#23785, #23827-rev & rem-DG
2006 SD 60
IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
* * * *
JOEL ABERLE, Plaintiff and Appellant,
v.
CITY OF ABERDEEN,
a Municipality, Defendant and Appellee.
* * * *
APPEAL FROM THE CIRCUIT COURT OF
THE FIFTH JUDICIAL CIRCUIT
BROWN COUNTY, SOUTH DAKOTA
* * * *
HONORABLE LARRY LOVRIEN
Judge
* * * *
DREW C. JOHNSON
Johnson Law Office
Aberdeen, South Dakota Attorney for plaintiff
and appellant.
MARK A. ANDERSON
Aberdeen, South Dakota Attorney for defendant
and appellee.
* * * *
CONSIDERED ON BRIEFS
ON FEBRUARY 13, 2006
OPINION FILED 07/05/06
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GILBERTSON, Chief Justice
[¶1.] Joel Aberle, an employee of the City of Aberdeen, was terminated by
the City and filed a wrongful termination suit. On a motion for partial summary
judgment, the circuit court found Aberle was not an at-will employee as an implied
employment contract existed, and that Aberle was wrongfully terminated in
violation thereof. A bench trial on the issue of damages resulted in an award for
past damages, and in lieu of future damages, the circuit court ordered the City to
reinstate Aberle. Aberle appeals the circuit court’s order for reinstatement. By
notice of review, the City appeals the circuit court’s ruling as to the existence of an
implied employment contract and argues that it had the right to terminate Aberle
as he was an at-will employee. The City also appeals the order for reinstatement.
We reverse and remand concluding the City possessed a contractual right to
terminate Aberle as an at-will employee.
FACTS AND PROCEDURE
[¶2.] In 1995, Joel Aberle (Aberle) applied to the City of Aberdeen (City) for
a maintenance worker position at the Aberdeen Regional Airport. The employment
application stated: “If an employment relationship is established, I understand that
I have the right to terminate my employment at any time and that the City of
Aberdeen has a similar right.” Aberle was hired for the position in November of
1995.
[¶3.] During his employment, City utilized “Standard Policy & Procedure
#001,” which detailed seven behaviors encouraged and expected by City and eleven
behaviors that were discouraged and were labeled as “will not be tolerated.” A copy
of the policy acknowledging receipt of the information was signed by Aberle on
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December 11, 1995, and was retained in his personnel file. The document stated as
its subject “Standards of Employment,” with an effective date of September 18,
1989, and contained the following:
Behaviors which will be encouraged and expected:
1. Neat appearance, exemplary conduct and cooperation with all
departments.
2. Demonstration of courtesy and tact when dealing with the
public, other employees, visitors, and all those involved in city
government and its functions.
3. Participation in In-service Training Activities and safety
procedures.
4. To familiarize and adhere to administrative and department
policies, procedures and regulations.
5. Provisions made to pay for debts due, so to maintain the
integrity of the City and its employees.
6. Make constructive suggestions for the betterment of the City.
7. Following the proper chain of command in complaints,
suggestions and grievances.
Behaviors which are discouraged and will not be tolerated:
1. Unwillingness to accept work and/or assignments.
2. Appearing for duty or working under influence of illicit drugs
and/or alcohol.
3. Excessive absenteeism and/or misuse of sick time.
4. Thievery, misappropriation or negligent care of city or others[’]
personal property.
5. Refusal to comply with proper directions of supervisory
personnel.
6. Threatening, offensive or abusive conduct (verbally or
physically) towards supervisory, fellow employees and city
officials, or the general public.
7. The acquisition, discussion or release of confidential material
without proper authority.
8. Threaten or attempt to use personal or political influence.
9. Desertion of duty post; including sleeping while on duty.
10. Falsification or misrepresentation of information, records, or
documents.
11. Willfully violat[e] any of the provisions of Civil Service or
Administrative or Department rules or regulations.
I have read and understood the expected practices outlined
above. While employed by the City of Aberdeen, I agree to
conform in these practices. I understand that to engage in any
of the listed non-acceptable behaviors will result in my being
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considered for disciplinary action or immediate discharge. I
understand that I have the right to terminate my employment at
any time and that the City has a similar right. (emphasis added).
