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Ware v. Prudential Insurance Co.

Decided: September 21, 1987.

CHARLES WARE, PLAINTIFF-RESPONDENT,
v.
PRUDENTIAL INSURANCE COMPANY, DEFENDANT-APPELLANT



On appeal from Superior Court of New Jersey, Law Division, Camden County.

O'Brien, Skillman and Landau. The opinion of the court was delivered by Skillman, J.A.D.

Skillman

[220 NJSuper Page 136] Plaintiff was employed by defendant as the district manager of its Haddon Heights office. On February 2, 1983, he was discharged.

Plaintiff filed suit claiming that his discharge constituted (1) a breach of his employment contract and (2) a violation of public policy. The case was bifurcated and tried first on liability only.

The jury returned a verdict in favor of defendant on plaintiff's claim that his discharge violated public policy. However, the jury found that defendant had breached its employment contract with plaintiff by failing to follow the procedures applicable to the termination of managers. The case was subsequently tried on damages before another jury which returned a verdict in favor of plaintiff in the amount of $1,250,000.

On appeal defendant argues that the trial court erred in the liability trial in not granting judgment in its favor either at the close of plaintiff's case or after the presentation of all evidence, in granting partial summary judgment in favor of plaintiff, in failing to grant defendant's motion for a new trial and in failing to properly instruct the jury as to the applicable law. With respect to the damages trial, defendant argues that the trial court erred in not granting a mistrial after the opening statement of plaintiff's counsel, in not permitting defendant to show that plaintiff would have been terminated even if a probationary period had been utilized and in refusing to permit defendant to argue to the jury that plaintiff failed to mitigate damages. Defendant also argues that the jury's verdict on damages was against the weight of the evidence and that it was procured through the use of fraud, misrepresentation and misconduct on the part of plaintiff. We conclude that the trial court erred in not granting a judgment in defendant's favor at the close of plaintiff's case. Accordingly, we reverse and remand for the entry of judgment in favor of defendant. In view of this disposition, we find it unnecessary to reach the other points raised by defendant.

Defendant's insurance sales force is divided into geographic areas, which are called districts. Within a district, the sales force consists of agents, sales managers and a district manager. Agents call on and service insureds. Sales managers have

some supervisory responsibility with respect to agents and also deal directly with insureds. The district manager is at the next and highest level in the district hierarchy. The district manager has general supervisory responsibility over all employees in the district. As district manager for the Haddon Heights district, plaintiff supervised 5 sales managers, 48 agents and 9 clerical employees.

When plaintiff was promoted to the position of district manager, he signed a written employment agreement. Section 5 of this agreement states that "[t]he Manager's appointment and this Agreement may be terminated by either party at any time" and section 3(e) states that "[t]he Manager agrees that the company . . . [s]hall not be bound by any alteration of the terms and conditions of this Agreement unless such alteration is made in writing by one of its officers." It is further noted that section 6 states that "[t]his Agreement supersedes any previous agreement the Manager may have had with the Company."

Plaintiff concedes that on its face this agreement established an at will employment relationship under which defendant was free to discharge him without cause and without following any prescribed procedures. However, plaintiff contends that this written employment agreement was modified by various contemporaneous and subsequent oral and written statements by defendant's representatives, pursuant to which defendant made a commitment to plaintiff and other employees not to discharge or to take other negative employment action except in accordance with prescribed procedures.

In support of his claim, plaintiff relies primarily upon Woolley v. Hoffmann-La Roche, Inc., 99 N.J. 284 (1985), mod., 101 N.J. 10 (1985), which was decided several months after the liability trial in this case. In Woolley, the Court held that ". . . absent a clear and prominent disclaimer, an implied promise contained in an employment manual that an employee will be fired only for cause may be enforceable against an employer

even when the employment is for an indefinite term and would otherwise be terminable at will." 99 N.J. at 285-286.

