FSM SUPREME COURT TRIAL DIVISION

Cite as Reg v. Falan, 14 FSM Intrm. 426 (Yap 2006)

[14 FSM Intrm. 426]

FRANCIS REG,

Plaintiff,

vs.

HENRY FALAN, individually and in his capacity

as the Director of Education, Yap State,

Defendant.

CIVIL ACTION NO. 2002-3002

MEMORANDUM OF DECISION

Andon L. Amaraich

Chief Justice

Trial: April 12, 2006

Decided: October 4, 2006

APPEARANCES:

For the Plaintiff:   David W. Kirschenheiter, Esq.

                              Micronesian Legal Services Corporation

                              P.O. Box 57

                              Koror, Palau   PW   96940

For the Defendant:   Ronald K. Ledgerwood, Esq.

                                   Assistant Attorney General

                                   Office of the Yap Attorney General

                                   P.O. Box 435

                                   Colonia, Yap   FM   96943

[14 FSM Intrm. 427]

* * * *

HEADNOTES

Common Law; Constitutional Law ) Judicial Guidance Clause

    U.S. courts’ common law decisions are an appropriate source of guidance for the FSM Supreme Court for contract and tort issues unresolved by statutes, decisions of constitutional courts here, or custom and tradition within the FSM. The FSM Constitution’s judicial guidance clause requires that the court’s review of U.S. courts’ decisions proceed against the background of pertinent aspects of Micronesian society and culture, but where the business activities which gave rise to the lawsuit are not of a local or traditional nature, and the work setting and the work itself are of a markedly non-local, international character, the court need not conduct an intense search for applicable customary laws and traditional rules when none have been brought to its attention by the parties and none are apparent. Reg v. Falan, 14 FSM Intrm. 426, 430 n.1 (Yap 2006).

Contracts ) Unilateral Contract; Employer-Employee

    Provisions in a personnel handbook may be enforceable as an employment contract if they meet the requirements for the formation of a unilateral contract. The offer must be definite in form and must be communicated to the offeree. Whether a proposal is meant to be an offer for a unilateral contract is determined by the outward manifestations of the parties, not by their subjective intentions. An employer’s general statements of policy are no more than that and do not meet the contractual requirements for an offer. Reg v. Falan, 14 FSM Intrm. 426, 431 (Yap 2006).

Contracts ) Unilateral Contract; Employer-Employee

    It does not matter whether a personnel handbook was received at the time the employee was hired or at some later time because the distribution of the manual may act as an offer of a unilateral contract even if there was no unilateral contract offered at the time of hiring. This is because the consideration for the contract was supplied when the employee continued to work, after receipt of the manual, when he had no obligation to do so. Reg v. Falan, 14 FSM Intrm. 426, 431 n.2 (Yap 2006).

Contracts ) Unilateral Contract; Employer-Employee

    When a personnel policies manual is detailed and the court finds that it was intended to set the terms of employment; when a review of the employee handbook makes it clear that the employer intended its employees to be bound by the manual’s terms and that it intended to bind itself to these terms, the personnel policies manual was meant to be an offer for a unilateral employment contract and an employee has accepted the offer through his continued employment. Reg v. Falan, 14 FSM Intrm. 426, 431-32 (Yap 2006).

Employer-Employee

    An employer may fire an employee who was convicted of a violent felony while already employed when its personnel manual states it will refuse employment to such persons since an employer who fires an employee is refusing employment to the former employee. Reg v. Falan, 14 FSM Intrm. 426, 433 (Yap 2006).

Criminal Law and Procedure

    When any person who possesses or uses any firearm is guilty of a felony and the use of the firearm was the discharge of a handgun on a public road in a village at night, it is violent felony. Reg v. Falan, 14 FSM Intrm. 426, 433 (Yap 2006).

Employer-Employee

    When a personnel manual gives the director the responsibility of carrying out employee

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terminations, but another superior carried it out, this variation from the procedure is inconsequential because the requirement that the director perform the termination is a responsibility placed on the director rather than a procedural right vested in the employee. Reg v. Falan, 14 FSM Intrm. 426, 434 (Yap 2006).

