    Notice: This opinion is subject to correction before publication in the P ACIFIC R EPORTER .
    Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
    303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
    corrections@appellate.courts.state.ak.us.



             THE SUPREME COURT OF THE STATE OF ALASKA


CALVIN GRIMMETT,                             )
                                             )        Supreme Court Nos. S-13944/14093/14083
            Appellant and                    )        (Consolidated)
            Cross-Appellee,                  )
                                             )        Superior Court No. 3AN-09-08970 CI
    v.                                       )
                                             )        OPINION
UNIVERSITY OF ALASKA,                        )
                                             )        No. 6791 – June 28, 2013
            Appellee and                     )
            Cross-Appellant.                 )
                                             )
                                             )
UNIVERSITY OF ALASKA,                        )        Superior Court No. 4FA-08-02579 CI
                                             )
            Petitioner,                      )
                                             )
    v.                                       )
                                             )
YAUNA TAYLOR,                                )
                                             )
            Respondent.                      )
                                             )

            Appeal in File Nos. S-13944/14093 from the Superior Court
            of the State of Alaska, Third Judicial District, Anchorage,
            Jack Smith, Judge.

            Appeal in File No. S-14083 from the Superior Court of the
            State of Alaska, Fourth Judicial District, Fairbanks, Michael
            A. MacDonald, Judge.
              Appearances: Kevin T. Fitzgerald, Ingaldson, Maassen &
              Fitzgerald, P.C., Anchorage, for Appellant/Cross-Appellee
              Grimmett. William B. Schendel, Schendel Law Office,
              Fairbanks, and Susan Orlansky, Feldman Orlansky &
              Sanders, Anchorage, for Appellee/Cross-Appellant/Appellant
              University of Alaska. No appearance by Yauna Taylor,
              Respondent.

              Before: Carpeneti, Chief Justice, Fabe and Stowers, Justices.
              [Winfree, Justice, not participating.]

              STOWERS, Justice.

I.     INTRODUCTION
              Yauna Taylor and Calvin Grimmett were employed by the University of
Alaska. The University terminated their employment through notices of nonretention.
The University also and alternatively terminated Grimmett for cause.
              Superior Court Judge Michael A. MacDonald found that the University
violated Taylor’s due process rights when the University nonretained her without a
hearing rather than terminating her for cause; the court ordered additional briefing on the
issue of Taylor’s backpay. Superior Court Judge Jack Smith upheld Grimmett’s
nonretention, finding that the University’s nonretention policy did not violate Grimmett’s
due process rights. However, Judge Smith set aside Grimmett’s for-cause termination,
finding that the University had violated the objective prong of the implied covenant of
good faith and fair dealing.
              The University petitioned for review in Taylor’s case, which we granted.
Grimmett appealed and the University cross-appealed. We consolidated these cases for
oral argument and decision because both involved the University’s use of its
nonretention procedure. We conclude that the University violated Taylor’s due process
rights when it used its nonretention procedure to terminate her employment without a


                                           -2-                                       6791

hearing. We therefore affirm Judge MacDonald’s decision and remand for further
proceedings concerning the scope of Taylor’s backpay remedy. In Grimmett’s case, as
in Taylor’s, the University used its nonretention procedure to terminate the employment
of a for-cause employee without a hearing, in violation of the employee’s due process
rights. We therefore reverse Judge Smith’s decision upholding Grimmett’s nonretention.
However, we also reverse Judge Smith’s decision setting aside Grimmett’s for-cause
termination and hold that the University did not violate the implied covenant of good
faith and fair dealing when it terminated Grimmett’s employment for cause. We remand
for further proceedings to determine if Grimmett is entitled to additional pay in light of
our decision.
II.   FACTS AND PROCEEDINGS
      A.        Taylor Facts And Proceedings
                Taylor worked as an “Administrative Generalist” for the University of
Alaska Fairbanks from May 1, 2005 to May 1, 2008. The University provided Taylor
with periodic employment letters detailing the terms of her employment.1 Those letters
explained “[t]his appointment is for ‘regular,’ ‘continuing’ employment with benefits,”
and then provided “General Conditions of Employment,” which stated in part:
                New employees of the University are employed in an at-will
                probationary status for the first six months of employment.
                Promoted employees also serve a probationary period with
                limited rights of retreat. During the probationary period your
                employment may be terminated for no reason or any reason.
                Pursuant to University Regulation [04.07.100], the University
                also may elect to discontinue employment through non-
                retention with notice or pay in lieu of notice.


      1
            Taylor’s last employment letter was dated June 27, 2007 and provided that
the term of employment was August 5, 2007 through June 7, 2008, a ten-month
appointment period.

