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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Hoendermis v. Advanced Physical Therapy, Inc. (4/29/2011) sp-6558

Hoendermis v. Advanced Physical Therapy, Inc. (4/29/2011) sp-6558, 251 P3d 346

        Notice:  This opinion is subject to correction before publication in the PACIFIC REPORTER. 
        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,   e-mail 
        corrections@appellate.courts.state.ak.us. 

                THE SUPREME COURT OF THE STATE OF ALASKA 

PATRICIA K. HOENDERMIS,                              )
                                                     ) 
               Appellant/Cross-Appellee,             )
                                                     )
      Supreme Court No. S-13462/13481 	 	     )
        					     ) 
v.                                           	     ) 
                                                     )       Superior Court No. 
ADVANCED PHYSICAL THERAPY, INC., 		     )       3AN-06-07728 CI 
d/b/a ADVANCED PHYSICAL THERAPY                      ) 
OF ALASKA; ADVANCED PAIN                             ) 
THERAPEUTICS OF ALASKA, LLC,                         )       O P I N I O N 
d/b/a ADVANCED PHYSICAL THERAPY                      ) 
OF ALASKA; and VALERIE PHELPS,                       )       No. 6558 - April 29, 2011 
                                                     )
               Appellees/Cross-Appellants.           )
 
_____________________________________)
 

               Appeal from the Superior Court of the State of Alaska, Third 
               Judicial District, Anchorage, John Suddock, Judge. 

               Appearances:       Kenneth      W.    Legacki,     Anchorage,     for 
               Appellant.       John    S.  Hedland,    Hedland,     Brennan     and 
               Heideman, Anchorage, for Appellees. 

               Before:    Carpeneti, Chief Justice, Fabe, Winfree, Christen, 
               and Stowers, Justices. 

               STOWERS, Justice. 

I.       INTRODUCTION 

               Advanced Physical Therapy (APT) terminated the employment of Patricia 

Hoendermis ("Patti"), the clinic's practice administrator, for an inability to communicate 

with her co-workers and supervisor. Hoendermis sued APT for wrongful termination and 

----------------------- Page 2-----------------------

failure to provide overtime compensation.           The superior court granted APT summary 

judgment on both claims.         Hoendermis appeals.        We reverse the grants of summary 

judgment because there are genuine issues of material fact regarding both claims. 

II.     FACTS AND PROCEEDINGS 

        A.      Hoendermis's Job Responsibilities 

                Patti Hoendermis became an APT employee in October 2000. Hoendermis's 

initial job title was "practice manager."  It was changed to "practice administrator" in an 

internal restructuring in November 2005. 

                Valerie Phelps has been the president of APT since Hoendermis was hired. 

 Phelps asserted in an affidavit that Hoendermis acted as an administrative or executive 

employee   throughout   her   tenure   at   APT,   spending   at   least   80   percent   of   her   time 

managing   the   clinic.   Phelps   stated   that  Hoendermis's   job   responsibilities   included 

creating a policy and procedure manual, securing bank loans and lines of credit, putting 

together APT's insurance package and pension fund, working with APT's lawyer on 

contracts, working with APT's accountant on taxes, and researching and leasing office 

space    and   equipment.      Phelps    stated  that  she   started  taking   away    Hoendermis's 

responsibilities   with   respect   to   the   clinic's  finances   and   budget   in   November   2005 

because Hoendermis made so many mistakes in those areas. 

                Phelps   also   asserted   that   Hoendermis,   at   least   until   November   2005, 

managed APT's administrative employees.               In a deposition, Phelps testified that by 

November 2005 Hoendermis no longer supervised other employees but did act as a "go- 

to person" for questions.       However, in an affidavit, Phelps asserted that Hoendermis 

"regularly directed the work of the clinic's nonprofessional (administrative) staff" and 

did not state that these responsibilities ended in November 2005. 

                Hoendermis disputed Phelps's description of her job responsibilities.  She 

asserted in her affidavit that she performed "bookkeeping and secretarial duties" and at 

                                                  -2-                                           6558
 

----------------------- Page 3-----------------------

least 50 percent of her time was spent "doing clerical kinds of things" like note-taking, 

bookkeeping, ordering supplies, and unplugging the toilet. She stated that she lacked any 

managerial or decision-making power and did not supervise any staff. 

        B.      The Policy And Procedure Manual 

                All employees at APT were subject to APT's Policy and Procedure Manual. 

The manual specified that all APT employees were employed at will, and that "the 

company may end the employment relationship at any time, with or without cause, with 

or   without    advance     notice."    It  also  provided    that   "[e]mployees     terminated     for 

misconduct may be discharged immediately, without advanced notice." 

