Opinion ID: 1911222
Heading Depth: 1
Heading Rank: 3

Heading: Indefinite Employment Contracts.

Text: The central issue presented by this dispute is whether DLC's issuance of a handbook created an employment contract. [2] This question arises because Iowa employment relationships are presumed to be at-will: In the absence of a valid employment contract either party may terminate the relationship without consequence. See Hunter v. Board of Trustees, 481 N.W.2d 510, 513 (Iowa 1992). Indeed, the doctrine of employment at-will is merely a gap-filler, a judicially created presumption utilized when parties to an employment contract are silent as to duration. Butler v. Walker Power, Inc., 137 N.H. 432, 629 A.2d 91, 93 (1993); see also Sorenson v. Kennecott-Utah Copper Corp., 873 P.2d 1141, 1145 (Utah App.1994) (at-will rule is mere rule of contract construction); Richard A. Epstein, In Defense of the Contract at Will, U.Chi.L.Rev. 947, 951 (1984) ([at-will] rule of construction [is] in response to the perennial question of gaps). To understand our interpretation of employment contracts, particularly the nexus between the at-will doctrine and employee handbooks, we provide a brief overview. A. Development of employment at will. The at-will presumption originated in English seasonal servant contract law. See Jay M. Feinman, The Development of the Employment at Will Rule, 20 Am.J.Legal Hist. 118, 118 (1976) (hereinafter Feinman Article). When parties remained silent as to the duration of service, the English courts filled the gap by presuming a certain duration and imposing a notice-of-termination requirement. 1 William Blackstone, Commentaries on the Laws of England 413 (U.Chi. Press 1979) (If the hiring be general without any particular time limited, the law construes it to be a hiring for a year.... [Neither side can break the contract] without a quarter's warning.) (hereinafter Blackstone). The judicially created doctrine complemented statutes imposing a ban on leaving one's position or firing a worker before the end of the term and reflected the judiciary's concern for fairness between masters and seasonal servants. Feinman Article, 20 Am.J.Legal Hist. at 120; see Blackstone, at 413 (relationship continues throughout all the revolutions of the respective seasons; as well as when there is work to be done, as when there is not). The doctrine has never been static. As additional statutes were promulgated and the variety of employment situations far removed from the domestic environment increased, the English judiciary varied the amount of notice in accordance with the type of employment. Feinman Article, 20 Am.J.Legal Hist. at 121-22. English law thus attempted to adapt to changing conditions and new situations.... Id. at 121. American courts relied heavily upon English precedent until the 1870s, when changing economic and social conditions prompted a dissolution of earlier law: the presumption of yearly hiring was seen as anachronistic and the concept of reasonable notice was disavowed. Id. at 125; cf. Richard J. Pratt, Comment, Unilateral Modification of Employment Handbooks: Further Encroachments On the Employment-At-Will Doctrine, 139 U.Pa.L.Rev. 197, 198-99 (1990) (hereinafter Pratt Article); Marla J. Weinstein, Comment, The Limitations of Judicial Innovation: A Case Study of Wrongful Dismissal Litigation in Canada and the United States, 14 Comp.Lab.L.J. 478 (1993) (comparing Canadian and American at-will jurisprudence; Canada retains the notice requirement). At this juncture, a new approach was suggested that changed the doctrine to a presumption of at-will employment: With us the rule is inflexible, that a general or indefinite hiring is prima facie a hiring at will, and if the servant seeks to make it out a yearly hiring, the burden is upon him to establish it by proof.... [I]t is an indefinite hiring and is determinable at the will of either party, and in this respect there is no distinction between domestic and other servants. H.G. Wood, A Treatise on the Law of Master & Servant § 134, at 272 (1877). As the English presumption was a reflection of the economic and societal conditions in early Britain, Wood's rule was an outgrowth of prevailing American thought: ascendancy of freedom of contract, a reflection of the usual duration of employment contracts, and support for the development of advanced capitalism. Feinman Article, 20 Am.J.Legal Hist. at 130-31; see also Pratt Article, 139 U.Pa. L.Rev. at 199-201. B. Iowa jurisprudence. Wood's version of employment at will quickly spread and was universally adopted. 