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ARKANSAS William Stuart Jackson Jane A. Kim ARKANSAS William Stuart Jackson Jane A. Kim Wright, Lindsey & Jennings LLP 200 West Capitol Avenue, Suite 2300 Little Rock, Arkansas 72201-3699 Tel: (501) 371-0808 Fax: (501) 376-9442 Web: www.wlj.com E-mail: [email protected] [email protected] I. AT-WILL EMPLOYMENT A. Statute Arkansas has no statute that determines the status of an employee. B. Case Law An employer or an employee may terminate an employment relationship at- will, except where there is an agreement that the employment is for a specified time, in which case termination may only be for cause. Additionally, a termination may only be for cause where an employer's employment manual contains an express and definite provision stating that the employee will only be dismissed for cause and that provision is relied on by the employee. Crain Indus., Inc. v. Cass, 810 S.W.2d 910, 305 Ark. 566 (1991). II. EXCEPTIONS TO AT-WILL EMPLOYMENT A. Implied Contracts 1. Employee Handbooks/Personnel Materials Where an employment manual contains provisions stating that employment is at-will and that the employer may terminate the employment “at any time for any reason,” other provisions of the manual setting forth disciplinary procedures and written explanations for termination do not modify at-will employment and the plaintiff had no property interest giving rise to due process protections. Thompson v. Adams, 268 F.3d 609 (8th Cir. 2001). A policy and procedures manual distributed to employees in which the employer states that discipline shall be for cause, but also explicitly states that termination may be without cause, does not modify an employment at-will relationship under the employee handbook/policy manual exception to the at-will doctrine. Therefore, the plaintiff had no property interest protected by due process. Bennett v. Watters, 260 F.3d 925 (8th Cir. 2001). A grievance process adopted by an employer is not the same as a for-cause provision in an employment manual and does not give rise to an exception to at- will employment. Faulkner v. Ark. Children’s Hosp., 69 S.W.3d 393, 347 Ark. 941 (2002). A list of conduct contained in an employment manual that would lead to automatic termination did not constitute an implied promise by the employer not to dismiss the employee for other unlisted conduct. Nothing in the manual indicated that the list of terminable conduct was exhaustive. Mertyris v. P.A.M. Transp., Inc., 832 S.W.2d 823, 310 Ark. 132 (1992). In Crain Indus., the plaintiff employees brought a wrongful discharge action against their employer, Crain Industries, claiming the following provision in the Crain Industries handbook as the basis for their action: In the event it should become necessary to reduce the number of employees in the work force, employees will be laid off on a seniority basis by department. The last employee hired would be the first to be laid off. This policy will be adhered to with one possible exception; that is, under circumstances where the 2 efficiency of a department would be impaired by the loss of some particular employee's skill. 810 S.W.2d at 911. The question presented was whether an exception (for a contract arising from a promise made in a handbook) to the employment at-will doctrine applied. The court held that the lower court did not err in instructing the jury to find in favor of the employees if the jury found that the express provisions in the handbook constituted an express agreement. When an employer makes definite statements about what its conduct will be, an employee has a contractual right to expect the employer to perform as promised. Id. at 914-15. In Gladden v. Ark. Children's Hosp., 728 S.W.2d 501, 292 Ark. 130 (1987), a consolidated appeal involved two employees, each of whom had been terminated by their respective employers. Samples, one of the employees, had been employed for four years by a hospital that issued her a hospital manual containing a variety of personnel policies. The manual contained a list of 13 grounds for termination, and indicated that before an employee could be terminated for "absenteeism," two written warnings and two suspensions without pay were required. Samples was terminated for absenteeism; she protested the termination. Following her protests, the hospital gave her the choice to quit, be fired, or return to work on 90 days’ probation. Because Samples refused to return on probation, the hospital terminated her. Accordingly, she brought a suit for breach of contract under the employment manual. A directed verdict was granted in favor of the hospital at the close of Samples' case-in-chief. Gladden, the second employee, was terminated from another hospital. She alleged that in discharging her, the hospital violated the terms of its personnel regulations, which