                The manual described a progressive disciplinary action plan that included 

verbal counseling, a first written warning, a second written warning, and discharge. 

Before describing the steps for progressive discipline, the manual specified that APT 

"reserves   the   right   to   determine   in   its   sole   and   unlimited   discretion   when   and   if 

progressive discipline will be used and always reserves the right to discharge employees 

without cause and/or previous notice." After describing the progressive discipline steps, 

the manual provided that "[w]hether and to what degree progressive discipline will be 

used is always subject to the unlimited discretion of [APT] management.  For example, 

there   may   be   extraordinary   circumstances  (malicious   destruction   of   property,   theft, 

dishonesty, etc.) that would warrant immediate discharge without prior suspension or 

prior verbal or written warning." 

        C.      Hoendermis's Termination 

                APT terminated Hoendermis's employment on January 10, 2006 as a result 

of Phelps's perception that Hoendermis wasunable "to work effectively with or get along 

with other individuals employed in the clinic" and that Hoendermis had failed "to take 

the necessary steps to resolve the problem." 

                                                  -3-                                            6558
 

----------------------- Page 4-----------------------

                The immediate precipitating event was an argument about invoices that 

occurred the week before between Hoendermis and Lynn Crockett, APT's part-time 

bookkeeper. After the argument Hoendermis left the office for approximately two hours. 

Phelps   asserted   that   when   she   asked  Hoendermis   to   discuss   the   incident   with   her, 

Hoendermis refused to speak with Phelps when Phelps was available.                      Hoendermis 

asserted that she did not refuse to speak with Phelps. 

                Phelps described other problems that Hoendermis had working with others. 

She stated that Hoendermis would get upset with other employees and "continually go 

after" them, complaining about them to other employees at the expense of her work. 

Hoendermis complained frequently to Phelps about her problems with other employees. 

Phelps asserted that she discussed these problems with Hoendermis several times over 

a matter of years. 

                After   her   termination    Hoendermis      filed  for  unemployment       insurance 

benefits with the Alaska Department of Labor and Workforce Development, but was 

denied.   She appealed the denial to the department's appeal tribunal.  In March 2006 the 

appeal    tribunal   affirmed    the  denial   of  benefits,  concluding     that  Hoendermis      was 

discharged for misconduct because she continued to get into arguments with co-workers 

after Phelps asked her to stop. 

        D.      Procedural History 

                In May 2006 Hoendermis filed a complaint in the superior court alleging 

that she had been wrongfully terminated in violation of APT's policy manual, which she 

asserted was a contract, and in violation of the covenant of good faith and fair dealing. 

She also alleged that APT had failed to pay her overtime compensation in violation of 

state and federal law. 

                On June 23 APT moved for summaryjudgment. It argued that Hoendermis 

was    not   eligible   for  overtime    compensation       because    she   was   an   executive    or 

                                                  -4-                                           6558
 

----------------------- Page 5-----------------------

administrative employee.  It also argued that Hoendermis was an at-will employee and 

that the policy manual expressly allowed APT to dismiss employees with or without 

cause.   APT argued that Hoendermis was collaterally estopped from claiming wrongful 

termination because the Department of Labor and Workforce Development found that 

she had been dismissed for misconduct.  It also argued that Hoendermis did not present 

any evidence showing that APT violated the covenant of good faith and fair dealing. 

                Hoendermis filed an opposition to the motion for summary judgment and 

a   cross-motion   for   summary   judgment.        She  alleged   that   APT   did   not   afford   her 

progressive discipline as required in the policy manual.             She also alleged that she was 

disparately treated in violation of the covenant of good faith and fair dealing because 

other employees committed more serious infractions than she did, including assault and 

inappropriate intimate interactions with patients, but they were not terminated.                    She 

further alleged that she was not an administrative or executive employee and was thus 

eligible for overtime compensation. 

                At   a   hearing   on   August   18,   2008,   the  superior   court   granted   complete 

summary judgment to APT. The court foundthat Hoendermis had not raised any genuine 

issue   of   material   fact   suggesting   that  she   was   not   an   administrative   or   executive 

employee and therefore entitled to overtime compensation.                It also found that (1) APT 

had   not   wrongfully   terminated   Hoendermis   because   she   was   an   at-will   employee, 

(2)    APT     was    not   required    to   offer   Hoendermis       progressive     discipline,    and 

(3) Hoendermis had not presented evidence of disparate treatment that should have been 

presented to a jury. 

