Suburban Hospital, Inc. v. Dwiggins

CHASANOW, Judge. William R. Dwiggins claims that Suburban Hospital, Inc. (Suburban) unfairly fired him from his job as a building maintenance supervisor. He says that he did not receive a fair hearing in the hospital’s grievance system, and he wants the courts to make sure he gets one. Suburban counters that Dwiggins received everything he was entitled to through the grievance procedures.

Dwiggins won a partial victory in both the trial court and the Court of Special Appeals. Suburban Hospital v. Dwiggins, 83 Md. App. 97 , 573 A.2d 835 (1990). Because the case raises important questions on the subject of at-will employment, this Court granted Suburban’s petition for certiorari. The Facts Dwiggins had been employed at Suburban Hospital for a decade before the dispute at issue here arose in 1985.

When he was hired, there were no discussions about how long he would be employed. His first duties at Suburban were as a carpenter. In 1980, Dwiggins was promoted to building maintenance supervisor, and during the following two years, he was praised for his job performance. Suburban set forth a number of written policies for employees.

Early in 1981, the director of personnel and the hospital administrator signed a policy on disciplinary action that told employees what they could expect from the hospital and created certain requirements that officials had to meet when disciplining employees. For example, an employee’s suspension “must be validated by a counseling memo forwarded to the personnel department. All cases of suspension must have prior review by the department head ²⁹⁸ and division head.” If an employee was to be fired, more stringent procedures were to be followed: “Review by the department head, division head, personnel department, and hospital administrator is required for termination of an employee.” A worker aggrieved by a decision of a supervisor could seek review through both an informal and then a formal process that included review by a four-member ad hoc grievance committee. Two committee members would be appointed by the director of personnel; the other two would be chosen by the employee.

The grievance committee would then review the issue and inform both sides of its decision within two working days. Either side was given the option of appealing to the hospital administrator. The process ended with the hospital administrator. According to Suburban’s policy and procedure statement, “The administrator will consider the grievance and within five working days decide upon its disposition.

The decision of the administrator will be final.” A year later, in 1982, Suburban adopted a “code for employee relations” and promised “to protect the privileges, interests, and benefits of its employees____” In this document, the hospital declared that it would establish written standards for job performance and would “permit and encourage any employee” to present grievances “to the appropriate supervisor for settlement.” If the complaint had not been handled to the employee’s satisfaction at that level, he or she was promised that the matter would “be dealt with at successively higher levels of management in accordance with an established, written procedure.” The hospital published a reinstatement policy in 1983. In it, Suburban said, “Reinstatement is an offer and acceptance of any position within six months of separation from the hospital.” A reinstated employee would “be placed in a three month probationary period.” In 1985, Dwiggins found that a wall being built inside the hospital was going to block an elevator entrance if construe ²⁹⁹ tion plans were followed. To solve this problem, he amended the plans on his own by ordering a bend in the wall. When Suburban’s associate administrator, Paul Quinn (Quinn), found out, he suspended Dwiggins for three days and recommended that he be fired.

Dwiggins’ transgressions were four-fold, according to Quinn: (1) he had built the wall without approval from the administration; (2) he had failed to get a building permit; (8) he had spent money without the necessary clearance; and (4) he had not told laboratory personnel what he was doing so that they could protect their equipment. Dwiggins invoked the hospital grievance procedure. An ad hoc committee decided that he should not be blamed on the first two allegations. Rather than agree that Dwiggins should be fired, the committee recommended that he be placed on probation with a number of specific restrictions.

After reviewing the committee’s recommendations, the hospital administrator concurred. She warned Dwiggins that he would have to follow written guidelines for his work and that he would be placed on six months probation “with the understanding that any violations of the written guidelines will be grounds for immediate termination.” Dwiggins signed the administrator’s letter outlining the restrictions and returned it as requested, agreeing to the terms of his reinstatement. On July 2, 1985, the day he was scheduled to resume work, Dwiggins signed a document entitled, “Performance Conditions,” which spelled out specific work rules as follows: “No construction requiring a building permit may be undertaken without the appropriate signed permit from the County. No outside contractor can be engaged without signed approval from Administration.