Employer-Employee

    When nothing in the personnel policies manual requires that an employee be given notice of his right to object to his termination and that this notice should have informed him of his right to write to the supervisor, director and the policy council, this notice was not required. Reg v. Falan, 14 FSM Intrm. 426, 434 (Yap 2006).

Employer-Employee

    When the preamble to a personnel manual section states that the disciplinary actions are not mandatory, but the involuntary termination portion of that section is stated in mandatory terms, and when read together, the manual requires that the involuntary dismissal procedure be followed, and where the procedure is set out in such detail and phrased with mandatory language, the earlier general statement that disciplinary procedures are guidelines must give way. Reg v. Falan, 14 FSM Intrm. 426, 435 (Yap 2006).

Contracts ) Damages; Employer-Employee

    When the personnel manual provides for an employee’s involuntary dismissal two weeks after the director has recommended it, and when the employee was not afforded the two weeks of pay that he should have received had the procedure been followed, in this regard, the contract has ben breached and the plaintiff is due his expectation damages under the contract, the amount he would have been paid for those two weeks. Reg v. Falan, 14 FSM Intrm. 426, 435 (Yap 2006).

Employer-Employee

    A terminated employee’s contract was not violated when he was not given a hearing before termination since the personnel manual did not require any hearing. Reg v. Falan, 14 FSM Intrm. 426, 435 (Yap 2006).

Employer-Employee; Taxation

    When a plaintiff is due what he should have been paid during the two-week notice period that was required by his contract, but was not paid, the court will award that as damages and the employee’s share of taxes should be deducted from this amount and paid to the appropriate taxing agencies as required by law and the employer’s share of applicable taxes should not be deducted from this amount, but should be paid to the appropriate taxing agencies as required by law. Reg v. Falan, 14 FSM Intrm. 426, 435 (Yap 2006).

Public Officers and Employees ) Yap

    Once Yap’s Director of Education took over control of YHS, appointed a DOE employee as the YHS Acting Director, and exercised the power to terminate a YHS employee on a Yap Assistant Attorney General’s advice, YHS employees are then state employees since when an individual or entity exercises the power to fire an employee, they become an employer of that employee. Reg v. Falan, 14 FSM Intrm. 426, 436 (Yap 2006).

Public Officers and Employees ) Yap

    No dismissal or demotion of a permanent Yap state employee is effective for any purpose until the management official transmits to the employee, by the most practical means, a written notice setting forth the specific reasons for the dismissal or demotion and the employee’s rights of appeal. The rights of appeal that the employee should be informed of include: 1) an appeal through the Chief

[14 FSM Intrm. 429]

of Division of Personnel, 2) a hearing before an ad hoc committee where the plaintiff has a right to be heard and evidence is taken and recorded, and 3) a full written report of findings and recommendations to the highest management official at the agency. Reg v. Falan, 14 FSM Intrm. 426, 436 (Yap 2006).

Public Officers and Employees ) Yap

    When the termination letter sent to the plaintiff stated the reason for his termination, but did not set forth his appeal rights, the plaintiff’s dismissal from state employment was not effective. Reg v. Falan, 14 FSM Intrm. 426, 436 (Yap 2006).

Public Officers and Employees ) Yap; Torts ) Damages ) Mitigation of; Torts ) Wrongful Discharge

    Reinstatement to his former position and back pay to the date of his termination to the date he is reinstated are remedies are generally available to an employee who has shown wrongful discharge. But the amount awarded in back pay should be reduced to the extent the plaintiff has mitigated his damages by securing other employment. Reg v. Falan, 14 FSM Intrm. 426, 436-37 (Yap 2006).

Public Officers and Employees ) Yap; Torts ) Damages ) Mitigation of; Torts ) Wrongful Discharge

    When a plaintiff suing for wrongful discharge has introduced no evidence of his efforts to mitigate his damages by attempting to secure a job during his periods of unemployment, the plaintiff is precluded from recovery of damages for these periods. Reg v. Falan, 14 FSM Intrm. 426, 437 (Yap 2006).