[¶4.] In addition, City also used a publication titled “General Employee
Policies” that included a section on disciplinary action. That section stated: “It is
understood that there are offenses for which disciplinary action may be warranted,
including termination.”
[¶5.] On November 28, 2003, Aberle received a letter from City indicating
that he was being terminated, but would have the opportunity to meet with several
City officials to show cause why he should not be terminated. The letter stated that
Aberle had been determined to have violated three of the affirmative and two of the
prohibited items in Standard Policy & Procedure #001.
[¶6.] Aberle met with several City officials on December 9, 2003. At the
hearing, City presented no evidence and called no witnesses. Aberle objected to the
procedural format of the hearing due to his inability to examine City’s witnesses.
He claimed he was entitled to due process protections as he was not an at-will
employee. Aberle received written notice of termination on December 10, 2003,
which again stated the same violations of Standard Policy & Procedure #001 as
reason for the termination.
[¶7.] Aberle requested a post-termination hearing, claiming he was not an
at-will employee, but instead could only be terminated for cause after compliance
with pre- and post-termination hearings. His request for a post-termination
hearing was denied by City, which claimed the procedure was not necessary
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because Aberle’s status as an at-will employee did not entitled him to due process
protection in his termination.
[¶8.] At the time of his discharge, Aberle was receiving $12.19 per hour for a
standard forty-hour work week, plus heath insurance benefits and a four percent
retirement match, which brought his weekly wage to $606.85, or $121.37 per day.
His remaining work life expectancy was seventeen years at the time of discharge for
a total of 4,420 days of work life.
[¶9.] Aberle was unemployed without work for eighty-three days as he
searched for a new job. On April 6, 2004, Aberle obtained employment with Jensen
Rock and Sand, (Jensen) at a rate of $9.00 per hour, but without health or
retirement benefits. His total weekly salary at Jensen was $360.00, or $72.00 per
day. Aberle continued to look for work while employed with Jensen, and eventually
found a position with HRS Food Service (HRS) on June 7, 2004. His hourly rate at
HRS was $9.75 per hour plus $28.38 for health benefits, but no retirement match.
His total weekly wage at HRS was $418.38, or $83.68 per day.
[¶10.] Aberle filed suit against City claiming wrongful discharge and
requesting monetary damages. Aberle claimed lost wages while unemployed of
$10,073.71. He also claimed lost wages for the difference between his wages while
employed with Jensen and what his wages would have been if he had remained
employed with City in the amount of $2,172.28. Aberle stated that he was satisfied
with his position with HRS and planned to work for HRS until retirement.
Therefore, he claimed the difference between his daily wage rate with HRS and his
wage rate with City times his remaining life work expectancy for a total of
$166,589.90.
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[¶11.] Aberle moved for summary judgment on the issue of whether he was
an at-will employee or a contract employee. Aberle argued that as a contract
employee he was entitled to a post-termination hearing. As evidence of his status
as a contract employee, Aberle submitted City’s General Employee Policies manual
and Standard Policy & Procedure #001. Finally, Aberle argued that he was
wrongfully terminated as he was not provided a post-termination hearing.
[¶12.] City argued Aberle was an at-will employee and therefore no post-
termination hearing was required. City offered the same two documents as
evidence that it did not waive its right to terminate Aberle at will under the
language of the documents.
[¶13.] The circuit court found that an implied contract existed between City
and Aberle by virtue of the General Employee Policies manual and Standard Policy
& Procedure #001, and by City acting upon these documents in its notice of
termination to Aberle. By adopting the offenses stated in Standard Policy &
Procedure #001 and stating the alleged violations were the basis for the
termination, the circuit court concluded that City waived the statutory presumption
that Aberle was an at-will employee. The circuit court concluded that Aberle was a
contract employee who could be terminated only with notice and with cause after
pre-termination and post-termination hearings. Further, City’s failure to provide
due process type pre-termination and post-termination hearings violated Aberle’s
right to due process and subjected him to a wrongful termination.
[¶14.] Thereafter, a bench trial was scheduled on the issue of damages. City
raised as a defense that Aberle failed to mitigate damages. City submitted evidence
to show that several fields of employment with the same or higher wages as his
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position with HRS, and for which Aberle was qualified, were available in the
Aberdeen area. City argued that his failure to continue to search for a position with
a higher salary constituted a failure to mitigate his damages.