                                             -3-                                    6791
The letters also stated that Taylor’s “appointment and other terms of employment are
governed, in order of priority, by Board of Regents Policy, University Regulations, and
applicable campus rules and procedures.” Regents Policy 04.01.055(A) states that “At­
will employment is an employment relationship that either the employee or the university
may terminate at any time for any reason or no reason.”2 Further, “[e]mployment not
established as at-will entitles the employee to such notice and appeal processes as
specified by regents’ policy and university regulation.”3         University Regulation
04.01.050 distinguishes between “At-Will Employment” and “For Cause Employment.”
The regulation explains that the University “designates employment not established as
at-will to be for cause.”4 The University concedes that Taylor’s employment was for-
cause employment.
             In a letter dated April 3, 2008, the University informed Taylor of its
“decision to exercise its right of nonretention,” citing University Regulation 04.07.100.5



      2
            U NIV . OF A LASKA , R EGENTS ’ POLICY & U NIVERSITY REGULATION
P04.01.55(A), available at http://www.alaska.edu/bor/policy-regulations/ (last visited
Mar. 27, 2013).
      3
             REGENTS ’ POLICY P04.01.55(C).
      4
             U NIVERSITY REGULATION R04.01.050(B).
      5
             University Regulation 04.07.100 reads, in part:
             If the University elects to discontinue employment through
             nonretention under Regents’ Policy 04.07.100, written notice
             shall be given as required by this section. Provisions of this
             section do not apply to termination of employment pursuant
             to other provisions of Regents’ Policy or University
             Regulation, nor do they apply to employees covered by
             collective bargaining agreements. At the election of the
             University, the employee may be given pay in lieu of notice.

                                           -4-                                      6791

Taylor was placed on paid leave for four weeks, and on May 1, 2008 her employment
with the University officially ended.
             Nonretention is described in Regents’ Policy 04.07.100:
             The university may discontinue or not renew an existing
             employment relationship through nonretention. Nonretention
             does not reflect discredit on an employee. If notice of
             nonretention is required by university regulation, the notice
             will be in writing and will comply with university regulation
             adopted under this section. The university may not use
             nonretention to terminate tenured faculty.[6]
In a form provided to employees who receive notice of nonretention, the University
explained that “[w]ithout a request” the University “will not voluntarily disclose to
[third] parties any performance or conduct related reasons for a nonretention or at-will
termination, although the University will consider any such reasons with respect to future
employment with the University.”
             In response to her nonretention, Taylor filed a grievance with the University
arguing that because she was a for-cause employee, she was entitled to receive
termination-for-cause proceedings. During the discovery process for this grievance
proceeding Taylor learned the University had concerns about her performance.
             The University appointed attorney William Cotton as a hearing officer and
argued that the University was permitted by its employment agreement, policies, and
regulations to nonretain Taylor. Cotton concluded that “the University [was] correct that
the Policies and Regulations allow[ed] the non-retention of non-tenured employees
without a showing of cause.” Cotton then cancelled a previously scheduled evidentiary
hearing and recommended that the “Chancellor uphold the University’s decision to non-
retain Ms. Taylor.” Chancellor Brian Rogers adopted Cotton’s recommendation. Taylor


      6
             REGENTS ’ POLICY P04.07.100.

                                           -5-                                      6791
then appealed to University President Mark Hamilton, who affirmed the denial of
Taylor’s grievance.
             Taylor filed an administrative appeal in the superior court in Fairbanks.
The superior court ruled in Taylor’s favor. The court first noted that “[a]ppellate courts
review an agency’s interpretation of its own regulations under the reasonable and not
arbitrary standard. This deferential standard of review properly recognizes that the
agency is best able to discern its intent in promulgating the regulation at issue.”7 Even
given this deferential standard of review, the superior court found the University’s
decision that employees like Taylor “are subject to nonretention at will” to be “an
unreasonable interpretation of the [University’s] regulations” because it “renders ‘for
cause’ employment rights meaningless.” The superior court explained:
             In short, performance or conduct related reasons for
             nonretention can be a discredit towards future University
             employment. The University is in fact using nonretention
             where discredit attaches. This suggests that nonretention is
             being misapplied. The policy contemplates nonretention
             being used only when it would not reflect discredit on an
             employee. Thus it cannot be applied in circumstances where
             discredit attaches.
             Additionally, the superior court found that Taylor, as a “for cause”
employee, “had an interest in continued employment and was therefore protected by the
Due Process Clauses of the United States and Alaska Constitutions. . . . Those due
process rights included the right to a hearing before being terminated.” The superior
court concluded that because the University wrongfully denied Taylor such a hearing,
the University violated her due process rights. The court reversed Taylor’s nonretention