* * * *

COURT’S OPINION

ANDON L. AMARAICH, Chief Justice:

    This case arises from the Henry Falan’s, the former Yap State Director of Education, dismissal of Francis Reg from Reg’s position as the Assistant Director of Yap Head Start. Reg sued Falan, individually and as Director of Education for Yap State, for wrongful termination. Trial was held on April 12, 2006. The court hereby makes the following findings of fact and conclusions of law.

FACTUAL BACKGROUND

    Beginning on September 20, 1993, Francis Reg was the Assistant Director of Yap Head Start ("YHS"). YHS is funded by a grant from the U.S. Department of Education. Until sometime between 1999 and 2001, Yap Community Action Program ("Yap-CAP") was the grantee through a delegation from the Department of Education of Yap State ("DOE"). Thereafter, DOE withdrew the delegation and became the grantee. Until sometime during 2000, the program was administered by a Policy Council ("PC").

    On April 4, 2000, Reg was called before the PC to discuss administrative problems at YHS including misplaced funds, misuse of boats and late budgets and grant documents. On July 8, 2000, a DOE employee named Mike Caldwell told Reg that he was being placed on paid administrative leave while an audit of YHS was done.

    While Reg was on administrative leave he discharged a handgun in the village of Amin, Yap. He was charged with prohibition of weapons and with disturbing the peace. On September 5, 2000, Reg pled nolo contendere to these charges. On April 27, 2001, the Yap State Court entered the judgment and order convicting Reg on these charges.

[14 FSM Intrm. 430]

    On April 27, 2001, Henry Falan, the Director of Education for Yap State and grantee of the Head Start program, terminated Reg on the advice of a Yap State Assistant Attorney General and with the approval of the PC. On the same day, Falan sent Reg a letter which notified him of his termination. The letter cited Reg’s conviction for a violent felony as the basis for the termination.

    Two different Personnel Policies Manuals, Plaintiff’s Exhibit 20 and Defendant’s Exhibit A, were introduced as evidence at trial. The relevant difference between the two manuals is in the disciplinary action sections. Plaintiff’s Exhibit 20 lists three "[m]ajor offenses which will result in immediate termination." These are deliberate damage to YHS property, theft of YHS property, and child abuse. The newer manual, Defendant’s Exhibit A, added, among other things, conviction of a violent felony to the list of major offenses which would result in immediate termination.

    Neither manual indicates the date it came into effect. However, Reg testified that Plaintiff’s Exhibit 20 was the manual in effect when he was working at YHS and that Defendant’s Exhibit A came into effect after DOE took over YHS, after he was placed on leave, and before he was terminated. This testimony was uncontroverted. Absent some evidence that YHS made Reg aware of the changes made to the manual before adverse action was taken against him, it is unreasonable to find that his employment was governed by a manual that went into effect while he was on administrative leave. Accordingly, the manual which governed Plaintiff’s employment and the adverse action taken against him was Plaintiff’s Exhibit 20.

DISCUSSION AND CONCLUSIONS OF LAW

I.   Personnel Manual

A.  Was there a contract?

    Plaintiff has not alleged that he had an express employment contract and no evidence of one was adduced at trial. Plaintiff’s wrongful discharge claim then is a claim for breach of an implied contract. Plaintiff claims that this implied contract is predicated on the Personnel Policies Manual.

    Whether terms in a personnel manual may create a contractual obligation on the employer appears to be an issue of first impression. Many U.S. courts have dealt with the question, however, and these courts’ opinions on the subject are instructive. There is not a consensus among U.S. jurisdictions on the question. However, "the overwhelming majority of courts considering the issue" have held that a personnel manual may create contractual obligations. Duldulao v. Saint Mary of Nazareth Hosp. Ctr., 505 N.E.2d 314, 317 (Ill. 1987) (also includes string cites to cases that have rejected and followed this principle). This court finds that the cases cited among the majority are the

[14 FSM Intrm. 431]

most persuasive. Additionally, a previous decision of this court seems to approve of this trend. See Nakamura v. Bank of Guam (II), 6 FSM Intrm. 345, 353 (App. 1994) (finding no merit to employee-plaintiff’s contention that the trial failed to make findings necessary to dispose of his claim of breach of implied contract arising out of a personnel manual).