[¶15.] Aberle was able to establish that he conducted reasonable work
searches throughout the course of his unemployment and while working at Jensen,
up until the time he secured the position with HRS. However, the circuit court did
not make a finding as to whether Aberle failed to mitigate his damages after
accepting employment with HRS. Instead, the circuit court ordered specific
performance in lieu of determining Aberle’s damages for future pay. The circuit
court ordered City to reinstate Aberle to his former position, and awarded damages
of $37.69 per day from June 7, 2004, the date Aberle began working for HRS, up
until the date City rehired Aberle at his former rate of pay and benefits plans.
[¶16.] Aberle raises one issue for our review: Whether the circuit court erred
when it ordered City to reinstate Aberle to his former position. By notice of review,
City raises the same reinstatement issue, and also raises the issue of whether City
retained the right to terminate Aberle under an at-will term of employment. We
will address City’s at-will issue first, as it is the dispositive issue for this case.
STANDARD OF REVIEW
[¶17.] The circuit court’s ruling on a summary judgment will be upheld on
appeal when “the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any, show there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a matter of law.”
Titus v. Champan, 2004 SD 106, ¶13, 687 NW2d 918, 923 (quoting SDCL 15-6-
56(c)). “We will affirm when no genuine issues of material fact exist, and the legal
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questions have been correctly decided.” Id. (citing Holzer v. Dakota Speedway, 2000
SD 65, ¶8, 610 NW2d 787, 791 (citing Bego v. Gordon, 407 NW2d 801, 804 (SD
1987)). On appeal, we view all reasonable inferences drawn from the facts in favor
of the non-moving party. Id. (citing Morgan v. Baldwin, 450 NW2d 783, 785 (SD
1990)). The moving party bears the burden to clearly show the absence of genuine
issues of material fact and entitlement to judgment as a matter of law. Id. The
circuit court’s conclusions of law are reviewed de novo. Id. (citing City of Colton v.
Schwebach, 1997 SD 4, ¶8, 557 NW2d 769, 771)).
ANALYSIS AND DECISION
[¶18.] Whether an express or implied contract existed between
the City and Aberle that governed the conditions under
which the City could terminate Aberle’s employment. 1
[¶19.] SDCL 53-1-3 provides that “[a] contract is either express or implied.
An express contract is one, the terms of which are stated in words. An implied
contract is one, the existence and terms of which are manifested by conduct.” Only
when parties do not expressly agree will the law intercede and determine whether
the conduct of the parties has created an implied contract. Jurrens v. Lorenz Mfg.
Co. of Benson, Minn., 1998 SD 49, ¶6, 578 NW2d 151, 153 (citing Ryken v. Blumer,
1. Aberle argues that the City did not properly preserve this issue for appeal
because it failed to object to the circuit court’s proposed findings of fact and
conclusions of law. On appeal we conduct a limited review as to whether the
circuit court’s findings of fact support the conclusions of law without regard
to whether the issue was properly preserved below. Premier Bank, N.A. v.
Mahoney, 520 NW2d 894, 895 (SD 1994) (citing Huth v. Hoffman, 464 NW2d
637, 638 (SD 1991)). In the instant case, we limit our review to whether the
two documents submitted on the motion for summary judgment as a matter
of law establish an express or implied contract of employment.
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307 NW2d 865, 868 (SD 1981)). Therefore, the existence of an express contract
precludes the existence of an implied contract. Id. (quoting 66 AmJur2d Restitution
and Implied Contracts § 6, at 948-49 (1973)).
[¶20.] In the context of employment relationships, South Dakota is an
employment-at-will state per the provisions of SDCL 60-4-4. 2 Should a contract
exist between the employer and the employee, the terms of the contract control over
the provision of the statute. Obviously the two parties may, as part of an
employment contract, agree that the employee is employed under an at-will term of
employment.
[¶21.] However, an employer may surrender its statutory at-will power via
either an express or implied contract. Holland v. FEM Elec. Ass’n, Inc., 2001 SD
143, ¶12, 637 NW2d 717, 720 (citing Butterfield v. Citibank of South Dakota, N.A.,
437 NW2d 857, 859 (SD 1989); Osterkamp v. Alkota Mfg., 332 NW2d 275 (SD
1983)). An express surrender occurs when the employer affirmatively indicates
such intent by adopting written personnel policies or manuals that explicitly state
that a for-cause termination procedure must be followed. Id. (citing Hollander v.
