# FILED

June 17, 1997 Cecil Crowson, Jr

. App ellate C ou rt Clerk IN THE COU RT OF A PPEA LS OF TENN ESSEE WESTERN SECT ION A T JA CKSON

MA RLES FLOWER S, ) ) Plaintiff/Appellee, ) Shelby Circuit No. 51934 T.D. ) VS. ) A ppeal No. 02A 01-9610-CV-002 40 ) MEMPHIS HO USING AUTHORITY, ) ) Defendant/Appellant. )

APPEAL FROM THE CI RCUI T COUR T OF SH ELBY C OUNTY

AT MEMPHIS, TEN NESSEE THE HONORABLE WYETH CHANDLER, JUD GE

GREGORY L. PERRY Memphis, Tennessee Attorney for Appellant

ALA N BRYA NT CHA MBERS JEFF A. CROW, JR. CHA MBERS, CR OW, DURHA M & HOLT ON Memphis, Tennessee Attorneys for Appellee

REVERSED A ND REMA NDED

ALAN E. HIGHERS , J.

CONCUR: DAVID R. FA RMER, J. HOLLY K IRBY LIL LA RD, J.2

In this action for breach of employment contract, D efendant Memphis Hous ing Authority (MHA) app eals two o rders of the tr ial court ent ered in favor of MH A’s former employee, Plaintiff/Appe llee Marles Flowers. In its first ord er, the tr ial court g ranted Flowers’ motion for summa ry judgment based o n the court’s conclusion that MHA’s

Manual of Operations c onstituted part of the employment cont ract betw een the parties and, furthe r, that MHA breached this contrac t by termi nating Flowers without j ust cause. After a mending the pleadin gs to conform to the proof in the record, the tri al court’s initial or der also gr

anted summary judgment to F lowers on his claim that, in terminating Flowers, MHA deprived him of a protectible property interest in violation of his constitu tional right to due process. The trial court later

entered a final order granting Flowers the remedies of back pay for a per iod of three year

s, as wel l as reinst atement to his former position with M HA. For the reasons hereinafter

stated, we reverse the trial court’s orders and remand for further proceedings.

For purposes of

Flower s’ motion for summar

y judgment, the parties stipulated tothe following facts. MHA hi red Flowers for a management position in September 199 0. MHA’s operation is parti ally g overned by federal law

and by federal rules and reg ulations implemented by

the United States Department of Housing and Urban Development (HUD). Bet ween N ovember 1991 and February 1992, HUD’s district area office in Nashville conducted a Comprehensive Coordinated M anagement Rev iew of MHA

. As a result of this revie w, HUD iss ued a report i n March 1992 w hich concluded that Flow ers had been improperly hired. Based on this finding , HUD instructed MHA to termina te Flo wers’ employment. As

instructed, MHA terminat ed Flower s in April 1992.

During Flower

s’ employment

with MHA, MHA

had in effect an employee handbook known as its “M anual of Ope ratio ns.” As pertinent to this appeal, the Manual’s forward states: This is the official Manual of Ope r ations for the Memph is

Housing Autho rity. Its purpose i s to arrang e for ready ref erenc e a review

of the policies , relationshi ps, and proceduresof [MHA]. It is intended primari ly as a guide for employees in the discharg e of their duties

. Article IV of the Manual, enti tled AMEND MENTS , provides that:3 The Manual of Operati ons and t he By- Laws of [MHA] may be amended by an y speci al or reg ular meeting of the Board of Commissioners by a simple majority of said Commission ers, there being a

quorum prese nt. Section 208 of the Manual, ent itled EMPLOYMENT AND PERSONNEL REGULATIONS , provides that: All employ ment and personnel p roceduresshall be regulated

bythe p rov isi ons h erei naft er p rovided i n this secti on and elsewherein this Ma nual. In this section, the Manual l ists four reasons for ter mination of serv ices: resi gnation, dismissal for just cause, retirement, an d reduction i n force. The Manual a lso lists causes forwhich an employee may be suspended, demoted, o r terminat ed, and it div ides the

causes into two categories , major infract ions and other i nfractions. After listing examples of infractions, the Manual states:

None of the aforementioned Maj or or Other Infracti ons will be deemed to prevent the dismissal , dem otion , suspension, or discipli nary act ion of an employee for just cause. JUST CAUSE shall ex ist when [ MHA] has a reasonable basis for the action taken even though such cause is not cont ained in those mentioned above. Section 304 of the Manual, entit led THE PERSONNEL GRIEVANCE PROCEDURE , sets forth a procedure where by emplo yees may file “gri evances conc erned wit h the interpretati on and/or applic ation of [the M an ual], its di rectives , procedures, working conditionsand discipl ine.” Final ly, Secti on 401 of the Manual, entitl ed PURPOSE , provides that: This Manual of Operations contem plates that every [function]

of [MHA] shall be carried out by its members and emp lo yee s strictly in accordanc e with policies an d procedures ado pted by [MHA], and i ncorporated in the Manual.