    The leading U.S. case, which is representative of and frequently cited by the jurisdictions that have enforced provisions of personnel manuals, is Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn. 1983). In Pine River, the court held that provisions in a personnel handbook may be enforceable as an employment contract if they meet the requirements for the formation of a unilateral contract. That court explained:

    The offer must be definite in form and must be communicated to the offeree. Whether a proposal is meant to be an offer for a unilateral contract is determined by the outward manifestations of the parties, not by their subjective intentions. Cederstrand v. Lutheran Brotherhood, 263 Minn. 532, 117 N.W.2d 213, 221 (1962). An employer’s general statements of policy are no more than that and do not meet the contractual requirements for an offer. Thus, in Degen v. Investors Diversified Services. Inc., 260 Minn. 424, 110 N.W.2d 863 (1961), where the employee was told that he had a great future with the company and to consider his job as a "career situation," we said these statements did not constitute an offer for a lifetime employment contract.

Pine River, 333 N.W.2d at 626.

    In Pine River, as here, an employee who was hired for an indefinite term alleged that he was fired in violation of the "disciplinary policy" terms of his employer’s personnel manual. Also in that case, as here, the employment agreement, such as it was, was entirely oral and nothing was said about the job being permanent. In Pine River, the manual in question was distributed to employees after the employee was hired.

    Here there is no dispute that the offer of employment was accepted by Reg. The only questions are whether the offer, in this case the distribution of the manual was definite in form and whether the proposal was meant to be an offer for a unilateral contract.

    With regard to retention of employment, the Personnel Policies Manual is detailed and the court finds that it was intended to set the terms of Plaintiff’s employment. Reg testified that he expected his employer to follow the procedures outlined in the Personnel Policies Manual. A review of the employee handbook makes it clear that YHS intended its employees to be bound by the terms of the manual and that YHS intended to bind itself to these terms. The introduction to the manual reads, "This manual states the personnel policies of the Yap Head Start Program. . . . It is required that all employees are made aware of these personnel policies. All new employees will be requested to read the Personnel Policies Manual." The eighteen-page manual lists detailed procedures to be used by and

[14 FSM Intrm. 432]

requirements for both employees and YHS. These procedures cover a wide range of work-related topics from hiring to leave to termination. The tone of the manual and the statements made in it are not akin to the vague, casual "career situation" statement referenced in Degen.

    The court therefore finds that the Personnel Policies Manual was meant to be an offer for a unilateral employment contract and that Plaintiff accepted the offer through his continued employment.

B.  Was there a breach?

    Plaintiff alleges that his employer breached his contract by failing to perform certain actions referenced in the Personnel Policies Manual before terminating him. Specifically, Plaintiff alleges that the following actions violated the procedures outlined in the manual: (1) firing him for pleading nolo contendere to the firearms charge, (2) failing to have the Head Start Director fire him, (3) firing him without being given notice of his right to object to the termination, (4) firing him without giving him two weeks notice, and (5) firing him without giving him a hearing in front of the PC.

    Does the Personnel Policies Manual prohibit the firing for the reason stated, does it require the procedures referenced, and if so, were these procedures followed?

[14 FSM Intrm. 433]

i. Did the Personnel Policies Manual allow YHS to fire Plaintiff for pleading nolo contendere to the firearms charge?

    Section III of the Personnel Policies Manual States that YHS will not refuse employment to anyone "because of criminal record, with the exception of . . . violent felonies." Plaintiff argues that this prohibition applies only at the time of hiring. In other words, the prohibition would allow YHS to refuse to hire someone who had a criminal record including the conviction for a violent felony, but it would not allow YHS to fire an employee who was convicted of a violent felony while already employed by YHS. Neither logic nor the plain reading of the section supports this argument. An employer who fires an employee is "refus[ing] employment" to the former employee.

