D.C. Court Dismisses Class Action Breach of Contract Case Based on Policy Manual

by BakerHostetler
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Supervisory employees’ claims derailed by merits

It’s unusual to see an employment class action based on breach of contract by nonunionized employees. A recent case from the District of Columbia involving the Washington Metropolitan Area Transit Authority (WMATA), reflects why, and highlights problems that occur when employees try to bring class-wide claims based on the employer’s policy manuals.

First, some background. The transit system in Washington, D.C., has drawn a great deal of unfavorable publicity over its expense, safety issues, frequent service interruptions and other issues. Despite ridership declines in the wake of several highly publicized safety issues and service problems, the Metro has approximately 12,500 employees, over 1,000 of whom make over $100,000 in base pay. The average pay for all Metro employees is $84,000 plus generous fringe benefits costing nearly $40,000 more. Most of these employees are unionized and WMATA pays over $100 million per year in overtime costs. So how do the supervisors fare?

In Dawson v. Washington Metropolitan Area Transit Authority, Civil Action No. 15-2092 (RBW) (D.D.C. June 23, 2017), the plaintiffs were supervisors for WMATA. They contended that WMATA’s published salary policies promised that supervisors would make at least 5 percent more than their highest paid direct reports. They sought to represent a class of supervisors (including themselves) they claim were underpaid pursuant to this policy.

While a class action, the court undertook the analysis one might expect in an individual handbook case. It examined the terms of the policy, much as a court would in an individual case based on an employee handbook, to determine whether they would constitute an enforceable contract. It found that the policy encouraged the 5 percent differential as part of its compensation philosophy and also to avoid salary compression. Significantly, however, the policy also made salary adjustments “subject to budgetary conditions” and gave WMATA’s general manager “discretion to modify, change, or expand the salary structure” and to limit or cap salary adjustments if in WMATA’s best interests. Faced with such language, the court unsurprisingly found that the policy did not constitute a contract and granted summary judgment in the employer’s favor.

The decision in Dawson is demonstrative of the problems nonunionized employees face in asserting class-wide breach of contract claims. Years ago, in Sprague v. General Motors Corp., 133 F.3d 388 (6th Cir. 1998) (en banc), the Sixth Circuit similarly rejected class-wide claims for retiree medical benefits by a class of salaried employees, even though it has freely found for unionized employees asserting similar claims involving a collective bargaining agreement. With most employers disclaiming handbooks and reserving discretion in their policy manuals, it is difficult for nonunion employees to establish the threshold agreement they need to assert a claim.

The bottom line: Nonunion employees seeking to assert class action breach of contract claims may face fatal obstacles on the substantive merits of their claims.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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