Handbook Disclaimers Permit Dismissal of Pharmacist

Issue of the Case:

In this month's case, an Arizonacourt was asked whether a pharmacybreached an implied contract when itfired a pharmacist, allegedly in contradictionof its employee handbook.

Facts of the Case:

The plaintiff pharmacist was employedby the defendant pharmacy asthe pharmacist-in-charge for about 3years. As part of the hiring process, theplaintiff signed an employment applicationthat stated it was "not a contractfor employment?and was terminableat-will by either the employeror the pharmacist." The applicationwent on to state that the plaintiff'semployment could be terminatedwith or without cause and with orwithout notice at the option of eitherthe company or him.

The pharmacy also gave the plaintiffa copy of its employee handbook thatcontained language indicating thatemployees could be terminated at thecompany's discretion and that theemployee was free to resign at anytime. The handbook also stated noguarantees of any certain disciplinaryprocedure. Other company documents,including the plaintiff's bonusplan, contained similar messages.

Throughout the plaintiff's employment,the pharmacy used "performancecoaching" techniques to improve,correct, and modify employeebehavior. The coaching policy included4 steps: (1) coach and counsel,(2) verbal reminder, (3) writtenreminder, and (4) decision-makingday. A decision-making day is when anemployee takes the next scheduledday off to determine if he or she wantsto continue to work for the company.

In the event that precipitated thislawsuit, the plaintiff got into a loudargument with the assistant storemanager in front of customers overthe amount of a coupon to give a customerwho received a misfilled prescription.The next day, the company'sdistrict manager met with the plaintiffto present him with a written performanceimprovement plan and to"coach" him concerning the incident.The plaintiff refused to sign the documentbecause it was prepared inadvance of the meeting and he wastoo upset. The plaintiff was fired thatafternoon.

Alleging that the company failed tofollow the terms of the employee handbook,the plaintiff sued the pharmacyfor breach of implied contract of employment,wrongful termination, andbreach of good faith and fair dealing.

The Court's Ruling:

A jury returned a verdict in favor ofthe plaintiff and awarded him$257,958 in damages for the breach ofcontract claim. The verdict was overturnedon appeal. The appellate courtconcluded that, as a matter of law, theplaintiff was an at-will employee andcould be terminated at any time.

The Court's Reasoning:

Generally, an employment contractof indefinite duration is terminable atwill. Parties in an employment relationship,however, are free to contractuallydefine the parameters of therelationship based on the totality oftheir statements in job applications,personnel handbooks, memos, andother documents.

Not all employer policy statements,however, create contractual promises.An implied contract is formed when areasonable person could conclude thatboth parties intended that the employer's(or the employee's) right toterminate at-will employment hadbeen limited. Earlier cases ruled thatdisclaimers in employee handbooks,which clearly and conspicuously tellemployees that the manual is not partof the employment contract and thattheir jobs are terminable at will, instillno reasonable expectations of jobsecurity and do not give employeesany reason to rely on representationsin the manual.

The plaintiff contended that a reasonableperson could interpret theperformance coaching process as apromise that an employee would notbe terminated without a decisionmakingday. The defendant pharmacycountered that the repeated disclaimersin the employment applicationand the handbook were adequateto prevent any reasonable expectationthat the plaintiff's employment wasanything other than at will and thathe could be terminated without cause.

The court found that the disclaimersin this case were clear and comprehensiveto the point of redundancy. Itstated that if the multiple disclaimersin these documents did not meet theclear and conspicuous requirement ofearlier cases, it could not imagine anythat would. In the court's mind, it wasinconceivable that the pharmacyintended, or the plaintiff could havereasonably interpreted, the statementsin the documents as an offer to limitits right to terminate at will employment.A contract to terminate only forcause must be based on more than anemployee's subjective expectation.

Larry M. Simonsmeier isEmeritus Professor ofPharmacy Law atWashington State UniversityCollege of Pharmacy.