Plaintiff's claim that he was entitled to job security in his position with defendant rests upon a document entitled, "Guide for Vice Presidents, Regional Marketing" (hereinafter referred to as "the Guide"). This document, a 1981 revision of an earlier similar document, was sent to each Vice President for Regional Marketing, which was the next higher position in defendant's management hierarchy above the position of district manager formerly held by plaintiff. A memorandum by Martin Leeds, Vice President for District Agencies, forwarding the Guide to the Vice Presidents for Regional Marketing, stated that "[t]he new Guide has been up-dated to reflect current District agencies policy and will serve as a valuable reference for you and your regional staff." The Guide was not sent to plaintiff or to any other person at his level in the company.

The Guide contains three parts relied upon by plaintiff: (1) "Position Description and Responsibility, Vice President, Regional Marketing, District Agencies Department," (2) "Setting Objectives and Performance Evaluation" and (3) "Procedure to be Followed for Managerial Changes Involving Demotion, Early Retirement or Transfer."*fn1 The first section contains a general description of the management responsibilities of a Vice President, Regional Marketing. The second section requires the Vice President, Regional Marketing, to establish standards of performance for each district manager and to evaluate the performance of each manager in relation to the job standards established during the planning process. Where performance does not meet the standards, a district manager can be placed on probation. If probation is required due to the failure of a district to satisfy performance standards, the Vice President is advised to follow the steps outlined in the third section of the Guide relied upon by plaintiff. This section states that "[o]ur

efforts should be directed toward helping each sales manager do a better management job" but where a certain manager "is not measuring up to expectations" the Vice President, Regional Marketing, may have to consider placing the manager on probation. The Vice President, Regional Marketing, is required to submit to his superior, who is the Vice President, District Agencies, a plan which includes objectives for the contribution of the district to regional goals, progress in achieving these goals, and recommendations as to improvement during the probationary period. If the desired improvement in performance is not forthcoming, the manager may be demoted, transferred or placed on early retirement.

Plaintiff testified that he was assured by higher level management employees that the signing of an employment agreement was a mere formality and that his basic relationship to defendant was governed by its personnel manuals. Such assurances were allegedly given to plaintiff when he signed the employment agreements for the positions of sales manager and district manager. Specifically, plaintiff was allegedly told by his immediate superior, Edward G. Kissler, that any problem in his performance would be discussed with him orally and that a proposed solution to the problem would be proposed, that he could be placed on formal probation for six months if he was unable to solve the problem based on the initial discussions, and that defendant would not take any adverse personnel action unless the problem could not be solved within this formal probationary period.

On the other hand, Vincent Trocchio, the Vice President, Regional Marketing, to whom plaintiff was responsible, testified that the Guide was not intended to be a personnel manual for district managers. Rather, it was intended to be a management guide for the four persons occupying the position of Vice President, Regional Marketing, in defendant's eastern region. Hence, it was distributed on a very limited basis. In addition, Trocchio testified that the procedures set forth in the Guide for counselling district managers and placing them on probation

apply only to failures to meet productivity standards and other deficiencies in performance, and not to insubordination or other violations of company rules which would provide grounds for termination.

Trocchio further testified that plaintiff was terminated because he urged the salesmen in his district to sell replacement policies to insureds, which was contrary to company policy.*fn2 Trocchio first learned of this practice in 1981 and warned plaintiff that he was "going the route of" another manager who had been terminated. Subsequently, the Chairman of the Board of defendant received a letter enclosing a tape recording of a sales meeting conducted by plaintiff in which he allegedly strongly advocated the selling of replacement policies for existing policies. This tape was played for plaintiff in December 1981 by Trocchio, who told plaintiff that the sales practices he was urging were improper. Trocchio also sent plaintiff a letter on December 28, 1981, which stated among other things:

[I]t is apparent this replacement activity is going on with your knowledge and consent. . . . We will not condone replacement activity of any type, threats of any kind, or the use of abusive language on the part of management. I feel confident that you will take the steps to correct this condition, and would appreciate your writing to advise me that it will not be necessary to review these items with you again.