1 Samuel Williston, The Law of Contracts § 39, at 61-62 (1920) (hereinafter Williston). Indeed, it is long established in Iowa case law. Harrod v. Wineman, 146 Iowa 718, 720, 125 N.W. 812, 813 (1910) (it is held by an overwhelming weight of authority that a contract of indefinite employment may be abandoned at will by either party without incurring any liability); see also Fogel v. Trustees of Iowa College, 446 N.W.2d 451, 455 (Iowa 1989); Wolfe v. Graether, 389 N.W.2d 643, 652 (Iowa 1986); Harper v. Cedar Rapids Television Co., 244 N.W.2d 782, 791 (Iowa 1976). Despite the universal acceptance of the employment-at-will doctrine, legislatures and courts have restricted its application. For example, federal labor law gave rise to union contracts that include just cause discharge provisions. Michael J. Phillips, Disclaimers of Wrongful Discharge Liability: Time for a Crackdown, 70 Wash.U.L.Q. 1131, 1134 (1992). Similarly, public employees are protected from arbitrary dismissal under civil service statutes. E.g., City of Des Moines v. Civil Serv. Comm'n, 540 N.W.2d 52, 58 (Iowa 1995); Iowa Code § 400.18 (1995). Reflecting the perceived need to protect employees from the harshness of the at-will doctrine, courts began to erode the doctrine with exceptions. Richard Harrison Winters, Note, Employee Handbooks & Employment-At-Will Contracts, 1985 Duke L.J. 196, 199; cf. Lawrence E. Blades, Employment at Will vs. Individual Freedom: On Limiting the Abusive Exercise of Employer Power, 67 Colum.L.Rev. 1404 (1967). These exceptions generally fell within three categories: (1) discharges in violation of public policy, (2) discharges in violation of employee handbooks constituting a unilateral contract, and (3) discharges in violation of a covenant of good faith and fair dealing. Stephen F. Befort, Employee Handbooks & the Legal Effect of Disclaimers, 13 Indus.Rel.L.J. 326, 333-34 (1991/1992) (hereinafter Befort Article). However, Iowa's strong support of the at-will presumption is demonstrated by our reluctance to undermine the rule with exemptions. We have carved out only two narrow deviations: tort liability when a discharge is in clear violation of a well-recognized and defined public policy of the State, Springer v. Weeks & Leo Co., 429 N.W.2d 558, 560 (Iowa 1988), and employee handbooks that meet the requirements for a unilateral contract, French v. Foods, Inc., 495 N.W.2d 768, 769-71 (Iowa 1993). We have consistently rejected recognition of a covenant of good faith and fair dealing. E.g., id. at 771; Fogel, 446 N.W.2d at 456-57. Our prior handbook decisions concerned only for-cause provisions. However, we explicitly left room for future expansion: an employment handbook may guarantee an employee that discharge will occur only for cause or under certain conditions.  French, 495 N.W.2d at 770; accord Hunter, 481 N.W.2d at 513; Fogel, 446 N.W.2d at 455. We now hold or under certain conditions to include progressive disciplinary procedures. Such provisions are enforceable if they are part of an employment contract. Cf. Vaughn v. Ag Processing, Inc., 459 N.W.2d 627, 639 (Iowa 1990) (We have recognized that written personnel policies providing terms and procedures to be followed when discharging an employee would be considered part of an at-will employee's employment contract.) (emphasis added); Hamilton v. First Baptist Elderly Hous. Found., 436 N.W.2d 336, 340-41 (Iowa 1989) (considering whether personnel policies are part of the employment contract). We must now determine whether Anderson's handbook constitutes an enforceable contract. If it does not, we presume the parties intended a contract at will. C. Unilateral contract approach. When considering whether a handbook creates a contract we utilize unilateral contract theory. McBride v. City of Sioux City, 444 N.W.2d 85, 90-91 (Iowa 1989). A unilateral contract consists of an offeror making a promise and an offeree rendering some performance as acceptance. See Hunter, 481 N.W.2d at 513; see also 1 E. Allan Farnsworth, Farnsworth on Contracts § 3.4, at 165 (1990) (hereinafter Farnsworth). An employee handbook is a unilateral contract when three elements are present: (1) the handbook is sufficiently definite in its terms to create an offer; (2) the handbook is communicated to and accepted by the employee so as to constitute acceptance; and (3) the employee provides consideration. [3] McBride, 444 N.W.2d at 91. As with any contract, the party who seeks recovery on the basis of a unilateral contract has the burden to prove the existence of a contract. Hawkeye Land Co. v. Iowa Power & Light Co., 497 N.W.2d 480, 486 (Iowa App.1993). Therefore, Anderson has the burden to prove DLC's handbook created an enforceable contract. We begin our analysis with a discussion of the communication aspect of the acceptance element of Anderson's claim.