                On August 20 APT filed a motion for attorney's fees pursuant to Civil Rule 

68(b)(1) based upon a one dollar offer of judgment that APT made on June 16, 2006, 

shortly after Hoendermis filed her original complaint.  APT alternatively requested fees 

                                                  -5-                                             6558
 

----------------------- Page 6-----------------------

pursuant to Civil Rule 82(b)(2).        The superior court denied APT's request for Rule 68 

fees, but granted its request for Rule 82 fees. 

                The court entered a final judgment in favor of APT. 

                Hoendermis appeals, asserting that the superior court erred in granting 

summary judgment because there were material factual disputes for both her overtime 

compensation claim and wrongful termination claim. 

                APT cross-appeals, asserting that the superior court erred in failing to award 

it Rule 68 attorney's fees. 

III.    DISCUSSION 

        A.      Standard Of Review 
                We review a superior court's grant of summary judgment de novo.1              In our 

review,   we   must   determine   "whether   any   genuine   issue   of   material   fact   exists   and 

whether on the established facts the moving party is entitled to judgment as a matter of 
law."2   We draw all factual inferences in favor of, and view the facts in the light most 

favorable to, the party against whom summary judgment was granted.3 

        1       Nielson v. Benton, 903 P.2d 1049, 1052 (Alaska 1995) (citing Tongass 

Sport Fishing Ass'n v. State, 866 P.2d 1314, 1317 (Alaska 1994)). 

        2      Id. (citing Wright v. State, 824 P.2d 718, 720 (Alaska 1992)). 

        3       Rockstad v. Erikson, 113 P.3d 1215, 1219 (Alaska 2005) (citingEllis v. City 

of Valdez, 686 P.2d 700, 702 (Alaska 1984)). 

                                                 -6-                                            6558
 

----------------------- Page 7-----------------------

        B.	      It Was Error To Grant APT Summary Judgment On The Overtime 
                 Compensation Claim. 

                 The    Alaska    Wage     and   Hour    Act   (AWHA)        governs    the  payment      of 
overtime.4    AWHA does not apply to bona fide executive or administrative employees.5 

An administrative employee is one 

                 (A) whose primary duty consists of work directly related to 
                management   policies   or   supervising   the   general   business 
                 operations of the employer; 

                 (B) who customarily and regularly exercises discretion and 
                 independent judgment; 

                 (C) who performs work only under general supervision; 

                 (D) who is paid on a salary or fee basis; 

                 (E)   who   regularly   and   directly  assists   a   proprietor   or   an 
                 exempt executive employee of the employer; and 

                 (F) who performs work along specialized or technical lines 
                requiring special training, experience or knowledge and does 
                not   devote   more   than   20   percent   .   .   .   of   the   employee's 
                weekly   hours   to   activities   that   are   not   described   in   this 
                                                                 [  ] 
                paragraph or (7) or (11) of this section. 6 

An executive employee is one 

        4       AS 23.10.050-.150. 

        5       AS 23.10.055(a)(9)(A). 

        6        Former 8 Alaska Administrative Code (AAC) 15.910(a)(1) (repealed 2008, 

Reg. 185).     Paragraph (7) defines "executive employee," and paragraph (11) defines 
"professional employee." 

                 It does not appear that a replacement regulation has been adopted, so we 
may discuss 8 AAC 15.910(a)(1) (as well as 8 AAC 15.910(a)(7), see infra note 7) as if 
it remains in effect.  See Laidlaw Transit, Inc. v. Anchorage Sch. Dist., 118 P.3d 1018, 
1023 n.8 (Alaska 2005). 

                                                    -7-	                                             6558
 

----------------------- Page 8-----------------------

                 (A) whose primary duty consists of the management of the 
                 enterprise     in  which     the  employee      is  employed      or  of   a 
                 customarily recognized branch, department, or subdivision of 
                 the enterprise; 

                 (B) who customarily and regularly directs the work of two or 
                 more other employees; 

                 (C) who has the authority to hire or fire or effect any other 
                 change of status of other employees or whose suggestions or 
                 recommendations regarding these kinds of changes are given 
                 particular weight; 

                 (D) who customarily and regularly exercises discretionary 
                 authority; 

                 (E) who does not devote more than 20 percent . . . of the 
                 employee's weekly hours to activities that are not directly and 
                 closely related to the work described in this paragraph or (1) 
                 or (11) of this section; and 

                                                                     [  ] 
                 (F) who is compensated on a salary basis. 7 

                 Hoendermis argues that the superior court failed to consider the evidence 

she   set   forth   supporting   her   claim   that   she   was   not   an   administrative   or   executive 

employee. 

