Does a Personnel Handbook or Employee Handbook Create a Property Interest in Continuing Employment? Under Tennessee Law, It Depends.
Tennessee is an at-will employment state, essentially giving employers and employees the right to terminate employment at any time, for any reason. This means that employees generally do not have a right to continued employment. To what extent does a personnel manual or employee handbook impact this for state and municipal employees? It depends.
· Keller v. Casteel: Personnel Manual Does Not Create a Property Interest
The Tennessee Supreme Court recently decided the case of Keller v. Casteel. In Keller, a City of Cleveland (“City”) employee was terminated from his job after he pled guilty to criminal charges.[1] The employee challenged his termination by appealing to the City Manager.[2] After holding a hearing regarding the employee’s dismissal, the City Manager upheld the decision to terminate the employee. Id.
The employee then challenged his termination in court, arguing that the City had violated his due process rights under the United States and Tennessee Constitutions.[3] To assert this right, however, the employee had to show that he had a property interest in his continued employment. In other words, the employee had to show that he had a right to continued employment. The trial court and the Tennessee Court of Appeals held that the City’s personnel manual gave the employee the right to continued employment pending an appeals process.[4] The Court of Appeals reasoned that the personnel manual’s provisions provided an unequivocal right to an appeals process and corresponding judicial review of decisions once appealed.[5]
The City appealed to the Tennessee Supreme Court. The Supreme Court had to decide whether the employee “had a property interest in his employment with the City that entitled him to due process after the termination of his employment.”[6] Put another way, the Court had to decide whether the personnel manual gave the employee a right to continued employment.
After laying out the facts of the case, the Supreme Court noted that both the United States and Tennessee Constitutions prohibit the government from depriving a person of liberty or property without due process of law.[7] So the first step of any due process analysis is determining whether a plaintiff has alleged a property interest entitled to due process protection.
In Keller, the employee alleged a property interest in continued employment. “To be entitled to procedural due process protection, a property interest must be more than a ‘unilateral expectation’ or an ‘abstract need or desire.’ It must be a ‘legitimate claim of entitlement’ to a specific benefit.”[8]
The Supreme Court explained that any property interest in employment must align with Tennessee’s employment-at-will doctrine.[9] In Tennessee, employment is presumed to be at will. “Under the employment-at-will doctrine, employment is for an indefinite period of time and may generally be terminated by either the employer or the employee at any time, for any reason, or for no reason at all.”[10]
In this case, the employee argued that he had a property interest in continued employment under the personnel manual’s procedures. The court rejected this argument, noting that the employee could not “point to language in the City personnel manual indicating that he is anything other than an employee at will.”[11]
The court noted that in some cases, a personnel manual could create contract rights protected by procedural due process. But the standard for proving that a manual creates contract rights is high; a plaintiff must show that the manual “contains specific language showing the employer’s intent to be bound by the handbook’s provisions.”[12]
The employee could point to no such language in the City’s personnel manual. In fact, the manual stated quite the opposite—that none of its provisions were “an employment contract or any other type of contract.”[13] Accordingly, the employee did not have a protected property interest and could not assert a claim for a due process violation.[14]
· Woodard v. City of Murfreesboro: Personnel Manual Does Create a Property Interest
A short time after Keller was decided, the United States District Court for the Middle District of Tennessee examined the issue of whether a municipal employee handbook created a constitutionally protected property interest in Woodard v. City of Murfreesboro.[15] This time, the answer was that it did.
Woodard, like Keller, dealt with a municipal employee challenging the procedures used in his termination. The district court noted that this case was distinguishable from Keller because the employee handbook’s language was different.[16] Unlike the manual at issue in Keller, which specifically stated it was not a contract, the handbook in Woodard included more binding language. The district court explained, “The use of the word ‘shall’ in multiple places, along with references to ‘due process’ and employees’ ‘constitutional rights’ in the description of [the] procedure constitutes unequivocal language demonstrating the City’s intent to bound by the handbook’s provisions.”[17] Accordingly, in Woodard, the employee’s due process claim was permitted to go forward.
· Using Keller and Woodard as a Guide for Potential Due Process Claims
Keller and Woodard exemplify the questions that must be asked when asserting procedural due process claims related to government employment. Every case is different and should be evaluated on its unique facts. Going forward, Tennessee state and municipal employees should carefully examine any personnel manuals or employee handbooks before using them as a basis to bring a procedural due process claim. Manuals or handbooks that disclaim any contractual rights likely do not create any right to continued employment. Tennessee employers should keep in mind that a manual or handbook that uses terms such as “shall” or “constitutional rights,” however, is more likely to protect the employee and result in a finding that the employee has a constitutionally protected property interest in his or her employment.
[1] Keller v. Casteel, 602 S.W.3d 351, 354 (Tenn. 2020).
[2] Id. at 355.
[3] Id.
[4] Id. at 355-56.
[5] Id. at 356.
[6] Id. at 356-57.
[7] Id. at 357.
[8] Id. at 358 (quoting Tenn. Dep’t of Corr. v. Pressley, 528 S.W.3d 506, 513-14 (Tenn. 2017)).
[9] Id.
[10] Id.
[11] Id. at 359.
[12] Id. at 360.
[13] Id. at 361.
[14] Id.
[15] No. 3:20-cv-00148, 2020 WL 3546759, at *1 (M.D. Tenn. June 30, 2020).
[16] Id. at *8.
[17] Id. at *9 (internal citations and quotation marks omitted).