      7
            The court cited Regulatory Comm’n of Alaska v. Tesoro Alaska Co., 178
P.3d 1159, 1163 (Alaska 2008).

                                           -6-                                      6791
and awarded backpay of an amount to be determined after further briefing. The
University petitioned for review and we granted that petition.
      B.      Grimmett Facts And Proceedings
              The underlying facts of Grimmett’s case are largely undisputed. Grimmett
was employed as a police officer with the University of Alaska Anchorage’s Police
Department until October 2008. Although the record does not contain a copy of
Grimmett’s employment contract, the University’s notice of nonretention to Grimmett
references Regents’ Policy and University Regulation 04.07.100, and Grimmett does not
contend that he was not subject to this policy and regulation under the terms of his
employment.
              After receiving an anonymous complaint alleging that Grimmett wrote
himself parking citations in order to park illegally without consequence, the University
interviewed Grimmett about his use of “self-ticketing.”8 Grimmett admitted that he self-
ticketed five or six times over the course of about two years. Upon receiving the
complaint and Grimmett’s admission, the University decided to terminate Grimmett’s
employment for cause and alternatively to nonretain Grimmett under University
Regulation 04.09.040.
              Grimmett received notice of the University’s decision and subsequently
notified the University of his intent to contest his for-cause termination. A few months




      8
              Grimmett’s “self-ticketing” consisted of parking illegally and writing
himself a ticket which he then placed on his vehicle windshield so that other police or
traffic enforcement officers would not ticket the vehicle; after Grimmett returned to his
illegally parked vehicle, he would destroy the ticket and avoid any consequences for
illegally parking.

                                           -7-                                     6791

later, Grimmett notified the University that he also disputed his nonretention.9 The
University appointed Cotton as a hearing officer, and both Grimmett and the University
submitted briefing. With respect to Grimmett’s nonretention, Cotton found Grimmett’s
challenge was not timely and, even if it had been, the nonretention was “substantively
valid” and should be upheld. Regarding Grimmett’s for-cause termination, Cotton found
“that on balance the University has proven by a preponderance of the evidence that there
was just cause to justify termination.” University Chancellor Fran Ulmer adopted the



       9
              There is a dispute between the parties regarding the timeliness of
Grimmett’s appeal of his nonretention. The University issued both the notice of
Grimmett’s nonretention and the notice of its intent to terminate his employment for
cause on the same day. Grimmett timely requested a hearing to contest the for-cause
termination, but — as he admitted to the hearing officer — did not timely challenge the
nonretention. The hearing officer found that Grimmett’s appeal of the nonretention was
untimely, but nevertheless addressed the substantive validity of the appeal, finding the
nonretention was valid. On appeal, the superior court found that Grimmett waived his
right to appeal his nonretention, but it nevertheless also addressed the substantive
validity of the nonretention, finding that the University’s nonretention policy did not
violate due process. In his appeal before us, Grimmett again challenges the nonretention,
arguing that it violates due process. Although it is clear that Grimmett’s challenge to the
nonretention was untimely, both the hearing officer and the superior court addressed the
merits of Grimmett’s challenge, and both parties have had a full opportunity to be heard
on this issue. We have stated that we are “not inclined to cut off rights of appellate
review because of some failure on the part of a litigant to comply with the rules.”
Orbeck v. Wheeler Constr. Co., 394 P.2d 781, 782-83 (Alaska 1964). In Cook v. Aurora
Motors, Inc., 503 P.2d 1046, 1049 (Alaska 1972), we set forth the considerations that
should be balanced in determining whether the rules should be relaxed. They are the
right to appellate review, the willfulness and extent of the rules violation, and the
possible injustice that might result from dismissal. Id. Given that Grimmett’s grievance
was not filed inordinately late, that such lateness may have been due to confusion
engendered by the University’s attempt to terminate Grimmett’s employment by the
simultaneous use of two separate procedures, and that both the hearing officer and the
superior court reached the merits of the nonretention, we will likewise address the merits
here.