Another sales meeting conducted by plaintiff was taped on September 17, 1982 and again sent anonymously to the Chairman of the Board of defendant. The management of defendant felt that this tape also showed that plaintiff was advocating improper sales practices to the agents under his supervision. Trocchio played this second tape in plaintiff's presence on January 20, 1983 and discussed its contents with him. Based on this discussion and an internal investigative report, Trocchio determined that plaintiff should be terminated. Trocchio testified that plaintiff was terminated

. . . based on the fact that he was advocating replacements; that he would not comply whenever I told him to change his methods of operation; he was not promoting the welfare of the company as a manager should be; he was always out of step with the rest of the company. Any time he was told something he disagreed. His way was the only way.

Consequently, after securing the approval of the Vice President for District Agencies, Trocchio notified plaintiff that he was being terminated immediately.*fn3 Trocchio also testified that the grounds for plaintiff's termination -- the failure to follow the company's regulations -- were not encompassed by the Guide and hence the procedures set forth therein, including a formal six month probationary period, were not followed.

Based on this evidence the trial court denied defendant's motion to dismiss at the close of plaintiff's case. In addition, the trial court granted a partial directed verdict in favor of plaintiff at the close of defendant's case, concluding that as a matter of law plaintiff's employment contract was modified by the Guide. As previously noted, the jury which heard the trial on liability subsequently determined that defendant had breached its contract with plaintiff.

The essential issue presented by this appeal is whether the principles of Woolley v. Hoffmann-La Roche, supra, should be extended to a situation where a management employee has an individual written employment contract which expressly states that his employment is at will and where the documents distributed to him by management to guide his supervision of lower level employees are silent with respect to his own employment rights.

The basic principle of Woolley is that ". . . when an employer of a substantial number of employees circulates a manual that, when fairly read, provides that certain benefits are an incident of the employment (including, especially, job security provisions), the judiciary . . . should construe them in accordance

with the reasonable expectations of the employees." 99 N.J. at 297-298. In determining the "reasonable expectations" of Woolley, the Court emphasized that, like most of his co-employees, plaintiff had been employed "without any individual employment contract." 99 N.J. at 299. Therefore, the Court concluded that when he was "given this one document that purports to set forth the terms and conditions of his employment [the employment manual]," it was "almost inevitable" that he would "regard it as a binding commitment, legally enforceable, concerning the terms and conditions of his employment." Ibid.

In contrast, plaintiff had an individual employment contract, which stated that "[t]he Manager's appointment and this Agreement may be terminated by either party at any time," and further provided that "[t]he Manager agrees that the Company . . . [s]hall not be bound by any alteration of the terms and conditions of this Agreement unless such alteration is made in writing by one of its officers." Furthermore, whereas the employer in Woolley was not unionized, the insurance agents employed by defendant were unionized and had entered into a collective bargaining agreement which governed their complete employment relationship with defendant, including the procedures required to be followed before their employment could be terminated.*fn4 Therefore, it may be concluded that the "reasonable expectation" of defendant's insurance agents was that their employment relations were not governed by any personnel manual but rather, in the case of non-supervisory employees, by collective bargaining agreements, and in the case of supervisory employees, by individual employment contracts. Cf. McQuitty v. General Dynamics Corp., 204 N.J. Super. 514 (App.Div.1985).

The Court in Woolley also emphasized that a company's general personnel practices embodied in a policy manual do not automatically become legally binding terms and conditions of employment. To avoid this consequence, "[a]ll that need be done is the inclusion in a very prominent position of an appropriate statement that there is no promise of any kind by the employer contained in the manual; . . . and that the employer continues to have the absolute power to fire anyone with or without good cause." 99 N.J. at 309. Since an employer may avoid any legally binding effect being given to personnel policies set forth in a policy manual by a unilateral statement in the manual, it follows a fortiori that this effect may be avoided by the execution of a written employment contract by which the employee expressly agrees to an at will employment status. See Batchelor v. Sears, Roebuck & Co., 574 F. Supp. 1480 (E.D. Mich.1983); Novosel v. Sears, Roebuck & Co., 495 F. Supp. 344 (E.D. Mich.1980). Here, plaintiff expressly agreed that his employment agreement could be "terminated by either party at any time." Furthermore, plaintiff may not avoid the explicit terms of his written employment contract by asserting that oral assurances of job security, inconsistent with the contract, were given to him when it was executed. See Borbely v. Nationwide Mutual Ins. Co., 547 F. Supp. 959, 970-971 (D.N.J.1981).*fn5