Construction must be coordinated with all departments involved. No keys may be made or changed without individual and specific approval of the Associate Administrator or the Administrator. ³⁰⁰ No field changes may be made to any Ward Hale project without specific administrative signed authorization by the Associate Administrator or the Administrator.” The conditions were followed by the warning: “Failure to comply with any of these provisions during the probationary period will result in immediate termination.” John Marynowski, Suburban’s Director of Engineering/Maintenance and Dwiggins’ supervisor, co-signed the document. Two months later, Marynowski filed a formal “counseling memo” complaining about Dwiggins’ performance. He accused Dwiggins of showing “poor judgment in job planning and supervision in completing the renovation of radiology and the installation of the dishwasher____” Specifically, Marynowski said that the job was finished a week late and that the work was badly coordinated by Dwiggins.

On September 16, Marynowski filed another counseling memo saying that, Dwiggins “has again demonstrated poor followup and a lack of concern of his responsibility as a supervisor.” The memo was read to Dwiggins. Finally, on September 26, 1985, Marynowski filed a counseling memo recommending that Dwiggins be fired for failing to abide by the reinstatement agreement he and the hospital administrator signed. Specifically, he accused Dwiggins of violating the condition forbidding him to hire an outside contractor—Peak Sheet Metal—without signed administration approval. Dwiggins again brought the hospital’s grievance system into play, arguing that the accusation was false and that he had not hired Peak Sheet Metal in violation of the reinstatement agreement.

Suburban’s Personnel Relations Coordinator decided against Dwiggins. In accordance with the grievance procedure, the matter then went to a four-member ad hoc committee, two of whose members were selected by Dwiggins. The proceedings before the ad hoc committee were not recorded. We are informed that Dwiggins was permitted to present a letter from A1 Peak of Peak Sheet Metal, but Peak was not called as a witness.

Dwiggins also ³⁰¹ alleges that he was not present when Quinn was interviewed by the committee. After reviewing the evidence, the committee decided that Dwiggins was accountable even if he had not personally contracted to engage Peak Sheet Metal to work at the hospital. “[S]ince the project was [Dwiggins’] responsibility then it was his responsibility to bring them in,” the committee reasoned. “[I]t was [Dwiggins’] responsibility to get written prior approval to bring in the contractor to do the work.” Dwiggins, the committee concluded, should be fired. As required by the grievance procedure, the hospital administrator reviewed the case as well as a letter from Dwiggins’ attorney. On November 1, 1985, the administrator wrote Dwiggins a letter saying, “it is my decision that your termination be upheld and that you not be reinstated.” Dwiggins then filed a breach of contract action, contending in part that Suburban had breached a contractual duty to follow the grievance procedures the hospital had established for employees.

He also argued that the written reinstatement agreement he had signed was a legally enforceable contract and that the hospital dismissed him in violation of the agreement’s terms. Suburban countered that Dwiggins was an at-will employee and the reinstatement agreement did not change that status. The hospital also argued that the grievance procedures it established had been followed to the letter; therefore, Suburban said, Dwiggins could be fired at its pleasure. In essence, Dwiggins has two basic complaints: (1) he should not have been fired except for just cause because the reinstatement agreement showed that he was not an at-will employee, and (2) the grievance process was unfair.

After a trial in the Circuit Court for Montgomery County, a jury awarded damages to Dwiggins totalling $35,809, an amount later reduced by stipulation to $31,259, for breach of contract based on the reinstatement agreement. On appeal, the Court of Special Appeals held that the reinstatement agreement constituted a legally enforceable contract ³⁰² between Dwiggins and Suburban. But the intermediate appellate court remanded the case for a determination whether the grievance process used by the hospital was “fundamentally fair” and whether “the rules governing it [had been] substantially followed____” 83 Md.App. at 118 , 573 A.2d at 846 . The Court of Special Appeals held that “[t]he reinstatement agreement certainly was a contractual undertaking.” 83 Md.App. at 109 , 573 A.2d at 841 . “Considering that agreement together with the underlying policies that authorized and led to it, we have no hesitation in concluding that the hospital did, in fact, contractually limit its otherwise vast discretion to discharge Mr. Dwiggins at any time and for any reason.” Id.