                                           -8-                                       6791

hearing officer’s findings and conclusions. Grimmett appealed this decision to the
superior court in Anchorage.
               The superior court found: (1) the University’s nonretention policy did not
violate Grimmett’s procedural or substantive due process rights; (2) Grimmett’s for-
cause termination was justified, as the University terminated him for serious violations
of departmental policy; but (3) the University’s “decision to terminate Grimmett for
cause was objectively unfair given the culture of disregard for parking rules in [the
University of Alaska Anchorage Police Department].” Thus, the court found that “[t]he
for cause termination of [Grimmett] is set aside,” but the “nonretention of [Grimmett] is
upheld.” Grimmett appeals and the University cross-appeals.
III.   STANDARD OF REVIEW
               “In administrative appeals, we directly review the agency action in
question.”10
               We review questions of fact under the “substantial evidence” test.11
“Substantial evidence is ‘such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.’ ”12 “We need only determine whether such evidence




       10
             Fairbanks Fire Fighters Ass’n, Local 1324 v. City of Fairbanks, 48 P.3d
1165, 1167 (Alaska 2002) (citing N. Alaska Envtl. Ctr. v. State, Dep’t of Natural Res.,
2 P.3d 629, 633 (Alaska 2000)).
       11
               Handley v. State, Dep’t of Revenue, 838 P.2d 1231, 1233 (Alaska 1992).
       12
               Id. (quoting Keiner v. City of Anchorage, 378 P.2d 406, 411 (Alaska
1963)).

                                           -9-                                     6791

exists, and do not choose between competing inferences.”13 “We do not evaluate the
strength of the evidence, but merely note its presence.”14
             We review questions of law where no agency expertise is involved under
the “substitution of judgment” test.15 “The substitution of judgment standard thus applies
where the agency’s expertise provides little guidance to the court or where the case
concerns statutory interpretation or other analysis of legal relationships about which
courts have specialized knowledge and expertise.”16
             Construction of employment contracts, including questions concerning the
implied covenant of good faith and fair dealing when the material facts are not disputed,
are reviewed de novo.17
             Questions of due process present constitutional issues that we review de
novo.18



      13
             Id.
      14
             Id.
      15
             Id.
      16
            N. Alaska Envtl. Ctr. v. State, Dep’t of Natural Res., 2 P.3d 629, 633
(Alaska 2000) (quoting Kelly v. Zamarello, 486 P.2d 906, 916 (Alaska 1971)) (internal
quotation marks omitted).
      17
              Luedtke v. Nabors Alaska Drilling, Inc., 834 P.2d 1220, 1223 (Alaska
1992) (“Whether Luedtke’s suspension breached the covenant of good faith and fair
dealing is a question for the trier of fact. Normally we review such questions only for
clear error. However, we may review the application of a legal doctrine to undisputed
facts without the usual deference to the superior court.” (quoting Foss Alaska Line, Inc.
v. Northland Servs., 724 P.2d 523, 526 (Alaska 1986))) (internal citations and quotation
marks omitted).
      18
             James v. State, Dep’t of Corr., 260 P.3d 1046, 1050 (Alaska 2011).

                                          -10-                                      6791

IV.   DISCUSSION
      A.     Dismissing Taylor Without A Hearing Denied Her Due Process.
             1.     Taylor was a for-cause employee.
             The University hired Taylor without tenure for a ten-month term.19 The
University “designates employment not established as at-will to be for cause.”20 The
University concedes that Taylor’s employment was never designated as at-will and that
her employment was therefore “For Cause Employment” as described in University
Regulation R04.01.050(B). The term “for-cause employment” is often used to denote
employment that can be terminated only for cause, as opposed to at-will employment,
which does not include such protections.21 Further, a public employee who can be
terminated only for cause has a legitimate expectation of continued employment that,
under both federal and Alaska constitutional law, gives rise to a property interest in her

      19
               It is undisputed that the University had no obligation to renew Taylor’s
contract at the end of her employment, and that Taylor would not be entitled to a hearing
on a declination to renew. See Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 573
(1972).
      20
             U NIVERSITY REGULATION R04.01.050(B).
      21
               See, e.g., Era Aviation, Inc. v. Seekins, 973 P.2d 1137, 1139 (Alaska 1999)
(observing that “[o]ur cases have distinguished between at-will and for-cause
employment based on the level of cause needed to terminate the employment
relationship”); Ford v. Trendwest Resorts, Inc., 43 P.3d 1223, 1228 (Wash. 2002)
(stating that “we are unwilling to abandon the long-standing distinction between at-will
employment and for-cause employment”); Brooks v. Hilton Casinos Inc., 959 F.2d 757,
771 (9th Cir. 1992) (describing “for cause employment” as “employment as long as [the
employees] did their jobs properly”); see also Casey v. City of Fairbanks, 670 P.2d 1133,
1138 (Alaska 1983) (stating that “persons who are employed other than ‘at will’. . . have
a sufficient property interest in continuing their employment, absent just cause for their
removal, to require that they be given notice and an opportunity to be heard under the
due process clause of the Alaska Constitution (art. I, § 7) before their employment is
terminated”).