The limited distribution and obvious internal management objectives of the Guide is a further reason for concluding that plaintiff and other employees of defendant could not have had a "reasonable expectation" that the document was intended to confer "employee benefits." The document was addressed to the Vice Presidents, Regional Marketing, for the Eastern Division. Only four persons occupied this position. Copies also were sent to certain other high level executives and/or their

administrative assistants. No copy was sent to plaintiff or any other employee at his level of management. Nor does the record indicate that there was any organized program to disseminate the contents of the document to employees other than those to whom it was sent.

The Guide was transmitted by a memorandum from the Vice President, District Agencies. The transmittal memorandum contains a description of the contents of the Guide which clearly indicates that its subject is the management responsibilities of Vice Presidents, Regional Marketing, and not the benefits of the employees who serve under them:

For your information, the Guide includes two sections pertaining particularly to EHO.

Regional Home Office Organization -- includes the following EHO organizational charts:

. . Eastern Home Office

. . District Agencies Regional Sales Offices

. . Agencies Administration and Field Services Division

. . Underwriting and Issue Division

. . Ordinary Policy Service -- NY

. . Ordinary Policy Service -- NJ

. . Debit Policy Service Division

. . Management Information Division

Objectives -- outlines the objective setting process in sales, expense and affirmative action.

There is also a new section on Losses and Surpluses which includes both general guidelines and specific instructions for dealing with problems such as: Agents Losses of Company funds, Burglaries, Defalcations of Company funds, and Surpluses, etc.

Furthermore, the sections of the Guide upon which plaintiff relies deal solely with the development of performance standards, evaluation of performance, and the procedures to be followed when a district's performance has been deficient. These procedures include counselling the manager and a period of probation. If the district's performance does not improve, the Guide further provides for the "demotion, early retirement or transfer" of the manager. Thus, the focus of this section is upon the performance of the district, not the employment rights

of the manager.*fn6 Indeed, the Guide does not deal at all with causes other than poor performance for removing a manager from his position, such as violations of the law, personal derelictions or failures to comply with company regulations. This is an understandable limitation upon the scope of the authority of a Vice President for Regional Marketing only if the sole intent of the Guide is to enable him to improve performance within his region by removing persons who have shown a lack of management capabilities from management positions.

The fact that defendant did not distribute the Guide to plaintiff but rather gave him a different guide which is silent with respect to the employment rights of managers also indicates that the intent of the Guide -- as well as other policy guides issued by defendant -- is solely to delineate management responsibilities. Consistent with this intention, the document distributed to plaintiff contained a detailed description of his management responsibilities, including the procedures he should follow if a sales manager or agent under his supervision failed to perform properly. If the document was intended to serve as a handbook guaranteeing employee benefits, it would be reasonable to expect that it also would specifically set forth those benefits. See Tobias v. Montgomery Ward & Co., 362 N.W. 2d 380 (Minn.Ct.App.1985). For example, in Woolley, Hoffmann-La Roche distributed a single employment manual, entitled "Hoffmann-La Roche, Inc. Personnel Policy Manual," which was described as covering "all employees of Hoffmann-La

Roche," 99 N.J. at 287 n. 2, and included a specific section on "[t]ermination" that stated ". . . the company's philosophy with respect to termination of employees and provides uniform guidelines for the administration of this policy." 99 N.J. at 310. In contrast, the Guide distributed to plaintiff is silent with respect to his employment rights. Therefore, we conclude that the guides distributed by defendant were intended to delineate management responsibilities at each level within the corporate hierarchy and not to confer benefits upon employees at levels below the persons to whom the guides were distributed.

Accordingly, the judgment on appeal is reversed and the matter is remanded to the trial court for the entry of ...


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