                 We   must   decide   if   there   is   a   genuine   issue   of   material   fact   whether 

Hoendermis was an administrative or executive employee and consequently not entitled 

to overtime compensation under AWHA.                  We must construe the evidence in the light 

most favorable to Hoendermis because the superior court granted summary judgment 
against   her.8    An   employee   must   meet   all   of   the   requirements   established   in   the 

definitions of administrative or executive employees in order to be exempt from AWHA; 

        7        Former 8 AAC 15.910(a)(7) (repealed 2008, Reg. 185). 

        8        See Am. Rest. Grp. v. Clark, 889 P.2d 595, 597 (Alaska 1995). 

                                                     -8-                                                 6558 

----------------------- Page 9-----------------------

an   issue   of   material   fact   as   to   only   one   of   the   requirements   is   sufficient   to   defeat 
summary judgment on the overtime compensation claim.9 

                In its summary judgment motion, APT has the burden of making a prima 

facie showing that there are no genuine issues of material fact and that it is entitled to 
judgment      as  a  matter   of  law.10   Upon     this  initial  showing,    the  burden    shifts  to 

Hoendermis, who then must "set forth specific facts showing genuine issues and cannot 
rest on mere allegations."11      The parties can submit affidavits supporting or opposing a 

motion for summary judgment provided they are "based upon personal knowledge."12 

                APT established a prima facie case that Hoendermis was an administrative 

or    executive    employee      by   presenting    sworn     factual   assertions   regarding     each 

requirement.     These, along with Hoendermis's disputing sworn factual assertions, are 

discussed below. 

                 In her affidavit supporting APT's motion for summary judgment, Phelps 
asserted   that   Hoendermis's   responsibilities   were   primarily   managerial,13         including 

directing     administrative     staff  and   overseeing     "all  aspects    of  clinic   operation." 

Hoendermis presented conflicting material facts. She asserted in her affidavit supporting 

her opposition to APT's motion for summary judgment that by November 2005 her 

"primary duties were no longer related to management policies" because Phelps had 

        9       See Whitesides v. U-Haul Co. of Alaska, 16 P.3d 729, 735 (Alaska 2001). 

        10      See Charles v. Interior Reg'l Hous. Auth., 55 P.3d 57, 59 (Alaska 2002). 

        11      Witt v. State, Dep't of Corr., 75 P.3d 1030, 1033 (Alaska 2003) (quoting 

Braun v. Alaska Commercial Fishing & Agric. Bank, 816 P.2d 140, 144 (Alaska 1991)). 

        12      Broderick v. King's Way Assembly of God Church, 808 P.2d 1211, 1215 

(Alaska 1991). 

        13      See former 8 AAC 15.910(a)(1)(A); former 8 AAC 15.910(a)(7)(A). 

                                                  -9-                                            6558
 

----------------------- Page 10-----------------------

gradually removed her from management.                She stated that she did not supervise any 

employees and did not advise Phelps on financial or other aspects of the business. APT, 

in   its  reply  to  Hoendermis's       opposition    to  summary      judgment,     pointed   out   that 

Hoendermis referred to herself as a practice manager or administrator in business letters 

sent after the November 2005 reorganization.  APT also referred to Hoendermis's post- 

APT resume, in which she referred to her position at APT as "practice manager" and 

described her managerial experience.  Hoendermis's use of the "practice manager" job 

title is not determinative. Federal labor regulations provide that "[a] job title alone is 

insufficient to establish the exempt status of an employee," which "must be determined 

on the basis of whether the employee's salary and duties meet the requirements" for 
exempt status.14     Hoendermis's description of managerial experience on her resume is 

also not determinative because it could have referred to her work before November 2005. 

Hoendermis   raised   a   genuine   issue   of   material   fact   on   the   issue   whether   her   job 

responsibilities were primarily managerial. 

                Phelps asserted in her affidavit that Hoendermis exercised discretion and 
independent judgment,15 "regularly direct[ing] the work of the clinic's nonprofessional 

(administrative) staff . . . , monitoring and making reports regarding financial issues of 

the clinic and had general oversight of all aspects of clinic operation."                 Hoendermis 

presented a genuine issue of material fact, asserting in her affidavit that she did not 

        14      See 29 C.F.R.  541.2 (2005).   These federal regulations are not binding in 

Alaska,   but   may   be   adopted   here.  See   AS   23.10.095   ("The   commissioner   [of   the 
Department       of  Labor    and    Workforce     Development]       may    adopt    regulations    and 
interpretations that are made by the administrator of the Wage and Hour Division of the 
federal    Department      of  Labor    and   that are   not  inconsistent    with   AS    23.10.050   - 
23.10.150."). 

