Court: Court of Appeals of South Carolina; January 15, 2013; South Carolina; State Appellate Court
In the breach of contract case, Michael Cunningham appeals the circuit court's summary judgment in favor of Anderson County on all his claims. He contests the court's ruling that his employment contract with the County was void, its finding that he could not invoke the public policy exception to at-will employment, and its determination that his accrued sick leave did not qualify as 'wages' under the South Carolina Payment of Wages Act. The appellate court affirms in part, reverses in part, and remands the case.
The County operates under a Council-Administrator system, where the Council employs an administrator to oversee government operations. After the November 2008 election, a lame-duck Council (2008 Council) approved a severance contract for the outgoing administrator and appointed Cunningham as the new administrator under a three-year Master Employment Agreement. However, the newly elected Council (2009 Council) disapproved of the prior contracts and presented Cunningham with a new at-will employment contract, which he declined to sign. Following his termination on February 3, 2009, Cunningham sought legal recourse on April 22, 2009, alleging breach of contract, wrongful discharge, and a violation of the Payment of Wages Act. The parties proceeded with discovery on the breach of contract claim, while the wrongful discharge claim was deferred, leading to Cunningham's motion for summary judgment and the County's cross-motion for summary judgment on all claims.
Cunningham filed a second motion for summary judgment related to his claim under the Payment of Wages Act, which the circuit court denied while granting the County’s motion for summary judgment. The court ruled that Cunningham’s 2008 contract was void and could not bind the 2009 Council. Consequently, Cunningham's claim for accrued sick leave was deemed non-compensable under the Payment of Wages Act for three reasons: (1) the County lacked a policy for compensating at-will employees for accrued sick leave upon termination, (2) the sick leave provision was part of a void contract, and (3) the provision was categorized as severance, which the Act excludes from its definition of "wages." Additionally, Cunningham could not invoke the public policy exception to the at-will employment doctrine in support of his wrongful discharge claim, as he did not assert that he was an at-will employee. The court's ruling led to Cunningham's appeal, which raises three issues: whether the circuit court erred in granting summary judgment based on the void contract regarding breach of contract, whether it erred in classifying accrued sick leave as not constituting "wages" under the Payment of Wages Act, and whether it erred in granting summary judgment on the wrongful discharge claim due to Cunningham's failure to claim at-will employment. The standard for reviewing summary judgment motions follows Rule 56(c) of the SCRCP, which requires that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law. The court does not evaluate conflicting evidence at this stage but seeks to expedite cases that do not necessitate a fact finder. Adverse parties must present specific facts to counter summary judgment, though they only need to provide minimal evidence to establish a triable issue when the burden of proof is preponderance of evidence. All evidence is viewed favorably toward the non-moving party.
Cunningham challenges the circuit court's ruling that his employment contract was void, asserting that the court erred. The court referenced *Piedmont Public Service District v. Cowart*, which involved a long-term employment contract requiring severance pay and established that such contracts could not bind successor boards when they pertain to governmental powers. In that case, the court distinguished between the powers of special purpose districts and municipalities, noting that while public service districts are not equivalent to municipalities, municipal law applies to their contracting authority.
The court emphasized that contracts impacting governmental functions cannot extend beyond the terms of the governing body unless explicitly authorized by statute. If a contract involves business or proprietary powers, it may bind successors if fair and reasonable at the time of execution. The rationale from *Newman v. McCullough* reinforced that contracts related to governmental functions lack binding power beyond the current council unless there is clear statutory authority. This principle aims to protect public interests by ensuring that governing bodies retain necessary powers for their duties. The court concluded that the rules established in *Cowart I* and *Cowart II* are relevant to Anderson County's situation, reaffirming the limitations on contracts involving legislative or governmental functions.
The court differentiates between proprietary and governmental functions, noting that the distinction can be challenging due to overlapping responsibilities. The intent of the rule is to protect the public by ensuring governing bodies retain necessary powers to fulfill their duties effectively. The determination of whether a contract binds successor boards hinges on whether it impairs the discretion that public policy dictates should remain intact. Examples of proprietary functions include contracts for parking meters and waterworks operations, while the removal or appointment of public officers is classified as a governmental function, which cannot be restricted by employment contracts that extend beyond the terms of current governing members, as established in Cowart II.
An exception exists if enabling legislation permits local governing bodies to enter contracts beyond their members' terms. Cunningham argues that the principles from Cowart I and Cowart II are inapplicable due to the abolition of Dillon’s Rule by the Home Rule Act. Dillon’s Rule restricts municipal powers to those expressly granted or implied. The court acknowledges that while Cowart I referenced Dillon’s Rule, it ultimately did not rely on it for its determination; instead, it emphasized the principle that governmental bodies must not impair the authority entrusted to their successors, reinforcing the need for local autonomy under the Home Rule Act.
