                   IN THE COURT OF APPEALS OF TENNESSEE
                        WESTERN SECTION AT JACKSON
                                                                      FILED
MARLES FLOWERS,                     )                                 June 17, 1997
                                    )
             Plaintiff/Appellee,    ) Shelby Circuit No. 51934 T.D. Cecil Crowson, Jr.
                                    )                               Appellate C ourt Clerk
VS.                                 ) Appeal No. 02A01-9610-CV-00240
                                    )
MEMPHIS HOUSING AUTHORITY,          )
                                    )
             Defendant/Appellant.   )


            APPEAL FROM THE CIRCUIT COURT OF SHELBY COUNTY
                        AT MEMPHIS, TENNESSEE
                THE HONORABLE WYETH CHANDLER, JUDGE




GREGORY L. PERRY
Memphis, Tennessee
Attorney for Appellant


ALAN BRYANT CHAMBERS
JEFF A. CROW, JR.
CHAMBERS, CROW, DURHAM & HOLTON
Memphis, Tennessee
Attorneys for Appellee




REVERSED AND REMANDED




                                                        ALAN E. HIGHERS, J.



CONCUR:

DAVID R. FARMER, J.

HOLLY KIRBY LILLARD, J.
          In this action for breach of employment contract, Defendant Memphis Housing

Authority (MHA) appeals two orders of the trial court entered in favor of MHA’s former

employee, Plaintiff/Appellee Marles Flowers. In its first order, the trial court granted

Flowers’ motion for summary judgment based on the court’s conclusion that MHA’s Manual

of Operations constituted part of the employment contract between the parties and, further,

that MHA breached this contract by terminating Flowers without just cause. After amending

the pleadings to conform to the proof in the record, the trial court’s initial order also granted

summary judgment to Flowers on his claim that, in terminating Flowers, MHA deprived him

of a protectible property interest in violation of his constitutional right to due process. The

trial court later entered a final order granting Flowers the remedies of back pay for a period

of three years, as well as reinstatement to his former position with MHA. For the reasons

hereinafter stated, we reverse the trial court’s orders and remand for further proceedings.



          For purposes of Flowers’ motion for summary judgment, the parties stipulated to the

following facts. MHA hired Flowers for a management position in September 1990. MHA’s

operation is partially governed by federal law and by federal rules and regulations

implemented by the United States Department of Housing and Urban Development (HUD).

Between November 1991 and February 1992, HUD’s district area office in Nashville

conducted a Comprehensive Coordinated Management Review of MHA. As a result of this

review, HUD issued a report in March 1992 which concluded that Flowers had been

improperly hired. Based on this finding, HUD instructed MHA to terminate Flowers’

employment. As instructed, MHA terminated Flowers in April 1992.



          During Flowers’ employment with MHA, MHA had in effect an employee handbook

known as its “Manual of Operations.” As pertinent to this appeal, the Manual’s forward

states:

                This is the official Manual of Operations for the Memphis
                Housing Authority. Its purpose is to arrange for ready
                reference a review of the policies, relationships, and
                procedures of [MHA]. It is intended primarily as a guide for
                employees in the discharge of their duties.

Article IV of the Manual, entitled AMENDMENTS, provides that:



                                               2
              The Manual of Operations and the By-Laws of [MHA] may be
              amended by any special or regular meeting of the Board of
              Commissioners by a simple majority of said Commissioners,
              there being a quorum present.

Section 208 of the Manual, entitled EMPLOYMENT AND PERSONNEL REGULATIONS,

provides that:

              All employment and personnel procedures shall be regulated
              by the provisions hereinafter provided in this section and
              elsewhere in this Manual.

In this section, the Manual lists four reasons for termination of services: resignation,

dismissal for just cause, retirement, and reduction in force. The Manual also lists causes

for which an employee may be suspended, demoted, or terminated, and it divides the

causes into two categories, major infractions and other infractions. After listing examples

of infractions, the Manual states:

              None of the aforementioned Major or Other Infractions will be
              deemed to prevent the dismissal, demotion, suspension, or
              disciplinary action of an employee for just cause. JUST
              CAUSE shall exist when [MHA] has a reasonable basis for the
              action taken even though such cause is not contained in those
              mentioned above.

Section 304 of the Manual, entitled THE PERSONNEL GRIEVANCE PROCEDURE, sets

forth a procedure whereby employees may file “grievances concerned with the

interpretation and/or application of [the Manual], its directives, procedures, working

conditions and discipline.” Finally, Section 401 of the Manual, entitled PURPOSE, provides

that:

              This Manual of Operations contemplates that every [function]
              of [MHA] shall be carried out by its members and employees
              strictly in accordance with policies and procedures adopted by
              [MHA], and incorporated in the Manual.



