Suburban Hospital, Inc. v. Dwiggins

WILNER, Judge. William Dwiggins was an employee of Suburban Hospital, Inc. On September 26, 1985, he was discharged by his supervisor for allegedly violating a specific condition of his employment. Invoking the hospital’s grievance procedure, Dwiggins presented his case to various hospital personnel, including a four-member grievance panel. The panel, on disputed evidence, concluded that Dwiggins had violated the condition and that discharge was an appropriate sanction.

The hospital administrator concurred in those findings, thereby effectuating the discharge. Mr. Dwiggins filed suit in the Circuit Court for Montgomery County against the hospital and its associate administrator, Paul Quinn. He charged the hospital with breach of contract and the somewhat nebulous tort of breaching a duty of fair dealing by denying him due process; he charged Quinn with defamation by publishing untrue statements concerning Dwiggins’s abilities and performance. The tort action against the hospital and the action against Quinn were dismissed on motion.

The breach of contract count was submitted to a jury, which returned a verdict in Dwiggins’s favor in the amount of the wages he lost from the time of his discharge until he found reemployment a year later, in September, 1986. The hospital has appealed from the judgment of $31,259 against it in the contract action; Dwiggins has cross-appealed from the dismissal of his action against Quinn. We shall vacate the former and affirm the latter. Background Mr. Dwiggins was first employed in 1975 as a carpenter.

In 1982, he was promoted to a supervisory position. His ¹⁰¹ annual evaluations in 1983 and 1984 indicate that his then-supervisor, Larry Emory, regarded his performance as of the highest quality. During the period 1981-83, the hospital adopted and published a number of personnel policies. In 1981, it promulgated a set of written policies dealing with disciplinary action and grievances.

The statement on grievances declared that it was the hospital’s policy to assure fair and equitable treatment to its employees and that, if an employee felt that an injustice had been done, he or she “may initiate a grievance as outlined below.” The formal grievance procedure created by this policy statement contains six steps, beginning with the immediate supervisor and ending with presentation of the grievance to an “ad hoc grievance committee” (Step 5) and ultimately to the hospital administrator (Step 6). The ad hoc grievance committee is to consist of four persons, two selected by the employee and two selected by the supervisor. The parties are permitted to choose “any employee of the hospital they wish to serve on the committee.” The director of personnel serves as chairman of the committee but may not vote except in case of a tie. The grievance committee is directed to “review the grievance and within two working days inform both parties to the grievance of its decision, in writing.” Nothing is said in the policy statement about how a “hearing” before the committee is to be conducted, other than that the director of personnel will determine the time and place of the committee meeting.

In 1982, a more general policy on employee relations was adopted by the hospital. It stated, in relevant part, that the hospital “voluntarily assumes a direct and continuing obligation to protect the privileges, interests and benefits of its employees” and that, to address these and other objectives, the hospital “subscribes to the code of employee relations set forth below.” Among the provisions of that code were statements that the hospital “shall establish written work performance and on-the-job behavior standards which shall ¹⁰² be expected from an employee” and “shall permit and encourage” employees to present grievances and “assure” that such grievances “will be dealt with at successively higher levels of management in accordance with an established, written procedure.” Finally, for our purposes, in 1983, the hospital adopted a written policy with respect to reinstatement. The introductory paragraph of the document stated that “[rjeinstatement is an offer and acceptance of any position within six months of separation from the hospital.” This is restated in the body of the policy statement: “A position is offered to a former employee and the employee accepts the conditions of reinstatement.” Dwiggins’s first run-in with hospital management occurred in the spring of 1985 and concerned the construction of a wall in one of the hospital corridors. The county code required a building permit for the wall, but, when Dwiggins applied for one on May 30, it was denied because the plans were not sufficiently detailed.

It is not clear from the record who was responsible for preparing adequate plans. Dwiggins was instructed by his immediate supervisor, Mr. Emory, to make the necessary changes in the plans and resubmit them to the county on Monday, June 3. Instead, Dwiggins proceeded with the construction over the Memorial Day weekend. In the course of the construction, Dwiggins discovered that the plans called for the wall to block access to an elevator; to avoid that, he sua sponte altered the plan by moving the wall a few inches and creating a dogleg.