        15      For   the   definition   of   an   administrative   employee,  see   former   8   AAC 

15.910(a)(1)(B); former 8 AAC 15.910(a)(7)(D). 

                                                  -10-                                            6558
 

----------------------- Page 11-----------------------

exercise discretion or independent judgment.  She stated that she did not make financial 

decisions,   had   no   authority   to   change   leases,   and   could   not   discipline,   hire,   or   fire 

employees. 
                Phelps asserted in her affidavit that Hoendermis was paid on a salary.16 

Hoendermis asserted in her opposition to summary judgment that the fact that she had 

to keep track of her time on a time card was "inconsistent with exempt status."  We have 

held that an employee was treated as an hourly rather than a salaried employee when he 

was subjected to "a rigid hourly schedule" and the employer "strictly enforc[ed] that 
schedule with severe disciplinary sanctions."17   This is not the case here.                Hoendermis 

did keep track of which days she worked on a time sheet, but she did not maintain that 

she was held to a rigid schedule, and Phelps stated in her deposition that her employees 

were self-managed.  Hoendermis's time sheets did not establish an issue of material fact 

on the issue of salary. 

                Phelps asserted in her affidavit that if Hoendermis "devoted any of her work 
time to matters other than administrative or executive functions, it was less than 20%."18 

Phelps also asserted in her affidavit that Hoendermis's work "required special experience 

and knowledge in areas of business management, bookkeeping and accounting, and legal 

areas."   Hoendermis asserted in her affidavit that at least 50 percent of her day was spent 

doing   clerical   work.     We   have   held   that   similar   conflicting   factual   assertions   as   to 
managerial/non-managerial time allocation created a genuine issue of material fact.19 

        16      See former 8 AAC 15.910(a)(1)(D); former 8 AAC 15.910(a)(7)(F). 

        17       Whitesides, 16 P.3d at 734. 

        18      See former 8 AAC 15.910(a)(1)(F); former 8 AAC 15.910(a)(7)(E). 

        19      See Am. Rest. Grp., 889 P.2d at 597 (finding genuine issue of material fact 

as   to   percentage   of  work   week   spent   performing   non-executive   duties   when   parties 
                                                                                          (continued...) 

                                                  -11-                                                6558 

----------------------- Page 12-----------------------

Hoendermis's assertion created an issue of material fact concerning the allocation of her 

time. 

                 Phelps asserted in her affidavit that Hoendermis regularly directed the work 
of the clinic's nonprofessional staff.20         Hoendermis presented an issue of material fact, 

stating   in   her   affidavit   that   she   did   not   supervise   the   administrative   employees   and 

pointing   to   Phelps's   assertions   in   her   deposition   that   Hoendermis   did   not   supervise 

anyone beginning two months before her termination. 

                 Phelps stated in her affidavit that Hoendermis "had responsibility for hiring 

and   firing   administrative   staff   and   made   recommendations   to   [Phelps]   concerning 
raises."21   Hoendermis countered, asserting in her affidavit that Phelps "evaluated all of 

the administrative staff's work, decided on raises, and made all decisions on the hiring 

and   firing   of  those   employees."     APT,   to   refute   Hoendermis's   assertion,   pointed   to 

e-mails   in   which   Hoendermis   communicated   with   potential   employees,   scheduling 

interviews and making offers. The most recent e-mail was dated June 17, 2005, however, 

well   before   November   2005   when   Phelps   removed   Hoendermis   from   many   of   her 

responsibilities and well before Hoendermis's termination in January 2006. The e-mails 

do not preclude Hoendermis from establishing a genuine issue of material fact regarding 

her   nonexempt   status   for   up   to   six   months   prior   to   her   termination.    Hoendermis 

presented an issue of material fact regarding her hiring and firing responsibilities. 

         19      (...continued) 

claimed differing percentages). 

        20       See former 8 AAC 15.910(a)(7)(B). 

        21       See former 8 AAC 15.910(a)(7)(C). 

                                                    -12-                                              6558
 

----------------------- Page 13-----------------------

                Phelps   asserted   in   her   affidavit   that   Hoendermis   only   worked   under 
Phelps's general supervision.22       Hoendermis did not contest this. 

                Phelps   asserted   in   her   affidavit   that   Hoendermis   regularly   and   directly 
assisted her.23   Hoendermis did not contest this. 

