 

### err inrefusing to grant Nye's petition for judicial review. Slander Nye's complaint alleged that her supervisors atthe Department of Livestock made statements about her ability to work and perform the tasks ather work sitewhich 

### were either intentionallymalicious ormade with gross disregard for the truth. The complaint also alleged that certain Department administrators caused these statements tobe published inNye's notice of discharge, and that the publication

was made with reckless disregard for the truth. Nye alleged that she 

### was injured invarious ways as a result of the making of the above statements. The Department of Livestock argued to the DistrictCourt that the intradepartmental publications complained of by Nye were absolutely privileged under Montana law. We agree. Section 27-1-804(1), MCA, provides that a privileged publication is one made inthe proper discharge of an official duty. The language of section 27-1-804(1) has been applied by this Court to factsquite similar to those now before us. In Storch v. Board of Dir. of East. Mont. Reg. Five M.H.C. (1976), 169Mont. 176, 545 P.2d 644, the plaintiff was an employee of a stateregional mental health center who had been discharged because he was unclean and unkempt and wasliving with a woman not his wife. One of the bases for Storch's suitagainsthis employers was that they had 1-ibeled him. This Court held that the privilege afforded by section 27-1-804 (1) 

## ,MCA, is absolute. 

### " [I] 

### t constitutes an absolute privilege with the only requirement being that the intradepartment communication be one rendered while engaged inan 'official duty.' There can be no doubt that the hiring and firing of 

### employees ispart of the 'official duty' of Montana Regional Health Centers. 

# . . "Whether statements made by such public officers inrelation to the hiring and firing of employees may be subject to absolute privilege has been answered in the affirmativemany 

### times. Under facts similar to the instant case, the United States Supreme Court inBarrv. Matteo, 360 U.S. 564, 571, 79 S.Ct. 1335,-3 L.Ed. 2d 1434, 1441, stated that insofar as a public officer

### was acting within the scope of his authority his communication was absolutely privileged." Storch, 169Mont. at181-82, 545 ~.2d at 647-48. We find that the absolute privilege afforded by section 27-1-804(1), MCA, applies to the facts of this case. Margaret Nye had no cause of action for slander, and the District Court did not errby dismissing that element of her complaint. Wrongful Discharge Nye sought to amend her complaint to add a claim for wrongful discharge, but the District Court refused to allow amendment. Wedo not agree thatwrongful discharge could not lieas a matter of law, and remand to the DistrictCourt to allow amendment of the complaint. The DistrictCourt's order of dismissal appears to rest upon the fact thatNye's employment was "atwill." Section 39-2-503, MCA. However, the tortof wrongful discharge may apply to an atwillemployment situation. In fact, the theory of wrongful dischargehas developed 

### inresponse to the harshness of the application of the at

### willdoctrine,under which an employment may be terminated without cause. See Pierce v. Ortho Pharmaceutical Corp. (1980), 84 N.J. 58, 417 A.2d 505. The determination of whether the cause of action arises 

### rests upon whether an unfair orunjustified termination was inviolation of public policy. Keneally v. Orgain (1980), Mont. 

## , 606 P.2d 127, 37 St.Rep.

Administrative rules may be the source of a public policy which would support a claim of wrongful discharge. Pierce, 417 A.2d at512. The Stateof Montana, through the Department of Administration, developed policy 3-0130, disciplinehandling, and policy 3-0125, grievances. These rules for the resolution of employment difficulties

### were adopted by the Department of Livestock. Policy 3-0130 states that "

### [w]hen punitive discipline is necessary, just cause, documentation of facts and due process 

### are required." Under policy 3-0130 "[jlustcause 

### isdetermined if the alleged act 

### were an actual violation of an established agency standard, legitimate order, policy, labor agreement, failure to

### meet applicable professional standards, or a seriesof lesser violations, and if the employee would reasonably be expected tohave knowledge of the aforementioned." Due process isdefined inpolicy 3-0130 as 

# ".

. . a legal check designed to ensure an employee: 1)isinformed of what action is being taken and the reasons for it, and 2) has an opportunity to respond to and question the action and todefend or explain the questioned behavior or actions

# ." The application of the above rulesmay be challenged through the grievance policy, 3-0125, which was designed inpart to "guarantee alleligible State employees a consistent, expeditious and equitablemeans of adjusting grievances." We find that the Department of Livestock failed to apply its own regulationstoMargaret Nye, and thereby violated public policy. Margaret Nye 

### was terminated from her probationary statusposition asan officeclerk V for performance deficiencies related to thatposition. In that termination, the Department followed its termination and grievanceprocedures. However, the same procedures were not applied to the permit clerk 

## - position inwhich Nye had achieved permanent status. "'Permanent status' means the statean employee attains after satisfactorily completing an appropriate probationary period ina permanent position." 2-18-101 (6),MCA [now 2-18-101 

## (lo), MCA]

# . Having completed her probationary period, Nye had permanent status inthe permit clerk job. The fact that she chose to attempt to advance within the Department did not eliminate her permanent status inthe permit clerk position. Before the Department could remove Nye from the permit clerk position inwhich she had permanent status, the Department had the obligation to follow the public policy expressed inits own regulations. There was no showing of "justcause" for removing Nye from her permanent status inthe permit clerk position. She

was entitled toproper termination from her permanent position. The disciplinepolicy defines "employee" as "all employees who have served a probationary period and areinpermanent employment statuswith the stateof Montana." Margaret Nye

was denied a "consistent, expeditious and equitable" resolution of her problem, contrary to the public policy expressed in the discipline and grievancepolicies adopted by the Department of Livestock. The record indicates that the Department did not realize

or recognize that it had an obligation to follow the same procedure with regard to the permit clerk position as 

### wasrequired for the office clerk V position. It appears this willrequire a change inpolicy so far as Department operations

areconcerned. Under such circumstances it appears fair to give the Department the opportunity to conduct further hearings and follow the procedures under 

### itsregulations to determine if the Department and Nye may work out an acceptable solution of the claim. We affirm the action of the District Court indenying the petition forjudicial review and indismissing the claim of damages for slander. We, therefore, remand the case to the DistrictCourt with the following instructions: (1) Enter an appropriate order reinstating the complaint of Nye so far as the claim of wrongful discharge is concerned. (2) Enter an appropriate order holding the cause in abeyance for such a period of time as the DistrictCourt shall determine to be reasonable inorder to give the Department of Livestock and the claimant an opportunity to determine if Nye shall be immediately reinstated inher permit clerk job, or if the Department desires to terminate her in thatposition, to follow the procedures provided in the Department regulations, with the aim of securing a fair resolution of the dispute between the parties. (3) In the event that an equitable resolution of the controversy isnot achieved, the DistrictCourt shall enter such further order asisappropriate to allow the amendment of the complaint forwrongful discharge and proceed to trialof the case. I

dWeConcur:

Chief.,Justice