When Mr. Quinn returned to work on June 3 and discovered what Mr. Dwiggins had done, he concluded that Dwiggins had acted inappropriately in four respects: (1) constructing the wall without “Administration approval”; (2) proceeding without a building permit; (3) expending “outside contractor funds” without “Administrative authorization”; and (4) neglecting to inform the laboratory of the project so that it could move or cover its equipment. Quinn thought the transgressions serious enough to suspend ¹⁰³ Dwiggins for three days and recommend his termination thereafter. Dwiggins filed a grievance. Although he asserted that the reasons given by Mr. Quinn were “inaccurate,” he did not indicate in what way they were inaccurate; his grievance was based primarily on the argument that, as this was his first offense, the recommended penalty was too severe.

The grievance was eventually considered by a grievance committee, which concluded that, as to the first two charges, Mr. Emory, rather than Mr. Dwiggins, was the culpable agent, but that Mr. Dwiggins should have given advance notice to the laboratory and should not have made any change in the plans without consulting Mr. Emory. By unanimous vote, the committee recommended that Dwiggins be reinstated on probation, subject to a number of conditions. The hospital administrator reviewed the findings of the grievance committee and concurred in its recommendations. She wrote to him, in relevant part: “Three conditions must be met by you with the acceptance of this reinstatement.

They are as follows: 1. Written guidelines will be established for project work which you must agree to follow until department policies are written. 2. You will be placed on probation from July 1 through December 31 with the understanding that any violations of the written guidelines will be grounds for immediate termination. If you accept the above conditions, please call Mr. John Marynowski, your new supervisor, and arrange your return.

Upon your return, I would like you to bring me a signed copy of this letter.” (Emphasis added.) At the bottom of the letter was the statement, “I accept the three conditions of reinstatement as listed above, and will plan to return to work on July 2, 1985,” under which was a signature and date line. ¹⁰⁴ Dwiggins signed the letter and returned to work. He also signed another document captioned “Performance Conditions,” making clear, among other things, that “[n]o outside contractor can be engaged without signed approval from Administration” and that “[fjailure to comply with any of these provisions during the probationary period will result in immediate termination.” A month later, he received a memo from Mr. Marynowski dealing with purchase orders. It stated, in relevant part, that Dwiggins could sign purchase orders for material being requested by maintenance personnel, that the purchase order would then have to be signed by Marynowski, and that any item over $500 had to be approved by hospital administration. On September 6, 1985, Mr. Marynowski delivered a written warning to Mr. Dwiggins, resulting from what Marynowski regarded as “poor judgment in job planning and supervision in completing the renovation of radiology and the installation of the dishwasher____” The work, he complained, was poorly coordinated and was completed a week late.

On September 26, Marynowski decided to discharge Dwiggins for further misadventures in the renovation of the radiology department. Specifically, he charged that, in direct violation of both the reinstatement condition precluding the engagement of outside contractors without Administration approval and the purchase order policy, Dwiggins had “engaged an outside contractor (Peak Sheet Metal) without' signed approval from Administration.” Once again, Mr. Dwiggins invoked the grievance procedure, contending that the charge was untrue — that he had not hired any outside contractors. The charge and the defense were presented in Step 4 of the grievance procedure to the Personnel Relations Coordinator who, in a Memorandum of October 17,1985, found that Dwiggins had indeed engaged the contractor in violation of the condition of his reinstatement agreement. Specifically, he found: “During the week of August 18, 1985, Bill Dwiggins engaged Peak Sheet Metal to do the duct work in the Radiology Waiting Room without signed approval from ¹⁰⁵ Administration.

This violation of his reinstatement condition was discovered when the Suburban Hospital Purchase Order # M-4564 was submitted for payment, along with the Peak Sheet Metal Invoice # 1021 for the duct work completed by Peak Sheet Metal. There is no evidence that any prior signed approval was obtained from Administration to have this job done by an outside Contractor (Peak Sheet Metal).” The Coordinator also noted that Dwiggins was then on probation and that the performance conditions promulgated pursuant to the reinstatement agreement made clear that the violation of any of the conditions of reinstatement “will result in immediate termination.” The grievance was then presented to a four-member grievance committee. The proceedings before that committee were not recorded. It appears, from what we were told at oral argument, that, although Dwiggins made a presentation and was permitted to present to the committee a letter from A1 Peak of Peak Sheet Metal, he was not allowed to call Mr. Peak as a witness.