                From the affidavits and other evidence submitted by both parties, there are 

several   genuine   issues   of   material   fact  that   preclude   summary   judgment.   Deciding 

whether Hoendermis is entitled to overtime compensation will depend on weighing the 

credibility and persuasive strength of the parties' witnesses and evidence: this is the 
responsibility of the fact finder.24      We reverse the grant of summary judgment on the 

overtime compensation claim.25 

        C.	     It Was Error To Grant APT Summary Judgment On The Wrongful 
                Termination Claim. 

                1.	     The     Department        of   Labor     decision     does    not   preclude 
                        Hoendermis's claim. 

                APT argues that Hoendermis is collaterally estopped from asserting that she 

was     wrongfully     terminated     because    the   Department      of  Labor    and   Workforce 

Development found that she was terminated for misconduct. Hoendermis argues that the 

department's decision does not have a collateral estoppel effect on her case because the 

        22      See former 8 AAC 15.910(a)(1)(C). 

        23      See former 8 AAC 15.910(a)(1)(E). 

        24      See Whitesides v. State, Dep't of Pub. Safety, Div. Of Motor Vehicles, 20 

P.3d 1130, 1136-37 (Alaska 2001). 

        25      Because we are reversing the grant of summary judgment on the overtime 

claim, we do not need to decide whether APT's Rule 68 offer of judgment was valid. 
The superior court, however, correctly foresaw our decision in Beal v. McGuire, 216 P.3d 
1154 (Alaska 2009), and properly applied the factors described therein for evaluating 
Rule 68 offers. 

                                                 -13-	                                          6558
 

----------------------- Page 14-----------------------

department did not address all of the issues involved in the current case, and also that 

collateral estoppel should not apply to decisions from her unemployment compensation 

proceedings because those proceedings did not provide enough incentive to fully litigate 

the issues. 

                We may consider collateral estoppel as a basis for summary judgment even 
though the superior court did not base its summary judgment decision on those grounds.26 

                The decisions of administrative agencies can collaterally estop, or preclude, 

issues from relitigation in a judicial setting if the issue to be precluded is identical to the 
issue   decided   by   the   administrative  agency.27     However,   collateral   estoppel   analysis 

"would not apply if the amount at stake in the present case differ[s] substantially from 
that   in   the   [earlier]   proceeding."28 This   is   because   the  stakes   in   an   unemployment 

compensation proceeding may be substantially less than those involved in a wrongful 

termination lawsuit, and this difference may be sufficient to render collateral estoppel 

from such agency determinations inappropriate. But we do not decide that question here. 

        26      See Sopko v. Dowell Schlumberger, Inc., 21 P.3d 1265, 1269 (Alaska 2001) 

("We are not bound by the reasoning articulated by the lower court, and we can affirm 
a grant of summary judgment on alternative grounds, including grounds not advanced by 
the lower court or the parties.") (internal citations omitted). 

        27      See Johnson v. Alaska State Dep't of Fish & Game, 836 P.2d 896, 906 

(Alaska 1991) (internal citations omitted).           We have also emphasized, however, that 
although the decision to apply collateral estoppel is discretionary, "this discretion must 
be tempered by principles of fairness in light of the circumstances in each particular 
case."  Misyura v. Misyura, 242 P.3d 1037, 1040 (Alaska 2010) (quoting Borg-Warner 
Corp. v. Avco Corp. (Lycoming Div.), 850 P.2d 628, 638 (Alaska 1993)). 

        28      Sengupta v. Univ. of Alaska, 21 P.3d 1240, 1250 n.29 (Alaska 2001). 

                                                  -14-                                               6558 

----------------------- Page 15-----------------------

                We have held that the issue of employee misconduct considered by the 
Department of Labor is different than the issue of wrongful discharge.29              The department 

only determines whether an employee is eligible for benefits; it does not examine the 
employer's culpability.30 In the case at hand, the department determined that Hoendermis 

was not eligible for full benefits due to misconduct.              Hoendermis contends here that 

"[e]ven assuming that . . . [she] was at fault and committed misconduct at work," APT 

breached the covenant of good faith and fair dealing. The department did not address this 

issue   in   its   adjudication.    The   department's   decision   that   Hoendermis   committed 

misconduct therefore does not preclude a court from examining Hoendermis's breach of 

covenant of good faith and fair dealing claim. 

                2.      The policy manual did not guarantee progressive discipline. 

                Hoendermis argues that she was wrongfully terminated as a matter of law 

because   APT   failed   to   provide   her   with   progressive   discipline   in   violation   of   the 

procedure laid out in its policy manual.  She asserts that APT is bound by Alaska law to 

follow the manual's requirements when an employee has a reasonable expectation that 

the procedures will be followed, and she had that expectation. 

                APT responds that the manual expressly provided that all APT employees 

were   employed   at   will   and   could   be   discharged   for   any   reason,   and   that   the   use   of 

progressive discipline was within APT's unfettered discretion. 