A contract's binding nature on successor governing bodies hinges on whether it limits their discretion, which public policy requires to remain intact. This principle does not conflict with the Home Rule Act's directive to liberally interpret municipal and county powers. Cunningham's assertion regarding the Home Rule Act allowing a lame-duck council to enter into an employment contract beyond its term is rejected. The relevant statute, S.C.Code Ann. § 4-9-620, stipulates that a county administrator's employment is at the council's discretion, similar provisions are present for municipal managers. Courts in previous cases have affirmed that local governing bodies cannot bind successors in appointing or removing public officers. The language in § 4-9-620 does not clearly authorize contracts extending beyond the outgoing council's term and thus does not fit within established exceptions. Additionally, statutes that conflict with common law must be strictly construed, and any legislative intent to alter common law must be explicitly stated.
The court held that legislative enactments do not intend to change common law unless explicitly stated. Common-law principles should not be altered by ambiguous implications, and clear language is required for any changes. Cunningham argued that a narrow interpretation of Section 4-9-620 contradicts statutes mandating broad interpretation of county powers, particularly S.C.Code Ann. § 4-9-25, which allows counties to enact necessary regulations for health and welfare without limiting their general powers. The court disagreed with Cunningham’s assertion that a lame-duck council could bind its successor regarding governmental functions, emphasizing that such binding would restrict the successor's powers. Cunningham also contended that severance payment under his contract was a proprietary function, thereby allowing the 2008 Council to bind the 2009 Council. However, the court cited precedent establishing that contracts involving public officer appointments are governmental functions and cannot be bound by employment contracts beyond the council's term. Consequently, the court found Cunningham's contract void and affirmed the summary judgment for the County. Additionally, the court ruled against Cunningham's claim that accrued sick leave constituted "wages" under the Payment of Wages Act, clarifying that the exclusion of "severance" from the Act's definition does not pertain to sick leave payments.
According to S.C. Code Ann. § 41-10-10(2), "wages" encompass all compensation for labor, including payments for vacation, holiday, and sick leave owed under any employer policy or contract. The court can affirm based on any grounds in the appeal record. In this case, the determination of whether sick leave was part of a severance package is unnecessary since the claim relies on the validity of the contract, which was found to be void. Cunningham acknowledged that if his contract is void, he would not be entitled to sick leave as the County had no policy for compensating at-will employees for accrued sick leave upon termination. Consequently, the court affirmed summary judgment for the County regarding this claim.
Regarding the wrongful discharge claim, Cunningham argued that the circuit court mistakenly concluded that he could not invoke the public policy exception to the at-will employment doctrine due to not claiming to be an at-will employee. The court agreed, noting that in South Carolina, employment at-will is presumed unless a specific employment contract exists. At-will employees can be terminated for any reason. However, the public policy exception allows a wrongful termination claim if the termination is retaliatory and violates public policy. This exception applies not only when an employee is forced to break the law, but also in other circumstances.
Cunningham's allegations included that the County conditioned his employment on agreeing to directives that violated public policy and laws, including S.C. Code Ann. § 16-17-560, which protects against termination based on political opinions. The County argued that Cunningham could not invoke at-will employment laws since he had not claimed to be an at-will employee. However, Cunningham had made this argument in a supplemental filing, comparing his contract to one in Stiles v. Am. Gen. Life Ins. Co., suggesting a misunderstanding of that case but sufficiently countering the County’s argument that he waived his at-will claim. The court noted that Cunningham's contract is defined by statute as one for a definite term, which falls under the rule in Stiles, indicating potential treatment as an at-will employee, aside from the notice provision.
Cunningham's appeal hinges on his characterization of his contract as providing 'at-will status with a notice provision.' Despite the earlier determination that the contract is void, the analysis addresses Cunningham’s claim that the only limitation on his termination was adherence to severance provisions, allowing for termination for any reason, including those violating public policy. He argues that the contract, while providing a severance remedy, still permits recovery of damages if terminated without cause. However, the court clarifies that the severance provisions indicate a definite contract, which does not align with at-will employment principles. In South Carolina, at-will employment allows termination without liability for any reason, whereas a definite term contract can only be terminated for just cause before the end of the term. Wrongful termination under such a contract typically results in damages equating to the wages for the unexpired term, reflecting the benefit of the bargain. While Cunningham cites cases to support his claim of an at-will relationship, the specifics of his contract—requiring severance pay for termination without cause—differ significantly from those cases, which either lacked clear grounds for termination or explicitly stated at-will employment.