    Therefore, the Personnel Policies Manual did not prevent YHS from firing Plaintiff for a post-hiring violent felony conviction. This leaves the question of whether Plaintiff s firearms conviction was a conviction for a violent felony. The term "violent felony" is not defined by the Personnel Policies Manual and the court was unable to find a definition in any Yap or FSM statute or case law. Plaintiff was convicted of violating 11 Y.S.C. § 904 which states that "[a]ny person who shall . . . possess or use any firearm shall be guilty of a felony." The plain meaning of the modifier "violent" is "moving, acting, or characterized by physical force, especially by extreme and sudden or by unjust or improper force." Black’s Law Dictionary 1570 (6th ed. 1990). Each party’s closing argument refers to the definition of "violent felony" that appears in the U.S. Code. That definition encompasses a felony that "involves conduct that presents a serious potential risk of injury to another." 18 U.S.C. § 924(e). Even using this more limited definition, the discharge of a handgun on a public road in a village at night is violent. The court finds that Plaintiff was convicted of a violent felony and therefore, pursuant to the Personnel Policies Manual, he could be denied continued employment at YHS.

[14 FSM Intrm. 434]

    Plaintiff argues that neither Defendant nor the PC had evidence of Plaintiff’‘s conviction at the time Plaintiff was terminated. Plaintiff argues that Reg was terminated on the day the conviction was formally entered so that neither Defendant nor the PC had any documentary evidence of the conviction when the termination was done. Plaintiff cites to no authority that this evidence is required. It is not. Plaintiff was terminated after he was convicted of a violent felony and the termination was made on the basis of the conviction.

ii.  Did the Personnel Policies Manual require YHS to follow certain procedures referenced in the manual?

    Plaintiff argues that the termination was procedurally deficient in that it did not comply with the Personnel Policies Manual in four respects: 1) the YHS Director should have terminated him; 2) he was not given notice of his right to object to the termination; 3) be was not given two weeks notice; and 4) he was not given a hearing before the PC.

a.  Termination by YHS Director

    The Personnel Policies Manual states in no uncertain terms that the YHS Director "will carry out the responsibility" of terminating YHS employees. YHS was required to follow this procedure in terminating Plaintiff.

    At the time Plaintiff was terminated, the YHS Director was on administrative leave. The acting director during this period was a Yap Department of Education employee named Mike Caldwell. It is undisputed that Plaintiff was terminated by Defendant and not the acting YHS Director. This variation from the procedure is inconsequential. The requirement that the YHS Director perform the termination is a "responsibility" placed on YHS Director rather than a procedural right vested in the employee. The PC approved Plaintiff’s termination. Despite Plaintiff’s unsubstantiated allegation that the PC was forced to "rubber stamp" the termination, Plaintiff has shown no harm resulting from this minor variation in procedure.

b.  Notice of right to object

    Plaintiff asserts that he should have been given notice of his right to object to the termination and that this notice should have informed him of his right to write to the supervisor, director and PC. Plaintiff does not point to any authority or to anything in the Personnel Policies Manual that requires that this notice be given. It was not required.

c.  Two weeks notice

    Plaintiff claims that Section IX(B)(4)(a) of the Personnel Policies Manual required YHS to give him two weeks notice of his termination.

    By their terms most of the Disciplinary Action procedures set out in the manual are not mandatory, but rather are guidelines. The preamble to the section says this explicitly. The description of several of the steps in the disciplinary process (verbal warning, written warning, and suspension for no more than three working days) states that the steps "may" be taken.

    The involuntary dismissal portion of the manual is slightly different. It states, in relevant part: "The Head Start Director will present to the PC the case involving the employee and recommend termination in two (2) weeks. The PC must approve this action before the employee can be terminated." This section is poorly written, but the only sensible interpretation of it requires a

[14 FSM Intrm. 435]

termination to be approved by the PC and to be carried out with two weeks notice to the employee.

    The court is mindful that the preamble to the section states that the disciplinary actions are not mandatory. The involuntary termination portion of that section is stated in mandatory terms, however. When read together, the manual appears to require that the involuntary dismissal procedure be followed. Where the procedure is set out in such detail and phrased with mandatory language the earlier general statement that disciplinary procedures are guidelines must give way. Cf. Toussaint v. Blue Cross & Blue Shield of Michigan, 292 N.W.2d 880, 885 (Mich. 1980) (an employee’s legitimate expectations grounded in an employer’s written policy statements can give rise to an enforceable contract where the statements are definite).

