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, Judge presiding. 

Counsel of Record: 

For Appellant: 

Patrick Flaherty argued, Great Falls, Montana 

For Respondent: 

John Bobinski argued, Helena, Montana 

5 ft rJ 1 ," 1532 ? n Filed: 

Submitted: September 26, 1981 

Decided: January 14, 1982 
Mr. Justice Fred J. Weber delivered the Opinion of the 

Court . 

Margaret Nye brought an action in the District Court of 

the Fifth Judicial 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 its merits. Nye appealed. We reverse the 

portion of the order dismissing the wrongful discharge claim 

and remand to the District Court for further proceedings. 

Margaret Nye was hired by the Department of Livestock 

of the State of Montana ("Department") in October 1977. She 

initially worked as a permit clerk for the Department. The 

record does not disclose the grade at which the permit clerk 

position was classified under the state employee classification 

plan. In May 1979, Nye was promoted to the position of 

general office clerk V at a position classification of grade 

8. Nye stated at the time of her promotion that she understood 

that pursuant to Department policy she would be put in a 

probationary status for six months. In August 1979, Nye's 

supervisors in the Department determined that she was not 

performing adequately in her new position. On August 20, 

Nye was told of the deficiencies in her work and was given a 

ten day warning notice which informed her that the deficiencies 

must be corrected. Nye's work was spot checked during the 

ensuing ten day period and her supervisors determined that 

she had not corrected certain deficiencies. Nye was terminated 

on August 31, 1979. 

Nye invoked the Department's grievance procedures in 

order to challenge her termination. A three-person hearing 
committee 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 its opinion and recommendation 

to the head of the Department of Livestock. The committee 

concluded that departments of state government 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 that Nye knew and understood 

that she had made mistakes in her new position. The committee 

also found that Nye 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 not properly trained and supervised 

Nye. The hearing committee decided that termination was an 

unduly harsh method of dealing with Nye's deficiencies, 

especially when her excellent prior 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 dealt with 

fairly. The committee concluded that there was a "lack of 

total fairness" in the termination of Nye. The hearing 

committee recommended that Nye not be reinstated to her 

previous position and not be awarded back pay. (It is 

unclear whether "previous position" refers to the permit 

clerk job or the general office clerk V job.) The committee 

further recommended that Nye be awarded $1,495.36 as compensation 
for the unfair treatment given her by the Department. 

Finally, the committee recommended that Nye be granted an 

entitlement to any grade 7 or 8 position in the Department 

for which she was qualified. The entitlement was to apply 

to any such position which became vacant in a two-year 

period. 

The report and recommendations of the hearing committee 

were submitted to the director of the Department of Livestock 

in accordance with Department grievance procedures. The 

director refused to follow the committee's recommendations 

and affirmed Nye's termination. Nye filed suit in District 

Court seeking judicial review of the agency action, damages 

for slander, and, by way of an amended complaint, damages 

for wrongful discharge. The district judge denied the 

petition for judicial review and dismissed the cause on its 

merits because he determined that Nye had only a contract at 

will. Nye appealed, and raised the following issues: 

(1) Did the District Court err by denying judicial 

review of the Department director's decision? 

(2) Did the District Court err by dismissing the 

slander complaint? and 

(3) Did the District Court 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 District Court 

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 is not satisfied with the 

outcome of the Director's decision, the 

grievance may 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. 

In Montana, only the legislature may validly provide for 

judicial review of agency decisions. "The legislature may 

provide for direct review by the district court of decisions 

of administrative agencies." Mont. Const. art. VII, § 

4, cl. 2. A right of judicial review cannot be created by 

agency fiat. 

In order for Nye 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 

all administrative remedies available within the agency and 

who is aggrieved by a final decision in a contested case is 

entitled to judicial review under this chapter." As defined 

at section 2-4-102 (4), MCA, " ' [c] ontested case' means any 

proceeding before an agency in which a determination of 

legal rights, duties, or privileges of a party is required 

by law to be made after an opportunity for hearing." 

"The definition refers to determinations which 

are 'required by law' to be 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 is required 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 

Or constitutional, which indicates that a person in Nye's 

position is "required by law" to be 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. We conclude that this 

case does not qualify as a contested case under MAPA. 

The District Court did not err in refusing to grant 

Nye's petition for judicial review. 