Douglas County, South Dakota, 2000 SD 159, ¶14, 620 NW2d 181, 185; Richardson
v. East River Elec. Power Co-op, Inc., 531 NW2d 23 (SD 1995)). In such instances,
an express contract of employment is created that contains specific terms
surrendering the statutory at-will power. Id. The second manner in which an
2. SDCL 60-4-4 provides: “An employment having no specified term may be
terminated at the will of either party on notice to the other, unless otherwise
provided by statute.”
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employer may surrender its statutory at-will power occurs when an employer
impliedly creates such a contract. Id. When no explicit surrender of the statutory
at-will power is made by the employer, but policies or handbooks “contain[] a
detailed list of exclusive grounds for employee discipline or discharge and a
mandatory or specific procedure which the employer agrees to follow prior to any
employee’s termination[,]” an implied contract is created that binds the employer to
the for-cause termination procedure. Id. (quoting Hollander, 2000 SD 159, ¶14, 620
NW2d at 185).
[¶22.] The hallmark of both an implied and an express surrender of the
statutory power to terminate employees at will is a clear intention on the part of the
employer. Butterfield, 437 NW2d at 859. An employer creates a protected property
right in continued employment for its employees when it surrenders its statutory
at-will power and adopts a discharge policy that provides termination will occur
only for cause. Hollander, 2000 SD 159, ¶15, 620 NW2d at 185 (citing Hopkins v.
Saunders, 199 F3d 968, 975 (8thCir 1999) (citing Spitzmiller v. Hawkins, 183 F3d
912, 916 (8thCir 1999))). Whether the surrender is made by an express or implied
contract, if the employer does not follow proper termination procedures an employee
who has been terminated may have a wrongful discharge claim. Holland, 2001 SD
143, ¶12, 637 NW2d at 721.
[¶23.] However, the fact that an employment contract is memorialized in
writing does not in and of itself constitute a surrender of an employer’s statutory at-
will power. Butterfield, 437 NW2d at 860 (quoting Toussaint v. Blue Cross and
Blue Shield of Mich., 292 NW2d 880, 890 (Mich 1980)). A written employment
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contract may include both guidelines for employee conduct and behavior and an
explicit reservation of the at-will power. Id. Such an explicit reservation does not
require the use of any specific language, but it must clearly indicate that the
employer reserves the right to fire an employee at any time when it deems
discharge to be appropriate. Id. at 859.
[¶24.] In the instant case, the circuit court found that an implied contract of
employment existed as a matter of law. It found that the “Standards of
Employment” and the General Employee Policies, plus City’s conduct of identifying
specific violations of standards by Aberle, showed a clear intent on the part of City
to relinquish its statutory at-will power.
[¶25.] The circuit court erred when it held the two documents created an
implied contract of employment. The two documents which carry Aberle’s signature
contain written and explicit terms of employment and constitute an express
contract as a matter of law concerning his at-will status. This is consistent with the
terms of SDCL 53-1-3 which declare that implied contracts are created “by conduct”
rather than solely by terms of a document. Thus, because an express contract
existed as to at-will status under the two documents, an implied contract could not
exist. The circuit court failed to consider the significance of the last line of the
“Standards of Employment” portion of the employment contract which states: “I
understand that I have the right to terminate my employment at any time and that
the City has a similar right.” (emphasis added). This statement serves as an
explicit reservation of the right to terminate employees at any time, without notice
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or regard to violations of the “Standards of Employment.” That is, it is an explicit
contractual reservation of the statutory power to terminate an employee at will.
[¶26.] Moreover, the circuit court’s erroneously relied on the policy
encouraging and discouraging certain behaviors. This policy did not create an
implied contract because, as we noted in Holland, “the polic[ies] or manual[s][must]
‘contain[] a detailed list of exclusive grounds for employee discipline or discharge
and a mandatory and specific procedure which the employer agrees to follow prior
to any employee’s termination[,]’” before an implied contract may be found to exist.
However, the City of Aberdeen’s policy contained neither an exclusive list of
grounds for discipline nor a mandatory or specific procedure for employee
termination. Consequently, it did not create an implied contract.