                                          -11-                                      6791

job.22 Such a property interest is protected by the Due Process Clauses of both the
United States and Alaska Constitutions.23 An essential principle of due process is that
a deprivation of life, liberty, or property “be preceded by notice and opportunity for
hearing appropriate to the nature of the case.”24 In employment termination cases in
particular, due process requires“[a]t a minimum” that the employee “receive oral or
written notice of the proposed discharge, an explanation of the employer’s evidence, and
an opportunity to present his position.”25
             The University argues that although it identified Taylor’s employment as
“for-cause employment,” Taylor was not entitled to due process prior to her termination.
It argues that its “nonretention” clause should have put Taylor on notice that despite her
“for-cause employment” status she, like an at-will employee, could be terminated
without due process.
             We acknowledge that “the use of the words ‘for cause’ does not magically,
or always, transform a job into protected property; the focus must remain upon the nature
of the employee’s legitimate expectation of continued entitlement to his or her job.”26



      22
            Chijide v. Maniilaq Ass’n of Kotzebue, Alaska, 972 P.2d 167, 171–72
(Alaska 1999); City of North Pole v. Zabek, 934 P.2d 1292, 1297 (Alaska 1997).
      23
              City of North Pole, 934 P.2d at 1297.
      24
              Id. (quoting Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 542
(1985)) (internal quotation marks omitted).
      25
              Id. (quoting Storrs v. Municipality of Anchorage, 721 P.2d 1146, 1149
(Alaska 1986)) (internal quotation marks omitted). In employment termination cases
“we have consistently held that due process of law . . . requires a pre-termination
hearing.” Id. (quoting Odum v. Univ. of Alaska, Anchorage, 845 P.2d 432, 434 (Alaska
1993)) (internal quotation marks omitted).
      26
             Bennett v. City of Boston, 869 F.2d 19, 21 (1st Cir. 1989).

                                             -12-                                   6791

Similarly, although — as noted above — the term “for-cause employment” typically
denotes employment that can be terminated only for cause, this does not necessarily
mean that an employer could not use the phrase “for-cause employment” in some other
way. But if the employer seeks to use the term “for-cause employment” in an unusual
and unexpected way, without the protections that are typically associated with “for-cause
employment,” it must make this clear. As we explain below, Taylor’s employment
contract, including the terms of the University’s nonretention clause, did not clearly
indicate that the University intended Taylor’s “for-cause employment” to be subject to
termination without due process. In other words, the University’s contract with Taylor
established a legitimate expectation of continued employment and required the
University to provide Taylor due process before terminating her.
              2.     Nonretention may not be used for performance-based dismissals.
              The University’s policies and regulations provided that Taylor, as a for-
cause employee, was subject not only to “for cause termination” but also to termination
“[i]n the event of layoff, non-retention, or financial exigency.”27 Similar provisions are
often present in for-cause employment contracts, and courts “as a rule” have found “that
layoffs resulting from a genuine need to reduce the work force or to eliminate certain
positions should not be treated as violating a contractual obligation to terminate only for
cause.”28 Such procedures may be used for genuine work-force-related needs and may
not be used as “merely a pretext for termination.”29




       27
              U NIVERSITY REGULATION R04.01.050(B)(2).
       28
              STEVEN C. K AHN ET AL., LEGAL G UIDE TO H UMAN RESOURCES § 8.02[5]
(1999).
       29
              Id.

                                           -13-                                      6791

              Consistent with these principles, the University’s policies and regulations
provide detailed information about the circumstances under which “layoff” and
“financial exigency” apply, ensuring that such procedures will be used only when there
is a genuine need to reduce work force or eliminate certain positions.30 By contrast, the
policies and regulations provide little explanation of the circumstances under which the
“nonretention” procedure may be used. Regents’ Policy 04.07.100 states that “[t]he
university may discontinue or not renew an existing employment relationship through
nonretention”31 but does not elaborate further on when nonretention may be used.
Similarly, the associated regulations merely describe the procedures associated with
nonretention.32 There is nothing in the policies or regulations to disturb the expectation
established elsewhere that Taylor was a for-cause employee or to indicate that a for­


       30
               The Regulations specify that layoff may be used when there exists either
“a lack of or reduction in available work; a lack of sufficient available funds; a good faith
reorganization; or another reason, not reflecting discredit upon the affected
employee(s).” U NIVERSITY REGULATION R04.07.110(A). Similarly, a “financial
exigency” exists “when the board determines that a shortfall in projected revenues for
general operations . . . will have a material adverse effect on the operation of the
university generally, or on a major administrative unit or an academic or other unit of a
major administrative unit.” REGENTS ’ POLICY P04.09.020(A).
       31
              The University’s definition of “nonretention” departs from the usual
meaning of the term. In cases both from Alaska and other jurisdictions, “nonretention”
is frequently found and almost always used to refer only to the power not to renew an
employee’s contract at the end of her term, not the power to “discontinue” employment
mid-term. See, e.g., Shatting v. Dillingham City Sch. Dist., 617 P.2d 9, 10 n.1 (Alaska
1980) (observing that “Alaska’s statutory scheme recognizes a distinction between
‘nonretention’ and ‘dismissal’ ” in the context of teacher employment, in which the
former term means the election by an employer not to reemploy a teacher for the school
year or school term immediately following the expiration of the teacher’s current
contract).
       32
              U NIVERSITY REGULATION R04.07.100.