                We     have    held   that  "employee      policy   manuals     may    modify     at-will 

employment   agreements,   and   that   whether   a   given   manual   has   modified   an   at-will 

        29      See Manning v. Alaska R.R. Corp., 853 P.2d 1120, 1124 (Alaska 1993); 

Luedtke v. Nabors Alaska Drilling, Inc. (Luedtke I), 768 P.2d 1123, 1131 n.5 (Alaska 
1989). 

        30      Manning, 853 P.2d at 1125. 

                                                  -15-                                               6558 

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employment agreement must be determined on the particular facts of each case."31  The 

employer is bound by the representations in the manual when the manual's provisions 
"create the reasonable expectation that employees have been granted certain rights."32 

In general, we have held that policy manuals modify at-will employment contracts and 

create rights for the employee when the manuals specifically state that the employee can 
only be terminated for cause.33 

                In Holland v. Union Oil Co. of California, we examined an employer's 

policy   memorandum   that   described   a   system   of   progressive   discipline   but   left   the 
employer with the discretion to skip any disciplinary steps.34  The memorandum provided 

a non-exclusive list of non-permitted activity and contained hedging terms such as "can 
result"   and   "steps   in   the   progressive   discipline   system   may   be   bypassed."35      We 

concluded that the language did not bind the employer to any disciplinary procedure, and 

that   "as   a   matter   of   law,   the   memo   could   not   create   a   reasonable   expectation   that 
employees have been granted certain rights."36 

                In its motion for summary judgment, APT established a prima facie case 

that its policy manual did not guarantee Hoendermis progressive discipline. As evidence, 

        31      Holland v. Union Oil Co. of Cal., 993 P.2d 1026, 1030 (Alaska 1999) 

(quoting Jones v. Cent. Peninsula Gen. Hosp., 779 P.2d 783, 787 (Alaska 1989)). 

        32      Parker v. Mat-Su Council on Prevention of Alcoholism and Drug Abuse, 

813 P.2d 665, 666 (Alaska 1991). 

        33      See, e.g., Jones, 779 P.2d at 785, 787; Parker, 813 P.2d at 666-67. 

        34      Holland, 993 P.2d at 1032. 

        35      Id. 

        36      Id. (quoting Parker, 813 P.2d at 666) (internal quotation marks omitted). 

                                                  -16-                                               6558 

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it pointed to the language within the policy manual describing the discretionary nature 

of progressive discipline. 

                Hoendermis argued in her opposition to summary judgment that APT was 

bound by the manual to provide progressive discipline because she had a reasonable 

expectation   that   she   would   receive   it.   Citing   Phelps's   deposition   testimony   that 

Hoendermis wrote the policy manual, Hoendermis argued that as the employee most 

familiar with the manual, she was in the best position to interpret it. Hoendermis asserted 

that she reasonably expected progressive discipline because others had received it and 

because APT's attorney told her that progressive discipline was mandatory. 

                Hoendermis's   arguments   fail   to   establish   a   reasonable   expectation   of 

progressive discipline. Her assertion that she was very familiar with the manual informs 

us that she was familiar with the entire manual: not only the progressive discipline steps, 

but also the statements directly preceding and following the steps which clearly stated 

that   APT   retained   unlimited   discretion   in  deciding   whether   to   provide   progressive 

discipline.    Hoendermis's expectations arising from her observations of others and her 
alleged conversation with APT's attorney37 do not change the fact that the manual itself 

did not create a reasonable expectation of a right to progressive discipline. 
                This case is very similar to Holland, and we hold, as we did in Holland,38 

that as a matter of law APT's policy manual did not create a reasonable expectation that 

Hoendermis was guaranteed progressive discipline. 

        37      The attorney denied in his affidavit telling Hoendermis that progressive 

discipline was required. 

        38      993 P.2d at 1032. 

                                                -17-                                             6558 

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                3.	     There are genuine issues of material fact whether APT violated 
                        the covenant of good faith and fair dealing. 

                Hoendermis argues that her termination violated the covenant of good faith 

and fair dealing because "other employees who had committed much more egregious 

actions were not disciplined."        APT argues that it did not violate the covenant of good 

faith and fair dealing because Hoendermis was not similarly situated with the other 

employees who were not disciplined.            We must determine whether the superior court 

properly found that there were no genuine issues of material fact precluding summary 

judgment on Hoendermis's claim for violation of the covenant of good faith and fair 

dealing. 