[¶27.] Because we reverse on the threshold issue and find that there was no
implied contract of employment that guaranteed due process termination rights to
Aberle, we do not need to consider whether reinstatement was the proper remedy.
[¶28.] We reverse and remand for action consistent with this opinion.
[¶29.] KONENKAMP, ZINTER and MEIERHENRY, Justices, concur.
[¶30.] SABERS, Justice, dissents.
SABERS, Justice (dissenting).
[¶31.] As noted in Wilson v. Great Ne. Ry. Co., 83 SD 207, 211, 157 NW2d 19,
21 (1968): “The question presented . . . is whether or not there is a genuine issue of
fact. It does not contemplate that the court shall decide such issues of fact, but
shall determine only whether one exists.” (citation omitted). “If a court, in ruling on
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a motion for summary judgment, engages in fact-finding, reversal is required.”
Johnson v. Rapid City Softball Ass’n, 514 NW2d 693, 698 (SD 1994) (quoting Kropff
v. City of Monroe, 340 NW2d 119, 120 (MichCtApp 1983)). The same rule applies to
the South Dakota Supreme Court.
The circuit court erred when it ruled as a matter of law
that City created an implied employment contract based
upon its written employment policies and the Supreme
Court compounds the error by reversing and remanding
when there are genuine issues of material fact to be
decided by the jury.
[¶32.] South Dakota is an employment-at-will state per the provisions of
SDCL 60-4-4: “An employment having no specified term may be terminated at the
will of either party on notice to the other, unless otherwise provided by statute.”
However, an employer may surrender this statutory power to hire and fire at will.
Holland v. FEM Electric Ass’n, Inc., 2001 SD 143, ¶11, 637 NW2d 717, 720 (citing
Butterfield v. Citibank of South Dakota, 437 NW2d 857, 859 (SD 1989); Osterkamp
v. Alkota Mfg., 332 NW2d 275 (SD 1983)). An employer may expressly surrender
its at-will statutory power by affirmatively indicating such intent and by adopting
personnel policies or manuals that explicitly provide “that a for-cause termination
procedure must be followed.” Id. (citing Hollander v. Douglas County, South
Dakota, 2000 SD 159, ¶14, 620 NW2d 181, 185 (additional citations omitted)).
[¶33.] In addition, an implied surrender will be found to exist when the policy
or manual “‘contains a detailed list of exclusive grounds for employee discipline or
discharge and a mandatory and specific procedure which the employer agrees to
follow prior to any employee’s termination.’” Id. (quoting Hollander, 2000 SD 159,
¶14, 620 NW2d at 185) (additional citation omitted)). The hallmark of both an
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implied and an express surrender of the statutory power to terminate at will is a
clear intention on the part of the employer. Butterfield, 437 NW2d at 859.
However, “‘[t]he existence and governing terms of any implied contract present
questions of fact to be decided by a jury.’” Holland, 2001 SD 143, ¶6, 637 NW2d at
719 (quoting Jurrens v. Lorenz Mfg. Co. of Benson, Minn., 1998 SD 49, ¶9, 578
NW2d 151, 154 (citing Lien v. McGladrey & Pullen, 509 NW2d 421, 424 (SD 1993))).
[¶34.] In this case, whether City’s General Employee Policies manual and
Standard Policy & Procedure #001 created an implied contract of employment was
an issue of fact, and if it did, also at issue was what terms governed the contract.
As such, the issue of whether an implied contract existed, and if so, the
determination of its terms were incapable of being resolved on a motion for
summary judgment, as both were material facts in dispute. The circuit court
engaged in impermissible fact finding when it determined that an implied contract
of employment existed, and that the contract provided Aberle with the right to both
a pre- and post-termination hearing governed by due process standards. Given that
the circuit court engaged in fact finding with regard to genuine issues of material
fact on a motion for summary judgment, reversal and remanding is required. The
majority gets that part right but then proceeds to enter the opposite result for the
City of Aberdeen as a matter of law despite the fact that there are genuine issues of
material fact. This Court should not compound the error by reversing and
remanding and then entering the opposite result when there are genuine issues of
material fact to be decided by the jury.
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[¶35.] We should reverse and remand to the circuit court for jury trial on the
issue of whether an implied contract of employment existed and for a determination
as to its terms.
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