                                            -14-                                       6791

cause employee may be terminated for any reason or no reason at all without due
process.    On the contrary, the context of the nonretention clause suggests that
nonretention functions in a way similar to layoff and financial exigency and that, like
those two procedures, nonretention is limited to reductions in force or similar non­
performance-related exigencies.
              In particular, we observe that the Regents’ Policy governing nonretention
states that nonretention “does not reflect discredit on an employee.”33 In this respect,
nonretention is similar to a layoff, which according to University Regulation 04.07.110
similarly “does not reflect discredit on the employee’s performance.” The University’s
regulations ensure that a layoff “does not reflect discredit” on the employee by requiring
that layoffs be used only for reasons “not reflecting discredit upon the affected
employee(s),” such as reorganization or lack of funds.34 An employee would reasonably
expect that the “non-discredit” clause in the nonretention procedure would function in
a similar way as the “non-discredit” clause in the layoff procedure, and that accordingly
nonretention could be used only for reasons “not reflecting discredit upon the affected
employee,” such as reorganization or lack of funds. Dismissing an employee via
nonretention apart from reasons like layoff, reduction in force, and financial exigency,
especially where the employer is doing so for performance-based concerns, cannot help
but raise questions in the minds of future potential employers, thus making it difficult if
not impossible for the former employee to rebut the suspicion of discredit. In short, by
the terms of Taylor’s contract and the University’s policies and regulations, the




       33
              REGENTS ’ POLICY P04.07.100.
       34
              U NIVERSITY REGULATION R04.07.110.

                                           -15­                                      6791
University was permitted to use the nonretention procedure only for non-performance­
based reasons.35
              3.     Conclusion
               The University’s policies and regulations failed to make clear that it
intended Taylor’s “for-cause employment” to be devoid of the protections that typically
define “for-cause employment.” Taylor had a legitimate expectation that her “for-cause
employment” would continue, and the University was required to provide Taylor due
process when it sought to terminate her. Because the University’s nonretention policy
could not be used to achieve a performance-based dismissal, the University was required
to provide Taylor with the due process protections available to her as a for-cause
employee. Accordingly, the University violated Taylor’s right to due process when it
failed to provide her a pre-termination hearing.
       B.     Grimmett’s Nonretention And For-Cause Termination
              Grimmett appeals the superior court’s decision upholding his nonretention
termination, arguing that the University violated his due process rights when it
nonretained him. The University appeals the superior court’s decision to set aside
Grimmett’s for-cause termination, arguing that it did not breach the covenant of good
faith and fair dealing.




       35
              The rule that nonretention proceedings may not be used for performance-
based dismissal is consistent with our previous encounters with non-discredit clauses.
In both Stanfill v. City of Fairbanks, 659 P.2d 579, 582 (Alaska 1983) and Moore v.
State, Dep’t of Transp. and Pub. Facilities, 875 P.2d 765, 770 (Alaska 1994), employers
were faced with rules that stipulated that layoffs would not “reflect discredit upon the
service of the employee.” In both cases, those rules provided that an employee could
only be laid off for “reasons which are outside the employee’s control.” That is, they
could only be terminated for issues unrelated to performance.

                                         -16-                                     6791

              1.	    The University violated Grimmett’s due process rights when it
                     nonretained him.
              The University terminated Grimmett’s employment through the same
nonretention procedure discussed above in Taylor’s case. Like Taylor, Grimmett was
a for-cause employee entitled to due process. Consequently, the University’s use of the
nonretention procedure without giving Grimmett due process was a violation of his
rights.36
              2.	    The University did not breach the objective prong of the
                     covenant of good faith and fair dealing when it terminated
                     Grimmett for cause.
              After a hearing on the University’s for-cause termination of Grimmett, the
hearing officer determined that Grimmett had engaged in the practice of self-ticketing.
The hearing officer found that other officers had at times self-ticketed as well. The
hearing officer found “it blatantly obvious[] that the practice engaged in was wrong, was
dishonest, and was in violation of . . . four University policies . . . .” Further, the hearing
officer found that “the serious impropriety of the practice [was] exacerbated by the fact
that it was committed by a University police officer charged with the enforcement of the
law and University rules. Indeed, the officer used his official powers to commit the
dishonest acts.” Finally, the hearing officer explained:
              [I]n addition to being obviously objectively improper, I
              conclude that the officers in question, despite certain
              statements to the contrary, recognized that their actions were
              wrong and in violation of University rules. Specifically, I
              find that Officer Grimmett, despite protestations to the
              contrary at the hearing, recognized that they would at least
              result in the serious discipline of suspension without pay.