    Defendant, not the YHS Director, presented the case to the PC. Again, this variation from the procedure is inconsequential. The requirement that the YHS Director present the case is a burden placed on YHS Director rather than a procedural right vested in the employee.  The PC approved Plaintiff’s termination. Despite Plaintiff’s unsubstantiated allegation that the PC was forced to "rubber stamp" the termination because Defendant presented the case, Plaintiff has shown no harm resulting from the YHS Director’s failure to present the case.

    It does appear, however, that Plaintiff was not afforded the two weeks of pay that he should have received had the procedure been followed. In this regard, YHS breached its contract with Plaintiff and Plaintiff is due his expectation damages. Plaintiff’s damages under the contract are the amount he would have been paid for those two weeks. See Alik v. Kosrae Hotel Corp., 5 FSM Intrm. 294, 296 (Kos. 1992).

d.  Hearing before PC

    Plaintiff claims that his contract was breached because he did not receive a hearing before the PC. Plaintiff does not point to any authority or to anything in the Personnel Policies Manual that requires that he be given a hearing before the PC. It was not required.

C.  Damages

    Plaintiff is due what he should have been paid during the two-week notice period that was required by the contract. Plaintiff’s uncontested testimony was that he was paid $20,500 per year as the Assistant Director of YHS. Therefore, Plaintiff is owed $788.46. The employee’s share of taxes should be deducted from this amount and paid to the appropriate taxing agencies as required by law. The employer’s share of applicable taxes should not be deducted from this amount, but should be paid to the appropriate taxing agencies as required by law.

    DOE was grantee of YHS during all relevant periods. When Defendant, as Director of DOE, took over control of YHS, he assumed the contractual obligations of YHS. Therefore, damages are awarded against Defendant in his capacity as Director of DOE.

II.  State Public Service System Act

    If Plaintiff s employment with YHS was covered by the Yap State Public Service System Act then he may have had rights in addition to those afforded by the Personnel Policies Manual.

A.  Applicability

    The act &q uot;shall apply to all employees of and positions in the State government now existing or

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hereafter established and to all personnel services performed for that government." 8 Y.S.C. § 141. In his trial testimony Defendant conceded that both the State and YHS termination policies applied to Plaintiff’s termination.

    Without this concession and before the Department of Education rescinded its delegation of grantee status to Yap-CAP, the question of whether YHS employment was state employment would be a difficult question to answer. Once Defendant, as Yap’s Director of Education, took over control of YHS, appointed a DOE employee as the YHS Acting Director, and exercised the power to terminate a YHS employee on the advice of a Yap Assistant Attorney General, the answer becomes clear. When an individual or entity exercises the power to fire an employee, they become an employer of that employee.

    Additional evidence was adduced at trial that showed that Yap State, through the Department of Education, was in control of YHS at the time of Plaintiff’s termination. Defendant testified that he took over YHS after hearing from the Head Start funding source in the U.S. that funding might be withdrawn from YHS because of noncompliance with the U.S. Head Start requirements. U.S. Head Start told Defendant that immediate corrective action was necessary. Defendant then consulted with the PC. Because he found it difficult to work the PC and because the PC was not organized in compliance with U.S. Head Start requirements, he reconstituted the PC. Defendant testified that he worked with Caldwell after he appointed Caldwell as YHS Acting Director. In fact, Defendant acted as a de facto Director of YHS. For instance, he, rather than Caldwell, presented the case for terminating Plaintiff to the PC and performed the actual termination. Pursuant to the Personnel Policies Manual, these tasks were to be performed by the YHS Director. Defendant also suggested that he had the power to approve the hiring of YHS employees. Defendant also testified that ultimate accountability for YHS rested with the Yap Department of Education.

    The court finds that for the purposes of the termination at issue, Plaintiff’s employment was state employment that was protected by Yap’s State Public Service System Act.