There is nothing in the record showing any request to call Mr. Peak as a witness. The letter, addressed to Mr. Dwiggins, states: “In response to your request for information concerning dates about work to be performed on C Wing and Dr. Farney’s office my calendar shows that I walked C Wing area, reception area, corridor area in front of small elevator with Larry Emery [sic] and you and at that time gave estimate not to exceed $3,000. At that time I was told to do the job to be coordinated by you and you would be in touch. Job was done to your schedule with the exception of one diffuser, which is a wholesale problem that they could not deliver on time.” In terms of the critical issue of who actually employed Peak — Dwiggins or Emory — the letter is unclear and therefore of little assistance.

After considering the disputed evidence as to whether Dwiggins or someone else employed Peak to do the job, the ¹⁰⁶ committee unanimously decided that Dwiggins was responsible. The specific finding in that regard was: “Although Bill Dwiggins indicated he did not call in Peak Sheet Metal to do the work on the Radiology department, the committee felt that the contractor would not have come in to do the work on his own — someone had to contact them and since the project was Bill’s responsibility then it was his responsibility to bring them in. In light of the reinstatement agreement it was Bill’s responsibility to get written prior approval to bring in the contractor to do the work.” The committee thus concluded that Dwiggins had violated the condition and that the termination should stand. The hospital administrator then reviewed the committee’s findings and recommendation, along with a letter from a lawyer for Dwiggins, and decided to uphold the termination.

In his amended complaint, Dwiggins characterized these proceedings as follows: “On or about September 26, 1985, following two unfounded reprimands at the direction of Defendant Paul Quinn, Plaintiff was terminated based upon untrue allegations of failure to comply with the unlawful restrictive conditions of his reinstatement. Another grievance hearing was requested and held with .inconclusive results as there was insufficient evidence to reach any reasonable result. Nevertheless, the termination of Plaintiff was upheld by Defendant Suburban Hospital.” Dwiggins complained that Quinn and the hospital “did not allow any decisive action by the Grievance Committee and wrongfully exercised authority over the grievance process to the serious detriment of Plaintiff” and that Quinn “maliciously and wantonly failed to give Plaintiff adequate warning or notice of cause for discharge or provide Plaintiff with an opportunity to substantially [sic] respond to any causes for discharge or to be given a hearing thereon____” Through such conduct, he said, the hospital “breached its contractual duty to the Plaintiff by denying to Plaintiff the rights arising from Defendant’s establishment of and Plain ¹⁰⁷ tiff’s reliance upon said Grievance Committee procedures in continuing his employment with the Defendant Hospital and by wrongfully discharging Plaintiff.” The case was presented to the jury on a straight breach of contract basis, the threshold issue being whether the reinstatement agreement modified the initial at-will nature of Dwiggins’s employment. The jury was instructed that, if it found that a contract was created that modified the at-will nature of Dwiggins’s employment and limited the hospital’s discretion in terminating his employment, it should consider then whether the hospital breached that contract by discharging him.

The jury obviously found that a contract had been created and breached. In this appeal, the hospital urges, first, that the evidence was insufficient to establish the existence of an enforceable contract, and second, that if there was such a contract, the period of contractual employment extended only through the probationary period (December 31, 1985), and thus damages should have been limited to that period. Mr. Dwiggins, as we observed, complains about the dismissal of his action against Mr. Quinn. Breach of Contract The hospital’s position is that Mr. Dwiggins was an at-will employee when he was hired, that that circumstance never changed, and that the reinstatement agreement simply set forth the conditions of his probation and was never intended to give him greater protection than he had before he was reinstated.