                All at-will employment contracts are subject to the covenant of good faith 
and   fair  dealing.39   "[T]he   covenant   operates   as   a   check   on   employers'   traditional 

freedom to terminate at-will employment for any reason; . . . an employer may not 
terminate an at-will employee for reasons antithetical to the implied covenant."40 

                The covenant contains both objective and subjective components.41                  An 

employer can breach either component.42             The objective component of the covenant 

requires employers to "act in a manner that a reasonable person would regard as fair."43 

This includes not unfairly treating similarly situated employees disparately; in other 

        39      Era Aviation, Inc. v. Seekins, 973 P.2d 1137, 1139 (Alaska 1999) (citing 

Guin v. Ha, 591 P.2d 1281, 1291 (Alaska 1979)). 

        40      Id. 

        41      Charles v. Interior Reg'l Hous. Auth., 55 P.3d 57, 62 (Alaska 2002). 

        42      Id. 

        43      Id. 

                                                 -18-	                                          6558
 

----------------------- Page 19-----------------------

words, employers must treat like employees alike.44  An employer breaches the subjective 

component of the covenant when it "discharges an employee for the purpose of depriving 
him or her of one of the benefits of the contract."45 

                APT     presented    a  prima    facie   case   supporting    summary      judgment. 

Hoendermis's original complaint asserted that APT breached the covenant of good faith 

and fair dealing, but did not allege specifically that APT did not treat like employees 

alike.   Phelps stated in her affidavit in support of APT's motion for summary judgment 

that APT terminated Hoendermis because she was unable to work with others and refused 

to communicate with Phelps, her immediate superior.               We have held that a party has 

presented a prima facie case supporting summary judgment on a breach of covenant of 

good faith and fair dealing claim when a manager has stated in an affidavit that the 
employer   terminated   the   employee   for   being unreliable.46        Similarly   here,   Phelps's 

assertion that Hoendermis was terminated for an acceptable reason is enough to establish 

a prime facie case. 

                We must next determine whether Hoendermis raised a genuine issue of 

material fact whether she was treated differently from similarly situated employees. In 

the context of the covenant of good faith and fair dealing, similarly situated employees 

are those who are members of the same class, as defined by job position and the nature 
of the alleged misconduct.47        Hoendermis was terminated for allegedly failing to get 

along with other employees.         In Hoendermis's affidavit supporting her opposition to 

summary   judgment,   she   described   several   other   APT   employees   and   their   alleged 

        44      Id. 

        45      Id. (internal quotations omitted). 

        46      See French v. Jadon, Inc., 911 P.2d 20, 24-25 (Alaska 1996). 

        47      Mitchell v. Teck Cominco Alaska, Inc., 193 P.3d 751, 761 (Alaska 2008). 

                                                 -19-                                             6558 

----------------------- Page 20-----------------------

misconduct:      one   massage   therapist   had   a   romantic   relationship   with   a   patient;   an 

exercise   therapist   assaulted   another   employee   at   work;   a   physical   therapist   had   an 

inappropriate social relationship with a patient; a clinical director may have violated 

Medicaid rules; and two   receptionists exhibited "unacceptable behavior" at work - one 

of whom required anger management counseling.                  In terms of job position, whether 

Hoendermis was similarly situated to any of these other employees is a question of fact, 

and the trier of fact will make that determination. At this stage, however, sufficient 

evidence exists in the record to successfully raise a genuine issue of material fact as to 

whether Hoendermis was similarly situated with other employees. 

                Hoendermis must also raise a genuine issue of material fact whether she 

was treated differently from similarly situated employees in an unfair manner.                  In her 

affidavit,    Hoendermis      alleged   that  none   of  the   employees     discussed    above    were 

terminated.  She asserted that "Ms. Phelps did follow the disciplinary process with other 

employees" at APT.  Hoendermis's statement that she was terminated when others were 

not for similar or more severe offenses raises a genuine issue of material fact whether she 

was disparately treated in an unfair manner - a violation of the covenant of good faith 

and fair dealing. 

                Because Hoendermis raised a genuine issue of material fact that she was 

similarly situated to other APT employees and that she was unfairly treated in a different 

manner than those employees, we reverse the grant of summary judgment on the claim 

of breach of the covenant of good faith and fair dealing. 

IV.     CONCLUSION 

                We     REVERSE         the  grant   of   summary      judgment     on   the   overtime 

compensation claim because Hoendermis raised genuine issues of material fact whether 

she was an administrative or executive employee.  We REVERSE the grant of summary 

judgment on the wrongful termination claim because Hoendermis raised a genuine issue 

                                                 -20-                                            6558
 

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of material fact whether APT violated the covenant of good faith and fair dealing.  We 

REMAND for further proceedings. 

                                         -21-                                    6558
 
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