       36
             As we explain below in Part IV.B.3, because Grimmett’s nonretention took
effect immediately, this violation of due process may not have been cured by the later
for-cause termination proceedings.

                                             -17-	                                       6791
The hearing officer concluded that the University had just cause to terminate Grimmett.
The University Chancellor adopted the hearing officer’s findings and conclusions, and
Grimmett appealed that decision to the superior court.
              The superior court affirmed the hearing officer’s conclusion that
Grimmett’s termination was justified because Grimmett had committed a serious
violation of University policy. The superior court found that “Grimmett clearly violated
three of the UPD Policies cited by the University: misuse of authority, conduct
unbecoming, and conformance with all laws.” However, the court went on to hold that
“due to the ‘culture of disregard for parking rules in UPD,’ ” the University behaved in
an objectively unfair manner when it fired Grimmett. The court explained that because
Grimmett was not “on notice that his conduct could result in termination,” the University
breached the covenant of good faith and fair dealing when it fired him.
              The University argues that the superior court erred in finding that the
University breached the objective prong of the implied covenant of good faith and fair
dealing and in finding that it treated Grimmett in an objectively unfair manner by
terminating his employment for self-ticketing. Relying primarily on the findings of the
hearing officer, Grimmett argues that because “UAA PD had created an atmosphere
which would provide little to no notice that an officer could or would be terminated for
self ticketing,” the University breached the covenant of good faith and fair dealing by
terminating him for self-ticketing. Because the underlying facts of Grimmett’s case are
undisputed, we review the application of law to those facts de novo.37
              At the administrative hearing, the hearing officer considered evidence and
testimony that suggested an inconsistent attitude by the University with respect to officer



         37
              Luedtke v. Nabors Alaska Drilling, Inc., 834 P.2d 1220, 1223 (Alaska
1992).

                                           -18-                                      6791
parking. The hearing officer found, for example, that the chief occasionally voided
tickets, that police officers did not write tickets on other police officers’ vehicles, and
that there was no broad investigation into the practice of self-ticketing. However, the
hearing officer also found that none of this evidence was relevant, as these practices were
either officially sanctioned 38 or were unknown to the chief. In contrast, Grimmett’s self-
ticketing was not sanctioned, and the police chief was made aware of Grimmett’s actions
only after a letter of complaint and Grimmett’s admission.
              In Luedtke v. Nabors Alaska Drilling, Inc., we held that the covenant of
good faith and fair dealing requires an employer “to act in a manner which a reasonable
person would regard as fair” and “requires that the employer be objectively fair.”39 The
superior court found that the University violated the Luedtke principle when it fired
Grimmett; the court reasoned that the University’s casual attitude towards parking
violations rendered termination for such a violation objectively unfair by failing to put
Grimmett on notice that his behavior could result in termination.
              On appeal, the University argues that the superior court improperly
extended Luedtke, and additionally that the University gave Grimmett the notice required
by Luedtke because Grimmett was aware that self-ticketing could result in termination.
Grimmett counters that even though official regulations and policies forbid self-ticketing,


       38
              For example, the Parking Director once agreed to void parking tickets that
several individuals received while parked at the University for an on-campus conference,
but he followed University policies and procedures in doing so.
       39
               834 P.2d at1224-25. “We have recognized a covenant of good faith and
fair dealing in all at-will employment contracts.” Id. at 1223. In Luedtke, we held that
an employer violated this covenant “as a matter of law” where “[t]he superior court
found that Luedtke was tested for drug use without prior notice, that no other employee
was similarly tested, and that Nabors suspended Luedtke immediately upon learning of
the results of the test.” Id. at 1225-26.