B.  Requirements

    The act states that "[n]o dismissal or demotion of [a] permanent employee shall be effective for any purpose until the management official transmits to the employee, by the most practical means, a written notice setting forth the specific reasons for the dismissal or demotion and the employee’s rights of appeal." 8 Y.S.C. § 187(b). The rights of appeal that Plaintiff should have been afforded and informed of include: 1) an appeal through the Chief of Division of Personnel, 2) a hearing before an ad hoc committee where the Plaintiff has a right to be heard and evidence is taken and recorded, 3) a full written report of findings and recommendations to the highest management official at YHS. See 8 Y.S.C. § 187(c).

    There is no dispute that the termination letter sent to Plaintiff stated the reason for his termination, but did not set forth his appeal rights. As such, Plaintiff’s dismissal was not "effective" under 8 Y.S.C. § 187(b).

C.  Remedy

    Plaintiff seeks reinstatement to his former position and back pay to the date of his termination to the date he is reinstated. These remedies are generally available to an employee who has shown

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wrongful discharge. See generally 82 Am. Jur. 2d Wrongful Discharge §§ 247, 251 (1992). Plaintiff agrees that the amount awarded in back pay should be reduced to the extent he has mitigated his damages by securing other employment. See Restatement (Second) of Contracts § 350(1) (1981).

    The uncontroverted testimony of Plaintiff showed the following employment history after his termination. Plaintiff was unemployed from April 28, 2001 until May 1, 2002. From May 1, 2002 through April 30, 2004, Plaintiff was employed by the Yap Legislature and earned $13,000 per year. From May 1, 2004 through June 31, 2004, Plaintiff was unemployed. On July 1, 2004, Plaintiff began his employment with the District Preservation Office where he has earned and is currently earning $10,000 per year. Plaintiff introduced no evidence of his efforts to mitigate his damages by attempting to secure a job during his periods of unemployment. As such, Plaintiff is precluded from recovery of damages for these periods. See Restatement (Second) of Contracts § 350(2) (1981); see also Panuelo v. Pepsi Cola Bottling Co. of Guam, 5 FSM Intrm. 123, 129 (Pon. 1991) (a court will not compensate an injured party for a loss that he could have avoided by making efforts appropriate, in the eyes of the court, to the circumstances).

    Therefore, Plaintiffs back pay damages are $15,000.00 for the period from May 1, 2002 through April 30, 2004 and $22,816.96 for the period from July 1, 2004 through August 31, 2006 for a total of $37,816.96 for the period from Plaintiff’s termination through August 31, 2006. For each week after August 31, 2006 that one of the following has not been completed, the amount of back pay owed shall increase by $201.92;

1)  Plaintiff is afforded the procedural protections outlined in the State Public Service System Act and is terminated in accordance with the law and his contractual rights under the applicable YHS personnel manual; or

2)  Plaintiff is offered the job from which he was wrongfully terminated (or its substantial equivalent).

III.  Conclusion

    YHS’s Personnel Policies Manual constituted an employment contract with Plaintiff. YHS breached the contract by failing to provide Plaintiff with two weeks notice of his termination. Defendant assumed the contractual obligations of YHS when he assumed control of the organization and exercised YHS’s authority to terminate YHS employees. Defendant, in his capacity as Director of Education, is liable to Plaintiff for damages in the amount of $788.46 under the terms outlined above.

    At the time Plaintiff was terminated from YHS his employment was protected by the State Public Service System Act. Plaintiff was not afforded the procedural rights guaranteed by the act. Therefore, Defendant, in his capacity as Director of Education, is liable to Plaintiff for back pay damages in the

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amount of $37,816.96 plus $201.92 per week from September 1, 2006 until Plaintiff is either properly terminated or is offered his job with YHS or the job’s substantial equivalent.

Judgment will be issued in a separate document.

______________________________

Footnotes:

1.  Common law decisions of the courts of the United States are an appropriate source of guidance for this court for contract and tort issues unresolved by statutes, decisions of constitutional courts here, or custom and tradition within the FSM. See Semens v. Continental Air Lines, Inc.(I), 2 FSM Intrm. 131, 140 (Pon. 1985). The judicial guidance clause of the FSM Constitution requires that this court’s review of decisions of courts of the United States to proceed against background of "pertinent aspects of Micronesian society and culture." Id. Where the business activities which gave rise to the lawsuit are not of a local or traditional nature, and the work setting and the work itself are of a markedly non-local, international character, the court need not conduct an intense search for applicable customary laws and traditional rules when none have been brought to its attention by the parties. Id. Here, the activity in question is of a non-local, international character in that it is a program conceived of, modeled after, and funded by the Head Start program in the United States. No applicable customary laws or traditional rules have been brought to the court’s attention and none are apparent.