constituted a contract between the parties. Gladden's suit was dismissed on summary judgment. Although the Supreme Court of Arkansas affirmed both dismissals, it held that: [A] modification of the at-will rule is appropriate in two respects: where an employee relies upon a personnel manual that contains an express provision against termination except for cause he may not be arbitrarily discharged in violation of such a provision. Moreover, we reject as outmoded and untenable the premise . that the at-will rule applies even where the employment agreement contains a provision that the employee will not be discharged except for cause, unless it is for a definite term. With those two modifications we reaffirm the at-will doctrine. Id. at 505. The Arkansas Supreme Court stated that because neither of the manuals involved in the terminations contained "an express provision that discharge will not be without cause," the cases were properly dismissed on directed verdict and summary judgment. Id. In Cisco and St. Francis County v. King, Pugh and Greenwood, 205 S.W.3d 808, 90 Ark. App. 307 (2005), the Arkansas Court of Appeals found that an employment handbook with the following language created an exception to the employment-at-will doctrine: 3 Except as otherwise provided in these policies and procedures, the tenure of an employee with permanent status shall continue during good behavior and satisfactory performance of his duties except the Road Supervisor and Chief Deputies who are At Will Employees. Id. at 810. In making its determination, the court relied on Crain Indus., 810 S.W.2d 910. 2. Provisions Regarding Fair Treatment Crain Indus., supra, involved employees who had been discharged as the result of a reduction in force. The plaintiffs contended that their discharges were in violation of employee handbook language, which basically provided that the last employee hired would be the first let go in the event of a reduction in force. The Arkansas Supreme Court affirmed the jury's determination that this language was sufficient to form the basis of a contract and that the employer could only lay off employees in accordance with the provisions of the handbook -- i.e., by departmental seniority. In reaching its conclusion in Crain Indus., the Arkansas Supreme Court relied on Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983), a Minnesota Supreme Court case where a bank employee was fired summarily, allegedly for cause, and the bank president did not follow the discharge or disciplinary procedures in the handbook. In Pine River, the Minnesota court held that job security provisions in an employee handbook were enforceable. The Arkansas Supreme Court expressly relied on this holding in making its pronouncement that when an employer makes definite statements about what its conduct will be, an employee has a contractual right to expect the employer to perform as promised. Crain Indus., 810 S.W.2d at 915. 3. Disclaimers In St. Edward Mercy Med. Ctr. v. Ellison, 946 S.W.2d 726, 58 Ark. App. 100 (1997), an employee handbook contained an express provision that "employees are employed at will and for an indefinite term" and that the "employee handbook does not constitute a contract and does not confer any contractual rights on the employee." The Arkansas Court of Appeals held that the employee handbook's progressive disciplinary policy could not be construed as a guarantee that an employee could only be terminated in accordance with the policy, where the same handbook clearly and unequivocally stated that it was not a contract and did not confer contractual rights upon employees. Id. at 727. 4. Implied Covenants of Good Faith and Fair Dealing Under Arkansas law, every employment contract, even one that is terminable at will, contains "an implied covenant of good faith and fair dealing, which under limited circumstances may make discharge actionable." This covenant prohibits discharge for a reason that contravenes public policy. Smith v. Am. Greetings Corp., 804 S.W.2d 683, 684, 304 Ark. 596 (1991). 4 B. Public Policy Exceptions 1. General An at-will employee has a cause of action for wrongful discharge if he or she is fired in violation of a well-established public policy of the state. This is a limited exception to the employment at-will doctrine. It is not meant to protect merely private or proprietary interests. M.B.M. Co., Inc. v. Counce, 596 S.W.2d 681, 268 Ark. 269 (1980). It is generally recognized that the public policy of a state is found in its constitution and statutes. Sterling Drug, Inc. v. Oxford, 743 S.W.2d 380, 294 Ark. 239 (1988). An employer’s failure to adhere to its own internal policies or the labor laws of foreign countries is not a violation of Arkansas’ public policy. Lynn v. Wal-Mart Stores, Inc., 280 S.W.3d 574, 102 Ark.
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