By agreeing to a formal set of “performance conditions” in the reinstatement agreement, the Court of Special Appeals reasoned, “the hospital implicitly, but contractually, assured Mr. Dwiggins that he would not be disciplined for job conduct that was consistent with and not violative of those conditions. If this were not so—if the undertaking did not have that effect—it would be merely a sham, and there is no evidence that the hospital ever intended it as such.” 83 Md.App. at 110 , 573 A.2d at 842 . The intermediate appellate court also viewed Suburban’s grievance system as a neutral arbitration designed to fairly and conclusively resolve employee complaints. “In creating such a dispute resolution mechanism and committing itself to abide by it, the hospital necessarily ceded a certain measure of its discretion to make snap and final judgments in this area.” Id. The Court of Special Appeals held that, in order for a grievance procedure to be final and binding, it must be “fundamentally fair.” That court remanded for the lower court to hold an evidentiary hearing and “[i]f the court finds that the proceeding was fundamentally fair and that the rules governing it were substantially followed, it should dismiss the action against the hospital.” 83 Md.App. at 118 , 573 A.2d at 846 . ³⁰³ In Maryland, at-will employment is an employment contract of indefinite duration.

It can be legally terminated at the pleasure of either party at any time. Adler v. American Standard Corporation, 291 Md. 31, 35 , 432 A.2d 464, 467 (1981). H.G. Wood, A Treatise on the Law of Master & Servant (1877), a late 19th Century work on employment law, has been credited with bringing the at-will rule to national attention, though cases adopting the doctrine can be found even earlier. See S. Mazaroff, Maryland Employment Law, § 1.8 at 50-54 (1990).

The doctrine was born during a laissez-faire period in our country’s history, when personal freedom to contract or to engage in a business enterprise was considered to be of primary importance. See Love, Greeley v. Miami Valley Maintainance Contractors, Inc.: Has Ohio Gone Too Far in Creating a Public Policy Exception to the Employment At Will Doctrine?, 18 N.Ky.L.Rev. 543, 544-47 (1990); Massingale, At-Will Employment: Going, Going ..., 24 U.Rich.L.Rev. 187, 188-89 (1990). There are exceptions to the general rule that at-will employees can be terminated at any time for any reason. As we discussed in Adler , an at-will employee has a cause of action in tort if his discharge “contravened some clear mandate of public policy.” 291 Md. at 43-47 , 432 A.2d at 471-73 .

See Ewing v. Koppers Co., 312 Md. 45 , 537 A.2d 1173 (1988). Various statutes also restrict an employer’s right to terminate at-will employees. For example, if an employer discharges an employee who has filed a workers’ compensation claim, he is guilty of a misdemeanor. Maryland Code (1991), Labor and Employment Article, § 9-1105.

An employee cannot be fired as a result of time lost from work because he served on a jury. Md.Code (1974, 1984 Repl.Vol.), Courts and Judicial Proceedings Art., § 8-105. It is apparent that Dwiggins was an at-will employee at Suburban Hospital, at least when he began work with the institution in 1975. But the Court of Special Appeals read into the reinstatement agreement an assurance that Dwiggins would not be disciplined as long as his work did not ³⁰⁴ violate the agreement’s “performance conditions.” 83 Md. App. at 110 , 573 A.2d at 842 .

In other words, whatever Dwiggins’ status was before the reinstatement agreement, that document liberated him from being an at-will worker. In effect, that means that after July 2, 1985, the date he signed the agreement, Dwiggins could be fired only for cause. We do not believe that the parties intended to make Dwiggins harder to fire when they signed an agreement intended as part of a disciplinary action. The “performance conditions” listed in the reinstatement agreement serve one purpose: They tell Dwiggins what he should be particularly careful about in light of his prior problems with the administration.

They are not to be read as setting forth the only transgressions that could lead to Dwiggins’ discharge. As one court noted: “The assertion that a probation memo constitutes an implied contract for further employment is a rather novel theory and appears to have no basis