Afte r being termi nated by MH A, Flower s did not purs ue the personnel grievanc e procedure outlined in M HA’s Manual of Operations ; howe ver, the par ties stipul ated that Flowers would have been terminated ev en if he had completed the grievance process and that it wo uld have been futi le for him to do s o.

Flowers subsequently

filed a complaint

against M HA for b reach of employment contract. In his complaint , Flower s alleged that MHA’s

Manual of Operati ons constituted1 See U.S . Co nst. a m end s. V, X IV; 42 U.S .C. § 1 983 (198 8); see also Tenn. Const. art . I , § 8. 4 an employment cont ract betw een the parties and that MHA had breached this e mployment contract by terminating Flowers without just cause. Flowers late r sought to amend his complaintto state a caus e of action for subst antive and pr ocedural due process violations. 1 Both parties filed motions for summary judgment. The trial cour t granted Fl owers’ motion as to both clai ms, and this appeal followed.

On appeal, MHA contends that the tr ial court er red in (1) g ranting Fl owers’ motion to amend his complai nt; (2) gr anting Flowers’ motion for summary j udgment; (3) awarding Flowers back pay and reinstatement; and (4) denyi ng MHA’s motion for l eave to renew i ts motion for summary j udgment. We conclude that the outco me of this appea l is controlled bythis court’ s recent deci sion in Williams v . Memp his Housi ng Authority , No. 02A01-9608-CV- 00190, slip op. at 2-6 (Tenn. App. June 2, 199 7), and, thus, we reverse the trial c ourt’s judg ment based on the reas oning set forth in that case.

In W illiams v. MHA , two MH A employees were terminated un de r substantiallysimilar circumstances

under which Flowers was terminated. As in this appeal, in W illiams v. MHA , the dispositiv

e question was whether MHA’s Man ual of Operat ions constituted an employment

agreement which contractually lim ited MHA’s ri ght to termi nate the employees. An swering this quest ion in the neg ative, we reasoned:

Because Tennessee adheresto the “employee-at-will” rule, a presumption ar ises in thi s state that an employ ee is an employee at will. Davis v . Connecticut Gen. Life Ins. Co. , 743 F. Supp. 1273, 1280 (M.D. Tenn. 1990). Under this wellestablished r ule, a contract for empl oyment for an inde finite term i s consid ered a contrac t at wil l which can be terminated byan employer (or an employee) at any t ime without cause. Bringle v. Methodi st Hosp. , 701 S.W.2d 622, 625 (Tenn. App. 1985); accord Graves v . Anchor Wire Corp. , 692 S.W.2d 420, 422 (Tenn. App. 1985); Whittaker v.Car e- More, Inc. , 621 S.W .2d 395, 396 (Tenn . App. 1981). In recent yea rs, the cour ts of this s tate have recogniz ed, at least in theor

y, that an exception to the at-will rule may arise where an employer promulgates an empl oyee handbook which confers certain benefits on employ ees or whi ch limits t he employer’s right to terminate employees . In order to be considered part of the employmen t contract , how ever, the handbook

must contai n specific lang uage showi ng the employer’s i ntent to be bound b y the handbook’s provisions.5 Smith v. Morris , 778 S. W.2d 85 7, 858 (Tenn. App. 1988). Unless the empl oyee handbook co ntains specific gu arantees or binding commi tments, the handboo k wil l not constit ute a contract. W hit taker

v. Care-More , 621 S.W.2d at 397. As stated by one cour

t, “the lang uag e used m ust be phrased in binding terms, inter preted in the c ontext of the entire handbook, and read in conj unction wi th any other relevant material, such as an employ ment application .” Claib orne v. Frito -Lay, Inc. , 718 F. Supp. 1319, 1321 (E.D. Tenn. 1989). Our res earc h hasreveale d fe w in stances in w hich appellate courts of this state have conclude d that the languag e of an employee handbook was binding on an employer. See Williams v. Mare mont Corp. , 776 S.W.2d 78 (Tenn. App. 1988) (holding that terms of employee handbook were binding on employer

where handbook

provided that employees would be recalled in order of s eniority); Hamby v. Genesco, Inc. , 627 S.W.2d 373 (Tenn. App. 1981) ( holding that employee ha ndbook’s “rollback

” provi sion was binding on empl oy e r whe re h andbook provi ded that, for so lo ng as employ ment relationship continued, handbook contained guar

ant e ed policies, practic es, an d procedures of empl oyer); see also Hooks v. Gibson , 842 S.W.2d 625 (Tenn. App. 1992) (concluding t hat e mployee handbook became part of employmentcontract w here handbook was p romulgated pursuantto agreement bet w een employer a nd state and employees were third-part y beneficiar ies of such agreement).