        After being terminated by MHA, Flowers did not pursue the personnel grievance

procedure outlined in MHA’s Manual of Operations; however, the parties stipulated that

Flowers would have been terminated even if he had completed the grievance process and

that it would have been futile for him to do so.



        Flowers subsequently filed a complaint against MHA for breach of employment

contract. In his complaint, Flowers alleged that MHA’s Manual of Operations constituted


                                             3
an employment contract between the parties and that MHA had breached this employment

contract by terminating Flowers without just cause. Flowers later sought to amend his

complaint to state a cause of action for substantive and procedural due process violations.1

Both parties filed motions for summary judgment. The trial court granted Flowers’ motion

as to both claims, and this appeal followed.



       On appeal, MHA contends that the trial court erred in (1) granting Flowers’ motion

to amend his complaint; (2) granting Flowers’ motion for summary judgment; (3) awarding

Flowers back pay and reinstatement; and (4) denying MHA’s motion for leave to renew its

motion for summary judgment. We conclude that the outcome of this appeal is controlled

by this court’s recent decision in Williams v. Memphis Housing Authority, No.

02A01-9608-CV-00190, slip op. at 2-6 (Tenn. App. June 2, 1997), and, thus, we reverse

the trial court’s judgment based on the reasoning set forth in that case.



       In Williams v. MHA, two MHA employees were terminated under substantially similar

circumstances under which Flowers was terminated. As in this appeal, in Williams v. MHA,

the dispositive question was whether MHA’s Manual of Operations constituted an

employment agreement which contractually limited MHA’s right to terminate the

employees. Answering this question in the negative, we reasoned:

                          Because Tennessee adheres to the “employee-at-will”
                  rule, a presumption arises in this state that an employee is an
                  employee at will. Davis v. Connecticut Gen. Life Ins. Co., 743
                  F. Supp. 1273, 1280 (M.D. Tenn. 1990). Under this well-
                  established rule, a contract for employment for an indefinite
                  term is considered a contract at will which can be terminated
                  by an employer (or an employee) at any time without cause.
                  Bringle v. Methodist Hosp., 701 S.W.2d 622, 625 (Tenn. App.
                  1985); accord Graves v. Anchor Wire Corp., 692 S.W.2d 420,
                  422 (Tenn. App. 1985); Whittaker v.Care-More, Inc., 621
                  S.W.2d 395, 396 (Tenn. App. 1981).

                         In recent years, the courts of this state have recognized,
                  at least in theory, that an exception to the at-will rule may arise
                  where an employer promulgates an employee handbook which
                  confers certain benefits on employees or which limits the
                  employer’s right to terminate employees. In order to be
                  considered part of the employment contract, however, the
                  handbook must contain specific language showing the
                  employer’s intent to be bound by the handbook’s provisions.

       1
           See U.S . Const. am end s. V, X IV; 42 U.S .C. § 1 983 (198 8); see also Tenn. Const. art. I, § 8.

                                                         4
Smith v. Morris, 778 S.W.2d 857, 858 (Tenn. App. 1988).
Unless the employee handbook contains specific guarantees
or binding commitments, the handbook will not constitute a
contract. Whittaker v. Care-More, 621 S.W.2d at 397. As
stated by one court, “the language used must be phrased in
binding terms, interpreted in the context of the entire
handbook, and read in conjunction with any other relevant
material, such as an employment application.” Claiborne v.
Frito-Lay, Inc., 718 F. Supp. 1319, 1321 (E.D. Tenn. 1989).
Our research has revealed few instances in which appellate
courts of this state have concluded that the language of an
employee handbook was binding on an employer. See
Williams v. Maremont Corp., 776 S.W.2d 78 (Tenn. App. 1988)
(holding that terms of employee handbook were binding on
employer where handbook provided that employees would be
recalled in order of seniority); Hamby v. Genesco, Inc., 627
S.W.2d 373 (Tenn. App. 1981) (holding that employee
handbook’s “rollback” provision was binding on employer
where handbook provided that, for so long as employment
relationship continued, handbook contained guaranteed
policies, practices, and procedures of employer); see also
Hooks v. Gibson, 842 S.W.2d 625 (Tenn. App. 1992)
(concluding that employee handbook became part of
employment contract where handbook was promulgated
pursuant to agreement between employer and state and
employees were third-party beneficiaries of such agreement).

....