Slander 

Nye's complaint alleged that her supervisors at the 

Department of Livestock made statements about her ability to 

work and perform the tasks at her work site which were 

either intentionally malicious or made with gross disregard 

for the truth. The complaint also alleged that certain 

Department administrators caused these statements to be 

published in Nye's notice of discharge, and that the publication 

was made with reckless disregard for the truth. Nye alleged 

that she was injured in various ways as a result of the 

making of the above statements. The Department of Livestock 

argued to the District Court 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 in the proper discharge of an official 

duty. The language of section 27-1-804(1) has been applied 

by this Court to facts quite similar to those now before us. 

In Storch v. Board of Dir. of East. Mont. Reg. Five M.H.C. 

(1976), 169 Mont. 176, 545 P.2d 644, the plaintiff was an 

employee of a state regional mental health center who had 

been discharged because he was unclean and unkempt and was 
living with a woman not his wife. One of the bases for 

Storch's suit against his 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 in an 'official duty.' There can be 

no doubt that the hiring and firing of employees is part of the 'official duty' of 

Montana Regional Health Centers. . . 

"Whether statements made by such public 

officers in relation to the hiring and firing 

of employees may be subject to absolute 

privilege has been answered in the affirmative many times. Under facts similar to the 

instant case, the United States Supreme 

Court in Barr v. 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, 169 Mont. at 181-82, 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 err by 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. We do not agree that wrongful discharge could 

not lie as a matter of law, and remand to the District Court 

to allow amendment of the complaint. 

The District Court's order of dismissal appears to rest 

upon the fact that Nye's employment was "at will." Section 

39-2-503, MCA. However, the tort of wrongful discharge may 

apply to an at will employment situation. In fact, the 

theory of wrongful discharge has developed in response to 

the harshness of the application of the at will doctrine, 
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 or unjustified 

termination was in violation 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 at 512. The State of Montana, through the 

Department of Administration, developed policy 3-0130, 

discipline handling, 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 

"[jlust cause is determined 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 series of lesser 

violations, and if the employee would reasonably be expected to have knowledge of the 

aforementioned." 

Due process is defined in policy 3-0130 as 

". . . a legal check designed to ensure an 

employee: 1) is informed of what action is 

being taken and the reasons for it, and 2) 

has an opportunity to respond to and question 

the action and to defend or explain the 

questioned behavior or actions . " 

The application of the above rules may be challenged through 

the grievance policy, 3-0125, which was designed in part to 

"guarantee all eligible State employees a consistent, expeditious 

and equitable means of adjusting grievances." We find that 

the Department of Livestock failed to apply its own regulations 
to Margaret Nye, and thereby violated public policy. 

Margaret Nye was terminated from her probationary 

status position as an office clerk V for performance deficiencies 

related to that position. In that termination, the Department 

followed its termination and grievance procedures. However, 

the same procedures were - not applied to the permit clerk 

position in which Nye had achieved permanent status. "'Permanent 

status' means the state an employee attains after satisfactorily 

completing an appropriate probationary period in a permanent 

position." 2-18-101 (6), MCA [now 2-18-101 (lo), MCA] . 

Having completed her probationary period, Nye had permanent 

status in the permit clerk job. The fact that she chose to 

attempt to advance within the Department did not eliminate 

her permanent status in the permit clerk position. Before 

the Department could remove Nye from the permit clerk position 

in which she had permanent status, the Department had the 

obligation to follow the public policy expressed in its own 

regulations. 

There was no showing of "just cause" for removing Nye 

from her permanent status in the permit clerk position. She 

was entitled to proper termination from her permanent position. 

The discipline policy defines "employee" as "all employees 

who have served a probationary period and are in permanent 

employment status with the state of Montana." Margaret Nye 

was denied a "consistent, expeditious and equitable" resolution 

of her problem, contrary to the public policy expressed in 

the discipline and grievance policies 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 was 
required for the office clerk V position. It appears this 

will require a change in policy so far as Department operations 

are concerned. Under such circumstances it appears fair to 

give the Department the opportunity to conduct further 

hearings and follow the procedures under its regulations to 

determine if the Department and Nye may work out an acceptable 

solution of the claim. 

We affirm the action of the District Court in denying 

the petition for judicial review and in dismissing the claim 

of damages for slander. We, therefore, remand the case to 

the District Court 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 District Court 

shall determine to be reasonable in order to give the 

Department of Livestock and the claimant an opportunity to 

determine if Nye shall be immediately reinstated in her 

permit clerk job, or if the Department desires to terminate 

her in that position, 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 is not achieved, the District Court shall enter 

such further order as is appropriate to allow the amendment 

of the complaint for wrongful discharge and proceed to 

trial of the case. I 

d 
We Concur: 

Chief .,Justice