. . . . After

caref ully review ing the specific l anguage contai ned in MHA’s M anual of Operations, we conclude that the Manual’s provi sions are insufficient to overcome t he presumption th a t [the Employ ees] were at- will e mployees. The Empl oyees contend that the Manual contains sufficient guar ant ees to be binding upon MHA

beca use t he M anua l sp eci fi call y contemplates that all MHA funct ions “shall be carried out by its members and employees strictly in accordanc e with” the M anual’s policies an d procedures and , further, becausethe Manual states t hat “[a]ll empl oyment and pers onnel proceduresshall be regulated by” the Manual’s provisi ons. If this lan guage ev idences an inten t on the part of MH A to b e bound by the Manua l’s prov isions, however, suc h inten t is contradicted by the ex istence of a prov ision in the M a nual giving MHA’s Boar

d of Commissioner

s the authority

to amend the M anual at any s pecial or regular Boar d meeting. “An y language that preserves a unilateral right on the par t of the employer

to alter or modify the contents of [a] handbook” generallyprecludes the handbook from being considered part of the employment

contract. Claib orne v. Frito-Lay, Inc. , 718 F. Supp. 1319, 1321 (E. D. Tenn. 1989); see, e. g. , Smit h v. Morris , 778 S.W.2d 857, 858 (Tenn. App. 1988) (handbook’s language clearly showed “that modific ations were anticipated”); Bringle v. Methodi st Hosp. , 701 S.W.2d 622, 624 (Tenn. App. 1985) (h and book reserved to employer “right to change and abo l ish policies, procedures, rules and regulations”); Gregory v. Hunt , 24 F.3d 781, 786 (6th Cir. 1994) (handbook pro v ided that polici es were “ subject to chang e by management, unilaterall y and wi th ou t notice”); Davis v. Connecticut

Gen. Life Ins. Co. , 743 F. Supp. 1273, 12 79 (M.D. Tenn. 1990) (handbook r eserved to employer

“right to chan ge2 See W illi am s v. M HA , sl ip op. at 7 ( cit ing Gregory v. Hunt , 24 F.3d 781, 787 (6th Cir. 1994)). 6 any or all such policies, practices and procedures i n whole or in part at any

time, wi th or wi thout notice”) . Such lan guag e instead indicates “that the handbook simply constitute[s] a set of guidelines

or a source of infor mati on for an employee. ” Claiborne v. Fri to-Lay , 718 F. Supp . at 1321. In the case of MHA’s Manual of Operations, th is concl usio n is further supported by language indicating that the Manual’s purpose “is inte nded primarily

as a guide for

employees i n the discharg e of their duties.” Even if the Ma nual of Operati ons’ lan guage demonstrates an intenton the part of MH A to be bound by the Manual, we find nothing in the Manual’s provisions which would alter the Empl oyees’ status as at-will employees. First, we note that the Manu al did not entitle theEmployees to a specific term of employment because the Manual ’s provi sions gave the Employees

no assurances of employment for any definite time. See Graves v . Anchor Wire Corp. , 692 S.W.2d 420, 421 (Tenn. App. 1985); W hittaker v. Care-More, Inc. , 621 S.W.2d 395, 397 (Tenn. App. 1 981); accord Davis v. Connecticut

Gen. Life Ins. Co. , 743 F. Supp. 1273, 12 80 (M.D. Tenn. 1990) (concl uding that, becaus e Tenn essee st ill clings to “employee-at-will” rule, presumption that employee is at will must be overcome b y specific language g uaranteeing defin ite term of emplo yment ). Moreover, contrary to the Employees’ argument, the terms of the Manual did not limi t MHA’s r ight to terminate the Employees by requi ring that a ny terminati on of service s be for one of the enumerated reas ons, such as just cause. Although the Manual listed only four reason s f o r termination, including resignation, dismiss al f or just caus e, retirement, and reduction in force, this list did not purport to be exclusiv e. Indeed, the Manual’s inclusion o f reduction in force to this list contemplates that certain business ex igenciesmay arise which necessitate dismissi ng em ployees for r easons other than just caus e. In this ca se, therefore, we can find no language that unequivocally overcomes t he presumption that [the Employees] were at-will employees. See Gregory v. Hunt , 24 F.3d at 787; Davis v. Connect icut Gen. Life Ins . Co. , 743 F. Supp. at 1280. W illiams v. MHA , slip op. at 2-6 (footnotes o mitted).

In accordance w ith W illiams v. MHA , we concl ude that the trial court erred in r uling (1) that MHA’s

Manual of Operat i ons constituted an employment cont ract whi ch limited MHA’s rig ht to t erminate Flowers and (2) that Flowers was unlawfully deprived of his property rights in violation of his constitutional right to due process. 2 As a result of this holdin g, we reverse the trial court’s order granting Flowers’ motion for summary judgment,

as well as the trial court’s final order gr anting Flowers the remedie s of back pay an d reinstatement.7

The trial court’s judgment is hereby re versed, and this cause is remanded for furthe r procee dings consistent w ith this opi nion. Costs on appeal are taxed to Flowers, for which

execu tion may is sue i f ne cess ary.

HIGHERS, J.

CONCUR:

FARMER, J.

LILLARD, J.