2.  There was no testimony concerning what Reg was told concerning the job at the time he was hired. It is also not clear exactly when Reg received the Personnel Policies Manual Based upon his uncontroverted testimony, though, it is clear he received it prior to being placed on administrative leave. It does not matter, however, whether it was received at the time Reg was hired or at some later time because the distribution of the manual may act as an offer of a unilateral contract even if there was no unilateral contract offered at the time of hiring. This is so because the consideration for the contract was supplied when Reg continued to work, after receipt of the manual, when he had no obligation to do so. See Pine River, 333 N. W.2d at 629-30; Hoffman-La Roche, Inc. v. Campbell, 512 So.2d 725,733-34 (Ala. 1981).

3.  The relevant portions of the personnel manual are as follows:

III. HIRING AND TERMINATION PROCEDURES
. . .
         A. General Standards
. . .
                    6. The Head Start Program will not refuse anyone employment because of criminal record, with the exception of embezzlement of federal funds, violent felonies and child abuse/molestation convictions.
. . .
         D. Termination of Employees
. . .
                    2. The PC [Policy Council] must approve or disapprove the termination of the Head Start staff and the Head Start Director will carry out he responsibility
. . .

IX. DISCIPLINARY ACTION

The disciplinary action policy of the Head Start Program is a set of guidelines to help both the employee and the employer. The listing of offenses is not all inclusive, nor are the disciplinary actions mandatory. Rather, they are to be used as guides in determining appropriate action when it becomes necessary to discipline an employee.

Disciplinary action can be taken when an employee breaks a specific rule, regulation, policy, request or order (verbal or written).

A. Offenses

The following list is to be viewed as examples of minor and major offenses.
. . .

B. Disciplinary Process

1. Verbal Warning
The employee may be given two (2) verbal warnings . . .
2. Written Warning
The employee may be given one (1) written warning . . .
3. Suspension for no more than three working days

A supervisor may initiate suspension of an employee . . .
4. Dismissal

a. Involuntary dismissal
The Head Start Director will present to the PC the case involving the employee and recommend dismissal in two (2) weeks. The PC must approve this action before the employee can be terminated. Employees who are terminated involuntarily are entitled to any pay due . . .

X. COMPLAINT PROCEDURES
If an employee is dissatisfied with a personnel action, or if there should be some other complaint or misunderstanding, these procedures should be followed:

1.  The employee should present the complaint in writing to his or her immediate supervisor within fifteen (15) calendar days of the date of the act or occurrence, or the employees [sic] awareness of the act or occurrence, for which the complaint is being filed.
     The supervisor will resolve the matter.

2.  f the matter is not resolved in a satisfactory manner, or if the employee believes there is a valid reason for not taking the compliant to his or her immediate supervisor, the employee may refer it in writing to the next highest supervisor.

3.  If the matter is not resolved, the employee may then go to the Head Start Director . . . and then to the PC Personnel Committee who will have final mediating authority.

4.  Supervisors and other management officials have an obligation to accept an employees [sic] complaint and to act promptly, fairly, and in good faith in the issue or issues presented in the complaint. . . .

4.  The act exempts certain individuals from its protection, but the exemptions are not at issue here.

5.  This is equal to the difference between what Plaintiff would :have earned at YHS in the two year period ($20,500 x 2) minus what Plaintiff actually earned in the two year period ($13,000 x 2), or $41,000 minus $26,000.

6.  This is equal to the difference between what Plaintiff would have earned at YHS over the 113 week period ($394.23 x 113) minus what Plaintiff actually earned in the 113 week period ($192.31 x 113), or $44.547.99 minus $21,131.03.

7.  This is equal to the difference in weekly pay between Plaintiff’s YHS job and his current job.

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