       After carefully reviewing the specific language contained
in MHA’s Manual of Operations, we conclude that the Manual’s
provisions are insufficient to overcome the presumption that
[the Employees] were at-will employees. The Employees
contend that the Manual contains sufficient guarantees to be
binding upon MHA because the Manual specifically
contemplates that all MHA functions “shall be carried out by its
members and employees strictly in accordance with” the
Manual’s policies and procedures and, further, because the
Manual states that “[a]ll employment and personnel
procedures shall be regulated by” the Manual’s provisions. If
this language evidences an intent on the part of MHA to be
bound by the Manual’s provisions, however, such intent is
contradicted by the existence of a provision in the Manual
giving MHA’s Board of Commissioners the authority to amend
the Manual at any special or regular Board meeting. “Any
language that preserves a unilateral right on the part of the
employer to alter or modify the contents of [a] handbook”
generally precludes the handbook from being considered part
of the employment contract. Claiborne v. Frito-Lay, Inc., 718
F. Supp. 1319, 1321 (E.D. Tenn. 1989); see, e.g., Smith v.
Morris, 778 S.W.2d 857, 858 (Tenn. App. 1988) (handbook’s
language clearly showed “that modifications were anticipated”);
Bringle v. Methodist Hosp., 701 S.W.2d 622, 624 (Tenn. App.
1985) (handbook reserved to employer “right to change and
abolish policies, procedures, rules and regulations”);
Gregory v. Hunt, 24 F.3d 781, 786 (6th Cir. 1994) (handbook
provided that policies were “subject to change by
management, unilaterally and without notice”); Davis v.
Connecticut Gen. Life Ins. Co., 743 F. Supp. 1273, 1279 (M.D.
Tenn. 1990) (handbook reserved to employer “right to change


                               5
                  any or all such policies, practices and procedures in whole or
                  in part at any time, with or without notice”). Such language
                  instead indicates “that the handbook simply constitute[s] a set
                  of guidelines or a source of information for an employee.”
                  Claiborne v. Frito-Lay, 718 F. Supp. at 1321. In the case of
                  MHA’s Manual of Operations, this conclusion is further
                  supported by language indicating that the Manual’s purpose “is
                  intended primarily as a guide for employees in the discharge
                  of their duties.”

                          Even if the Manual of Operations’ language
                  demonstrates an intent on the part of MHA to be bound by the
                  Manual, we find nothing in the Manual’s provisions which
                  would alter the Employees’ status as at-will employees. First,
                  we note that the Manual did not entitle the Employees to a
                  specific term of employment because the Manual’s provisions
                  gave the Employees no assurances of employment for any
                  definite time. See Graves v. Anchor Wire Corp., 692 S.W.2d
                  420, 421 (Tenn. App. 1985); Whittaker v. Care-More, Inc., 621
                  S.W.2d 395, 397 (Tenn. App. 1981); accord Davis v.
                  Connecticut Gen. Life Ins. Co., 743 F. Supp. 1273, 1280 (M.D.
                  Tenn. 1990) (concluding that, because Tennessee still clings
                  to “employee-at-will” rule, presumption that employee is at will
                  must be overcome by specific language guaranteeing definite
                  term of employment). Moreover, contrary to the Employees’
                  argument, the terms of the Manual did not limit MHA’s right to
                  terminate the Employees by requiring that any termination of
                  services be for one of the enumerated reasons, such as just
                  cause. Although the Manual listed only four reasons for
                  termination, including resignation, dismissal for just cause,
                  retirement, and reduction in force, this list did not purport to be
                  exclusive. Indeed, the Manual’s inclusion of reduction in force
                  to this list contemplates that certain business exigencies may
                  arise which necessitate dismissing employees for reasons
                  other than just cause. In this case, therefore, we can find no
                  language that unequivocally overcomes the presumption that
                  [the Employees] were at-will employees. See Gregory v. Hunt,
                  24 F.3d at 787; Davis v. Connecticut Gen. Life Ins. Co., 743 F.
                  Supp. at 1280.

Williams v. MHA, slip op. at 2-6 (footnotes omitted).



       In accordance with Williams v. MHA, we conclude that the trial court erred in ruling

(1) that MHA’s Manual of Operations constituted an employment contract which limited

MHA’s right to terminate Flowers and (2) that Flowers was unlawfully deprived of his

property rights in violation of his constitutional right to due process. 2 As a result of this

holding, we reverse the trial court’s order granting Flowers’ motion for summary judgment,

as well as the trial court’s final order granting Flowers the remedies of back pay and

reinstatement.


       2
           See W illiam s v. M HA , slip op. at 7 (citing Gregory v. Hunt, 24 F.3d 781, 787 (6th Cir. 1994)).

                                                         6
      The trial court’s judgment is hereby reversed, and this cause is remanded for further

proceedings consistent with this opinion. Costs on appeal are taxed to Flowers, for which

execution may issue if necessary.




                                                       HIGHERS, J.



CONCUR:




FARMER, J.




LILLARD, J.




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