Expanding somewhat the theory set forth in his amended complaint, Dwiggins now maintains that his initial at-will status was changed not just by the July, 1985 reinstatement agreement but also by the various personnel policies adopted by the hospital. All of this proceeds from two underlying legal precepts. The first, of some duration and confirmed recently in Adler v. American Standard Corp., 291 Md. 31, 35 , 432 A.2d 464 (1981), is that “an employment contract of indefinite dura ¹⁰⁸ tion, that is, at will, can be legally terminated at the pleasure of either party at any time.” The second, of more recent origin, is that “employer policy directives regarding aspects of the employment relation become contractual obligations when, with knowledge of their existence, employees start or continue to work for the employer.” Dahl v. Brunswick Corp., 277 Md. 471, 476 , 356 A.2d 221 (1976). In Staggs v. Blue Cross of Maryland, 61 Md.App. 381 , 486 A.2d 798 (1985), we applied this second principle to provisions in an employer’s personnel handbook that, at least facially, appeared to limit the employer’s discretion to discharge employees at will.

At 392, 486 A.2d 798 , we held that: “[Provisions in such policy statements that limit the employer’s discretion to terminate an indefinite employment or that set forth a required procedure for termination of such employment may, if properly expressed and communicated to the employee, become contractual undertakings by the employer that are enforceable by the employee.” It is the application of this second principle that is at issue here. In particular, the threshold questions before us are these: (1) did the hospital, through policy directives or otherwise, contractually modify the at-will nature of Mr. Dwiggins’s employment by limiting in some way its discretion to discharge him at any time and for any otherwise permissible reason; (2) if so, what limitations did it place on itself; and (3) to the extent that there is a dispute as to whether the hospital exceeded those limitations and thus discharged Mr. Dwiggins in violation of its contractual undertaking, in what forum is that dispute to be decided? We shall address these questions seriatim. Contract Vel Non The parties seem to agree that, when Mr. Dwiggins was first employed in 1975, he was an at-will employee.

If there was a contractual modification of that status, it must come from one or both of two sets of documents: the personnel policy statements or directives promulgated by the hospital between 1981 and 1983, and the reinstatement ¹⁰⁹ agreement, coupled with the job performance conditions, that became effective in July, 1985. In the general policy statement on employee relations, the hospital stated that it was “assumpng] a direct and continuing obligation to protect the privileges, interests and benefits of its employees.” (Emphasis added.) To address its objectives, it “subscribe[d]” to the ensuing code, which included provisions for written work performance and job behavior standards as well as a grievance procedure for resolving disputes. Specific policy statements set forth, in greater detail, the grievance mechanism, the types of disciplinary actions that might be taken, and a policy on reinstatement that speaks in terms of “an offer and acceptance.” These policy statements were published and circulated to all of the hospital employees, including Mr. Dwiggins. Unlike the situation in Castiglione v. Johns Hopkins Hosp., 69 Md.App. 325 , 517 A.2d 786 (1986), cert. denied 309 Md. 325 , 523 A.2d 1013 (1987) and Fournier v. USF & G, 82 Md.App. 31 , 569 A.2d 1299 (1990), there is no disclaimer in any of these published written documents, or in any other document, indicating an intent on the hospital’s part that these undertakings not be regarded as contractual in nature.

The reinstatement agreement certainly was a contractual undertaking. It was a signed written document in which the hospital and Dwiggins agreed to a continuation of Dwiggins’s employment under certain specific conditions. 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. Nature of the Limitations Two kinds of limitations emerge from these documents.

One, which is not really disputed by the hospital, is the grievance procedure — the provision of a mechanism by which an employee could contest disciplinary actions, ¹¹⁰ including terminations. 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. The second kind of limitation is more substantive than procedural. In its general policy statement, the hospital agreed to establish written work performance and job behavior standards for its employees.

It particularized that undertaking with respect to Mr. Dwiggins in the reinstatement agreement, and, pursuant to that agreement, it did in fact promulgate written “performance conditions” which both Mr. Dwiggins and Mr. Marynowski signed. In agreeing to do that and then doing it in fact, 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. The Dispute Resolution Forum Until about 25 years ago, American courts had come to treat with veneration the common law principle that, absent some explicit contract or statute indicating otherwise, an employment that had no fixed term was at will and that either party could, with impunity, terminate it at any time and for just about any reason.

It appears, however, that this veneration may have been misplaced. Professor Clyde W. Summers, of the University of Pennsylvania Law School, has informed us that the rule did not come from the English common law, but was invented by American scholars. In his article, Individual Protection Against Unjust Dismissal: Time for a Statute, 62 Va.L.Rev. 481, 485 (1976), he wrote: “The American rule apparently was first announced a hundred years ago by a treatise writer who cited as authority