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Toussaint v. Blue Cross & Blue Shield - 408 Mich. 579, 292 N.W.2d 880 (1980)

Rule:

A provision of an employment contract providing that an employee shall not be discharged except for cause is legally enforceable although the contract is not for a definite term -- the term is indefinite -- and such a provision may become part of the contract either by express agreement, oral or written, or as a result of an employee's legitimate expectations grounded in an employer's policy statements.

Facts:

In the first of two cases, plaintiff Charles Toussaint brought an action for wrongful discharge against his former employer, defendant-appellant Blue Cross and Blue Shield of Michigan. Plaintiff Toussaint testified that on the day he was hired in 1967 he was given a "Supervisory Manual" and a pamphlet of "Guidelines", which contained defendant Blue Cross' personnel policies and procedures, including certain grounds and procedures for discipline of employees and termination of their employment. Plaintiff Toussaint argued that these documents constituted a written part of his otherwise oral employment contract with defendant Blue Cross and that, under the terms of the Supervisory Manual, he could be discharged "for just cause only", after warnings, notice, a hearing and other procedures provided in the Supervisory Manual. Plaintiff Toussaint testified that in 1972 he was called into his supervisor's office and told to resign. His employment with the defendant eventually ended after review of the decision by defendant Blue Cross' personnel department, company president, and chairman of the board of trustees, but plaintiff Toussaint was not given the benefit of all of the procedures in the Supervisory Manual. The jury returned a verdict for Plaintiff Toussaint of approximately $ 73,000 after the trial court denied defendant Blue Cross' motion for a directed verdict of no cause of action. The Court of Appeals reversed and instructed the trial court to enter a judgment for defendant Blue Cross. Plaintiff Toussaint sought further review.

In the second case, plaintiff Walter Ebling brought an action for wrongful discharge against defendant Masco Corporation. Plaintiff Ebling alleged that defendant Masco could discharge him only for cause after review by the defendant's Executive Vice President, and that defendant Masco discharged him before the third anniversary of his employment in order to prevent his exercise of a stock option which by then had appreciated substantially in value. A jury returned a verdict for plaintiff Ebling for $ 300,000. The trial court denied defendant Masco's motion for judgment notwithstanding the verdict. The Court of Appeals affirmed in a per curiam opinion. Defendant Masco sought further review. 

Issue:

In plaintiff terminated employees' actions for wrongful discharge from employment, were the indefinite term contracts providing for no discharge without cause legally enforceable?

Answer:

Yes

Conclusion:

The Supreme Court of Michigan reversed the Toussaint decision and remanded with instruction to reinstate the jury's verdict. The Court affirmed the Ebling decision. The general rule concerning the terminability of a hiring deemed to be for an indefinite term is not a substantive limitation on the enforceability of employment contracts but merely a rule of "construction." The Court held that the indefinite term contracts providing for no discharge without cause were legally enforceable. The Court held that employer statements of policy, such as the Blue Cross Supervisory Manual and Guidelines, can give rise to contractual rights in employees. Also, such contracts could result from oral or written express agreements with the employee or could result from employee expectations arising from employer policy statements. 

The Court saw no reason why an employment contract which does not have a definite term -- the term is "indefinite" -- cannot legally provide job security. When a prospective employee inquires about job security and the employer agrees that the employee shall be employed as long as he does the job, a fair construction is that the employer has agreed to give up his right to discharge at will without assigning cause and may discharge only for cause (good or just cause). The result is that the employee, if discharged without good or just cause, may maintain an action for wrongful discharge.

In both Toussaint and Ebling, there was sufficient evidence of an express agreement to justify submission to the jury. In Toussaint, the jury could also find for the former employee based on his legitimate expectations grounded in defendant Blue Cross' written policy statements set forth in the manual of personnel policies.

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