Cunningham's contract specifies that the Administrator serves at the pleasure of the County Council, allowing termination at any time, subject to specific provisions for termination "with cause." If terminated without cause, Cunningham is entitled to his salary and benefits for the remainder of a three-year term. The supreme court has not broadened the public policy exception beyond contracts like Stiles, as such contracts provide remedies for wrongful discharge. Employment contracts for a specific term cannot be classified as at-will, as established in prior court decisions. The public policy exception offers remedies for clear violations of public policy, not for contractual rights. Cunningham's contract intended to align with the damages measure outlined in Stiles; however, it was deemed void due to its illegality, resulting in Cunningham being considered at-will. This status permits him to seek remedies available to at-will employees. The circuit court incorrectly ruled that Cunningham could not pursue a wrongful discharge claim under the public policy exception. The County contended that the facts in Cunningham's complaint did not support a public policy violation, but the court disagreed, noting that Cunningham alleged his employment was conditioned on actions violating S.C.Code Ann. § 16-17-560, which protects against termination based on political beliefs. Thus, Cunningham's claims invoke the public policy exception, which is applicable when an employer requires an employee to act unlawfully.
Counsel for the County conceded that if the circuit court denied the County’s summary judgment motion regarding Cunningham’s ability to assert a wrongful discharge claim and the sufficiency of the allegations, further discovery would be necessary. Both parties agreed to allow this discovery contingent upon the denial of the summary judgment. Furthermore, they consented to permit the County to submit another summary judgment motion after discovery was completed. The court highlighted that summary judgment is a significant remedy and should only be granted after the opposing party has had the opportunity to complete discovery, citing Dawkins v. Fields. Cunningham indicated the potential to uncover additional relevant evidence during discovery, particularly referencing a deposition where he recounted a conversation with Eddie Moore, who suggested he could provide a list of employees for termination. This conversation, coupled with Moore’s subsequent vote to terminate Cunningham’s employment, supports Cunningham's claim. Consequently, the court reversed the summary judgment on the wrongful discharge claim, remanding it for further discovery, while affirming the summary judgment regarding Cunningham's breach of contract and wage violation claims. The court concluded with an affirmation and reversal, allowing for continued legal proceedings.
The ad hoc personnel committee, composed of Bob Waldrep, Tommy Dunn, and Eddie Moore, proposed a demotion for Cunningham to the Assistant Administrator position, offering a higher salary than his previous earnings. The court noted public policy concerns regarding governing bodies with staggered terms, affirming that such considerations apply regardless of perpetual succession. The South Carolina Supreme Court concurred with this perspective, recognizing that the prohibition against binding successor governing bodies is applicable to counties and county agencies. Various case law supports this principle, indicating that contracts for governmental functions extending beyond an officeholder's term are unenforceable. Specifically, contracts made by a governing body shortly before a new administration may impair the discretion of incoming officials. Notable cases, including Morin v. Foster and Valvano v. Bd. of Chosen Freeholders, illustrate the necessity for new officials to retain discretionary powers without being constrained by actions of their predecessors. The principle extends beyond county governments to municipal employment decisions, emphasizing that outgoing officials cannot limit the powers of incoming officials regarding appointments and governance.
The appointment of a county manager is a governmental matter governed by specific rules, which limit the Monroe County legislators unless the county charter allows for a four-year term. Courts have established that governing bodies cannot bind their successors in agreements related to governmental functions, ensuring new bodies can operate independently and effectively. This principle has been upheld in various jurisdictions, including a case where a contract made by lame-duck supervisors to appoint a police chief was invalidated as it sought to influence future governmental operations.
In the context of a legal dispute involving Cunningham, the circuit court ruled that a contract was void and that he was not entitled to accrued sick leave due to this void contract. Cunningham argued that the provision for sick leave was severable from the rest of the contract, citing a severability clause, but the County contended that this argument was not preserved for review. The court indicated that because the contract was deemed entirely void, no part of it could be enforced. The public policy exception, which typically protects employees from wrongful termination claims, does not apply when an employee has access to existing statutory remedies for such claims. Finally, the determination of what constitutes public policy is a legal question for the courts.
A jury is not tasked with determining legal questions, such as the definition of public policy. Instead, once public policy is established, the jury's role is to assess whether an employee's termination violated that policy. The South Carolina Supreme Court has broadened the public policy exception to the at-will employment doctrine to include contracts with a thirty-day notice requirement, which, although technically a “contract for a definite term,” does not provide the employee with typical remedies for wrongful discharge. The thirty-day notice effectively renders such a contract an at-will employment agreement, leaving the employee without recourse for wrongful termination. In South Carolina, employment is presumed to be at-will unless a specific contract is established, allowing termination for any reason or none at all. The court refrains from ruling on whether other allegations in the complaint invoke the public policy exception, noting that addressing additional sustaining grounds is at the appellate court's discretion.