                                           -19-                                      6791

the practice was common and sanctioned by lower-ranking members of the police
department; therefore, it was unfair for the University to terminate his employment for
self-ticketing.
              Luedtke holds that an employer violates the covenant of good faith and fair
dealing if the employer fires an employee without notice or for some other reason that
is objectively unfair.40 Given the deference due to the hearing officer’s findings of fact,
the University’s argument that Grimmett had notice that his actions could result in
termination and that Grimmett was not treated in an objectively unfair manner is
persuasive. As explained by the hearing officer:
              Grimmett has clearly committed dishonest acts which violate
              important University policies. Further, he both should have
              known the nature of these acts and I have found [he] did in
              fact know the nature of his actions. However, his dishonesty
              was an attempt to defraud the University of no more than a
              few dollars of parking fees. He admitted his actions
              immediately on questioning by Chief Pittman. Further, he
              was following a practice which other officers had taken and
              had even been told by a superior that the actions were ok
              (although I have clearly found that this did not justify his
              actions).[41] Arguably, it would have been sufficient for
              Chief Pittman to suspend Grimmett without pay for a
              significant time rather than to terminate him.
              However, I conclude that on balance the University has
              proven by a preponderance of the evidence that there was just


       40
              Id. at 1225-26.
       41
              The hearing officer found that Annie Endecott, who was Grimmett’s direct
supervisor from 2001 until early 2008, told Grimmett that self-ticketing was acceptable.
However, Endecott was terminated/nonretained in early 2008, and Grimmett admitted
that: (1) he knew self-ticketing was wrong; and (2) he knew he would need to be more
careful with self-ticketing after Endecott left because he felt that the two other lieutenants
for whom he worked would not approve of the practice.

                                            -20-                                        6791

              cause to justify termination because dishonesty and misuse of
              a police officer’s authority violate critically important
              University policies, and indeed societal values. . . . The
              University in this case has sent a strong message that its
              Police Department will not tolerate dishonesty and misuse of
              authority.
The hearing officer also found that Grimmett knew his actions violated university policy.
The University’s Regents’ Policy 04.07.040, entitled “Corrective Action,” explains that
dismissal is a possible corrective action in response to “violation of . . . regents’ policy[]
or university regulation, dishonesty, . . . or other misconduct.”42 Given that Grimmett
had notice through the University’s policies that his conduct was wrong and could result
in termination, and that he actually knew his actions were wrong, we conclude Grimmett
— a police officer charged with enforcing the law — was not treated in an objectively
unfair manner when the University terminated him because of his unlawful and dishonest
conduct. We reverse the superior court’s determination that the University violated the
covenant of good faith and fair dealing and affirm the University hearing officer’s
decision, which was adopted by the University chancellor, that the University’s for-cause
termination was justified.
              3. Remand is required to determine Grimmett’s pay.
              On October 13, 2008, Grimmett received a letter notifying him of his
nonretention. The letter stated that, per the terms of University Regulation 04.07.100,
the University “has decided to provide you with four weeks pay in lieu of notice.
Therefore, your non-retention will be effective today, October 13th, which will be
reflected as your last day of employment. The four weeks pay in lieu of notice will be
included in your final paycheck.”



       42
               P04.07.100.

                                            -21-                                        6791
               On that same day, October 13, Grimmett also received a letter notifying him
that the University intended to terminate his employment for cause. The letter stated
that, per the terms of University Regulation 04.08.80, Grimmett had five working days
to request a hearing and that a hearing would take place “no sooner than three working
days after receipt of your request.” Grimmett’s attorney provided timely response to the
letter and requested that the hearing “be scheduled for sometime in February/March
2009.” Grimmett’s hearing occurred on March 24 and 25, 2009. Hearing Officer Cotton
issued his recommended decision on June 10, 2009. The chancellor adopted the decision
on June 24, 2009.       According to University Regulation 04.08.80(B), governing
“Termination of Pay” under for-cause termination proceedings, “Employees will
normally remain in pay status until the decision of the chancellor . . . is made unless a
prior proceeding affording minimum due process has been made available.”
               Grimmett was paid for a period ending approximately November 13, 2008,
in accordance with his nonretention. We have determined the nonretention violated his
due process rights. Under University Regulation 04.08.80(B), Grimmett arguably was
entitled to remain in pay status until June 24, 2009, the date the chancellor issued the
termination-for-cause order. Because no findings were made with respect to Grimmett’s
pay, including whether a “prior proceeding affording minimum due process” was “made
available” to Grimmett prior to the chancellor’s decision, and because the parties have
not addressed this issue on appeal, we remand to the superior court for further
proceedings.
V.    CONCLUSION
               For the foregoing reasons, we AFFIRM the superior court’s ruling that the
University violated Taylor’s due process rights and REMAND for further proceedings
concerning the scope of Taylor’s backpay remedy. We REVERSE the superior court’s
upholding of Grimmett’s nonretention. We also REVERSE its ruling that the University

                                           -22-                                     6791

violated the covenant of good faith and fair dealing in its for-cause termination of
Grimmett, and we AFFIRM the University chancellor’s decision upholding the
University’s for-cause termination. We REMAND for further proceedings concerning
Grimmett’s pay.




                                       -23-                                    6791

